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Romantic literature often presents the individual as somebody caught in a struggle against the state and the market. Nothing could be further from the truth. The state and the market are the mother and father of the individual, and the individual can survive only thanks to them. The market provides us with work, insurance and a pension. If we want to study a profession, the government’s schools are there to teach us. If we want to open a business, the bank loans us money. If we want to build a house, a construction company builds it and the bank gives us a mortgage, in some cases subsidised or insured by the state. If violence flares up, the police protect us. If we are sick for a few days, our health insurance takes care of us. If we are debilitated for months, national social services steps in.

Romantic literature often presents the individual as somebody caught in a struggle against the state and the market. Nothing could be further from the truth. The state and the market are the mother and father of the individual, and the individual can survive only thanks to them. The market provides us with work, insurance and a pension. If we want to study a profession, the government’s schools are there to teach us. If we want to open a business, the bank loans us money. If we want to build a house, a construction company builds it and the bank gives us a mortgage, in some cases subsidised or insured by the state. If violence flares up, the police protect us. If we are sick for a few days, our health insurance takes care of us. If we are debilitated for months, social security steps in. If we need around-the-clock assistance, we can go to the market and hire a nurse – usually some stranger from the other side of the world who takes care of us with the kind of devotion that we no longer expect from our own children. If we have the means, we can spend our golden years at a senior citizens’ home. The tax authorities treat us as individuals, and do not expect us to pay the neighbours’ taxes. The courts, too, see us as individuals, and never punish us for the crimes of our cousins. Not only adult men, but also women and children, are recognised as individuals. Throughout most of history, women were often seen as the property of family or community. Modern states, on the other hand, see women as individuals, enjoying economic and legal rights independently of their family and community. They may hold their own bank accounts, decide whom to marry, and even choose to divorce or live on their own. But the liberation of the individual comes at a cost. Many of us now bewail the loss of strong families and communities and feel alienated and threatened by the power the impersonal state and market wield over our lives. States and markets composed of alienated individuals can intervene in the lives of their members much more easily than states and markets composed of strong families and communities. When neighbours in a high-rise apartment building cannot even agree on how much to pay their janitor, how can we expect them to resist the state? The deal between states, markets and individuals is an uneasy one. The state and the market disagree about their mutual rights and obligations, and individuals complain that both demand too much and provide too little. In many cases individuals are exploited by markets, and states employ their armies, police forces and bureaucracies to persecute individuals instead of defending them. Yet it is amazing that this deal works at all – however imperfectly. For it breaches countless generations of human social arrangements. Millions of years of evolution have designed us to live and think as community members. Within a mere two centuries we have become alienated individuals. Nothing testifies better to the awesome power of culture.

Bank-friendly writers and lobbyists fostered a myth that the economy needed its investment banks to remain solvent to keep the economy functioning. But many former officials, including Bair, SIGTARP‘s Neil Barofsky, and Reagan Administration budget director David Stockman, rejected the claims that public guarantees for reckless bank loans was needed to protect insured depositors. Retail savings and checking accounts were never threatened by the bad gambles that banks made. But this myth had to be promoted in order for Paulson, Geithner Bernanke and other bank protectors to persuade Congress to overrule Bair and make government (“taxpayers”) pay. Their aim was to save the banks from being nationalized, and to protect bankers from being prosecuted for fraud or reining in the exorbitant salaries and bonuses they had given themselves. No attempt was made to change the system that had led to the crash. If

The state and the market are the mother and father of the individual, and the individual can survive only thanks to them. The market provides us with work, insurance and a pension. If we want to study a profession, the government’s schools are there to teach us. If we want to open a business, the bank loans us money. If we want to build a house, a construction company builds it and the bank gives us a mortgage, in some cases subsidised or insured by the state. If violence flares up, the police protect us. If we are sick for a few days, our health insurance takes care of us. If we are debilitated for months, national social services steps in. If we need around-the-clock assistance, we can go to the market and hire a nurse – usually some stranger from the other side of the world who takes care of us with the kind of devotion that we no longer expect from our own children. If we have the means, we can spend our golden years at a senior citizens’ home. The tax authorities treat us as individuals, and do not expect us to pay the neighbours’ taxes. The courts, too, see us as individuals, and never punish us for the crimes of our cousins.

Romantic literature often presents the individual as somebody caught in a struggle against the state and the market. Nothing could be further from the truth. The state and the market are the mother and father of the individual, and the individual can survive only thanks to them. The market provides us with work, insurance and a pension. If we want to study a profession, the government’s schools are there to teach us. If we want to open a business, the bank loans us money. If we want to build a house, a construction company builds it and the bank gives us a mortgage, in some cases subsidised or insured by the state. If violence flares up, the police protect us. If we are sick for a few days, our health insurance takes care of us. If we are debilitated for months, national social services steps in. If we need around-the-clock assistance, we can go to the market and hire a nurse – usually some stranger from the other side of the world who takes care of us with the kind of devotion that we no longer expect from our own children. If we have the means, we can spend our golden years at a senior citizens’ home. The tax authorities treat us as individuals, and do not expect us to pay the neighbours’ taxes. The courts, too, see us as individuals, and never punish us for the crimes of our cousins.

Romantic literature often presents the individual as somebody caught in a struggle against the state and the market. Nothing could be further from the truth. The state and the market are the mother and father of the individual, and the individual can survive only thanks to them. The market provides us with work, insurance and a pension. If we want to study a profession, the government’s schools are there to teach us. If we want to open a business, the bank loans us money. If we want to build a house, a construction company builds it and the bank gives us a mortgage, in some cases subsidised or insured by the state. If violence flares up, the police protect us. If we are sick for a few days, our health insurance takes care of us. If we are debilitated for months, national social services steps in. If we need around-the-clock assistance, we can go to the market and hire a nurse – usually some stranger from the other side of the world who takes care of us with the kind of devotion that we no longer expect from our own children. If we have the means, we can spend our golden years at a senior citizens’ home. The tax authorities treat us as individuals, and do not expect us to pay the neighbours’ taxes. The courts, too, see us as individuals, and never punish us for the crimes of our cousins. Not

To solve the inability of middle-class renters to purchase single-family homes for the first time, Congress and President Roosevelt created the Federal Housing Administration in 1934. The FHA insured bank mortgages that covered 80 percent of purchase prices, had terms of twenty years, and were fully amortized. To be eligible for such insurance, the FHA insisted on doing its own appraisal of the property to make certain that the loan had a low risk of default. Because the FHA's appraisal standards included a whites-only requirement, racial segregation now became an official requirement of the federal mortgage insurance program. The FHA judged that properties would probably be too risky for insurance if they were in racially mixed neighborhoods or even in white neighborhoods near black ones that might possibly integrate in the future. When a bank applied to the FHA for insurance on a prospective loan, the agency conducted a property appraisal, which was also likely performed by a local real estate agent hired by the agency. as the volume of applications increased, the agency hired its own appraisers, usually from the ranks of the private real estate agents who had previously been working as contractors for the FHA. To guide their work, the FHA provided them with an Underwriting Manual. The first, issued in 1935, gave this instruction: 'If a neighborhood is to retain stability it is necessary that properties shall continue to be occupied by the same social and racial classes. A change in social or racial occupancy generally leads to instability and a reduction in values.' Appraisers were told to give higher ratings where '[p]rotection against some adverse influences is obtained,' and that '[i]mportant among adverse influences . . . are infiltration of inharmonious racial or nationality groups.' The manual concluded that '[a]ll mortgages on properties protected against [such] unfavorable influences, to the extent such protection is possible, will obtain a high rating.' The FHA discouraged banks from making any loans at all in urban neighborhoods rather than newly built suburbs; according to the Underwriting Manual, 'older properties . . . have a tendency to accelerate the rate of transition to lower class occupancy.' The FHA favored mortgages in areas where boulevards or highways served to separate African American families from whites, stating that '[n]atural or artificially established barriers will prove effective in protecting a neighborhood and the locations within it from adverse influences, . . . includ[ing] prevention of the infiltration of . . . lower class occupancy, and inharmonious racial groups.

the FHA does require an additional payment, called "Private Mortgage Insurance." This "PMI" insurance protects the lender and is required when the down payment on an FHA loan is less than 20%. The extra PMI payment can make your monthly payment slightly higher, thus reducing your cashflow.

Understandably, given public anger at bailouts, support had been gathering from both the right and the left for breaking up the largest institutions. There were also calls to reinstate the Depression-era Glass-Steagall law, which Congress had repealed in 1999. Glass-Steagall had prohibited the combination within a single firm of commercial banking (mortgage and business lending, for example) and investment banking (such as bond underwriting). The repeal of Glass-Steagall had opened the door to the creation of “financial supermarkets,” large and complex firms that offered both commercial and investment banking services. The lack of a new Glass-Steagall provision in the administration’s plan seemed to me particularly easy to defend. A Glass-Steagall–type statute would have offered little benefit during the crisis—and in fact would have prevented the acquisition of Bear Stearns by JPMorgan and of Merrill Lynch by Bank of America, steps that helped stabilize the two endangered investment banks. More importantly, most of the institutions that became emblematic of the crisis would have faced similar problems even if Glass-Steagall had remained in effect. Wachovia and Washington Mutual, by and large, got into trouble the same way banks had gotten into trouble for generations—by making bad loans. On the other hand, Bear Stearns and Lehman Brothers were traditional Wall Street investment firms with minimal involvement in commercial banking. Glass-Steagall would not have meaningfully changed the permissible activities of any of these firms. An exception, perhaps, was Citigroup—the banking, securities, and insurance conglomerate whose formation in 1998 had lent impetus to the repeal of Glass-Steagall. With that law still in place, Citi likely could not have become as large and complex as it did. I agreed with the administration’s decision not to revive Glass-Steagall. The decision not to propose breaking up some of the largest institutions seemed to me a closer call. The truth is that we don’t have a very good understanding of the economic benefits of size in banking. No doubt, the largest firms’ profitability is enhanced to some degree by their political influence and markets’ perception that the government will protect them from collapse, which gives them an advantage over smaller firms. And a firm’s size contributes to the risk that it poses to the financial system. But surely size also has a positive economic value—for example, in the ability of a large firm to offer a wide range of services or to operate at sufficient scale to efficiently serve global nonfinancial companies. Arbitrary limits on size would risk destroying that economic value while sending jobs and profits to foreign competitors. Moreover, the size of a financial firm is far from the only factor that determines whether it poses a systemic risk. For example, Bear Stearns, which was only a quarter the size of the firm that acquired it, JPMorgan Chase, wasn’t too big to fail; it was too interconnected to fail. And severe financial crises can occur even when most financial institutions are small.

Zero Line Spender, Saver, Wealth Creator Your financial personality type determines your financial position in life. Let’s say there is a zero financial line that represents a position where you owe nothing and have nothing. Perhaps you can remember those days getting started on your own. So, let us assume you just graduated from college and you’re one of the lucky few who graduated at the zero line, you owe nothing. Pretty amazing considering that in 2013, the debt on student loans exceeded all credit card debt owed in America. But fortunately, you made it out free and clear to the zero line. You’re a “Spender” so you go to the showroom and pick one out. With your job and the car as collateral, you get a car loan and you drop below the zero line. You lifestyle gets more and more expensive and since you are a ‘Spender” you probably take on credit card debt to help finance your lifestyle desires. You are constantly working your way back to becoming a zero, financially speaking. Then, you get married and now there are two in debt working their way back to zero. Eventually, children come along, and the odds of being able to put away enough money to pay your debt and interest and live on the top side of the zero line are becoming virtually impossible. Unfortunately, many Americans live in this position with little or no chance of ever living debt free. When something comes along that requires their savings, they must deplete their funds in order to avoid paying interest and then they must start saving again for their next expense. They are constantly returning to the zero line. The money they have accumulated is compounding interest, giving them uninterrupted growth. Having access to capital allows them to negotiate more favorable loans by collateralizing against their accounts rather than depleting them. They make payments to the lending institution with dollars from their current cash flow, protecting the growth of the money they have saved and invested for their future. Saving and investing with uninterrupted compounding is an important wealth concept for moving further and further away from the zero line.