Post Number 3: Below the Zenith Bazaar

Sub-prime mortgages are killing America. That may be a bit drastic, but the US housing and loaning situation is not in a good place right now. Banks are foreclosing upon houses more than ever before. This trend could really mess up the economy. I was once told, by the best teacher ever, that this is a cyclical market. What it will lose, it will probably gain back, at some point. But what if it never does? MarketWatch (a financial information website that provides business news, analysis and stock market data) analyst firm Stifel Nicolaus (no relation to Steve Stifler) claims that "the rapidly increasing scope and depth of the problems in the mortgage market suggest that the entire sector has plunged into a downward spiral similar to the subprime woes whereby each negative development feeds further deterioration", he calls it a "vicious cycle" and adds that they "continue to believe conditions will get worse". If this company is correct, what is going to happen? Will the currently booming economy join the downward trend? Will the subprime market begin to affect more harshly the upper class in various ways? Will many factors cause the US to fall out of the ranks of world super powers? Most likely not, but anything is possible unless we fix the problem.

An article in the Wall Street Journal proposes a solution to the problem. When the sub-prime buyers signed their fixed-rate mortgages, that was the beginning of the end for them. They could afford the “starter loan rate, but then the rates reset higher, and they can no longer pay. The idea for a fix is the brainchild of Sheila Bair, the federal bank regulator. She preaches that banks should convert the subprime loans from their fixed rate status to the currently lower, variable rate. This, she says, would benefit both parties, leaving many sub-prime buyers living in their homes, and banks (although getting less of an income stream) foreclosing fewer houses. A few companies are already responding. Troubled Countrywide Financial announced this week that it will modify the terms of $16 billion in adjustable-rate mortgages through the end of next year. Countrywide has already allowed more than 30,000 customers to restructure their mortgages and will contact an additional 52,000 to offer refinancing options.

Another idea making its rounds in Washington is to ask lenders to take a small, 10%-15%, haircut on these subprime loans but then bring in the Federal Housing Administration to insure the rest. This could spell disaster, if the housing market continues to decline, so it would not be the best idea.

I believe that the government will not save America. America’s housing market, sub-prime market, and future overall economy lies in the hands of the evil corporations that plague our world. I hate corporations for many reasons: they don’t care about their customers; all they care about is money, money, money. They drive prices up through the roof just because they can. But now America is in their hands. If they choose to prove me wrong in my generalizations, America can be okay. If they can follow in the tracks of Country-Wide Financial, they can help our country revitalize itself. Hopefully Sheila Bair gets through to them; but even if she does I will still hate corporations.