It was with this mindset that I started doing a little reading this afternoon, and the first article I ran across was from the Boston Globe about credit problems. It's a good, straightforward article highlighting various issues people are running into. In fact, it's noticeable for being so straightforward it's almost cliched. The same story could have been written months ago, or months from now, in any paper in the country.
We all know the language by now. We're in a 'credit crunch', a 'subprime crisis'. Lending standards are being 'tightened'. During the 'housing boom', lenders 'relaxed their standards'. Some of the more sarcastic reference a 'subcrime' crisis. Even the title of the article is interesting in how we are supposed to have a conditioned response to it, 'Qualified borrowers face credit squeeze'. The problem, we are told ad nauseum, is that qualified people can't get credit. There's just no money out there.
Now, it's good that the financial press and corporate media generally are talking about this issue. That's much better than ignoring the problem.
But after so many months of stories like these, the complete picture still isn't being told. The problem at its core isn't that there's a shortage of money; there's lots of liquidity for things that have value. Visa just had one of the largest IPOs in history. Corporations are sitting on something like $1.6 trillion in cash and $2 or $3 trillion more in short-term cash equivalents. As savings rates for average households were declining, corporate savings rates were hitting all time highs.
No, the key in that Boston Globe headline is not 'credit crunch'. It's 'qualified'. The obstacle we face, that we have been facing for many years, is a dearth of qualified borrowers. The 'housing bubble' was created precisely by lenders who gave money to people who can't afford what they're buying. Some specific policies related to interest rates and deregulation and so forth heightened the problem and explain the timing, and likely there was some criminal malfeasance involved as well as the usual predatory lending, too, but there's more to it than just that.
All the fancy technical analysis and long-winded answers and financial jargon can certainly serve as a useful distraction for particular actors that may have engaged in outright fraud or otherwise broken the law and may find themselves testifying before Congress, or other actors writing a book to explain why it's not their fault, but we are a very rich country. To become a crisis where people are literally being kicked out of their homes, it takes something more fundamental.
The fundamental question is this. Should someone willing to work full-time be able to comfortably afford decent housing? [And related to that, particularly in our tax code, do we place value on owning that residence?] Savings are low, people live paycheck to paycheck, and ultimately, people default on their mortgages, because the job they're in doesn't pay enough to afford their home. Wages, not credit, explain our current difficulties. The rest just makes the scale of the crisis more profound.
Now that's a question I would love to see headlining CNN this evening. I would love to see people talk about why we have people without homes, construction workers without jobs, and corporations with nothing to spend money on. There's no one right answer. But the first step is talking about the whole picture.
At least, after basketball. Gotta keep my facebook standing.
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