Credit sense: How did we get into this subprime mess?

I'm just an old country boy, and, as such, I'll admit some confusion concerning the national discussion on the home mortgage crisis. I can understand that some folk have had problems making their house payments. And I can understand that this puts more houses on the market and reduces the prices for all houses.

But I guess the real question is how we got here in the first place. To be real honest, I doubt most of us can fully understand the intricate details of the financial mess facing the housing market. We all point an accusing finger at greedy speculators or greedy bankers. Of course, the Democrats blame President Bush, but, then again, they blame the president for everything bad because that's how the game of politics is played. My only surprise is that Al Gore hasn't yet figured a way to blame the housing mess on global warming. Give him enough time and he'll surely find a way.

The focal point of this crisis has been the subprime lending practices. Now as I understand it, subprime loans go to those who have bad credit histories. Some banks — with the support of the federal government and your tax dollars — are willing to run the risk of making these questionable loans if they can charge an interest rate that helps them sleep at night. So people with spotty credit histories are offered higher interest rates to chase the American dream of owning their own home.

All apparently went fairly well until a perfect storm of factors combined. Higher gas prices, higher food prices and increasing interest rates forced some of these new homeowners to lag behind on their house payments. The banks began to run scared, the late payments increased and foreclosures began to pop up from sea to shining sea.

Add to this formula a hotly contested presidential election cycle and you have the recipe for a major economic disaster. And that is apparently where we find ourselves.

But here's a couple of points this old country boy still can't understand. The bankers tell us that the foreclosure rate on these subprime loans is running around 3 percent. So does that mean that 97 percent of all subprime loans are still current? Never was very good with math, but I can't see the depth of this problem. And while we're talking about greedy speculators and greedy bankers, should we not — at least in passing — talk about greedy individuals who overstepped their financial bounds and bit off much more than they could chew. Isn't part of the problem those individuals who so desperately wanted a home that they committed to a financial plan without any thought of just how the bills would be paid? Many of those defaulted homeowners are taking their plasma televisions to some other house. Doesn't that tell us something?

I got a chuckle yesterday from the revelation that Maggie Williams, Sen. Hillary Clinton's campaign manager, has made a cool $200,000 as a board member of one of the worst subprime lenders in the nation. Maggie was brought onto the board of Delta Financial to promote minority outreach. The company — as you might imagine — is now defunct. Now Maggie is working for a boss who is blasting the subprime lenders on a daily basis while Maggie pockets her $200,000 and keeps mum.

But Maggie — you got to love her — may have hit the nail on the head when describing the credit crunch among the subprime borrowers. Now you might want to remain seated when you read how Hillary's campaign manager explains this credit mess. Are you ready?

Maggie said, "There are people who miss payments and have bad credit for all kinds of reasons, although I believe it does affect poor people disproportionately."

If we had only listened to Maggie earlier we would not be facing this mess. Who would have thought that bad credit and missed payments would impact poor people more than it affects the rich? Now even a country boy can understand this logic.

Michael Jensen is a Southeast Missourian columnist and the publisher of the Democrat Standard in Sikeston, Mo.