Forclosures, For Real

As of late, foreclosures have been the recipients of much attention from the media, and there have been countless tragic stories of families struck hard by sub-prime mortgages. While these stories strike a cord with many Americans who are struggling right now, it is necessary to take a look at the whole story. In an article on Real Clear Politics, Steven Malanga asserts that there are some fallacies surrounding these troubling stories of foreclosures.

Malanga states that the news stories frequently "mischaracterize" the foreclosure problem we are facing. He claims that this "mischaracterization" stems from the idea featured in the article that "unanticipated personal reversals" and job losses are to blame. This doesn't add up to the "foreclosure mess we've seen" said Malanga. He claims that these unanticipated personal reversals occur even in "the best of times". He backs this point up by showing how in 2006 when the foreclosure troubles were just beginning, that a University of Texas study showed that the unemployment rate was "holding steady at 4.6%" which is quite low. Since, as Malanga states, the problem was not caused by job losses, then what has caused this foreclosure crisis? Apparently, in his words, "an end to the rise of home prices" is the real culprit.

This is an extremely interesting point that Malanga makes and it really goes to show how you can not just take the word of the media without looking deeper into the issue. This also leads me to wonder how exactly this will affect the election. If we have been mischaracterizing this major economic issue, then won't this just render some of the candidates' solutions and economic policies obsolete? For example, McCain's policy for handling sub-prime mortgages and home losses is to create government reforms and provide assistance for families struggling to make ends meet. This strategy would work best if the stories in the papers were completely accurate in their portrayal of the foreclosure crisis, but if what Malanga asserts is in fact accurate? Then this strategy will be like trying to plug a leak with a piece of bubble gum. This policy will work temporarily, but how long will we be able to support the families in most need? I fear that we wont be able to suppport them long enough because, as it appears to me, McCain's answer to the problem is more like a plan that will patch holes as they pop-up rather than fix the entire problem.

I fear that this strategy will be unsuccesful and costly because according to Malanga, the real problem is home prices, which is a topic left out of McCain's plan. It just makes me wonder, if we fail to see the true cause of the problem, how exactly can we fix it?

Sources:

Malanga, Steven."Foreclosure Myths: Can the Media Handle the Truth?", Real Clear Politics, http://www.realclearmarkets.com/articles/2008/10/foreclosure_myths_can_media_ha.html. 2. November. 2008

"Immediate Relief for American Families: Home Plan", McCain-Palin 2008, http://www.johnmccain.com/Issues/JobsforAmerica/relief.htm. 2. November. 2008