Step 1): Erase Our Memory of the Past
“I have no idea where to go from here….no idea what do now.."
-Kathy, a homeowner in Illinois said in late 2008.
“My husband and I moved back into my parent’s house and had to apply for government assistance. It’s absolutely humiliating. My husband sold his trucking business to a competitor just to scrape up enough money for us to try to get back on our feet again.”
This was the 2008 financial crisis. Homeowners like Kathy blindly trusted lenders and sub-prime creditors.
Credit flowed to every homeowner like a fashionable new street drug, readily available to make your life better to take away the stress of any financial obligations and finally give you the opportunity to buy the material things that you deserve.
It promised so much. Gave so little, yet took everything.
Now here we are in 2017 and the financial crises is nothing but a bad dream. Our worst hangover from binging relentlessly on free credit is finally over.
It’s time to forget it ever happened. Let’s stop blaming ourselves and move on.
Step 2): Dismantle the Dodd-Frank Act
Enter the “Trump Transition Team”.
According to the team:
"The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation."
These proposed changes are being pushed ahead with under the idea of helping the working class by allowing average homeowners and homebuyers (you guessed it) access to easier credit by loosening lending regulations.
Now granted, there are parts of Dodd-Frank Act which do need reform. It was signed into existence during an emergency situation with our economy - effectively “putting the brakes” on much of the activity which lead to the crisis.
The question is: What laws and regulations will replace Dodd-Frank to stop another widespread outbreak of loose credit?
Step 3): Release the Beast into the Wild
It’s scary to consider that these reforms seem to be starting at the level of the consumer; i.e., the middle class homeowner. The very individual who history has already proven not to be trusted with this type of thing.
It has a new face, a new attitude and appears to walk a little differently, but will we be able to recognize this new beast as it stalks its victims and preys on the weak yet again?
An Alternative Solution
In an August speech to the National Association of Home Builders, Trump has stated that he supports loosening regulations on home builders with the intent to lessen the time it takes to bring new product to the housing market.
He called the home building industry one of the most regulated in the country and estimated that 25% of the cost of a home is due to regulation.
However, the current administration’s planned policies conflict one another on many different levels.
Case in point: Trump’s tougher immigration policies will most likely increase the cost of construction due to labor shortages, driving up prices for the consumer as the home builder will have to spend more on the cost of rising construction wages.
Lesser of Two Evils
I don’t know about you, but I’m thinking: better with less restrictions in the building industry than with loosing credit requirements.
Bringing more inventory to market (quicker and more effectively) with the intention of bringing down housing prices should be the focus at this stage in the game.
Reforming the stringent rules of Dodd-Frank certainly has its place.
But you have to ask yourself: Is the current administration the one I trust to make these decisions?