The Mortgage Crisis

By Jason Ibrahim

I like to be in America,
OK by me in America.
Everything free in America
(For a small fee in America)
--West Side Story

Lots of people in the media nowadays like to refer to the "mortgage crisis", which they state as if not knowing what they mean-or worse, disagreeing with their interpretation-is tantamount to being an uncouth barbarian. The fact of the matter is I have a hard enough time keeping up with what the crisis of the week is, so anything I can do to separate the fake crises from the real ones is progress to me. It's also a fact that I don't think there is a mortgage crisis at all. Before you burn me at the stake, let me explain.

I do think there's a subprime mortgage crisis, but I think this began when subprime mortgages were instituted, not now that they're coming unraveled. Basically, a subprime mortgage occurs when a person or group of people decides to borrow more money than their means allow, and a mortgage company colludes with them, at usurious rates, for sure, to give their customers their own overzealous slice of the American Dream.

Let's just pause right here and make one thing clear: this is a voluntary agreement. No one's forcing the borrower to sign the document, and no one is compelling the creditor to lend the money. That means if the borrower defaults on the loan, he has no one to blame but himself. If the lender has to file bankruptcy, his own decisions brought him to that point. (If the government deems the lender "too important" to go out of business, well...more on that later.)

So what about me? Who am I to criticize people just struggling to get ahead, when I probably inherited the money to pay for my house when my wealthy great-uncle, the owner of a vast pancake-flipper-selling empire, mentioned me in his will, right? No, actually, I too have a mortgage, but one that is well within my means to pay; I didn't opt for the Altoona Taj Mahal. I get up and go to work every day; I'm thankful to God for my house and my job.

There's a quaint old saying that has gone way out of style over the last couple decades, the idea of "living beneath your means." I think it's the key to understanding the subprime crisis, on both sides of the transaction. I think a lot of people nowadays take that to mean "living beneath your worth," because if there's anything that our increasingly consumerist, image-obsessed popular culture is telling us, it's "what you have is who you are." In contrast, "living beneath your means" suggests exactly the opposite: that your character, your work ethic and your perseverance go a long way to determining your standard of living.

Someone that was undoubtedly in favor of the value of thrift was Abraham Lincoln. He wrote, in a strongly-worded letter to his shiftless brother in 1848,

"You are now in need of some ready money; and what I propose is, that you shall go to work, "tooth and nail," for somebody who will give you money for it....I do not mean you shall go off to St. Louis, or the lead mines, or the gold mines, in California, but I mean for you to go at it for the best wages you can get close to home, in Coles County. Now if you will do this, you will soon be out of debt, and what is better, you will have a habit that will keep you from getting in debt again....You say you would almost give your place in Heaven for $70 or $80. Then you value your place in Heaven very cheaply..."

In a way, both the lender and the borrower in the subprime crisis are like Lincoln's immobile brother. The borrowers are perhaps hard-working, honest people, but they have no appreciation for the fruits of their labor, and pine away for $70 or $80 while hundreds of dollars are wasted on all kinds of luxuries, when they could store this away for savings.

Meanwhile the lender has picked up his ax and shovel and headed for the Promise Land. If gold has a scent, these people have noses for it. Unfortunately, the gold in their mines is the same gold at the end of the rainbow. Did they really think they could get something for nothing, hawking high-interest mortgages to people who've demonstrated an inability to pay them? All good delusions must come to an end.

Or do they? Our leaders in Washington have determined that the best people to shore up these lenders-by the way, encouraging more subprime borrowing-are you and me. Through federal bailouts, we now own very minute portions of companies like Fannie Mae, Freddie Mac, and others. Only the government would say, "Let's see, you obviously can't handle money, so the best thing to do is...give you MORE money!"

Maybe what we really have is a subpar governmental crisis.

--Jason

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