Everyone has a right to own a home whether they can afford it or not. It says so in the Constitution — well, actually the Declaration of Independence in the part about inalienable rights like the "pursuit of happiness."
Politicians have been selling us on that privilege nearly since the Founder’s wrote it all down. All they charged us was our vote.
That is until the price suddenly went up. In fact, the cost to the rest of us in just one day increased by $85 billion, the amount the Federal Reserve has pledged to save (by nationalizing) the American Insurance Group (AIG). As we all know that’s only part of the taxpayer outlay so that everyone can share the American Dream.
In the last few weeks billions and billions more have been added to our tab with the bail out of Fannie Mae and Freddie Mac and private investment firm Bear Stearns. Meanwhile, Wall Street has imploded and banks are teetering and trillions in investment wealth have disappeared.
In the classic movie "King Kong," the final line by the would-be show biz impresario looking down at the magnificent but lifeless creature says, "It was beauty that killed the beast." For years now banks and mortgage companies and the "Street" have been preparing to ape that scene, subbing "greed" for "beauty" in the sudden demise of the sub-prime beast. But unlike Kong the common people have come to try to resuscitate this monster. Had Kong revived, he might have carried off Fay Wray to a split -level, four- bedroom, three- and- one-half bath number in the trees in his favorite Florida neighborhood at a nifty price of $1 million.
It wouldn’t have mattered that Kong not only didn’t have deep pockets or that in fact he had no pockets at all. The only requirement was to sign on the dotted line, nothing down with a super, duper interest 3-year arm of 4.9 percent that might only go up three points at the end of the first period. But he needn’t worry. By then this lovely home would be worth at least a half a mill more. If he couldn’t afford the bananas, all he would have had to do is sell it and use the equity to move higher. Right?
That’s how it worked forever until it didn’t. For some reason, the house that he got for such a bargain was a bit overpriced, say by a third. Now he’s dealing with a big time problem and looking for a way to get himself and Fay back to his island — maybe on the same kind of tramp steamer that brought him here in the first place. So he jumps the loan and the venal little jerks who sold it to him without proper documentation using one of those time bomb interest rates are gone too, leaving the greedy financial institutions who have bought umpteen zillion of these worthless deals in the lurch and us holding the bag. Panic is everywhere.
It turns out that some of the most venerated money companies in the land like AIG are so far out on Kong’s limb that if it breaks, all those hardworking, responsible stiffs who knew that one should obligate only one quarter of one’s monthly income to one’s shelter are going to crash with him. That means we all have to pitch in to save our hides (no offense Kong) and pray the entire housing market comes back into balance soon and the cheap money philosophy dies before we all tank financially.
What choice do we have? In the meantime, perhaps there is some solace in the fact that maybe the high rollers who got us here took a bath too. But don’t bet on it. If the past is any indication, these geniuses probably stashed away plenty in past earnings during years of irresponsible prosperity.
The employees and small time holders of now practically worthless stock in Fannie and Freddie and Lehman Brothers and AIG and so forth are the victims and have booked passage with Kong to his cliff side resort where roofs aren’t necessary.
So much for the American Dream and the politicians who not only promised a chicken in every pot but a Viking Stove to cook it on and a granite counter top on which to place the warming tray. Perhaps this is the catharsis we needed to understand that not everyone should own a house or other bought on credit goodies beyond our means. It may be the only way out of this nightmare where we end up on the ground like Kong with no one capable of administering CPR.
The pursuit of happiness has cost us dearly.
(E-mail Dan K. Thomasson, former editor of the Scripps Howard News Service, at thomassondan(at)aol.com.)