While driving home tonight I heard a Texas professor on the CBC talking about what has been happening on Wall Street these past few days. He spoke of a model that was broken and not working. He then mentioned the return to an older model where banks would hold their mortgages until the person having them repaid them. What a novel concept! To actually know the person you are lending to and to hold the debt with a charge on the property for the full amortization period!
For all 66 years of the credit union I work for this is the model that they have and it has served them well. Oh it isn’t glamourous and you can’t grow by 10% per year but it is safe and it is secure and after the last few days that is what a few people on the street didn’t consider very important.
Where it goes from here is anyones guess. The last bad economic time that we had with depleted housing prices, inflation and loss of jobs was the early 80’s. That would mean that anyone who is 40 years old or less didn’t live through that time as an economic entity i.e. too young to have a job. No one wants a return to those times. The problem is that a younger generation has lived in a constant growth and prosperity era. What goes up sometimes comes down. I wonder how most will manage if indeed it does get worse. Aesop had a fable about the tortoise and the hare. It is always interesting to see who won that race.