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An American Renaissance - Martha Randolph Carr

Back in the good old days of the summer of 2008 we were all merrily rolling along in a very cushy denial. Real estate could only go up in value, credit cards were a necessary part of life, derivatives were good even if we didn't know what they were, the big three automakers were solvent, and Bernie Madoff was seen as a stand-up guy.

Then, the smallest of things started to happen that became like a string on an overpriced sweater, and it all started to unravel. The moment of reckoning began in the beginning of 2008, the real start of the recession, when average homeowners with loans that had a built-in rate adjustment first watched their monthly payments jump beyond their means.

Many of them were unable to come up with the extra cash and in a panic, stopped paying altogether. It was something that any bank loan officer could have seen coming, if they'd had a chance to look at tax returns before the loans were approved.

But we were in the tail end of the era of liar loans when it was possible to get a mortgage for hundreds of thousands of dollars without showing any proof of income. It's a nice idea that we decided to just trust each other, but the practice is having some harsh consequences.

It didn't help that the first wave of bump-ups in mortgage payments occurred during historically high gas prices, which also put a significant dent into household budgets. Faced with the choice between paying for gas to get to work or paying for a mortgage on a house that they may have thought wasn't going anywhere, many chose the gas pump.

Denial was still in play as a lot of people justified skipping a few payments with the thought that they'd catch up before it was too late. However, corporations were already feeling a tightening economy and hiring freezes were in place. Massive layoffs would soon follow. There was not going to be a chance to catch up on much of anything.

Instead of being able to call their local banker who would have known the customers on a personal level and work out arrangements, people were served eviction notices. It was impossible to know who to call.

The loans had been bundled together as a security before the ink was dry on the loan papers and then sold over and over again to different types of investment firms all over the world. The entire practice was unregulated, which was a part of that trust thing again where we expected large corporations with a vested interest that amounted to billions of dollars to keep accurate, detailed records. That didn't happen.

The bundled securities became worthless, and in quick succession, a long list of corporations such as AIG, Fanny Mae, Lehman, Merrill Lynch, Wachovia and WaMu were forced to admit they were out of cash and out of time. The stock market quickly corrected to a much lower level as a lot of 401K's evaporated. Banks began to tighten credit even further as more corporations, such as Circuit City and the Los Angeles Times, declared bankruptcy and Ford, Chrysler and GM showed up in D.C., with their hands out, hoping for a reprieve that the average homeowner has yet to see.

Then, the largest pyramid scheme in American history was unveiled when Bernie Madoff finally had to confess to ripping off $50 billion dollars. It was an amount so large that many had to keep looking at the figure to make sure they had seen the word billion. He had gotten away with it for years, right under the nose of the SEC. The fat lady finally started to sing over the carcass of the Renaissance of Deregulation.

Millions of Americans woke up and found out they were on a leveled playing field. The great divisions of rich and middle class abruptly narrowed down to a place where everyone is being forced to work together in order to go forward.

That could turn out to be the best news of all. Perhaps, when we look back at 2009, we will realize this was the start of a new era of community and service in America and we will find that we have learned to value each other based on character rather than bling.

Martha's column is distributed exclusively by Cagle Cartoons Inc., newspaper syndicate. E-mail her at: Martha@caglecartoons.com.