A Small Town Banker's Perspective

Editor’s Note: This article is the third in a three-part series about the current mortgage crisis in America.

by Jerry O’Connor, President

The National Bank of Waupun

January 2010

How can we fix this problem?

Residential Mortgages: Go back to the model that provided protection for all parties to a mortgage product.

• Let the Free Market System work without artificial promises where fewer people can be hurt.

• Use mandates that prohibit forms of social discrimination without over-riding sound financing principles.

• Try the 28/36 rules and do not lend more than the property is worth! (In 2009 FNMA/FHLMC announced that they will tighten their D.T.I. ratio requirements to 36/45 percent in hopes of keeping consumers from biting off more than they can chew when buying or refinancing a property. (They still don’t get it!)

Lenders want to generate loan income without losing money – borrowers want to buy and be able to keep homes. If the boundaries are clear and the risk is measured, neither lenders nor borrowers will increase their risks to where they cannot afford the consequences of bad choices. In the end this tempered resistance to each other’s needs provided protection for all. The system that proved sufficient in the past will do so again.

Politicians need to be stopped from making outrageous promises that can never be fulfilled. The failures we are experiencing today cannot continue unabated without causing an eventual collapse of the dollar and a legitimate threat to our way of life. If the current group of politicians cannot keep themselves from this behavior, then let’s find new ones that see the danger we face and are willing to make the needed long-term decisions that will help to preserve America’s future.

The government should not use artificial tools to generate artificial opportunities or artificially suggest that they can insulate the public from the real consequences experienced when we violate basic values and principles.

In this regard Thomas Jefferson cautioned us: “A government big enough to give you everything you want, is strong enough to take everything you have” and “Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated.” We need to restore the governance of the Constitution and return to our founding principles.  

Regulators should better focus on the larger systemic risks in future scenarios if they are to be the protector the public expects. There should never be another unregulated arena like we have seen in the various cocktail investments spawned by Wall Street. If the Regulators fail, they should be held accountable and replaced by those who know what they are doing.

The public and private enterprise need to recognize that unbridled short-term greed has violent longterm consequences. In this case, greed nearly brought the world to the brink of economic collapse. We do not have the resources to stop a second economic tsunami.

Therefore, at every level of society we need to be educated about and embrace an economic model that is focused on long term success and not the greedy, “I’m getting mine now” mindset. From the board room to the break room we need to change the way we think about financial principles and security.

The citizenry – Hopefully the American citizens will also learn a lesson and demand more accountability from their government and from the Corporate Board Rooms. This crisis demands reflection and meaningful change. Fortunately, we do not have to endure a revolution to exact change from our government – in America we have the opportunity to make our changes at the voting booth. We need to shed political apathy and get engaged in preserving the things we have come to enjoy in America.

For every person reading this article, you have a responsibility to preserve America for the generations that follow. If you don’t – who will?

Conclusion – America’s problem isn’t a values crisis:

The source of this current American crisis in not found in our economic models. America is experiencing the consequences a much larger crisis – it is a Values crisis!

Our current circumstances are the result of a fatal combination of short-sighted government policies and a relentless pursuit of personal gains that frequently camouflaged unabridged greed. This was true from Washington to small town America; from Wall Street to Main Street; and from the Board Room to the Break Room.

On many occasions, America has been arrogant in a basic belief that either our money or the size of our government could insulate us from the consequences of our choices. Areview of the current crisis shows us that we could not have been more wrong with that outlook.

We find that many of the popular social fascinations today place the pursuit of pleasure above all other values. There is nothing sacred in most of our media. Too much of the programming going forth in America ignores the consequences of poor social choices. In fact, social degradation is glorified.

Entertainers and sports stars receive the most money and highest honors. The inner city or hospital volunteer, who seeks no accolades or fame, is routinely ignored.

There are mindsets that treat many parts of our society as throwaway people. There are those that see little value in the unattractive people of the world, the overweight, the undereducated, the people of the inner city, the country folks no one knows, convicts, the sick, the elderly, and the unborn… To many Americans, these people are unexciting and inconvenient – so throw them some money, throw them in prison, store them in the nursing homes – or just abort them before they ever hit the streets – and throw what’s left of their precious little bodies in the trash.

We are a peculiar society where we can be amazingly generous on one hand and totally callous on the other. Frequently America is more like Rome in its last years than we are the country founded on basic biblical principles. This is not a mandate that all go to Church, but it would be helpful if we knew the values that were used to build this country and still have the capacity to sustain our society for the long haul.

With these current social values found woven into America’s fabric, is it any wonder that we allowed ourselves to be drawn into a financial crisis? We violated economic principles, we allowed the government to promise what they could not do for infinitum, we allowed greed to reign over common sense and we ignored the consequences of all of these actions. But if you are willing to wait… here in America there should be a new sitcom coming out in the fall that will glorify these behaviors once again – ya…we can just laugh it all off.

In far too many ways we as a nation have abandoned far too many of the values that have made us a great nation – a “shining city on a hill.” Many of us still embrace Lincoln’s conviction that “America … is the last best hope of earth.”

I am concerned that if we do not embrace a historical American model of government and values, then we will be ruled either by socialists with a God-less society or by militant Islam. Can you think of either of these societies where you would want to relocate to? If not, you better protect the one you have.

However, in order for America to achieve and retain our past status, this city must be built on a solid foundation – and the foundation of any society is secured squarely by the values we are willing to stake our lives and future on.

This will not be easy. By most measures, all of the experimentation in social models over recent decades has resulted in a severe deterioration to our social structure.

We can recover from this decline – but not if we build on the social and economic models of recent decades.  As a result of these experiments, in many ways as a society we are in decline. We need to reconsider the foundation our society is built on.

This includes the values, honor and exercise of God – consciousness in our thinking. We need to return to a mindset that consequences are directly tied to the choices we make. There is a price to pay – either now or in the not too distant future. Whether it is in economics or in living out our everyday social choices, we will be blessed or cursed as a consequence of the decisions we make.

We do need change in America. But we need the right kind of change! That change must start with a restoration in our values. I would suggest that the change America was built on in the late 1700’s… would serve us very well here in 2010.