This financial crisis is spiraling into a powerful downward spiral with a vortex that is sucking everything in and keeping it in there.
Bad news begets bad news and because of all the bad news we stop focusing on the possibilities. Instead we get consumed by the gloom and doom.
It is heart wrenching to read in today’s IHT of middle class americans becoming homeless. The economic displacement is horrific and there is no justice to it.
Using “Systems Thinking” where we concern ourselves with the cause and effect of the whole system, foreclosing on peoples homes is absolutely shortsighted and short of stupid. While I understand the policy reasons for foreclosure, it makes no sense for the homeowner to be homeless with his family and at the same time the bank holding on to an empty house with no owner.
For the displaced family, the experience will truly mark a scar on them especially on the children and for the empty house it will simply start to degrade.
If the goal of the bank is to foreclose and sell at auction, could there not be other avenues that can be utilized to keep people in their homes? It is like we almost forget that the root cause of this crisis emanated from the greed of the banking sector.
What would the difference be if affected homeowners we say:
a: given a 6 month moratorium on their housing repayments? After all if the property is being foreclosed, it would take a good 6 months to be sold off (if the bank is lucky). So from a cash flow stand point the bank is no worse off by a moratorium.
b: The real price of the house at the moment for the bank is the unpaid amount on the mortgage. If it can recover more, great but it has no incentive to do so. The real value of the house to the owner is priceless, but in reality the real price is what the next buyer is prepared to pay. There must be a way for the bank and the owner to rework the number such that the they meet somewhere in between the full value of the mortgage outstanding and what the next buyer is prepared to pay.
Somehow I think the best way of getting out of this crisis is to ensure people maintain their dignity, are kept in their home and given opportunities to find solutions to their financial problems. Putting them on the street is not the solution.
Likewise in the Jakarta Post today. It reports that 40,000 people got laid off as manufacturing contracts were not renewed. Lying off people is the easiest thing to to, but I suspect that organizations in the long term would fare much better working hard to keep people in employment for as long as possible as employment allows people to spend.
Sure it is right of a company to lay people off simply because there is no business to pay for their salaries, but that is a viscous downward spiral. People with no incoke have no money to spend either!
What ever it is, I doubt if anyone has a solution to the crisis that was fueled by greed. But I think a big part of the solution is in people keeping their dignity in tact – having a job and a home to stay in.
The great thing about every crisis is that it ends with renewed hope and opportunity. While I have no doubt that the world will be changed for the better, we just have to navigate through the turbulence but keep focused on the positives.