Where Were the Watchdogs?

it would have continued to be a sure thing except one thing, people stopped paying their mortgages

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Economic crisis -Isn’t this the understatement of the century. Going from a time of economic boom to giving soup-kitchen hand-outs to big name business, the World’s economy hangs on a ledge of little hope. Where were the watchdogs when the American stock-market became its own worst enemy?

CNBC depicted it perfectly in its story, House of Cards,  when they showed that the governmental standards weren’t up to par to prevent a crisis such as this. At one time, not so long ago, the American housing market was at an all-time high, and everyone was cashing in. From Lebanese businessmen, to pizza delivery guys, everyone had a mortgage to sell, and everyone wanted a home.

Businesses such as the company Quick Loan Funding  and other Internet based banks were selling mortgages to unqualified buyers like candy. No qualifications or standards were required for these mortgages. As long as someone on wall street would buy these mortgages, they were selling and profiting. Quick Loan Funding was basically an infomercial, “As seen on TV” type mortgage company. People who bought these mortgages usually were refinancing with the low APR’s they were offering. A new beginning to the buyer, a quick cash scheme for the sellers.

There were other types of mortgages that were available such as “Interest Only” loans and ridiculous mortgages that allowed the buyer to pay a percentage of their payment, in some cases, raising their mortgage principals instead of decreasing them. Anything was game, and wall street bought into it all.

Wall Street also bought into the dreaded CDO’s. CDO’s were mortgage packages, so to speak, these were grouped mortgages, such as entire subdivisions, that complicatedly grouped together and sold to mostly European and Asian governments and municipalities to gain revenue for their area. They were told this was a solid, AAA investment. This was the problem.

Rating agencies, such as Standard and Poor, were to rate an investment as a AAA or a BBB. The AAA’s were less risky, solid investments and the BBB, of course, meant more risk. With everyone cashing in and putting pressure on these rating agencies essentially lowered the AAA standard. Possibly because, if other rating agencies were lowering their standards, and your agency did not, you lost business. Therefore, the greed of Wall Street drove them as well. 

This is why that the economy nearly world wide is poor. A big percentage of Wall Street investors are other countries. Investing in American businesses has almost always been a sure thing, and it would have continued to be a sure thing except one thing, people stopped paying their mortgages. These investments were based on the future revenue of mortgage payments and interests. That required that mortgages be paid to pay out on the investment. Americans began to refinance their homes, taking out home equity loans to pay off their credit cards, using the equity in their home as an ATM machine. Once they paid off their debts, they charged them all up again. The greed of the banks and wall street drove them to never say “enough is enough”. No one ever told the buyer you are over extending yourself. The banks were driven by the competition as well. If the banks said stop, the consumer took their business to another bank. After three mortgages and $50,000 dollars of credit kept families from eating, Americans just stopped paying, thus spiraling our economy into the mess it is now.

So where were the watchdogs during this? The voice of reason from our government stepping up and saying, “there must be better standards.” America’s government has committees and bureaus that watch these kinds of things and they turned a blind eye to it. Perhaps they were cashing in too. Greed was driving everyone all over the world, perhaps the pressure was too great to put a stop to it. Who knows. What is known is that now, when it is too late, they want to scoop in and try to dig us out of the cavern of debt by using spoons. It is not going to happen by handing out big bucks that WE DON”T HAVE to companies that just didn’t know what they were getting into, or the ones that just didn’t care.

So now we all sit and wait, watching the disaster unfold in front of our eyes and think there is nothing we can do to change it. The truth is, I haven’t the answer. All I can do is take care of what is mine. Pay my bills and my mortgage, and clip and save, and hold onto what is more precious than money. Perhaps if we all do the same, we will find a way out of this Economic crisis.

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