More than informed--self analysis post

At the very beginning of this project, the economy in the country was at its worst time. The companies on Wall Street were issuing bankruptcies, and people were losing jobs because of this. Then the stock market experienced the worst drop—national economy hadn’t been such volatile for decades. So I chose this topic, because I felt the mortgage crisis to some extent caused this. I thought I could go back to the starting point of everything just like rewinding a tape, and then I would have a clearer insight of the whole crisis.

That who caused this crisis is a very contentious topic. Those who lost their homes blamed the investment banks for designing risky loans such as payment option ARMs. They blamed banks for selling loans but not telling consumers potential risks. However, others claimed consumers shouldn’t have bought the house at the first place. If they chose to intentionally spend money beyond how much they earned, then they deserve the foreclosure. Finally there are others who blame the government for lacking oversight. It’s hard to decide who actually caused this. There are too many IFs concerning this issue—if a single group hadn’t done one thing, and the other things wouldn’t have happened. I believe that, most of the time, the cause of a disaster was the mixture of many possible reasons. Just as is said, “It was nobody’s fault, it was everybody’s fault.” What we are able to determine is what factor contributes more to the incident.

When I was researching, I saw so many cases about how miserable life could be with homes taken away, especially for those who had already been receiving minimum wage or welfare. In Pasadena, a woman was found dead in a burning house. She did this because she knew she would be evicted from the house. Most of people hadn’t known anything before they found themselves in the predicament. It makes me believe that it’s not mainly consumers’ fault, though some people made a lot of money from speculation. Every company is profit-seeking without an exception. And they couldn’t have deceived homebuyers if there weren’t any loophole in the system. The purpose of running a company is to exploit all the consumer surpluses. If one company profits from one particular investment, and every other companies will try to share them in a competitive market. “If they can do this, why can’t I?” That’s exactly how companies thought. Government should’ve discovered the loophole and fixed it.

Maybe it’s because I am brought up in China, in a country where government plays an important role in people’s life, so I gradually form the idea that government intervention is acceptable, sometimes even preferable. And after I did the comparison between US and China, I found that China didn’t fall into the crisis just because there was enough regulation. The requirement for down payment and the restriction of trading equities between banks all prove to be right choices in the market where housing prices were roaring. Many people think China is over regulated. I agree that Chinese government put too much intervention in some area such as media or even market. I can understand why people think like that, and some their comments are actually right. If I have ever learned anything from this, it will be that we need moderate government intervention during this critical moment. I might have some preconception at first place believing regulation is good. When I was doing the research, I put more focus on the commentaries that were for regulation. But I also understand why people don’t want any regulation. Deregulation is the idea Americans have long embraced, and people had live good lives under free market.

If one out of a million people are experiencing foreclosure, I will still believe free market is good. But now, one in 416 US homes got a default notice. And those people are just around us. I see my friends’ parents losing jobs; I see their college budget constraints. I feel really sorry for them. Everyone was working so hard to pay the loan, and now people lost both their homes and their jobs. This tragedy shouldn’t have happened.

I might not be the expert on this issue. But I’m glad that I was given the chance to look into the mortgage crisis. I was able to make some well-founded comments rather than blindly accuse whoever caused this.

Recommended blogs

Jumping the Fence

This blog deals with illegal immigrants from an objective perspective. Being a Latina herself, blogger Petra has a deeper analysis toward this issue. I can see that she really cares about this issue from heart. People don’t usually pay much attention to the issue of illegal immigrants, neither do our presidential candidates. However, illegal immigrants make a big part of our society. Petra provides us with a lot of precious information we rarely notice. She analyzed the issue from both sides, and brought up her own insightful conclusion. Jumping the Fence is worth visiting.

Homeland Security

This blog is dedicated to discussing national security. Instead of listing a wide range of cases, O bro focuses on airport security. Airport is the gate to United States. And with war on terrors going on, it’s high time we should set up a systematic security process in airport. However, this is no easy task. There are conflicts between security and privacy. Government funding is another problem. We need to think about if airport security should be a priority when there’s great deficit in our country. These questions are all valuable ones every one of us need to think over.

Reenergize Tired Earth

The blog concentrates on alternative energy. This fascinates me because energy is such a big and fundamental issue in our country. It is closely related to everybody on earth. Because we have conflicts between profit and alternative energy, so it’s interesting reading about how the author thinks about this issue. This blog refreshes my thought about energy consumption.

Tips for mortgage crisis

Mortgage crisis is never distant. It’s just around us. A lot of homebuyers are concerning what they can do to avoid such crisis happening as well as how to deal with possible foreclosure. There are pretty much information online. Here I want to share with you some useful tips I concluded.

1. Think twice before you decide to purchase a house

Purchasing a house is a big issue not only to yourself but also your whole family. To avoid a possible price plummeting like this one, you may want to sit down with you family and discuss all the possibilities. You may want to carefully evaluate your family income and job stability, and then decide whether to purchase a house or what kind of house you would like to buy. Besides, it may be helpful to sketch a future plan of paying back loans—how much to pay each month, and how long will it take to pay back all the loans. It’s always safer to spend within your ability. And it’s never too late to decide.

2. Refinance home equity loans

If foreclosure unluckily happens, this is the first choice I would recommend. Although it would be extremely hard to apply a refinancing loan during this credit period, no doubt this is the most helpful one. According to Amazines. Com, “it is important to bolster your credit, provide excellent documentation, and be realistic about pricing and market value in terms of equity or sales prices of listed homes.”

3. Local resources and renting information

If you can’t keep your home, there are a lot people who are willing to help. Talk to local mortgage counselor and ask for their advice. Those counselors are experienced in these cases. The following website offers helpful information in mortgage counseling around the country: http://www.hud.gov/offices/hsg/sfh/hecm/hecmlist.cfm. The website also has useful renting information (http://www.hud.gov/renting/local.cfm).

4. Remember, it’s not end of the world even your home has to be taken away.

I understand it’s a tough experience to be evicted from the house. I can feel the pain when one did nothing wrong but had to face the foreclosure. But please don’t give up life that easily. It’s a good idea to talk to friends and family members, or talk to people who share the same experience. Love can never be taken away, and it’s way more precious than a house. Stand up and fight the bad situation. Tomorrow is a brand new day.

Extended reading

http://www.huffingtonpost.com/news/housing-crisis

This is a liberal website dealing with housing crisis. This site contains both information and columnists’ comments. This site will appeal to more democratic people because most of the articles on it are against Fannie Mae and Freddie Mac, and are for government’s intervention.

http://online.wsj.com/public/page/news-real-estate-homes.html

Wall Street Journal is a more professional and neutral website. It usually has the latest new concerning the mortgage. Analysis on Wall Street Journal is usually more objective. And because this website has precise evaluation on the mortgage crisis, the articles seem persuasive to me unlike some irresponsibly biased blog posts I found through Google.

http://www.nytimes.edu

This is a valuable site for reliable resources. It may seem more liberal too. But just as Wall Street Journal, it has absolutely accurate analysis.

http://www.ccc.unc.edu/

Want to see how professors in our college working on the mortgage crisis? Here is the link. There are some valuable insights from our professors on this websites. You may not agree with them, but it’s still a good reference.

Illegal immigrants fueled mortgage crisis? What do you think?

I was trying to research some information about mortgage crisis relating to minorities. And then I found that, when it comes to illegal immigrants, a lot of people express their hatred toward them. They claim that illegal immigrants fueled mortgage crisis.

“There’s one giant paternal elephant in the room that has slipped notice: how illegal immigration, crime-enabling banks and open-borders Bush policies fueled the mortgage crisis,” according to Michelle Malkin, a columnist. Because illegal immigrants aren’t able to get a social security number, Bush government approved them to use ITIN (a.k.a matricula consular cards) in order to open bank account and report tax. Those illegal immigrants who could not purchase a house can be able to apply for loans as Americans do now. And that results in denouncing illegal immigrants publicly. As is stated by Michelle Malkin, “the defrauders manufactured and submitted false employment and income documentation for borrowers; most were illegal immigrants from Mexico.” And she said, “This is just the tip of an iceberg.”

For those who blame illegal immigrants for fueling economic crisis, they will do whenever a crisis comes because they hate immigrants. They won’t miss any chance to bash those illegal immigrants, including this one. “They shouldn’t be here in the first place, so they shouldn’t be bailed out,” said Chad Groening from OneNewsNow. Personally I don’t feel illegal immigrants are the main factors of the mortgage crisis. They are just a small part of the country. Most even couldn’t afford to buy a house. And actually, since banks are withdrawing from lending loans to illegal immigrants, they even find it harder to purchase a house. It there have been more regulation, there won’t be any single foreclosure, no matter whose house it is.

So dear classmates, I really want to know how you think about this issue. Do you think illegal immigrants fuel the mortgage crisis?

Implication post

At a critical point like now, it is urgent to get to consent and make the decision—we need regulation, and we need it now. If the problem remains unsolved, there will be serious outcome. First and foremost, we are likely to experience a deflation or recession like the Great Depression. According to VOX, a research based commentary for leading economists, “the rise in uncertainty and banking collapse look like the Great Depression.” Sounds distant to you? The crisis is just beside us. As was predicted by Cleveland.com last year, 1.4 million homeowners would undergo foreclosures in 2008. Because most people who have lost their homes receive little wage, it is likely they lose jobs at the same time. Can you imagine a world where people lose jobs, can’t afford a college education and health care? It is really going to happen if government does nothing about it. During the Great Depression, we have FDR who came up with the New Deal Policy and saved the economy. I wonder if anyone will do the same thing now. Jon Markman, an investing expert predicted in msn.com, people will have to face several differences in the future, including credit crunch, more bankruptcy and change in life style.

A more detailed comparison between China and US housing market.

In Friday Oct. 24th’s New York Times, there’s an article “In China, the Government Eases Mortgages as Real Estate Loses Its Sizzle”. It gave a more thought-provoking analysis on the mortgage issue between the market in China and the market in US.

The most significant difference is that the market is still strictly regulated in China. “Roughly half of Chinese home buyers still pay cash for their homes and do not take a mortgage at all.” This can perfectly explain why there are less default rates in China. As I mentioned in my blog, the down payment for the first apartment should be at least thirty percent of the price, and to prevent cases like speculation and risky investments, the down payment for the second apartment is raised to forty percent of the price. Although, as the housing price plummets in China, the down payment for the third house has been reduced to twenty percent, it is still not likely for homebuyers to commit default. Secondly, there’s a term limit for homebuyers to pay back loans. “The term of the mortgage must end when borrowers turn, for a woman, or 60 for a man.” Government takes this kind of regulation because they fear that people won’t have enough income to pay the loan back after they retire. Finally banks in China cannot sell the mortgage to each other as American banks do, which is called securitization, so they are less likely to suffer from bankruptcy.

What I found interesting is that “American banks and lawyers unsuccessfully urged China for years to allow securitization, but have curbed these pleas in recent months after seeing the global financial crisis unfold.”So maybe sometimes regulation is still good, no matter what kind of economic system people have, what kind of ideology they embrace. Deregulation is not always the smart choice.

What about our veterans?

For veterans who have just come back from Iraq, they have to face another battleground—foreclosure. And that is a war that they have no way to win.

A disabled Iraq war veteran Wilson, who was deafened in his right ear and is experiencing a 50 percent burning of his body, can lose his house any day. He has to pay $532 each month for mortgage loan. That may not be much to you. But as the sole provider of the family who receives a fix income, it is hard for Wilson to take care of his three kids and pay the loan at the same time. He is now owing the lender three months’ bill. He survived the ambush, the shot on his chest, and the car explosion, but he is about to give up now—the house. Another air force veteran Cooper, who was doing three jobs to pay the mortgage, still found it hard keep her house. “Nobody will finance ninety-two percent value of a house, and I am getting more in arrears,” said Cooper.

It is tough for those veterans, especially when they are hurt or are under deployment. Although government has passes some bills to relieve the stress on veterans, still a lot of veterans are suffering. The bills include The Helping Our Veterans Keep Their Homes Act of 2008, tax reliefs (HEART ACT), and increased medical and educational benefits. I’m sure these acts to some extent helped. But I doubt they covered all the veterans in the country.

Those veterans have already sacrificed too much on the battleground. We shouldn’t let them lose their homes.

Theory

America is experiencing biggest economic downturn since the Great Depression. The mortgage crisis is one of the main factors that caused this economic crisis. After housing price and stock index plummeting, the only thing that keeps increasing is people’s attention toward this issue—how should we fix this? Which bailout plan works best? Etc. However, the focal point of the argument is “regulate or not”. Deregulation and free market are what most Americans have long supported. The classical macroeconomic theory supports market solutions to problems and laissez-faire (minimal) government policies. Adam Smith compared market with an “invisible hand”. He believed that market will cure itself. However, if we choose to keep deregulating market, there’s a possibility that the market will go wild and crisis like this will happen again. On the other hand, we have supporters of restriction. Companies as Fannie Mae and Freddie Mac did too much damage before government had chance to take over them. Nobody can believe those companies that they will not do the same thing again. But, just as I mentioned before, restriction of the market deviates from the principle Americans have long embraced. And in the long run, government’s intervention will cause allocating and producing inefficiency.

So there are two choices—we either wait or do something. We can’t take subprime loans away from consumers because there are people who still need them. So the only way is to exert restriction on mortgage companies. I’m not meaning that this restriction will last forever, but at least for now we need some control over these companies. Central controlling doesn’t mean we are stepping into a socialist country, which most Americans fear. The basic different between a socialist country and a capitalist one is not the means but the purpose of implementing policies. Now government intervention is only the means to achieve a capitalistic purpose. So there is no need to worry. People may believe in business’s cycle that market has good times and bad times, but we have no idea how long will the bad time last. Just as macroeconomic theory failed to save the Great Depression, it might not work now.

Subprime Loans

“Subprime is Wall Street’s euphemism for junk.”
--Andy Serwer and Alan Sloan, How Financial Madness Overtook Wall Street, Time, Sep. 18, 2008

There might be hundreds of mortgage plans advertised on TV. However, the basic difference of them is whether it has a fixed interest rate. The subprime mortgage, for example, is the loan that has adjustable interest rate. Because it has an adjustable interest rate, people can delay paying loans as long as they want, and some even abandon the house so they don’t have to pay one cent. That’s where defaults come from.

“Risky mortgage products, not risky borrowers, are the root cause of the mortgage default crisis,” according to findings from University of North Carolina at Chapel Hill’s Center for Community Capital. That means the main factor of the mortgage crisis is subprime loan. There are more default cases because subprime loan has an adjustable interest rate. The study compared subprime mortgage with another lending corporation CAP, and got the conclusion that “Borrowers with comparable characteristics who had subprime loans were three to five times as likely to go into default as those with CAP loans. CAP stands for Community Advantage Program which helps middle and low income families with affordable loans. According to Center for Community Capital, if we return to traditional affordable loans just as Chinese lending system, things will straighten up.

It can’t be denied that some people are spending beyond their earning, and subprime mortgage gives them the incentive to default. However, we should think of the other side of people who really need the subprime mortgage. We should think about those middle or low income families who couldn’t afford houses. Do you still think subprime loan is evil?

Two million to kill the regulation plan

I just read a thought-provoking article on Huffington Post. Freddie Mac has paid $2 million to kill the legislation of regulating the risky investment company. The receiver of this two million dollar is a Republican consulting firm called DCI. DCI group is a “strategic public affairs and global issues management firm.” Campaign is the way DCI most often used to address the issue for organizations or corporations. In 2000, Senator Hagel sponsored a bill that called for regulation in the market. And then the gigantic loan corporation Freddie Mac started secretly paying money to DCI and hoped to stop the bill from passing. At first all Republicans were for the bill, and at last the bill died because there weren’t enough Republicans’ vote. Freddie Mac didn’t want its name to appear publicly. Everyone thought it was DCI, but actually it was Freddie Mac who undermined the whole regulation plan.

McCain said the other day Fannie Mae and Freddie Mac were “one of the real catalysts, really match that lit this fire.” He was right on this. These two gigantic investment companies were part of the chain in the economy crisis. I understand that all companies are profit-seeking. But there’s a limit to do this. If the bill have had passed, maybe we don’t have to face this economic downturn now. On the other hand, government officers should take responsibility too. If they have not been easily persuaded, if they have been more provident, they could have done their best to let the bill pass. Governors should see what’s best to middle-class, rather than vested interest.

HOLC

I noticed in the last presidential debate McCain mentioned home ownership Loan Corporation during the Depression Era. History is like a cycle, and now we are running into the economic crisis again. I wish the history could provide us with some profound insights toward this issue.

During the Great Depression Era, 1000 families were losing their homes each day to foreclosures. Then the HOLC (aka home owners’ loan corporation) was founded. They helped homeowners to buy mortgages from the bank and refinancing them so the homeowners could afford to pay the mortgage. According to Propaganda.com, when the Great Depression came to an end, HOLC rescued over 20% of the homes. In addition to that, HOLC made some profit from the rescue plan.

Actually, in September this year, Senator Hillary Rodham Clinton called for a plan to stop market crisis. She also called for a reform in HOLC to remove bad mortgage. She said during the speech “This is the greatest market upheaval during the great depression. We are indeed in a crisis, but in times of crisis, there are opportunities for leadership.”

Now it comes to the ongoing economic crisis. Some people believe McCain’s new plan will work well in saving such a crisis. “Investors will get an immediate distribution from the government’s cash,” said Yepper from a blog post. However, others think this time the crisis is different from the Great Depression in unemployment and international industrial economy. “The most important difference is the government’s role,” according to an article from Los Angeles Times.

We are not in 1930s. We people are moving forward, so is our economy and government system. What worked in the past may not apply to situation nowadays, because so much has been changed. McCain promised in the past presidential debate, “So, obviously, if we can start increasing home values, then there will be creation of wealth.” He might be right. I really wish it could be that simple.

Government's Intervention

Our government has come up a new idea, after the $300 billion plan. This time they decide to invest $250 billion directly to nine banks instead of buying bad mortgages. In return, the banks will be under restriction of government. This plan is considered more practical than the previous one. Consumers show more confident in this plan because the stock index skyrocketed today. Unlike the $300 billion plan, this one at least put some restriction over chief executives in the bank. They need to compensate for what they did. There’s no free lunch in this world. This plan is not groundless though. Government’s intervention has its basis in history.

In such a crisis, we need some regulation. Although Americans have long embraced the ideology of “free market” and “deregulation”, these are the ideas applied during good times. “Ideology is a luxury good in times of crisis,” says Nancy Koehn from Harvard Business School. There is no absolute freedom without regulation, or people will go wild. We still support freedom, but that’s a relative freedom. Now, both political parties are calling for more oversight, and ideas for it abound, according to a post in New York Times. Government intervention may not be the best solution. But we may want to believe it’s the only choice.

Who will clean up the mess?

There’s no doubt that we government should increase oversight on investment companies. However, the most significant difference between Obama and Johan McCain’s bailout plan is whether we should help banking companies in Wall Street. McCain’s plan is to purchase the bad mortgages. As a result, it facilitates increasing the value of home and bank. Obama votes against backing the bank, and he suggests that we should buy these mortgages at current interest rate. Obama, in addition, plans to create a universal mortgage credit and to ensure accountability in mortgage industry. Obama advised taxing small companies who earn more than $250,000 annually. Obviously, he holds the idea that those who benefit from government should pay tax to balance the assets.

If the government choose to back investment banks, it is possible that the banks can recapitalize themselves and start running again. However, according to Dissecting McCain’s bailout plan, it doesn’t give any penalty to the banks who sold risky loans. There’s a possibility that they will start deceiving consumer again.

Investment companies should have taken their responsibility before the crisis. They shouldn’t have lent risky loans to consumers in the first place. Government oversight is one problem. Investment companies deceiving consumers even though they knew it was risky is another story. It’s not about whether to bail them out or not. It’s all about the responsibility they should bear as companies. This crisis should be a warning to investment companies as well as those who want to take advantage to consumers—they can’t expect government to clean up the mess for them.

How should we approach this?

Two years ago, Bush bragged about providing homes to minorities and financing Fannie Mae and Freddie Mac. Ironically, people now have lost their home, and the two companies suffered bankruptcy. I just saw an article that was heartbreaking. A ninety-year-old woman in Ohio shot herself after the police tried to serve her an eviction order over thirty times. And she’s still being treated in the hospital. This is an extremely sad case during the mortgage period. She has been living in the house for thirty-eight years, and should have spent rest of her life in the house peacefully. And now things have overturned. Over last couple weeks, the economic issue has been the focal point of both VP debate and past presidential debate. This argument includes who should be blamed for the mortgage crisis, how presidential candidates could help people out of this predicament and what should be done to prevent such case happening again.

One of the most heated arguments these days is that who should be blame for of the mortgage crisis. Some opine that the gigantic real estate companies such as Fannie Mae, Freddie Mac and Bank of America caused the mortgage crisis and a series of irrecoverable damages. And actually they did to some extent deceive consumer in purchasing risky investments. We can see here how a house went through all possible buyers and then bought back by Fannie Mae. Fannie Mae's accounting scandal in 2006 also predicted its failure, during which Senator John McCain made a statement to warn Fannie Mae of its risky behavior. In addition, Bank of America was charged for deception in the mortgage crisis and received a fine for eight billions to modify loans. However, there are different opinions too. An Econbrowser believes Fannie Mae and Freddie Mac were actually under regulation, and it's government’s oversight that leaded to this catastrophe. Since GSE (government sponsored enterprise, such as Fannie Mae and Freddie Mac) scrutinize 70% of the loans, how could Fannie Mae and Freddie Mac keep receiving AAA rate if the loans were risky. Finally, there’s another point from Cascade Policy Institute that the crisis was not caused by deregulation because there is no regulation at all in this market. More regulation will only increase the risk. There are people also who back the Democrats and who back Republicans. I found a video about subprime analysis on left, right and center, in which people share different political views gave insightful analysis in the mortgage crisis.

United States is not the only country that experienced fluctuating housing price. Two year ago, Shanghai China experienced the same sudden downturn of real estate price and housing bubble. Housing prices almost tripled between 2006 and 2002. There were speculators, too, who bought an apartment with a small amount of money and then sold it when price increased. And then, in 2006, according to a real estate manager, “the entire industry is scaling back.” But most of people were not affected by the drop off of housing price. The reason of this difference between China and America is the banking system. In China, if one wants to purchase an apartment, the downpayment should be no less than 30% of the housing price. That means if he gives up this apartment, or his downpayment will be wasted. Compared to American’s mortgage industry, China’s may not be as mature. Nonetheless, it was because of government’s strict control that prevented China from such devastating crisis.

Government’s control over the whole industry is significant in preventing the disaster. In the past VP debate, Palin insisted that “there was greed and corruption on Wall Street, and we demand state government strict oversight over entities in charge of our savings.” Biden said “we have overwhelming deregulation on Wall Street.” It was right for both of them to have pointed out the error on Wall Street. However, in deciding what government should do exactly to bail people out of the crisis, Palin ignored the cause of current situation, which was partially due to deregulation. Biden, instead, listed four basic criteria which were powerful and insightful. Now it comes to the presidential debate on Tuesday, as stock index keeps plummeting (Doe Jones had crashed another 508 points that day), economic was the heated topic during the debate. Asked what was the most positive way to bail people out of this economic ruin, candidates gave different proposals. Senator McCain proposed another bailout plan, and as it turned out today, it is another $300 billion dollar bailout. He wants to use this money to buy all the loaned houses and resell to the homebuyer in a lower price. Obama had a totally different proposal—he aimed to cut tax on middle-class citizens, adjust mortgage interest rate and make sure the past $700 billion bailout was being used properly. However, according to Wall Street Journal, McCain’s New Plan failed to “punish” those irresponsible financial institutions. And as is described on Huffington Post, McCain’s plan is a gift to banks from tax payers. It is like after a kid using up all the pocket money, and his parents instantly give him another $100 dollars. He oversimplified the situation. Parents should teach the kid the principle of allocating money instead of spoiling him. Now our government is the parent, it should take on the responsibility to regulate his child instead of clearing up the mess. Besides, McCain’s plan conflicts his previous expense cutting theory.

As the campaign and economic going on at the same time, everything can happen (some even question the demand for bailout). But what I know is we should approach this issue in a most fair and effective way.

Lost not only home

So here I’d like to explain Mortgage Crisis a bit. The subprime mortgage crisis is an ongoing economic problem due to greedy lending from mortgage companies and investment banks as well as risky borrowing from homebuyers. At first mortgage companies found potential profits in housing market. As a result, they wrapped the risky plan up with a sugar coat and persuaded middle-class people to borrow mortgages. And when the housing price went down, the sugar coat melted both buyers and lenders suffered. Because the housing price plummeted, borrowers couldn’t afford to pay back the mortgage, at the mean time, lenders such as Fannie Mae and Freddie Mac couldn’t get the money back and had no choice but to issue bankruptcy.

The subprime mortgage crisis is no way to be a small deal because we see real people suffering from the economic crash. For example, a 34-year old mom with two kids is striving to pay back a $20,000 debt. She opened a blog to share with others her experience in paying the debt. There is another report stating that nearly two million children will be psychologically affected by foreclosure due to mortgage crisis. People are struggling to cover the medical expenses, college expenses and other basic needs. And now they lost their homes—the one and only source of secure and happiness.

We can’t say those people are foolhardy because they put their money into a risky investment. They are normal people as we do, who believe government will never make bad decisions, and believe they might take advantage of the properties and give their families a better life. And now, as things turn out, they not only lost their home, but also hope. This is not only the problem of Wall Street. We should give more attention to our neighbors on Main Street.

Before the Fall

Housing has always been a crucial issue. And now it has even become a controversial one. So here I’d like to share my view on the subprime mortgage crisis and its socially influence.

The last two weeks have witnessed remarkable economic upheaval in United States—Lehman Brother’s bankruptcy, bailout’s failing to pass, and it’s really hard to predict what is going to happen in the future. Maybe it’s a little bit difficult for us to catch up with all the overwhelming information. If we step back a bit, we will see that the whole unpopular episode was started by the Treasury taking over Fannie Mae and Freddie Mac—two giants in ensuring mortgages in United States.

Last two years, real estate bubble also appeared in Shanghai and Beijing—two major cities in China. But it wasn’t as devastating as what is happening here. The subprime mortgage crisis caused series of problems, and it’s not over yet. If nothing changes, another crisis is inevitable. So it is meaningful to ponder over who should be responsible for the mortgage crisis and how government’s decision will affect current economic condition.