A Warning From Thomas Jefferson
Two hundred years ago, Thomas Jefferson voiced a warning: ‘If Americans ever allow banks to control the issue of their currency, first by inflation and then by deflation, the banks will deprive the people of all property until their children will wake up homeless.’ Today, approximately 7,000 families every day are losing out to the housing crisis by having their homes foreclosed. That is about 21,000 women, men, and children each and every day being forced out of their family homes. Their assets are gone, and most of the time their life savings. It will take these people many years to recover, if ever.
Massive amounts of ARMs are due to reset and the consequences will be devastating. And the largest, most stinky heap of ARMs is due to reset in California where home prices continue to drop rapidly. Let’s do the math: ARMs resetting mortgage payments plus ever-falling home values equals a tsunami wave of homeowners who will have to walk away from their mortgages. Says Slate.com’s Mark Gimein, “…the crisis in California is going to get much worse, and there is no bailout that will solve it.”
Why is this happening? The first stage of the housing crisis featured people who could not afford their mortgages in the first place. The next stage will be about homeowners who have ample reason to walk away. In the next few months, if not already, the nation is going to sing in chorus and handwringing about the morality of people who give up and walk away from their mortgage.
Two years ago, lenders had no qualms about making risky loans and giving buyers loans with payments that would increase exponentially in the near future. So now, homeowners have no qualms about packing up and walking away.
This is the generation of jingle mail that scares the heck out of Wall Street and Washington. And in the meantime, the Senate and the House scramble to try to slow the deepening tornado that threatens the life right out of this country. Perhaps our government needs to study Thomas Jefferson’s ideas and get a clue.
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