By David Webb Staff Writer

Axiom rings true for those who took out subprime mortgages

David Webb: The Rare Reporter

I only retained one nugget of information from an economics class I took back in my college days, and that was �there is no such thing as a free lunch � someone�s got to pay for it.�

I found that phrase catchy. As I recall, the professor noted that the �no free lunch rule� was one of the most important theories we would learn in his class, and I�m beginning to understand why.

This week, I went out on the street to ask passersby to assess the shape of the economy in light of the avalanche of defaulted home mortgages that has left the stock market fluctuating wildly. (See Query, Page 4.) I discovered a lack of consensus about the economy, leading me to believe I�m not the only one who is confused.

Of five people questioned � all of whom were chosen strictly because they were the first ones to walk by and agree to talk � no two responded the same. My unscientific survey revealed that the economy is viewed by people on the street as, at best �fair,� at worst �poor,� �scary� to some, predictable to others and � my personal favorite � totally uninteresting.

Maybe one of those people who sped by me, refusing to comment, would have been a little more optimistic, but we�ll never know. They didn�t have the time to discuss the economy. Maybe, that�s because they�re confused, too.

On a more optimistic note, the top headline on The Dallas Morning News� Business Section, Wednesday, Aug. 22, read, �Area CEOs see growth, raises on the horizon.�

It was encouraging to read that, according to a survey by Southern Methodist University�s Cox School of Business, Dallas-Fort Worth�s chief executives are optimistic about the economy and plan to give their employees a raise in 2008.

But then I turned the page.

The top headline read, �All of Fed�s tools will be used in crisis.� I learned that Federal Reserve Chairman Ben Bernanke had agreed to use �all of the tools at his disposal to restore stability in financial markets roiled by the subprime mortgage crisis.�

That didn�t sound too good. It seemed to confirm we are in a crisis.

Then lower on the page in the Briefs section I read, �Thrifts� troubled assets highest in 14 years.�

There, I learned that �U.S. savings and loans held more troubled assets in the second quarter than at any time in the past 14 years as more families fell behind on their mortgage payments.�

On another inside page, I learned that the stock market continued to be erratic as �investors wait to see if the Federal Reserve cuts interest rates in an effort to help contain the credit crisis,� and that �confusion and uncertainty of risk is creating this liquidity problem.�

Finally, I noted in another brief that Capital One Financial Corp was closing down a mortgage unit and slashing 1,900 jobs.

Talk about unsettling news coverage, despite the good news item on the front page of the Business Section.

It�s got to be really tough for real estate agents and other professionals in the housing industry. Not only are they reading the newspaper and getting concerned and confused the same as I am, they have to keep clients interested in buying and selling homes. That�s got to be difficult. For the seller, they�re at the mercy of buyers who know they are in a buyer�s market and can call the shots for the first time in years. For the buyers, they must be wondering whether to purchase now or to wait for bigger bargains that may be waiting around the corner.

The Dallas real estate market has remained stable, according to local real estate agents, but it�s hard to ignore what�s going on across the nation. It�s the same with the stock market. Should an investor buy now at a low price, or wait for it to get lower? Or should an investor sell now at a loss in an effort to cut their losses?

What a dilemma.

As near as I can tell, the bottom line for the average homeowning, meager investor like me is to just sit tight and wait to see what happens. I�m going to leave the proactive plans to those who are a little more willing to take a risk � and younger.

But I have realized something. There truly is no free lunch. All of those subprime mortgages that were given to people whose credit wasn�t up to par or to people who were buying a more expensive house than they could afford � they stimulated the economy in years past, but we�re paying for them now.


This article appeared in the Dallas Voice print edition August 24, 2007 rpg online mobile gamesинтернет реклама стоимость