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.