Sunday, September 21, 2008

The New Phrase the Pays!

Households First! Then banks.

HT to Bluelyon via Lambert.

This country is not made up of banks and corporations. It is made up of households. It is made up of families. Not all families are bankers and finance people and insurance industry mucky mucks, but all bankers and finance people and insurance industry mucky mucks are parts of households.

Fix households first, and you fix the whole of the problem. Subprime loans are toxic because the mortgage payments were more than the families could afford. Make the mortgages affordable and suddenly those loans aren't so toxic. Next up on the foreclosure block are the Adjustable Rate Mortgages, whose interest rates are about to skyrocket. Freeze those rates for a bit and people keep their homes. Which means they keep paying their mortgage on time, which means that the loans don't become the financial equivalent of toxic waste.

All of this falls into my gallon of milk analogy of economics, or why having more people who can afford some stuff is better for the economy than having a few people who can afford a ton of stuff. No matter how rich someone is, they are never going to buy more milk than they need. They may buy slightly more than the average person, perhaps two gallons a week instead of one. But that rich person is never going to be able to buy as much milk as 15 middle class families, or even 4 poor ones.

Now rich people who own a lot of property, like say John McCain and his 8 houses, will never be able to match the shear numbers of property owners in the middle class. They just can't. And keeping families in their houses benefits not just the family, but the neighborhood the family lives in (no foreclosure blight) and the city the house is in (property values stabilize because the number of houses on the market isn't increased) and banks stop panicking because mortgages keep being paid.

Now if we take the Republican view that those being foreclosed on didn't deserve to own their own homes to begin with, or even just go with the idea that we need to save the banks first and the people second, we end up with downward spiraling property values, massive homelessness, deteriorating communities, and skyrocketing rents.

So in this brave new Great Depression, remember Households First! Everything else will follow if we keep that in mind.

No comments: