I have been busy toiling away with my work in the real estate business since the legislature ended in March. Coming home and getting to work is always a healthy reminder why our state has a citizen legislature. It brings value and perspective to state government. Rather than being cloistered away in a marble palace somewhere, the Utah Legislature comes home to live with the laws it passes.
Unfortunately, Utah does not have much influence over the bailout culture that is seeping into the public psyche. A recent example brings this trend to life. In a real estate transaction where I represented the sellers, a buyer had submitted an offer that was acceptable to my clients. We pressed forward with contract. However, two weeks before the transaction was to close, we received a letter indicating the buyer could no longer obtain a loan.
So what happened?
In this case, the buyer was a college graduate. They had student loans they were paying on. Some time during our contract (we were working on a 90 day time frame), the buyer received a letter from an entity claiming she did not need to pay her student loans. She called the entity and they indeed confirmed that was the case. She stopped making her student loan payments and her credit scores plummeted. She instantly became disqualified to purchase the property, or any property for that matter, until her credit scores could improve over the next year or two. Obviously, that was disappointing to everyone involved.
So, who was this entity that informed the buyer she could stop paying on her loan obligation? It turns out that it was a third-party negotiator who specializes in resolving distressed student loans for borrowers who can’t afford to make their payments. Yet, this borrow could afford to make her payments and was doing so. Somehow the buyer became convinced that she could simply stop making payments without consequence.
This brings us to the bailout culture problem. Since 2008, our economy has been on a trajectory that is completely dependent on central bank and government intervention. We saw the bank bailout in 2008 called TARP; we have seen homeowners bailed out with HARP and HAMP; borrowers everywhere have been bailed out with ZIRP. There are many more. The alphabet soup of programs aimed at deferring the consequences of our actions cannot go on without affecting the expectations and attitudes of consumers.
Hence, we observe our unsuspecting buyer lured into the belief that yet another program exists to defer the consequence of taking out student loans. Can she be blamed? Perhaps, but American culture is culpable as well. As long as these programs continue to erode away at the firm connection between cause and effect that exists in the minds of our people, we can expect more of the same. The implications of weakening prudence, propriety, and prosperity should not be overlooked.