July 05, 2008

It is a very long election season in the United States, so it would be the height of naïveté to assume that the details of his mortgage contract would be allowed to pass without comment, let alone with rational understanding.

Let's see: on a mortgage of 1.32 million over 30 years, Barack Obama received a rate of 5.625, vs. the 5.94% which is considered to be an average rate for equivalent risk? I have news for you: any mortgage rate is readily negotiable within a full percentage point. A less comfortable truth is that someone who brings more assets to the table will always receive a better rate than someone who has minimum or no collateral. It is inherent to the nature of a free market. Banks deal in risk management, and on average, the rich bring less risk to the deal than the middle class or the poor looking for that all-important first break. As Mark Twain once said, "A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain."

(That this practice happens to result in the rich always being required to pay less than the poor -- and thus is a significant factor in the rich getting richer and the poor poorer -- is a question of social justice, and thus outside the scope of this particular post.)

But there is just too much anger out there, too many foreclosures, too much hurt to be able to see something like this clearly. What can we blame for an untenable real estate and general credit situation? Whom can we blame? We ourselves cannot be responsible, clearly.

Of course, no matter who wins the presidency and the two legislative houses, they won't be able to turn around the current credit crash for some time yet to come. After all, we are still on the rising crest of the credit/subprime fallout. (It has been building for enough years.) The best of economic policies (whatever that might be) cannot counter this degree of inertia until most of it has spent itself ... and that, too, will take years.

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