Even though I wrote about the loss of perspective Wall Street had during this financial meltdown last week, I acknowledge that they were not the sole cause of our mess.
After reading Dan Wooldridge's "Begin with the Household" where he examines the meltdown at a more granular level I recalled my own experiences beyond Wall Street.
Dan cites Nouriel Roubini:
"So any unsustainable debt problem requires debt reduction. The lack of debt relief to the distressed households is the reason why this financial crisis is becoming more severe and the economic recession - with a sharp fall now in real consumption spending – now worsening."
Then I read The Wall Street Journal's "Bailing Out Ourselves: Bankers weren't the only ones who enjoyed the credit mania."
My memory took me back a little over two years ago when Christine and I were house hunting. Traveling up and down the peninsula (area between San Francisco and San Jose), we encountered several real estate agents, mortgage brokers, mortgage agents, and others related to residential real estate. By the time we moved into our new home, we met with a few real estate agents and mortgage agents who were pushing adjustable rate mortgages (ARM) and interest-only loans on to us.
"We have a great rate for a 5-year ARM. Actually we have this 3-year ARM and you can get more house for your money..."
The real estate agents didn't care if you to spent beyond your means since they make their commission and it was the same with the mortgage agents or brokers. It wasn't just the greed of Wall Street but the greed of Main Street. It was the greed of these key professionals in the residential real estate markets that helped create today's economic meltdown.
It was a blessing that my wife was financially very conservative and both of us are natural skeptics. Also my parents who were more conservative than Christine were insisted the we get a 30-year fixed loan for our new home. Everything turned out well for us, but many were victims (yes, victims) of some greedy real estate professionals.