THE BAILOUT BILL FAILED TO PASS - SO WHO IS TO BLAME FOR THIS MESS? "WE THE PEOPLE" ARE.

In the early afternoon hours of Monday September 29, 2008 the much bally-hooed bailout bill failed to pass in the U.S. House of Representatives.  

Now, according to a speech given mid last week by failed U.S. president George W. Bush, the end of the world is near. Financial Armageddon is on hand!  

Or is it?

As I've blogged before, a large percentage of economists from esteemed institutions nationwide were against this bill, saying that is was not needed, and any reaction on the stock market would be a much needed correction for the mis-managed financial markets.  

Today, I think the correct step was taken: rather than being bullied into passing a bill based on scare tactics touted by a president with questionable judgment, the decision has been made to wait and see the reaction of the stock and financial market, then formulate a plan based on that reaction.  

Will this delay hurt the U.S. economy?  

In the short term - yes. But it is probably a much needed hurt that needs to be felt.  

In the interim, we need to look at exactly who is to blame for all of this - and realize that "We the People' are primary responsible for this mess.  

Why?  

We're the ones who were enablers for predatory lenders. If you search the internet for the description and penalties of actions performed by unscrupulous lenders you will see that they are guilty of crimes such as processing loans without any income verification, proof of employment disregarded, large loans given to persons with really bad credit, etc. In other words, lenders literally gave away money with no guarantee of repayment just so they could collect their commissions for closing deals.  

BUT, IT IS ALSO THE GREED OF THE BORROWERS that got us into this mess.  

A lot of those currently in foreclosure bought houses they couldn't afford on the assumption that they could sell their house at an profit. While this practice - called "flipping" here in the U.S. is not new, inexperienced speculators took flipping to new heights. They thought that because of demand at the time that if they got a house by any means they could sell that house quickly at a HUGE profit due to the intoxicating appeal the hectic pace the housing bubble gave at the time.  

To achieve this they took out "sub-prime loans" whereas they made fixed payments on interest only (for example, on a 20 year loan), within a the first three years of the loan, then focused on paying the principle at a much higher rate for the remainder of the life of the loan. The plan was that at the end of the three years, persons would be able to refinance the remaining loan at a lower fixed rate mortgage.

Lenders, in the meanwhile, got greedy with the demand for loans and rather than risk money to buy one home with one loan amount, somehow figured a way to finance thirty (yes, you read right - THIRTY) homes on the value of one home loan.

It's like trying to buy thirty 99 cent burgers for one dollar.  

While such risks may have worked in the beginning due to market manipulation with fancy derivatives by Wall Street, the nature of subprime mortgages for quick profit had a the time limit that expired. This is what began the slump in the housing market and the current foreclosure crisis.  

Now while a lot of the blame still rests on predatory lenders, "We the People" need to remind ourselves that we, also, are the greedy ones thinking we could make huge profits in short time.  

We willingly took out credit cards we couldn't afford at high interest rates to buy the plasma TVs, Playstations and sound systems we couldn't afford. 

We ALL, were living on borrowed time.  

And now that time is up.  

Question is - what happens next?  

To quote the infamous Betty Davis, "Hang on, it's going to be a bumpy ride!"