I don’t talk politics often but when I do I like to tell people how I think and rationalize why I come to the conclusions and opinions that I arrive at.  First of all I have some vested interest in the financial sector, not only do I have a loan with a bank that went bankrupt, but I also work for a Fortune 100 Bank, one that fortunately for all of our customers and employee’s did not disregard ethics and morals just for the sake of making some shady loans to customers to have # of loans added to their books.

Lets face it people are desperate creatures, we live in a society where the majority of us struggle and work day in and day out for mediocrity and by the time we save enough money to stop working we are either old and frail, or plagued by health problems and lose the youth and vigor to enjoy the things we once wanted.

So when banks were offering the opportunity for people to get homes far beyond their means, remember people, the rule of thumb is this:  You can only afford a house that is 2.5 times your annual salary PERIOD.  Anything else = STRUGGLE.

So if you make $55,000 per year, then the most you should purchase your house for is $137,500 and you have to have around $26,000 dollars down in savings to get a good interest rate and loan.  Most people were getting $300,000 houses on that same salary, which left them belly up.  Sure if you have no car payment, or low other expenses you might be able to stretch to 3x your income, but it is unwise.

So many people got loans in the hopes they would get raises, bonuses or be able to re-finance later when interest rates were better.  This trapped many people, when the interest rates went up and the Interest Only Loans started converting to Adjustable Interest + Principal, mortgage payments doubled and tripled.  This equaled massive non-payments.  I have watched people go and rent a house 2 miles away for the same square footage as their current house they had mortgage for 1/3 the price.  Seriously, their payment ballooned to $3300 per month for a 3100 square foot house, so they just abandoned the house and moved into a Rental, same exact specs for $1,100 per month.

It is poor practice, but people are desperate and people must do what they can to keep a roof over their families head and put food on the table.  So I don’t judge anyone for any practices to keep themselves afloat in this rocky economy.

The government did the right thing by bailing out the financial sector because the people who still can pay their loans would have their loans called in “payment in full” as a bank can do when desperate. This would drive forclosures up even higher and possibly put familes out on the street.  The government is shielding the economy and the people as best as they can, knowing full well that we all have to do our part to help offset these costs later (which means taxes).

We are all Americans and we all have to stick together, I think all CEO’s of all company’s especially financial companies should turn over 90% of their stock and most of their salary and bonuses to the government to help fund this endeavor.  All banks that went under still payed their CEO’s tens of millions of dollars in stock, bonuses and salaries over the past few years, which is unacceptable.

In my opinion George W. Bush made one of the rare decisions of his presidential career that was the right and good decision for the American people.  Even if our government becomes more Socialistic as a result, we were headed there anyway with Healthcare reform.  The private sector has proven that it is irresponsible and needs more government regulation, the stock market is so volatile because people shortsell and bet on stocks crumbling, and panic.  The financial market should not be driven by emotion and fear, yet it tumbles artificially up and down constantly.

Here is a word of advice, do not tie up all your assets in stocks and mutual funds.  Make sure you have much of your wealth scattered in FDIC Insured Accounts.  ING gives you 5% APR and is FDIC insured to $100,000 which is fantastic, you can get $5,000 per year interest and move that out and keep your entire account insured in case of disaster.

Thanks for listening to my rant.

-Dragon Blogger

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