Do We Ever Learn from our Experiences or our Mistakes - An Old Solution to a Current Problem by Irwin Nesoff
Although the current mortgage meltdown and concurrent housing bust have been described as the worst since the Great Depression, they are not unlike those similar occurrences that took place back then, not so long ago. By 1933, as a result of the Depression, unemployment reached 25 per cent and there was an 80 per cent decline in new housing construction.
America experienced a building boom in the 1920’s fueled by the loosening of lending standards (sound familiar?) People began purchasing larger and larger homes encourged by interst only loans and the belief that prices would keep rising. (Am I making the comparison clear yet?) As the economy began to sour and people started losing their jobs the default rate on home mortgages began to rise, with approximately one in six homes entering foreclosure. Today that percentage is much lower, only about 3 per cent of all mortgages, or about 1.5 million mortgages are seriously past due or in foreclosure. However, considering the larger number of homeowners today that also results in a larger number of foreclosures.
Like George Bush today, Herbert Hoover watched the decline of the economy and the housing market in paralyzed disbelief. Taking no action to address the growing problem Hoover left it as part of his legacy of a ruined economy for his successor, FDR. This is very similar to the scenario being played out today as Bush is collecting unsolved problems for his successor to deal with.
When FDR came into office in 1933 he pushed through piles of legislation in his first 100 days to address the disastrous economy he had inherited. One piece of legislation passed in this flurry of New Deal bills was the Home Owners Loan Corp (HOLC). Through this mechanism, the federal government purchased failing mortgages and turned them into low interest mortgages to help stave off foreclosures. The HOLC also made low interest loans to help families repurchase homes that they had lost to foreclosure.
This was a simple idea that worked then and can work now. But, almost thirty years after the Reagan Revolution convinced Americans that government is the problem and NOT the solution, we are somehow waiting for the private sector that created and profited handsomely from this debacle, to solve it for us. The time for decisive action is now, but where are the legislators willing to commit the government to do what it exists for, to protect and serve the people. George Bush has spent seven years demonstrating to us that government under his tutelage is not capable of solving problems, only creating them. But isn’t that why we elected a Democratic Congress? The answer to the foreclosure crisis, the Home Owners Loan Corp. or some similar effort, is a proven method that worked once before and can work again. As in so many other failures of government to protect the welfare of its citizens, it is not the resources that we are lacking but the will.
Although the current mortgage meltdown and concurrent housing bust have been described as the worst since the Great Depression, they are not unlike those similar occurrences that took place back then, not so long ago. By 1933, as a result of the Depression, unemployment reached 25 per cent and there was an 80 per cent decline in new housing construction.
America experienced a building boom in the 1920’s fueled by the loosening of lending standards (sound familiar?) People began purchasing larger and larger homes encourged by interst only loans and the belief that prices would keep rising. (Am I making the comparison clear yet?) As the economy began to sour and people started losing their jobs the default rate on home mortgages began to rise, with approximately one in six homes entering foreclosure. Today that percentage is much lower, only about 3 per cent of all mortgages, or about 1.5 million mortgages are seriously past due or in foreclosure. However, considering the larger number of homeowners today that also results in a larger number of foreclosures.
Like George Bush today, Herbert Hoover watched the decline of the economy and the housing market in paralyzed disbelief. Taking no action to address the growing problem Hoover left it as part of his legacy of a ruined economy for his successor, FDR. This is very similar to the scenario being played out today as Bush is collecting unsolved problems for his successor to deal with.
When FDR came into office in 1933 he pushed through piles of legislation in his first 100 days to address the disastrous economy he had inherited. One piece of legislation passed in this flurry of New Deal bills was the Home Owners Loan Corp (HOLC). Through this mechanism, the federal government purchased failing mortgages and turned them into low interest mortgages to help stave off foreclosures. The HOLC also made low interest loans to help families repurchase homes that they had lost to foreclosure.
This was a simple idea that worked then and can work now. But, almost thirty years after the Reagan Revolution convinced Americans that government is the problem and NOT the solution, we are somehow waiting for the private sector that created and profited handsomely from this debacle, to solve it for us. The time for decisive action is now, but where are the legislators willing to commit the government to do what it exists for, to protect and serve the people. George Bush has spent seven years demonstrating to us that government under his tutelage is not capable of solving problems, only creating them. But isn’t that why we elected a Democratic Congress? The answer to the foreclosure crisis, the Home Owners Loan Corp. or some similar effort, is a proven method that worked once before and can work again. As in so many other failures of government to protect the welfare of its citizens, it is not the resources that we are lacking but the will.
The Center For American Progress has recently published a well researched report on addressing the mortgage crisis: http://www.americanprogress.org/issues/2007/12/pdf/holc_paper.pdf
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