WTF Congress

Have you ever watched the show "Are You Smarter Than a Fifth Grader?" Rumor has it, the show was originally going to be "Are You Smarter Than a Congressman?" The networks realized that too many people would win money on this show, so they replaced Congressman with a slightly more intelligent breed of Americans: Fifth Graders.

I was surprised and very disappointed that the bill did not make it through Congress today. Many will blame Nancy Pelosi for turning the issue into a partisan issue during her speech this morning. I personally think at a time like this, there was no reason to take a cheap shot at the "failed policies of the Bush Administration." There will be others who blame the Republican members of Congress who may have switched their vote to 'Nay' because they took offense to Pelosi's comments. In either case, it is the same old political blame game. This brings me to the topic for tonight's post: ACCOUNTABILITY.

Throughout this financial crisis, elected officials have constantly blamed the other party for the problems we are having now. Everyone on so called "Main Street" is blaming Wall Street for the situation we find ourselves in today. Homeowners are blaming CEOs of large Wall Street institutions for the problems they are having paying their mortgages. The fact of the matter is, nobody is admitting that they screwed up and that it is time to move on and fix the errors of the past. Let's take a look at some of the things that have happened over the past few years that have helped lead us into this difficult environment.

-In the late 90s Banks were encouraged to make loans available to middle and lower class people to buy homes because it was the "American Dream." Fannie and Freddie were influenced into buying subrime and Alt-A mortgages. This was done under a democratic administration.
Accountable parties: All members of congress and the democratic administration during that time. Enough of this bipartisan nonsense. Both parties should stop pointing fingers and admit that bad decisions were made. The executives of Fannie and Freddie should also admit that they were wrong. They should have exercised the appropriate due diligence and realized that these assets were not worth the risk in the long term.
-Alan Greenspan's Fed lowered interest rates substantially after our last recession. With interest rates at 1%, people begin taking home equity loans out to purchase second and third homes. Once the real estate bubble popped, many of these lines of credit were decreased due to the declining value of the house that served as collateral for these loans. This was done under a Republican Administration.
Accountable parties: Members of the Fed who should have foreseen the problems that ridiculously easy access to credit could cause. Many might be offended by this, but the people who bought second homes also need to be held accountable. Nobody forced you to buy a house or a car that you couldn't afford. Take some responsibility for your actions and don't expect all of the blame to fall on a few Wall Street executives. I hope people will think twice now about taking out a loan to buy something that really isn't necessary and that they cannot afford.
-With interest rates low, banks lent money to pretty much everyone with a license. Understanding the risk of lending to people with bad credit, they couldn't simply offer fixed rate loans to everyone. Instead, they created products with a teaser rate that adjusts upward significantly after a few years. I imagine the pitch went something like this:
Couple With Bad Credit: "We can only afford around $500/month."
Mortgage Agent: "Well at 2% for the first 2 years, your payment will only be $200."
Couple With Bad Credit: "What happens after that?"
Mortagage Agent: "Well in years 3-5, the payment goes up to $400. After that, it will adjust to 15%, which is around $1,500/month. But don't worry about that. You will be building credit for the next few years and should be able to refinance in a few years."
Couple With Bad Credit: "We really want this house and it sounds like we will be just fine. Let's do it!"
Accountable Parties: The mortgage lenders were obviously at fault for creating and selling products that people did not fully understand. The government was also at fault for not regulating this market. And by government I mean both Democrats and Republicans, so stop pointing fingers. There were members of both parties in Congress at the time and both sides failed to act. The Couple With Bad Credit should also take some responsiblity for their actions. I understand that many were misled into taking out a mortgage. In the end, you have the final decision and should hold yourself accountable for at least part of the problem.

I could go on and on with more examples and the same recurring theme would emerge: there are multiple factors that have led us to where we are and there are many people to blame. Regardless of who is at fault, one thing is for certain. We are in the middle of a financial crisis that needs to be taken care of ASAP. Let's hope Congress can stop bickering like 8 year olds and take some action. I don't know about you, but I want the people that represent me to do what is good for the country, not what is good for the presidential election or their reelection bid that is coming up soon.

One more quick comment regarding Wall Street vs. Main Street. If you think that we should not take action, stick it to the Wall Street firms and let them suffer the consequences of their actions, I want you to do the following tomorrow:
-Look at your 401(k). It probably is getting hammered this year. Then think about the 70 year olds who are retired and have seen their nest egg get clobbered.
-Think about your family and friends who actually work in the finanical industry. The CEOs of these companies will still have a lot of money if they go out of business. But your average Joe/Plain Jane might end up jobless and might have their retirement accounts completely wiped out.
-Think about small businesses who need loans for their day-to-day operations. What happens to these businesses and their employees if the banks stop lending?

The point is, Wall Street and Main Street are totally connected. So please Congress, stop bickering about Wall Street vs. Main Street. And stop the partisan bickering as well. Let's act like adults and get some legislation passed and restore our confidence in the financial system. As we all saw today, time is of the essence.

With all the stress and nervousness in our country today, don't forget to relax a little and find time for a good laugh. The video below always puts a smile on my face, even if we lost $1.4 trillion in market value today.

http://www.youtube.com/watch?v=cwvVh0_ZelI