Here is a five-why analysis of the root cause of the current economic crisis.
1. Why does congress need to bail-out the American banking system?
-Because there are so many failed mortgages and foreclosed upon homes.
2. Why are there so many foreclosed upon homes?
-Because too many lenders were giving mortgages to people who would not qualify for traditional mortgages.
3. Why do people not qualify for traditional mortgages?
a--Because they have poor credit.
b--Because they can not verify that they have enough income.
c--Because they really can't afford those homes.
4a--Why do people have poor credit?
Because they have mis-managed their credit
5a--Why have people mis-managed their credit?
Because other types of credit are too easy to get.
4b--Why can not people verify that they have enough income?
Because they are self-employed
4c--why are we helping people get into houses that they really can't afford?
Because there are no homes in the area that they can afford?
5c--Why do we allow the housing market to become so expensive that people can not afford homes?
Because real estate agents and mortgage originators make their money and move on.
How do we fix this problem?
1. Make it harder for people to get credit cards, store accounts and other types of credit we easily get into trouble with when we are young and trying to establish ourselves. This includes Student Loans and car loans. We have to make college more affordable and we have to put an end to easy credit. We need to end the 72-month car loan. If you can not pay off a car by the time the odometer will reach 75000 miles, then you can not afford it. We need to be realistic about our credit demands.
2. We have to find a better way to support small business owners and people who are self-employed so that they are better prepared for the realities of small business.
3. We have to find a way to control the market so that housing prices are realistic for the majority of home buyers.
We have to shift our paradigms about credit and money and expectations. If it takes another depression, then we failed to learn our lesson from the last one.
One final thought. People are angry at the Bush administration and McCain is going to pay the price for it. He is too close to Bush simply because he is a Republican and he works in Washington. The Republican ticket should have been Romney/Palin, but too many evangelicals can not vote for a Mormon. Too bad your religious bigotry has ruined two bright political careers and set your cause back 30 years. Too bad Obama isn't the answer either.
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