The crisis related to the mortgage industry or more importantly related to so many home owners is going to impact politics more than we might think.
We have yet to see the real impacts of a serious tightening in credit and a significant down-turn in housing prices. Until now, many sellers and home builders have held somewhat steady on price, preferring to hold on for a better deal rather than sell at a significant discount. That is changing. And as the months go by and what seems like a whole generation of first-time home buyers realizes that they have lost 10%, 20% of their home values, they are going to get angry.
People usually look for someone to blame when they get angry. President Bush is a likely target, the Congress is another. ‘Someone should have done something.’ ‘Someone should have saved the family of four who bought a house with zero down with a mortgage that offered zero interest for 3 years and then adjusted upwards swiftly, from themselves.’ …they will say.
Beyond the blame game, the issue of home mortgages and a credit crunch will most certainly, in a bigger way than it already has, become part of any politicians stump speech. More so on the national level, but if you are running for legislature or even city council and you fail to address the issue, fail to grasp the impact of falling home prices and a lack of available credit, or worse, you suggest it is "not an issue of state and local officials can do anything about" you will be missing a huge opportunity and perhaps, even worse, be suggesting to the voters of your community that you don’t care, that you will do nothing to help solve the problem–that you are not informed on one of the key concerns of virtually all voters today.
When it comes to the direct funding of for instance legislative campaigns, in California, it has always been assumed that virtually any candidate who owned a home had the ability to drop at least $100,000 of his or her money into the campaign. Even if it had to come from a second or line of credit on their home. I don’t necessarily approve of this form of arbitrage. However, it is done all the time.
In fact I’d bet that half the so-called self funders for legislative office today who have dropped their first $100,000 into their campaign accounts did so this cycle not by taking a small portion of their vast liquid assets and transferring it to their campaign, but rather wrote a check off a home equity line on which they are paying interest.
It is not as if this option is gone, but it is increasingly difficult to get a new home equity line of credit these days, especially if you need one that covers more than 70% of the value of your home.
So expected a reduced number of six-figure candidate contributions in the next reporting cycle.
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