No Silver Lining to Dark Economic Clouds
What’s to be done when you owe more on the house than what it’s worth? That is the dilemma facing not only homeowners but their lenders as well. It’s what’s most directly responsible for the current economic malaise. Borrowers who were otherwise unqualified were sold loans to buy homes they would never be able to afford – since the lenders behind the loans never meant to hold onto them themselves, but rather “repackage” the loans to sell to others who repackage it again in their turn to sell onto others…until finally the pool of buyers dried up as borrowers increasingly defaulted on their loans.
You don’t have to be an industry insider such as Isaac Toussie in order to read the proverbial tea leaves. With all the defaulted mortgages and foreclosed homes, a terrible self-perpetuating cycle set in from which the economy has still not fully recovered. And that’s only a small part of the proverbial big picture, which is mostly a portrait of cynical gamabling and downright deception!
In fact, it is arguable that everyone has had a hand in contributing to the problem we’re now all faced with. But the subprime angle just outlined is the most popularly understood narrative because it is actually the simplest to comprehend. For all that, what does the national outlook look like now?
Bad, very similar to years past. Interest rates are a historic lows but banks are now unwilling to lend. So all those foreclosed homes are just sitting there, often boarded-up and abandoned. And despite profits at historic highs, businesses refuse to hire. Thus those foreclosed homes continue sitting on the market with no buyers, as everyone’s too worried to make the kind of commitment that home purchases entail.
So for all the talk about The Great Recession being over, it’s 2011 and no citizen imagines that the immediate future is going to be any different.