With the fall of Bear Stearns, many other banks are getting a good looking at.  In an article in the Baltimore sun, the journalist Peter Morici makes some very good points about the current mortgage situation.  I quote him often here.

Mr. Morici makes it clear to us all the way things have changed over the years.  He states that 30 years ago, a borrower went to a bank, income and assets were examined by the loan officer, and if you qualified, you got your mortgage.  Today, however, it is a very different matter.  According to Mr. Morici, banks have lost touch with how business was done.  He states that “Loan agents hang around real estate offices, take applications and forward those to mortgage companies or regional banks. Those sell the notes to large Wall Street banks or securities firms that increasingly do most of the things banks do.”  Surprise, surprise.  Whoops! There went Bear Stearns.

It seems to me it all boils down to greed.  This is what has driven the market into the hole it is in now.  A quick buck is okay, but when doing so you drive the economy of one of the greatest nations in the world into the crapper, then possibly things should change?

Wall Street banks have bundled mortgages, good and bad, into securities and sold them to investors, hedge funds and pension plans.  There seems to have been little regulation in this practice, outside of who gets the biggest piece of the pie.  Now we see the Fed doing a bailout for one of the banks that got us to where we are in the first place.  Yet, the blue collar workers and unsuspecting retired people who are facing closure are hearing “sorry about your luck.”  The current proposal to help ease this situation is a fine gesture, but helps few people.  Yes, they are responsible for the hole they have gotten themselves into.  fulfilling the American Dream is not suppose to mean, though, that an unethical lender can give you a fast ride on a one way ticket to the poorhouse.  It should be that people currently in trouble should have some knowledge of what they have gotten themselves into, and if they had decided to go forward, then it was certainly their problem.  That does not, however, seem to be the case.

Now the Feds are scrambling to pull the whole economy out of the fire.  The action with Bear Stearns will probably be the first of many.  The rumblings and anxiety on Wall Street is a good indicator of that.  It really boils down to consumer confidence, doesn’t it?

According t Mr. Morici, no one now will touch a mortgage backed security with a ten foot pole.  You have to admit this is a bit understandable.  Doing so, however, puts us further in the hole, because no money is flowing.  The NBC Nightly News reported this week that consumers are depended on to provide the flow of cash in this economy to a very large percentage point.  I am thinking that if the people can see every night where the economy is going, that their shekels are going to stay under the mattress.  And then, the economy will suffer even more.  Already, major stores are reporting lack of sales, and it is trickling down to Main Street.  How much further does it have to go?  Inquiring minds want to know…