Mortgage and Credit Melt Down

I'm not sure about what is going on in the lending markets, but, from what I read some of the lending institutions loaned to people who did not qualify. After college in 1960 I worked for a short time as a loan officer in a Loan and Savings Association. We did not make any sub prime loans! Today, I believe the loan officer in some cases gets a commission.

The lending institutions today do not service the loans or take the loss in case of default because they sell the loans, to Freddie Mac or Fannie Mae, and others.

Fannie Mae, a private institution, created and charted by who else, your friendly government,http://www.fanniemae.com/faq/faq8.jhtml?p=FAQ in an attempt to do good, to help poor people buy houses, by doing what-- buying mortgages.

The attempt to do good never stops, no matter how much harm it does. Senator Boxer is cosponsoring more laws to interfere with the market place in regards to the mortgage crisis. http://boxer.senate.gov/features/mortgage/S%202452%20Summary.pdf Control freaks just cannot keep themselves from trying to interfere and micro manage other people's lives.

People borrowed more money than they could pay back because they thought real estate would keep appreciating at 20% per year! They took a risk. Now the caring government wants to take away the pain. "No gain, no pain", is the government's new motto.

This attempt to help the poor people, who did not lobby for Fannie Mae and Freddie Mac, was created by the banking, building, construction unions, Realtors, and anyone else who could make a buck from some government policy, no matter how bad the policy. The market to these people was common property, each trying to get more than they put in. See "Tragedy of the Commons" here -http://en.wikipedia.org/wiki/Tragedy_of_the_commons(The metaphor illustrates how free access and unrestricted demand for a finite resource ultimately structurally dooms the resource through over-exploitation. This occurs because the benefits of exploitation accrue to individuals or groups, each of whom is motivated to maximize use of the resource to the point in which they become reliant on it,while the costs of the exploitation are distributed among all those to whom the resource is available (which may be a wider class of individuals than that which is exploiting it). This, in turn, causes demand for the resource to increase, which causes the problem to snowball to the point in which the resource is exhausted).

Suppose there was no Fannie Mae or Freddie Mac, both heavily regulated. (Five of the 18 directors of Freddie Mac are appointed by the President of the U.S. )http://www.freddiemac.com/corporate/company_profile/faqs/#BM5_ The lenders would be responsible for their loans if they had to service them and collect the monthly payments, therefore making better quality loans, which they would still be free to sell.

It is impossible to see the harm government does. Let's not even talk about the Federal Reserve. We only see what we hope is protection and comfort. We think any government action must be for our own safety. Why else would we tolerate so much regulation in our lives. We seem to think everyone else (in the private sector) is unethical and THEY all need to be regulated.

I was talking to a small business owner about ethics in business. He said there was very little ethics in business. The market will force a business to cut corners to exist. Businesses that bid on projects will win if they low ball the bid, so low it will not cover their cost, so they cheat on the specifications to make a profit. I asked him about a business that dominated the market and had high profit margins, could it not be ethical? Here is his reply, "Even the large corporations; however, when faced with the pressure of meeting the quarterly numbers to please the stock holders, will dismiss ethics privately, but never publicly".

Still, I say the market place works to the benefit of more people, consumers, better than a centralized planned market. Millions of decisions are made each hour in the market between buyers and sellers. The human society is simply too complex today to be centrally controlled. Government should be a traffic cop, not the back seat driver of every vehicle on the road. If an unethical business provides a bad product the market will replace it, with another yet more efficient, but still unethical business.

We need a government that protects private property and ourselves. Democracy with freedom will not happen without these simple rules. Neither will democracy with freedom happen when controllers are making all our decisions.

Bilbo Baggins