As featured on p. 218 of "Bloggers on the Bus," under the name "a MyDD blogger."

Saturday, March 22, 2008

Holding Up Fingers, Expecting A Miracle

Of all the articles about the bad times ahead in the economy, I think this one scared me the most.

Though times are tough now, Americans believe the economy will bounce back by next year, according to a survey released Friday.

A national CNN/Opinion Research Corp. poll found that 60% of respondents think economic conditions in the United States will be "good" next year, as opposed to the 75% who think the economic situation is "poor" now.

"Most people realize that the economy has cycles of ups and downs," said Wachovia economist Sam Bullard. "Fortunately, the last two recessions were some of the shortest on record, so in 2009 we should be pulling up out of this."

Good Jesus. It's not so much that people are uninformed, unaware of the structural, long-term challenges. It's that this economist dimwit is AGREEING with them. Surely he knows better. The housing market is going to be in the toilet for quite a while, and rising oil prices impact every sector of the economy, as well as the ability for families to make ends meet. As people are unable to borrow equity from their homes and max out their credit cards, consumer spending inevitably slips. The holes in the financial institutions' bottom line are going to take years to solve. Without some technological innovation or a ridiculously strong commitment to the green economy, I think we're going to have a Bush hangover for a long time. This is why I wouldn't wish the Presidency on my worst enemy right now. The only rationale for thinking there will be some quick and cyclical bounce-back is American exceptionalism. Certainly under four more years of Republican policies and John McSame, absolutely nothing will change, just more robberbarons stealing from the public treasury at the expense of more and more of the masses.

I mean, a story like this just breaks your heart, and it's one out of hundreds of thousands.

in August 2005, Glenda Ortiz, a cook at a Best Western who lived in a cramped apartment in Arlington County, became a homeowner. By last March, the home was in foreclosure. The loan originator and mortgage company had gone out of business. And Ortiz was headed to court.

"It was all a mistake. One hundred percent," Ortiz said recently in Spanish. "I had such a burning desire to have my own house. I didn't think about anything else."

Ortiz and her husband, an air conditioner installer, are examples of what can happen when a hot real estate market collides with cheap credit, lax lending standards and little oversight. No one is free from blame in this tale.

Theirs is a story that Erick Gutierrez, housing director for the Washington-based Latino Economic Development Corp., said is all too familiar. Gutierrez blames the government for allowing so many subprime loans, such as Ortiz's, which required no proof of income. "You could say: 'You clean houses on weekends? Great!' And then put down that they made $1,000 a week," he said.

But by then, real estate agents would have made their commissions, mortgage brokers would have their closing costs, and the risky loans would have been repackaged and sold to Wall Street. No one cared as long as the housing market continued to boom.

This fetish of homeownership is stupid. I understand why people fall for it. But the speed and power of the message, shoveling people into bad mortgages, is breathtaking. The American dream became a marketing slogan to fatten the wallets of Wall Street investment bank managers.

If you think this will just "turn around" in 2009 you don't have a good understanding of the power of marketing, or the incredible unraveling of the financial markets that'll take more than a year to set right.

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