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.