I am a fifteen year old independent and new to the political
scene. Even though I am not allowed to vote, I still have a voice in this
election and I know its outcomes affect me today and as I grow up. Therefore, I
will utilize my freedom of speech and voice my opinion. Thanks in advance for listening.
As I’ve watched the presidential debates and the news, it is
definitely easy to notice even at my age, that the biggest problem of our
nation is the economy. I have been repeatedly exposed to a topic addressed
multiple times throughout this election.
Four years ago, our nation went through the biggest recession (economic
crisis) since the Great Depression. The result was the loss of nearly 15
million jobs, a crash in the housing market, multiple bailouts that cost
taxpayers billions, and ultimately the largest growth in the biggest monster
the U.S. has had to face…the deficit. This deficit has continued to rise and is
now more than 16 trillion dollars. A country bound by a rising 16 trillion
dollar deficit is not a free country. By the time I graduate in 2015, we are
estimated to be chained in 23 trillion dollars. Should I, fresh out of high
school and not even into college have to burden the mistakes of the previous
generation? Being enslaved by this debt doesn’t sound like a life of liberty
and justice to me. Yes, America is a “free” country, but only if we keep it
that way. A Hebrew proverb my dad
mentioned to me states. “Owe no man
anything but to love one another.” So
much for love (sarcasm) Its really hard to love one another when you are
strangled by 16 Trillion dollars in debt.
So I was determined to find out the answers to a few
questions. How did this recession come to be and whose fault is it? How can we
prevent it from happening again and how can we reverse its affects? How can we
tame this debt monster and then slay it? President Obama sure has highlighted
the fact that it was the previous administrations fault for the state of the
economy, however, after doing some research, I think his claim warrants
critique. He also has been very vocal in
about how “bad” the conditions were when he took office. But, even though this recession started just
before Obama’s presidential term, and even though he campaigned on fixing the
economy, I was surprised of his focus in the first 2 years of his
administration. His focus was not on
creating jobs, nor really improving the economy. On top of it all, he continued to increase
the deficit, and by increase…I mean by more than any other president. Obama has
consistently put the blame on the Bush administration. By the way, did I mention his party had
control of the house and senate his first 2 years? But even though he points fingers at Bush, the
influences on this recession can be traced all the way back to the 1990s. Yes, traced back to Bill Clinton’s administration;
well before the Bush years. Don’t get me
wrong, Bush isn’t getting a free pass here either. So, the problems trace back to the 90’s, and
as noted by a resounding majority, the recession is linked back to that time by
one gigantic factor: the housing market. Now, I’m not saying it was ONLY the housing
market that caused the economic calamity, but for now it is the focus of this
message. Banking lending practices, high
national debt, income inequality, as well as personal debt are all
contributors. However, all of these
issues… all of them… can be linked by Greed, and greed revolved around American
Housing.
Lets go back to 1993.
It all started with the Community Reinvestment Act and the affordable
housing “mission” by the government-sponsored enterprises Fannie Mae and
Freddie Mac. The basic goal was to help
more Americans get into their own home. More specifically, help low income
people be able to purchase a home. The
government seemed to have good intentions, but like most of the times the
government gets involved, it causes more problems than solutions.
Thomas Jeffereson once said "Congress has not unlimited
powers to provide for the general welfare, but only those specifically
enumerated." - Seems to me that
if congress allowed government to
control less, we Americans might have more.
So, to be able to achieve this goal, the lending standards
were reduced or deregulated. The strategy was that if more people qualified for
a mortgage loan, the more people would buy a home. The effort to reduce
standards was published at the request
of President Clinton in 1994. By 1995, the discretion used when
qualifying loans was dramatically lowered. For banks, simply proving they were
looking for qualified buyers didn’t cut it. The bank
regulators were expected to enforce the new lowered standards and now had to
show they had actually made a requisite
# of loans to LMI borrowers, (Low Moderate Income borrowers) basically meet
a quota of loans sold to LMI people. By 1997, Fannie offered 97% loan-to-value
mortgages. That is only having to pay a 3% down payment, barely giving any risk
to homebuyers. The only consequence of
failing to pay their mortgage would be bad credit for a few years…and only
losing a small down payment (3%). The
reason Fannie Mae and the banks could benefit from giving loans with such low
down payments, was that it would be more likely for people to take a longer
time to pay down their loans (especially since they were LMI) and this slowly
but enormously increased the interest rates they would have to pay. They were these
adjustable rate mortgages, whicht would rise in just two years to a much higher
payment.
Eventually to sum it up, “Lending standards were lowered and
lowered until people with no jobs, no income, no assets and no credit rating
were able to get huge mortgages for no money down and no proof of income.” This
happened over a series of years from the Clinton through the Bush
administration. These loans were named
sub-prime and Alt-A loans because they were given to people, again, with no
income, no job, or no assets. Many mortgage applications were not even being
checked by mortgage writers and some applicants were even prompted to lie on
them. (Feel the greed coming in) These
loaning businesses had a mindset in believing that home prices would never go
down & continue upward. They thought this way because now there was an
increased demand for buying homes, allowing the worth of homes to rise. More
homes were being bought not just because anyone could now qualify for one, but
because those who could already buy them for the same price or less, well now they
could get an upgrade or even bigger house! Also, some people would buy numerous
homes to sell for later as an investment. Basically the buying of houses
skyrocketed during this time!
This was the beginning and starting point of a revelation
that changed the game into one of making money more than anything. By 2001,
Fannie Mae and Freddie Mac were even offering no down payment at all! Through
2001 to 2007, Conventional mortgages(traditional mortgages with 30 year fixed
rate)dropped from 57.1% to 33.1%. Basically,
the safe loan practices were reducing drastically. At the same time, Subprime loans(those with
bad credit…very risky) rose from 7.2% to 18.8% and ALT A Loans went from 2.5%
to 13.9%. Also through this same span of six years, the residential mortgage debt rose from less
than 50% to nearly 75% and the 97% loan to value mortgages became more popular
as they rose from 10% to 40%. What does
this mean? Banks were selling more loans
to LMI folks than they were to people with the ability to pay them back.
Now, 38 % of all those purchases during this time were to come
from underserved areas (usually inner cities) & 25 % were to be loans to
low-income and very-low-income borrowers. You could say the quota was made
above and beyond! But, this contributed to the fact that some people were
defaulting on their very first payment. Another fact was that as mentioned
before, people had very little to lose if they defaulted on their mortgage
payment. Blind to that fact though, this started turning into something not
about getting people homes, it became about business. A.K.A Greed. The newest
and biggest market had just been discovered.
Now, I’m all about helping the needy, and especially the
poor. But when the government starts
overreaching and creating programs that do more harm than good, it creates
devastating consequences. Ben Franklin
once stated (after living in Europe in 1760’s), “the more public provisions
were made for the poor, the less they provided for themselves, and of course
became poorer.” Getting everyone in
affordable housing without working for it is a huge mistake. I recall another Hebrew proverb… “if a man doesn’t work, neither shall he
eat”.
Continuing with the housing, the banks started noticing this
booming business! And they wanted to be a part of it. Greed…After observing models showing how much
this business really had boomed, banks securitized mortgages and turned them
into mortgage backed securities that people could invest in. The banks were completely ignoring all data
showing a rising number of defaulting payments.
This means that the banks bought many mortgages and combined them
together, even if it meant they would not know the credit risks or worthiness
of them. Then they divided up that big, “mortgage pool” that holds all kinds of
mortgages into pieces called tranches; and then sold those tranches to
investors. The whole of this was called a collateralized debt obligation (CDO).
It worked like this. Those who owned the
tranches (CDO’s) would get paid when each person in that certain tranche paid
their mortgage and did not get paid when the mortgages were not paid. Confused?
Well, there was this huge increase in the housing market, and banks were
making more money by taking all the mortage loans…combining them all together,
then divided them up into smaller pieces and selling them to investors. Problem was that the investors had no idea
that mortgages were being defaulted on, and the banks had turned a blind eye. …check this out… that wasn’t enough. To top it all off, “There was such a huge
demand for these CDOs, that there were not enough mortgages to go around to
investors…. So…. the banks INVENTED synthetic CDOs (a.k.a. made fake ones!)
Pretty sneaky eh? But, this became a bet or economic gamble as whether or not
people would pay their mortgages. The
arising problem was the defaults and foreclosures that started. And the banks
were not paying attention to this. They were having a ball with all their CDO
sales.
By this time, the Bush administration (I told you he wouldn’t
get off free) was touting home ownership at an all time high. The banks were making huge money, and many
people that had little investment (low down payments) in to homes were going to
start missing those first month’s payments.
By 2007, an uneasy feeling started to settle in. Greed from banks and greed from politicians,
and greed from wallstreet were in full view.
However, the biggest and most untalked about greed came from the
individuals applying for the loans in the first place….the American people. It’s easy to place blame on the politicians we
elect…. But sometimes, we need to point the finger at ourselves. There is nothing wrong from wanting the
American Dream. I’ve learned throughout
my short life, that with hard work, persistence, determination, and faith, you
will reap what you sow and live a good life.
But, even at 15 years old, I know that if I can’t afford to pay for
something, I shouldn’t be asking for handouts or for someone to hand me a “risky”
loan. I also know that if I don’t have
to put anything down or invest any hard work into something, then I really have
no incentive to honor my obligation of a deal if it starts going bad. At some point, we can’t be a victim. We as Americans have to take responsibility
for our own actions as well as our own decisions. Its common sense.
Beginning around 2006, it was noticeable that home prices
began falling. Another huge trend began just as big as the last one. But this
time, it was for the worst and would be the cause of this great economic
crisis. In 2006 over 1.2 million homes in America were foreclosed upon and in
2007, 2.2 million homes were foreclosed. In October 2007, the U.S. Secretary of
the Treasury called the bursting housing bubble "the most significant risk
to our economy." Well, for some reason, no one was seriously paying
attention to this and neglected it. By the way… people want to blame Bush
policies, but it was his U.S. Secretary that sounded the alarm, and its
important to note that the House of Representatives was led by Nancy Pelosi…
Democrat, and the Senate was led by Sen Harry Reid…also a Democrat. The Democrats controlled both houses a full
year leading up to the financial collapse.
And although they were warned by a Bush official, there was no action to
stop the rising economic disaster. By
the way, President Barrack Obama was a Senator during that time.
By 2008, home prices were rapidly falling past anything ever
imaginable. This was because of these increased foreclosure rates. In 2008, the
foreclosure rates zipped past 3 million, a 225% increase since 2006! Because of
this, the bank’s CDOs dropped dramatically in value. But the aftershock of this
economic boom was just beginning. DUNDUNDUUUUNNNNNN!!! Banks began running out of
money as people started to pull out there savings. The banks began to breathe their last
breathe. All they had were the possession of unfinished homes and the authority
to give some really bad FICO scores.
Great. There was not enough money to keep the banks running let alone
lend to anyone. Now, many companies use loans to finance their business. You know…Like first invest, and then get a
profit… kind of deal…. Ya know, it takes money to make money. These loans might
only take 30 days to pay, but for some businesses, these loans were essential for
business to be able to pay for their inventories, as well as their payrolls.
Being accustomed to this strategy, most companies didn’t have any way to pay
for these things, especially when the banks held on for dear life, and gripped
what money they had remaining…and of course reduced the lending. These
companies were forced to resort to laying people off, to prevent their own
business from sinking… just as the banks were. This domino effect continued. Because they were laid off and couldn’t afford
it, more people started defaulting on their homes, and this in turn, caused a
landslide of downward home prices. They couldn’t afford basic necessities let
alone a house. Because the consumer wasn’t buying, companies were now not
making enough income and even more people had to be laid off. As a result, 8
million jobs were lost in 2008.
So, 2009. Now, I don’t
know if the presidential campaign was a distraction or what, but I’m wondering
why Obama didn’t realize what was happening.
There was a stimulus bill that was passed that plugged the hole, but
then that was it. And it wasn’t even
plugged that well. Hey … here you go
greedy banks…. Heres some money to hold you over. I mean, the banks had been so responsible with
what they had before right? But after
witnessing this devastation and loss of jobs, why didn’t he continue focusing
on creating the jobs that were lost. And
why instead, if the economy was in such shambles and he had all the power of a
Democratic Congress, did he not take action to fix it. No, he had different priorities. And those being of a very Partisan
nature. It was the Democrats opportunity
to pass Health Care Reform. Really it was more like health care DEFORM…. And
health care they did. The focus was not
the economy and certainly not jobs during those first two years. It became and ideological party free-for-all. (You would think running for president, your
eyes would be opened to this kind of stuff, ya know, why your running for
president in the first place, maybe because you want “change” in America and
value the reformation of it. You want to help people. You want to help the 8 million
struggling people who had just lost their jobs. Hey, Maybe that’s the reason
they couldn’t pay for healthcare…? We’ll discuss that another time though.) Anyways, in January 2009 alone, 740,000 more
jobs were lost and the number continued upward. I believe this would have been
the perfect opportunity for Obama to create change where it was needed and show
leadership. But we stayed in the recession and people are still suffering, and
here we are 4 years later. The unemployment rate did not decrease. And now, our
own country is going bankrupt. Our government, just like the LMI people who
bought homes, is spending money on things we can’t afford. (Obamacare?) Our
rising 16 trillion dollar debt proves it. This debt is the outcome of a
recession going back to the actions well before the Bush years. It roots back
to the time of an administration before I was even born. And now, our issues are resulting from the
irresponsible spending habits of our commander in chief. Every month my Dad balances his check
book. But in four years, our government
can’t even balance theirs once. But unlike the government, my Dad doesn’t get
bailed out when times are tough. He just
works more hours, or does more with less.
But for our issues with the national debt…. This time, we won’t have
anyone to bail us out.
So, What happens to the people dependent on the government, and all else of America after that. I don’t have the answer to that just yet, but
I know it won’t be good. If people are lazy enough to depend on the government,
then we are certainly too lazy to continue fighting for the mighty cause our
forefather’s fought over. (Be faithful in the little things…) That cause was
independence. That cause was freedom.
Our country… we are enslaved to our debt. Are we really free?
I read where our forefathers, being simple merchants and
farmers, went up against the world’s greatest and biggest military of the
era. They wanted freedom. They wanted liberty. They wanted independence and freedom to make
choices. They didn’t want to have the
government making decisions for them. And
when they had a choice, they chose to fight.
They chose to go against the status quo.
And Even when all odds were against them, their spirit of excellence and
ability to sacrifice was bigger than the Goliath in front of them.
So, now we have our choice. Do we continue to choose
greed? Do we continue to allow others or
the government to dictate our lives?
When will we have our forefathers’ determination?
Look, we honestly can't blame any definite one person or
administration or political party for this financial crisis, but we can conclude that in the past 3
administrations Greed has played a roll. Government involvement, bank lending practices,
banks proffits, mortgage companies are all part of the problem. However, again, the biggest culprit is
us. It’s the average American.
And now, in the next few days we have a choice to make. This choice includes the same choice our
forefathers had to make… in that our idea of Democracy is on the line. Although it doesn’t include the physical
turmoil they endured, it now more than ever includes the battle of our
hearts. It is a choice of stepping up to
our responsibilities. It’s a choice that
includes standing up to our National Debt.
It’s a choice to getting independence back to not just the middle class,
but to ALL Americans. If we can get the
government out of the way, and let Americans create more jobs, yes… Americans… then
we can raise ALL boats. We can get more
people off welfare and then into the middle class instead of the opposite.
This election…It’s about choosing a president that will
stand up to this national debt and take it seriously. It’s about choosing fiscal responsibility and
independence instead of government dependence.…. Its about
electing a president who doesn’t point fingers and blame others for our current
problems. Its about electing a president
that cares more about spending time at solving the nation’s problems than
meeting with Hollywood elites. This is
one of the defining moments of our country.
It’s the battle of our time. It’s
a time to test our morals and our convictions.
America, it’s time for a change.
We can’t continue on the current path we are on.
Will we continue the legacy of our forefathers and fight to preserve
it for the future generations? What say
you America?
I’m Victoria Tolley, and I approve this message! J
Video Link from this Script Coming Very Soon!
