Main Street? Wall Street? No, Ventura Blvd.!!

“I feel like Butch Cassidy and the Sundance Kid. Who are these guys that just keep coming?”
—Treasury Secretary Henry Paulson Jr.

This is a great article from the WSJ discussing California's impact on the crisis at hand.

"California doesn't have a Wall Street problem. Wall Street has a California problem," says Christopher Thornberg

I remember when I was living in LA in 2005, the height of the housing boom, and everyone was acting like there was free money everywhere. People who didn't own houses were in deep depression that they had missed out on winning the lottery, and people who did own their homes were taking out equity, as much as they could. They were paying of credit card debts, a good idea, and buying boats, a bad idea.

I was at an event for Texas Exes and a girl behind me in line told me how she was planning on living without paying the super high California rent, a plan she recommended that I also follow. You get your parents to give you a downpayment on a three unit home. Then you use the rental payments as your income to pay for the place and to qualify for the loan. If you do this with an interest only loan you can make the numbers work. Of course, property values in California are never going to go down, they are only going to continue to rise at exponential rates as they have for the past five year. So the fact that you are only paying off the interest isn't as important as the fact that soon your units will be worth three times as much. If you get a job and can start paying off the principal at any point in the future, you will still be a winner. The girl who told me this plan did not have a job, and her boyfriend was also looking for work because they had both just graduated.

Seriously, who gives a loan to someone just out of school with no income. Lots of banks did. And they deserve to fail.

Living next to all this free money that other people were getting was really hard for me. It was really unfair. Now all those people are being foreclosed on. They spent their house on a boat or credit cards. How irresponsible are Americans!

No one likes to see people on the street. And many of these people were living hand to mouth before they got free houses, so its hard to hear about them going back to that position. I think that its worth keeping in mind that these heartbreaking stories of homelessness are really stories of poverty. These are people who weren't doing that well before someone gave them a loan that they couldn't afford. They probably couldn't make rent every month.

There is a lot of data floating around about personal and public finances right now. This is an article about how much it sucks to be evicted from your home.

"Forty-four percent of employees live paycheck to paycheck, according to a survey conducted by MetLife in late 2007, and 48 percent of American households have less than $5,000 in liquid assets according to Edward Wolff, an economist specializing in the study of poverty and income distribution at New York University. "

And, the average American holds a couple grand in credit card debt. It seems like protecting people from eviction is just moving deck chairs on the Titanic. Americans as indivuals have serious financial troubles. It's hard to believe that most of these people who took out terrible loans had the financial savvy to even understand what they were doing given this data. They were used by predatory lenders. And those lenders profited while completely screwing up the housing market. In effect, denying homes to people who could afford them.

I would really like to see banks punished. The money is frozen and they are hurting, but seriously they aren't hurting enough. By giving out all that free credit, banks increased ticket prices on all of the homes in California. The same number of qualified buyers existed, and those buyers were all forced into a market with people spending Monopoly money. Those are the people you feel bad for. The ones who got a lot less house for their money and are now upside down on their loans because of attacks on housing prices. They are also the ones least likely to get any help. They have jobs and can continue to pay their responsibly financed mortgages, but they probably won't see that money back soon, maybe ever. That person could have been me!