Shiny Red Boots

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  1. At one time, an equity tap wasn’t even an option in Texas. Then, the Lege (after intense pressure from the lending lobby) changed the law, and once that happened then about the only way you could get that type of loan was to put your home equity up as collateral. We saw it happening in places like California, yet bought the whole “Texans are mature enough to be able to make the decisions for themselves” line of bull.
    Now, the chickens are coming home to roost – and they are mighty big suckers, to boot!
    (BTW, a hint for the summers in Texas: stand on the grass instead of the concrete.)

  2. Dear Husband and I spent a fair amount of time trying to date the changes in federal legislation that led to this catastrophe. We think there were two waves: one in the late 80s, and another in the mid 90s. Between the two, regulations were relaxed to the point of utter stupidity.
    The predatory lending really ticks me off. But it bothers me at least as much that everything’s getting dumped into one big “credit crisis” basket.
    We do have a problem with consumerism in the US. We also have a problem with predatory lending and, frankly, fraud, on the part of the mortgage companies. They’re separate issues, and as you say, these are some BIG chickens coming home to roost.
    (and yes, I know about the grass. and I still go barefoot a lot, too. AND — red is NOT my color at all. I took several liberties with my lesson to those kids.)
    Goldenrod — yup — great age! I’m glad you liked the lesson.

  3. I don’t know about the Federal legislation, however in Texas it wasn’t legal to take out home equity loans until sometime in the 1980s I think. This was part of the old homestead act, and I do remember the campaign to change that law (that’s where I heard the bit about the homestead protection being an archaic anachronism that wasn’t necessary in modern-day Texas.) It took effect, I think, sometime after the Tax Reform Act of (1986?) which killed off the deduction for credit card interest, yet retained the deduction for home-mortgage interest. After the Federal legislation passed, then the Texas Lege modified the homestead laws to match.
    You (and David Brooks) are correct in that there are multiple sides to this story. The scary thing to me is that we didn’t learn the lessons of the great real-estate crash of the late 80s, and now we are doomed to repeat history yet again. Even scarier is that with the change in the bankruptcy code, the borrowers are going to be even deeper in the hole, and besides they don’t have the lobbying strength that the big banks/investment firms do.
    Given the price of both gasoline and shoes, maybe we all better get used to walking barefoot…

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