Wall Street & Main Street: It’s a Two Way Street

My fellow blogger Janis Mara wrote about the government’s bailout of financial insitutions  several days ago, noting that the majority of Redfin readers didn’t think it was fair to bailout homeowners back then, so should we offer a lifeline to financial institutions? 

In reading the tons of articles that swirl around on the rescue plan, it seems to me that those who are opposed to the plan feel that Wall Street is getting what it deserves.  Banks and other financial institutions, they argue, got greedy and gave out credit to anyone who asked.  They too, rode the home buying frenzy, thinking home values would keeping going up, up, up and got the average joe into loans that were probably unsuitable and loaded with risks.

While I agree with all those points above, what I have found particularly interesting is that everyone is pointing their fingers at everyone else.  This whole credit crisis, I believe, is the responsibility of not only the banks and financial institutions, who doled out more credit than they should, but also the consumers who readily took on credit that maybe they shouldn’t have.  Like a marriage or partnership that doesn’t work out, there are two parties to this transaction.  And it is the responsibility of both parties to understand what they are getting themselves.  When it doesn’t work, it’s easy to lay blame.

Yes, I think the banks and financial institutions went too far with exotic mortgages, no-doc loans, minimal down payments, etc.  However, let’s not forget that on the receiving end were homebuyers that probably also thought buying a home was an instant profit making machine, since prices kept skyrocketing.  With no-doc loans, many probably stretched a little bit and in interest only loans, they too were making a bet on the housing market.

This credit crisis is more serious than I had imagined.  It has seemed to spill out of just the housing market to affect everything else.  I haven’t been a fan of bailing out anyone.  Especially as a taxpayer that sat on the sidelines and didn’t take on a mortgage during the heyday I wasn’t too sure that I could pay in the long run.  However, I do support the plan, only because this credit crisis seems to have infiltrated not just the housing market, but everything from car loans, credit cards, small businesses, etc.  I just only wish that folks stop pointing fingers and be willing to admit that they probably contributed to this problem.