Friday, September 26, 2008

Because We Can Doesn't Mean We Should

This past week the media has been completely absorbed with our nation’s economy; and rightly so. The topic has come up in just about every conversation I have had in recent days. Regardless the final solution created by Washington the lessons to learn are many and carries with it many unknown changes to the way we live life.

It would be a mistake for anyone to assume that after this week, life will go on as usual. Only the naïve or the unthinking will believe that change will impact everyone else and leave them untouched. The changes emerging on our horizon will impact everyone. In the words of Bob Dylan in his song, The Times, They Are A’Changin’:
Come senators, congressmenPlease heed the callDon't stand in the doorwayDon't block up the hallFor he that gets hurtWill be he who has stalledThere's a battle outsideAnd it is ragin'.It'll soon shake your windowsAnd rattle your wallsFor the times they are a-changin'.

During the past 10 years policies have been put in place making it possible for millions of Americans to realize the dream of home ownership. While this is a noble ideal, it was only made possible by purposefully recalibrating the minimum requirements for home ownership. Higher and more rigid standards may seem cold, uncaring and aimed at keeping home ownership an entitlement of the middle class. But as our current housing crisis is revealing, we could have avoided this economic emergency by holding to the higher criterion.

Lower down payments result in higher risk loans. Lowering minimum credit requirements only raises the odds that the number of foreclosures will increase. In our attempt to make home ownership available to more families, we set the stage for economic disaster.

Helping millions more Americans realize the ideal of home ownership is not wrong. It is the way in which we went about implementing the ideal that we went wrong. Would more regulation and oversight have prevented our current situation? Probably not. It is highly unlikely that those charged with managing our economy were unaware of this progression toward financial disaster. They saw it coming and consciously chose to allow its progression.

A basic principal has been violated and continues to be ignored by our government. It is a reflection of the way many Americans live their lives. Whether by choice or default the status quo has become, “if we can do it, we should”. Without thinking much further than the end of our noses, we make financial decisions that have potentially life-changing ramifications.

We need a new vehicle. Our decision is based on want rather than need, on monthly payment rather than long-term cost. So a year ago we bought an SUV as our commuter vehicle. Gas was $2.50 a gallon. Now that gas is well over $3 a gallon we see the error of our ways.

We need a place to live. Similarly our decision is based on monthly payment rather than overall cost. We’re comfortable with a $1,500 monthly payment but the lender says we can qualify for a much larger (nicer) house. The payment may be $2,100 but because we qualify for it, we decide that we should buy the larger (nicer) home.

America has the highest average standard of living of any country in the world. This distinction has come at a price. And the price is the sum total of what it has cost us to remain free. Free from tyranny, free from oppressive government, free to worship and free to pursue a happy life. The best way to protect freedom is to treat it as the costly treasure that it is instead of as an entitlement to further encourage the mentality of “if we can, we should”.

The quickest road to ruin is thinking that freedom is unfettered. If our way of life is to be protected, we must learn to live contented lives inside the boundaries freedom provides. Just because we can make home ownership available to everyone doesn’t mean everyone should own a home.

2 comments:

sepherim said...

It comes as no surprise that the American people will try to get something for nothing if someone tells them they can get away with it. I knew the system was screwed up royally a few years ago when I refinanced my home. I bought my house in 1986 for $49,000 which was just a little less than its appraised value. When I refinanced to get a lower interest rate, I was told I could borrow almost $100,000 on my $49,000 house. Why wouldn't I want to do that. Think of all the good things I could buy or do with that money. Somehow I was able to resist the temptation and by making twice a month payments I will soon have my mortgage paid off just in time to get ready for retirement. So as you said, just because we can doesn't mean we should.

R.J. Cookenboo said...

One word: AMEN!!!
I completely agree with you. We live in a credit happy country and somewhere along the way lost track of our spending. I think this financial crisis has a silver lining, and that's that we have a stark reality in our faces. We work hard but we forgot how to save along the way. These restrictions are going to have to be enforced if we want to see the light of day again. It's so terrible to see these people lose their homes but some of these folks are responsible for this mess. I helped some friends of mine buy a new home and sell their old one, they had no dp, no money for closing, and they had to use the money they got from the sell to pay off debt. I was terrified for them, but they insisted this is what they want. One of my fellow agents said, "We aren't in the business of doing what WE want."