This Republican spin says the current financial crisis was caused by too many folks buying homes they could not afford. It was myopic when they started the meme, but now it is being spouted by Chris Matthews and other pundits. I am frustrated that the blame is put on the shoulders of young families and working class people who merely were struggling for a piece of the American pie.
Below the fold:
First, let’s give a little thought to why many people overreached in borrowing for a home. There has been a well-documented decline over last twenty years in real wages. Many people now work in non-standard employment compared to 20 years ago. These "contract" workers forgo pensions and health insurance; in addition, because companies call them either "independent" contractors or exempt employees, they do not get overtime pay for extra hours worked. They work harder and harder and do not get ahead. These jobs are in retail as well as the professions (engineers, CPAs, physicians). Their more settled family members and co-workers tell them the only way to get ahead is to buy a home, get the interest deduction and the appreciation.
So, we have the luxury of saying they were irresponsible. They were, in fact, duped by mortgage brokers, tax advisors, etc. They bought homes with low downs and ARM interest rates believing in the housing bubble. The rest is history. But there were fundamental economic realities that have moved home ownership out of the hands of workers and young professionals.
Second, we ignore the improvement of the housing stock that resulted from the increased prices. Many people rehabilitated older homes by using equity loans : there is a whole television industry on cable TV that normalized the use of equity to improve kitchens, bathrooms, and outdoor space. These activities did add real value to our neighborhoods, cities, communities.
Third, there is no way the housing bubble caused unemployment to soar. There is no way the over-inflated prices of houses caused the decline in manufacturing. The housing bubble did not cause irresponsible use of derivative financial products by Wall Street masters. The housing bubble did not cause the deficits of the Iraq War.
Finally, let’s counter this absurdly simplistic and patently false trope: lending to the poor caused the (Dep)recession of 2009. The shift of wealth from middle and working class to wealthy over the past 30 years caused the Financial Meltdown.