A Time of Great Hope EDITORIAL

LIBERTY, February 15, 2010 – Our nation is going through a time of great social change not unlike the period we went through during the civil rights movement. We are at a time when we reexamine and question our basic values taking a very serious look at how things went so wrong.

People are very angry and have a right to be so. This is the reason for the “Tea Party,” movement. These people are largely middle class, white and have been suffering more than they and others deserve. Those less affluent suffer even more yet lack the where with all to even have a voice in the debate. They have become vocal in complaining seeking someone or something to blame but offer absolutely no solutions. This fact is where they fall far short and will in time go away and become forgotten as a largely ignored footnote in history over time. Although we hear a lot out of them at the present time, in long run they will be largely ignored.

What went wrong in the last several decades is an abandonment of basic moral principles that we could easily all agree on. We assumed that government should get out of our lives. That we as a nation should deregulate everything eliminating all the regulations, government policies and controls that reflect our basic moral values of fairness that everyone could easily agree on and that protect the public interest. We decided that our prosperity would be linked to the market, unfettered by any sense of a moral compass to guide it and protect us. Profit and particularly short term profit without considering the long term effects that such short sightedness brings, as well as the risk of it all, caught up to us in a big way in the third and fourth quarters of 2008.

For decades, Alan Greenspan preached deregulation and deregulated the banking industry and Wall Street. His premises was that we should not regulate and that the market would in fact act in it’s own self interest to preserve itself for the benefit of all concerned and the public good. Greenspan now says, “I was surprised, and I was wrong.”

Unfettered greed took over the minds of Wall Street and who could avoid the temptation for unlimited profit for a few in the near term no matter what the risk involved. There was no one telling them NO, protecting the public good. There was no regulation or anything else to stand in their way. They took the long odds wager and lost it plunging the country into economic collapse.

The public suffered from the same fault in wanting the quick rewards of immediate wealth and signed up for riskier and riskier creative mortgage products that banks and mortgage companies were so willing to provide making it big in the process.

In studying the history of the Great Depression the unregulated stock market was the problem. People were told the market would never go down. At that time you could purchase huge amounts of stock on margin and consumer credit was widely available to everyone for just about anything for the first time in the history of nation having been around for about 15 years prior to that time. The period just prior to the Great Depression was the “Guilded Age.” A time of exorbitant wealth for the few. In 2008 that average CEO of a corporation in the US earned almost 400 times that of the salary of the average worker in the same corporation. The only other time in our history that has occurred was the year of the great depression. That should tell all of us something.

What the Wall Street Bankers, Banks and Mortgage Companies did was nothing short of predatory and many were taken advantage of in the hopes that the value of real estate would continue to increase and they would realize large short-term profits. But it was the largest banks and Wall Street who had rigged the game in their favor, or at least they thought.

During the Great Depression is was the Stock Market that would never go down and people invested and risked everything they had buying stocks on margin and most lost all they had. During the Great Recession of our time it was the value of real estate that would never go down and Mortgage Companies and Banks created the never before unheard of risky loan products that allowed everyone to get into the game.

The basic moral principle that we must understand is that, “We are our brothers keeper.” We are all in this together and what affects the welfare of others affects our welfare and outcome as well. We are all in the same boat and we sink or swim together.

One example of a government law and policy used to protect the public and help insure the public’s welfare in Texas was that by state law home equity loans were not possible. Roughly twenty years ago lawmakers put this measure to a vote and we as Texans voted to allow lending institutions to make home equity loans to homeowners. That decision made lending institutions a lot of money. However, it lowered the net worth of many homeowners and placed them in a position of much greater risk. There are vey few people who benefit from a home equity loan except the people who make the loans.

When you make a home equity loan in many cases you are betting that the value of your home will continue to rise. Sometimes it does not. Many people today across our country were paying a mortgage on a home, took out a home equity loan because their home had increased in value and could do so. They found themselves little more that beggars when the value of their homes began to decline. Many homeowners, owing a mortgage and a home equity loan wound up owing much more on their homes than they were worth as home prices declined. Realizing the shape they were in, many walked away from their homes and there mortgages making our nation’s financial melt down all that much worse and driving our economy further down.

The world changed when our economy melted down in that fall of 2008. We will not be going back to business as usual. The excesses of the past will not be repeated if we are to recover. The mantra, so popular for decades of deregulation must be brought to an end in order to prevent the excesses of the market and protect the American people.

We need regulation as a society that is consistent with the basic moral values that we all can agree on and that protects us from the greed and excesses of those who would damage us.

Jim Wallis puts it this way; “There will be no economic recovery until we have a moral recovery as well.”

That statement alone gives me great hope for the future. We will come out of this economic tailspin and I believe we will be better people and a better country for having gone through it.

By Allen Youngblood