Martha Randolph Carr Martha Randolph Carr, 9/8/2008 [Archive]

Taking the Pulse

Taking the Pulse

By Martha Randolph Carr

This weekend the federal government took over the two mortgage giants, Fannie Mae and Freddie Mac. It was a latent signal of what had become very obvious to most Americans already. We are in the beginning of an economic downturn that may not have hit bottom yet.

The upside to the government action is that a slightly clearer picture of just where we all stand will likely emerge. It was a federal audit that discovered Freddie Mac was not exactly as financially sound as they had said that lead to the dual takeover. Policy changes at Freddie Mac were allowing people who were behind on their mortgage payments an extra year and a half to recover. That allowed the lending giant to keep them on the plus side of the books instead of downgrading the loans to poor.

There is probably more bad news to come before the entire story is out. But, finally getting the whole truth, no matter how bad, is when things have a chance at turning around because then we know what our starting point is at last. No more false starts or unrealistic expectations.

It doesn't mean that there won't be hardships or belt-tightening for all of us but the element of denial starts to get peeled away.

However, as I've said before, where the economic bottom is, has yet to be determined. There are a few factors that are still coming together that make the old equations a little out-dated. Take the scenario of a homeowner in the suburbs who has a fixed-rate mortgage, decent credit and employment that's covering the bills. But the job is almost an hour away in rush hour and all around his house are foreclosures driving down the value of his little quarter acre.

And, in his monthly budget the price of gas has risen to a place where just getting to work has meant giving up on most of the extras in his household. He's not working to live anymore; he's now living to work.

If the value of his home then slips far enough below what he still owes on the house it's possible that it can start to look like economic sense to walk away from the house and the debt. It's been done before by homeowners in California after earthquakes and lack of insurance left them with a cracked foundation and a large bill.

There are already several communities throughout Florida in particular where prices continue to fall to new lows. Top that off with the issues of the tax base in your community draining away while you lose neighbors to just hang out with or at least keep an eye out for you.

In the 1930's there was an enormous migration caused by an economic downturn due to a lack of regulation in the stock market mixed with a dustbowl throughout the farming belt. The consequences were given their own name, The Great Depression and were seen as so dreaded plenty of federal regulation was put into place to try and prevent another one. That is until enough time went by and we all got tired of regulations and removed them with the promise that we'd behave this time.

This time gas prices and a lack of regulation in the housing market could be creating another migration as people look to start over anew. It's another geographic fix that is stripping away entire communities because once again people were allowed to buy something on credit without the means to pay for it. It was probably a sign of the times when it became possible to buy a Big Mac with a credit card. Visa even had a recent commercial that lauded buying everything with a plastic card and depicted life grinding to a halt when the inconsiderate consumer tried to use cash. That's how much we were enjoying the party without paying attention to the bill.

But now, because people are not only buying less overall, what they already consumed is not getting paid back and the effects will continue to roll backward through retailers, wholesalers and manufacturers. The takeover of Fannie Mae and Freddie Mac is still just the beginning of this fable.

Martha Randolph Carr's latest book, A Place to Call Home, a memoir about the reemergence of U.S. orphanages is available wherever books are sold. If you'd like Martha to come and speak to your group visit: www.newvoicespeakers.com. Email Martha at: Martha@caglecartoons.com or visit www.martharandolphcarr.com. Martha's Big Adventure -- Coming soon to World Talk Radio.

© 2008 Martha Randolph Carr. Martha's column is distributed exclusively by Cagle Cartoons Inc. newspaper syndicate. For info call Sales at (805) 969-2829 or email Sales@cagle.com.

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