Economics and the Foreclosure Crisis

Throughout the last three decades, the United States experienced a substantial economic expansion. With more spending power than ever before, people began to seek larger purchases. Most of these significant purchases require the use of credit, and real estate is perhaps the most notable market which uses credit. Banks saw the great potential for profit, and sought to grant as many home loans as possible during this period of great wealth. Gradually, banks began granting loans to less qualified customers. After all, this inflationary period would continue forever, right? This is where the foreclosure problem began. The expansion ended, and a recession began. Suddenly, thousands of lower-income loan clients found it impossible to make payments on loans they should never have been granted to begin with. This problem must be resolved, and the nation must restructure itself so as to ensure that a similar event never occurs again.

To begin, one must examine the roots of the foreclosure problem. Like most issues, it is two-sided, and both sides must share the blame. Lenders know very well when to grant loans and when not to. This was certainly the case throughout the 1990s, when most of these problem loans were given. However, for some reason, the basic guidelines for lending were ignored, often on a massive scale. Why? Most people would point to the blind desire for profit. This is at least partially true, but it was certainly not blind. Banks were noticing that during this time of success, lower-income people were becoming more able to make larger purchases. Everyone was getting wealthier. So why not grant loans to these people? For the answer, one must look ahead. Surely, a recession would come eventually. A Capitalist economy fluctu...

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...t be resolved through an individual's drive to succeed in life. Once the economy is back on its feet, which should take only a year or two at the current rate, it will be time to prepare the nation for long-term success. The time is here to restore confidence in the private sector. The time is here for people to realize their own ability. It is time to toss out half a century of increasing government control over economy, and allow the greatest nation in the world to express its desire to achieve in the form of productivity. It is time for people to regain the desire to determine their own fate, and to have full control over their personal finances. This system, which was once the United States of America, requires a great deal of personal initiative, but it constructs, without fail, an economy which is built upon a foundation of stability, wealth, and prosperity.