Micro and Macro Debt Problems

No one will accuse me of being a bleeding heart liberal.  I might be accused by some of  being a redneck populist ignorant buffoon.  But, hey, we all have to be something.  I don’t like big government and sure don’t like Government, Inc.  I deplore big business playing footsy with politicians to receive special treatment in the tax code or any other of our zillion laws on the books.  It bothers me to see too many folks actually relishing gaming the system with food stamps, medicaid and unemployment benefits and more concerned with “personal days” off and calculating exactly how much sick leave they have left in the year so they don’t miss a day, sick or not.  Bernie Madoffs repel me and so do the people who followed along like lemmings believing they were taking advantage of a deal too good to be true and that they were more clever than us ordinary Joes who didn’t have inside connections like they did with the likes of Madoff.

I do trust our people and have confidence in them.  I don’t really trust the majority of our politicians because they spend our money and use up our credit without personal responsibility.  Most of the time, most of the people do the right thing and behave with decency and even honor I believe.  It is that substantial majority that wants Government, Inc. to do everything for them without working for it that bothers me.  But I like the average Joe.  That is why some of our debt increases feel me with such horror and even anger.   There is an example of debt policy that highlights so much of what I don’t like about the methodology of the politicians regarding  our debts, both public and private.

Each State controls the laws for real estate transactions and debtor/creditor relationships.  That is because it is a State matter reserved to them under the Tenth Amendment and not granted to the Feds under Article One, section 8.   (Same is true for insurance.  We’ll see how this plays out in the courts.  The Federal government has no constitutional authority over health insurance.)  For many years Texas had denied second lien or equity loans on people’s homestead.  You were allowed, naturally, to have a purchase money lien against your home when you first bought it and you could also take out a home improvement loan.  But that loan had to really be for home improvements, not a new car, to pay college tuition or take a trip around the world.  That legal position went back to the earliest days of the founding of the State.  It was known as a debtor’s state and always had a wary eye toward lenders and bankers.  It was the philosophy that it was good for folks to own their homestead and that it should be protected against creditor claims except for those purchase money loans, home improvement loans and State imposed taxes.  If you paid those no other creditor like Mastercard could take your home.

That was the law for over a hundred years in Texas.  Most states did allow second liens against one’s home and they money borrowed could be used for any purpose.  Texas was about the only hold out.  In the ’80’s the push began by the banks to allow such second lien loans.  After the S and L crisis of the late ’80’s the pressure was greatly increased.  The banks saw this as a huge un-tapped source of business.   There was billions of dollars locked up in the equity in the houses across Texas.  Many liberal Democrats were also for this idea because they thought that the little people should have access to their money, that denying them this extra money was depressing their stock in life.  So you had a combination of big business and liberal Democratic support for the same idea.  The law was changed and second lien loans were allowed.  Those that favor active government and those that like special treatment from the politicians both were overjoyed.   Yes, the floodgates were opened and people began taking those loans. 

Now we have many defaulted second mortgages and threats of foreclosure.  Yes, I do have a strong libertarian streak in me and I basically don’t like the idea of any government restricting my use of my assets in any way.  But having specialized in bankruptcy matters for over 40 years I knew of the foolish mistakes that many would make with this extra cash burning a hole in their pocket.  Before no matter what went wrong with your financial plans you could count on having a safe haven, home, for you and your family and now that was gone.  So much of that money was spent on frivolous things, at least in my opinion.  Everyone gets to make their own choices but they also have to face up to the consequences of those choices.  Now we have lots of people facing the loss of a home and for what? 

Maybe the system that worked for us for about 140 years wasn’t so bad after all.  This is a microcosm of the way the US government is dealing with our national debt at the moment.  We used to basically agree about the need and necessity of restraining debt and being very careful about the use of public funds.  Now it seems that any idea is not off the table as long as it makes some major political constituency happy i. e, unions, Freddie, Fannie, environmentalists, etc.  Will a future generation look back and wonder how we lost our way with regard to debt creation?  Will they wish we had left well enough alone?

The Bronx and Brooklyn were both named after some of the early Dutch settlers in New Amsterdam.  Bronck’s was a settler of that area and likewise was a fellow named Bruecklen.  They settled there in the 1640’s.  http://www.olcranky.wordpress.com

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2 Comments

Filed under business, Economics, government, law, Politics

2 responses to “Micro and Macro Debt Problems

  1. it`s very hard to make a decision for loan, thanks for the post

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