Lots of bad debt losses in this market. Mortgage companies down the tube, Freddie and Fannie under duress. What we universally hear about is that the buyers are unable to pay for what they bought. Those poor credit users and credit suppliers are seeking the sympathy of our collective legislative hearts and wallets.
But wait a second. All of that credit represents money that was paid to sellers. This decade’s “ownership society” boom was not driven by easy credit. Easy credit was a facilitator. The housing boom was driven by observations of sellers consistently making money on transactions.
To the extent that there were buyers who were not properly vetted to purchase a particular property or product, there were sellers who were unjustly enriched through the resulting transaction. Given that there might be several trillion dollars worth of bad debt that prudence could have prevented, there will have been the equivalent value in seller wealth that would not have been accumulated or spent on possessions. I haven’t heard anything about these “unjust gainers”. Nobody is blaming the sellers.
I wonder what the economic growth of this decade would have been with a more prudent, call it normal, credit policy. Given that this “seller’s feeding trough” was one of the most ambitious of the Administration’s economic programs, it is a foul flavor for the Republican’s business reputation. It harkens back to the President’s own history of oil business experience. Real world understanding is what makes business so tough, and it is something that cannot be taught in the Harvard Business Charm School.
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