Have you been reading about the financial crisis caused by the home mortgage debacle? Here is what Paul Krugman has to say about it. Thinking about it has raised some questions in my mind.
Anyone over the age of 35 or so knows very well the basic rules for making safe home mortgages – ones that will likely not go into foreclosure. They were the rules in place when we were young. A sound and safe home mortgage is based on an accurate appraisal of the value of the property, does not exceed 80% of the property’s value, and is made to someone for whom the mortgage payments are no more than one third of their take-home income.
So, if you are over the age of 35, have alarm bells been going off in your head over the last 15 years or so about what has been happening with home loans? If you have investments have you been avoiding ones that involve pools of residential mortgages? Have you said no to second and third mortgages and variable rate mortgages? If not, why not? Did you think that the need for the old rules were figments of our parent’s imaginations? Or did you think that something had changed so that the old rules did not apply any more? If so, what did you think had changed?
If you considered yourself a conservative at any time during the last 15 years did being a conservative make you more or less likely to think that throwing out the rules for how to write home mortgages was a problem? What exactly have conservatives been conserving?