Get Over It

Question: Who is happy about the travails that have swept through Wall Street and Main Street? Answer: Absolutely nobody. And while we need to review how we got to this place so that we do not return any time soon, the blame game does not serve our national interest at this critical point.

Yet there seems to be a need to point fingers: it’s the government’s fault-why is homeownership inextricably linked to the American Dream anyway?; it’s the Democrats’ fault for empowering Fannie Mae and Freddie Mac to act imprudently and getting too big; it’s the Republicans’ fault for easing the regulatory environment; it’s Wall Street banks’ fault for creating highly complex securities that utilize massive leverage; it’s the lender’s fault-under what system is it a good idea to hand over piles of money to folks who have low/no income and no asset base?; it’s the borrowers’ fault-these folks could not manage to buy a house that they could afford. Bottom line: there is plenty of blame to go around.

One group that feels highly indignant is those Americans that acted responsibly throughout the boom period. These good eggs were forced to listen to their neighbors’ crow about rising real estate values of their Florida condos. They are probably the same group that did not purchase internet stocks in a big way, but instead trudged along with good, but not over-the-top returns. These are the silent majority of taxpayers – they also seem to be seething about the current crisis facing the financial system.

The questions/comments that I have heard from this group are: “Why should I bail out Wall Street fat cats who earn millions of dollars?”, “Why does my tax money have to help a stupid borrower refinance his loan when nobody cares about the rate that I have for my loan?”, “we have to stop saving everyone. Only when the careless risk takers pay the price will they learn the hard lessons that will prevent stupid behavior in the future.” The last sentiment is the “moral hazard” argument, which strict ideologues trot out to underscore that “the free market system will take care of everything in the end.”

I understand and even identify with these core beliefs, but not enough to watch our gorgeous, flawed system end up in the toilet for a decade. We have seen the results of the free market in the aftermath of Lehman Brothers’ failure—a crippled financial system and a stock market in free fall: is this what we want or need? I don’t think so.

And for all of the prudent folks out here—you know, the ones that live within their means, put down at least 20% when we purchase real estate and diligently maximize their retirement contributions, as Joe Nocera pointed out in the New York Times, these people “need to get over themselves. If housing prices keep falling, many millions of additional homeowners will find themselves, through no fault of their own, with underwater mortgages. Besides, foreclosures damage property values for everyone, not just those losing their homes.” Finally, the best part is that those who have lived their lives responsibly will be the ones who can profit when the recovery occurs.