Reaping results of lax regulation

IMO, the only time an ARM loan should be allowed on any major transaction should be if the amortization schedule is for one year, or less. Creative financing allows sellers to bamboozle buyers, by making the buyer think that they can purchase more with less money. The buyer forgets that the money being loaned, is not theirs, payments will go up, and 100% of all the expenses incurred, must (repeat: MUST) be paid, at 'rate,' as agreed, or they loose more than the purchase item.

Real Estate financing, especially agricultural, once upon a time, not so long ago, was the most stabilizing factor in the economy. Today, that long-term stabilizing force has been subjugated, by greed, to the marketing whims of money brokers, where the buyer is subject to most of the risk, with the broker risk 'insured' to be minimal, in a, presumed, worst case disaster (This has been, once again, proven to be a gross error).

Again, IMPO, The above article is written by a person, has no knowledge about, nor understanding of, safe financial rule-making. Every suggestion made, above, already exist as rules, and laws, and are in place, to stop the problem of bad financing, except the problem of lenders not 'adhering' to those rules, and laws, for 'honesty,' or 'what-ever' sake. Arley Steinhour

Your last paragraph is obviously some sort of lame attempt to plop this mess squarely at the feet of the Bush administration.

The current debacle is not a result of lax legislation; but of HORRIBLE legislation authored by a Democrat majority from the early '90's.

As early as 1992, a majority-Democratic Congress "mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains." According to the LA Times.

Under Clinton, the entire federal government put massive pressure on banks to grant more mortgages to the poor and minorities. Clinton's secretary of Housing and Urban Development, Andrew Cuomo, investigated Fannie Mae for racial discrimination and proposed that 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low- to moderate-income borrowers by the year 2001.

Credit histories and down payments were encouraged to be disregarded. Threatening lawsuits, Clinton's Federal Reserve demanded that banks treat welfare payments and unemployment benefits as valid income sources to qualify for a mortgage.

In 1999, liberals were bragging about extending affirmative action to the financial sector. Los Angeles Times reporter Ron Brownstein hailed the Clinton administration's affirmative action lending policies as one of the "hidden success stories" of the Clinton administration, saying that "black and Latino homeownership has surged to the highest level ever recorded." Not a problem - except for the fact that, again, the examination of credit histories, downpayments, and the ability to re-pay the loans were taken off of the table as sound business practices by Democrat policies.

Economists warned that Democrats were forcing mortgage lenders to issue loans that would fail the moment the housing market slowed and delinquent borrowers couldn't get out of their loans by selling their houses.

In Bush's first year in office, the White House chief economist, N. Gregory Mankiw, warned that the government's "implicit subsidy" of Fannie Mae and Freddie Mac, combined with loans to unqualified borrowers, was creating a huge risk for the entire financial system.

Rep. Barney Frank denounced Mankiw, saying he had no "concern about housing." The New York Times reported that Fannie Mae and Freddie Mac were "under heavy assault by the Republicans," but these entities still had "important political allies" in the Democrats.

If the free-market had indeed been "free" to work; the idea of sub-prime mortgages would have never left the drawing board.

Mickel, you state that the Democrats started this all. Bush was warned in his first year in office. He had 8 years to change it...he chose to ignore it. What kind of president ignores the collapse of his own country and then defiantly states just 1 month ago that we are not in a recession, writes a blank check to his financial advisors, then all of a sudden his cabinet states we are officially in a recession. So far, Bush has done 0% for the average individual yet $100KKK towards companies and executives who can't budget their own checkbook. Good bye Bush....hello optimism.