Remembering Main Street
HOUSING ON MAIN STREET
Major components of the “American Dream” have always been the potential for a citizen to own a home and to start a business. In years past, most Americans neither owned a home, nor ran a business. That wasn’t important. What was important was the potential to do so.
The Liberal/Progressive mind doesn’t look at the world in terms of equality in potential – it requires equality in outcomes. It measures success of society not in terms of freedom – to succeed or to fail – but in terms of outcomes; equality in the possession of things. It seeks to control and direct those outcomes and possessions by creating laws, regulations and expanding governmental authority into all aspects of our lives.
In such a manner have come onerous taxes, strangling regulations, and an ever-reaching “Big Brother” directing who shall have what, and what they shall have; how homes must be owned, how they shall be built, what kind of roof they shall have, and that they be “green” and comply with uniform energy standards. Big Brother also decreed that all must have a home too, and that programs must be erected by government agencies to see to that outcome.
That’s not central planning, of course. No, that would be Socialism! Big Brother simply set up federal agencies to facilitate home ownership: FHA, HUD, FNMA, and FHAC (the latter two now under the FHFA due to their insolvency). Then Big Brother linked these together with the IRS to prove financial qualifications (though that could be waved for favored groups). The Federal Reserve (which controlled the banks and their lending practices) and other agencies then controlled appraisal, construction and energy standards. (It’s amazing that Jefferson ever built Monticello without all this assistance.)
Finally, Big Brother linked the housing industry with Wall Street. Local Savings and Loan Associations used to be the primary home lenders on Main Street, but they couldn’t provide the massive amounts of capital needed to ensure that everyone had a home. That could only be accomplished by creating massive blocks of securities, underwritten by Wall Street (for nominal fees – hundreds of millions of dollars worth), and guaranteed by the Federal Government (actually, the citizens on Main Street). The theory and good intentions of providing liquidity to housing markets was fundamentally sound, but government pushed it over the edge in its desire for the Liberal/Progressive need for an equal outcome.
A gigantic house was thus built – a house of cards, it turns out. By focusing on desired outcomes rather than merely assuring the opportunity, everyone did have a house. But when they couldn’t afford to pay for it, the house of cards came tumbling down. All the regulations, and all the King’s men, couldn’t stop values from falling again... and again ... and again.
The "Main Street" solution is exemplified in the purchase of my first house. It was about 1972. I was driving around one day and happened upon a small housing development named “Bahl Patio Homes.” They looked attractive and, out of curiosity, I stopped to check them out. As I walked through the models (window-shopping), a man came up to me and introduced himself: “I’m Don Bahl. Are you interested in buying one of my patio homes?” I explained I had just gotten out of the military and recently started a new job and there was no way I could make the down payment or qualify for a loan. “I’ll tell you what,” he replied with a smile, “how about if I can get you in to a home with nothing down?” He showed me the payment schedule and further explained that I would own the home and make the payments. He would arrange the loan and make the down payment. In exchange, when I sold the home, we would split the equity. We made the deal.
I signed a few forms (today, it would be a ream of them) and became a homeowner on the spot. Main Street allowed creativity, risk, and reward – not limits imposed by legalities and bureaucracy.
The definition of insanity is doing the same thing over and over and expecting different results. Or, expressed another way, if something isn’t working, stop doing it. That is far too logical, however, so now we have Big Brother continuing to create agencies, rules, regulations, and providing more assistance to us. The housing markets are tanked for perhaps another 10 years, but the big Wall Street banks got to keeps billions in profits for orchestrating the mess. Many even found jobs in the highest levels of government where they continue to work their “magic.”
BUSINESS ON MAIN STREET
Everyone in Washington D.C. likes to talk about “small business;” about how it is the dream of every American, the backbone of America’s economy, and creates the most jobs. They extol the virtues of small business owners and entrepreneurs as they find ways to invent, discover, advance and improve products and services to elevate the living standards of all, at home and abroad.
Alas, talking the talk is not walking the walk. As Big Brother marvels at the importance of small business, it regulates it to death and taxes it beyond its capabilities. In concert with the banking establishment, it denies capital except under the most stringent qualifications and then wonders why there are no jobs. It is said that a banker is someone who will loan you his umbrella when it is sunny outside and take it back when it starts to rain. Well, there is an economic hurricane out there – and not an umbrella in sight.
Main Street wasn’t always this way. There was a time about 30 years ago when I walked into my local bank for a loan. Fritz Kaupp was the local manager of the Santa Clara branch of Wells Fargo Bank, and I had been with them since college (about 15 years earlier). I walked over to Fritz and said, “Fritz, I’d like to borrow $50,000.” “What’s the money for,” he calmly asked? “Well, I have a contract to buy this parcel of land for $45,000 and I’m going to do a lot split and sell the individual parcels for $35-40,000 each. I need a little money for engineering and marketing. Here are the comps. I think the market is good and I can probably sell these within 6 months to a year.” Fritz looked over the contract, the preliminary title report, and the comps. He looked up and said, “Ok, I only have one question for you. Are you gonna pay the money back?” After my answer in the affirmative, he signed a form and said, “Here, give this to the cashier. She’ll transfer the money into your account. “
That was it. There was no pile of legal disclosures and disclaimers; no security; no avalanche of forms; no financial, accounting or tax gobbledygook. With a handshake and a promise, the loan was made. With my signature and his on one form, it was processed. Today, Big Brother ensures that we all do business based on the rules of a vast bureaucracy. In the earlier times, Main Street did business based on character. Which of the two approaches have failed us?
Government and lawyers –the two are virtually the same – have done society a great disservice in protecting us from every malady know to man or nature. In the course of insisting that we cross every “t” and dot every “i;” in insisting that there must always be a culpable party, not simply an accident; in requiring law after law, form after form, and agency after agency, they have taken away our willingness and ability to judge people by their character. There was never a law so protective, nor a contract so binding, as the simple handshake of a person of good character – and there never will be. We have to roll back the laws and regulations, simplify the expectations, and diminish the role of government. We have to return to a world where character counts.
We could learn a lot by going back the Main Street of the past – or at least talking to those who still reside there. The sad reality is that the political realm – the rule maker of society – has become an aristocracy, and it is fitting that they get their advice only from sources on a level equal to their own: Harvard lawyers, CEOs of major corporations, and housing “experts” (not ironically, major political donors, as well). These are invariably the same people who get us into these messes. Washington D.C. – and America – has to wake up and start throwing these idiots out, and getting their direction from Main Street. This past election was a harbinger of things to come, but there is much, more to be done before it will change.
One thing is for certain: continued control of our lives, families and businesses will doom us to failure. To get out of the mess created by the “experts” we have to return to a Main Street mentality, greatly reduce the size and scope of government at all levels, and substitute principles, character and common sense for laws and regulations. The job of government for the next 10 years should be to create not one new law, but to abolish every single one that conflicts with practical reality as observed from Main Street. That is the way to grow jobs, stimulate creativity and innovation, stabilize our economy, and return to the grand promise of life, liberty and the pursuit of happiness. The message to City Hall, the State Legislature, and the halls of Congress is simple: LEAVE US ALONE - GET OUT OF OUR WAY.
"Main Street," an original seriagraph owned by Len Semas depicting a typical street scene of, perhaps, 1950s America. Though this period was not without problems, it was America's "Golden Age." This essay discusses why.