BEEN THERE, DONE THAT #3 (or more)

Watching another stirring speech from President Obama I put on my old-guy hat. He was describing his new plan to save home owners threatened with foreclosure. Again I donned that sense of superiority that I have been there. It's deja vu all over again. There is nothing new about the crash in home values. There is nothing new ab0out people walking away from properties that are no longer worth as much as the mortgage against them. In the long-ago and best-forgotten time of absurd interest rates (over 20%) there was the Farm Gate Crisis. (Not to be confused with all the crises that are named "...gate" after Watergate.) These go back to the high interest times when farmers were abandoning their farms; when they were marching on Ottawa demanding some kind, any kind, of help.

All I say is that there is nothing new about the current mortgage crisis, a crisis peculiar to the United States where buccaneer lending has been rampant. (We shouldn't get too smug because with bad times many people here will be hard-pressed to pay their mortgages, but the situation is not the same as the one 9in the U.S.)

So, under the now-tired heading of "Been there Done That" I remember the housing slump of 1960-61, another in I think '82 and the last one in '92. Home values had risen meteorically. Everyomne was euphoric. Then the air went out of the balloon and we came back to earth. There was a saying that applied to business, but it applies equally to home ownership: "Who is the smartest person in business?" Ansewer: "The second last owner of a hotel in Nassau." (The Bahamas was, when the saying was current, a hotbed of investor speculation.)

So someone got rich while prices were on the rise. Someone, and there were many of them, got out before the crash. Many however, consumed by the idiotic notion that what went up would never come down but would continue to rise, got stung.

Obama hit the constrution nail on the head: too much supply and a dimishing number of buyers. The supply comes from the abundance of newly reposssessed houses being sold under "power of sale" for a fraction of their one-time value. (But you know all this.) The President clearly wants to reduce the supply by stopping the spiral of foreclosures.

Ask any retailer what happens to the market for his product when a competitor goes bankrupt and the receiver sells the stock through a liquidator. There is a sudden bargain-basement supply of the very product the retailer is trying to sell. In some cases the bank will not allow the liquidator to go in but will try to sell the bankrupt stock to other retailers in the sasme business, just to keep the prices from collapsing.

Nexr point: why do so many people equate success with home ownership? What is so wonderful about "owning." In a previous piece I wrote for this spae,I commented that the "owenershjip society" of George Bush helped bring about the rush to buy a home whether it made financial sense or not.

Simple question: the people who have been foreclosed on or who have simply upped and left - where are they living now? In the basement of their parents' home?

What has been done to use offer those foreclosed homes as rental properties? What moves have been made to tell the family that can no longer pay the mortgage, stay in the home and we'll rent it to you.

It may be a goofy idea, but something has to happen to oversupply in an under-demand economy. Millions of people delay purchases which further clogs the market with supply. But look out - all that pent up demand will have to go somewhere. When it does, the spiral will resume. Unless more people refuse to jump on the bandwagon of consumer insanity and actually "save" their money.