Son,

I enjoy the TV program Boston Legal. Their stories are right out of the headlines. Last evening one of their ‘legal’ cases surrounded home foreclosure.

Clarence, an employee of Crane, Pool?, and Schmidt, was two months behind on his mortgage payments because his interest had ballooned to 12%.? He had originated the 100% loan at 2%. Because of the sub-prime meltdown his interest had ‘ballooned’ – as was specified in the mortgage contract. The bank was foreclosing on the house. His pal, James Spader, challenged the lending bank.

As entertainment goes the show is pretty funny – but they manage to tackle real and serious issues. Admittedly, the writers present brief and cursory synopsis of complicated issues. I thought they summed up the mortgage crisis pretty well. Everyone loses. The borrower and lender both lose.

Mortgages are not new inventions in the world of finance.  Borrowing money is older than the Bible. Regulated lending of money has protected the uneducated masses and simultaneously made fortunes for banking empires. The system was working pretty well until the government, in the interest of less government and free trade, deregulated the lending industry. That deregulation led to the predatory lending practices we have seen the past 15-20 years.

The deregulation of the financial industry and the abolition of usury laws brought the jackals out of the woods and into our homes. Denny Crane, the deranged character played by William Shatner, is given the punch lines to the jokes. His take on the mortgage debacle: “…This is like a wet dream for liberals who want more government regulation…” Pretty funny.

I like Capitalism as an economic system. Capitalism is like a team of Clydesdale draft horses, pulling the wagon of prosperity. The majestic muscles are carried by saintly white socks, strutting with pride and power. And the metaphor follows correctly – the horses act as a ‘team,’ they are harnessed and bridled, trained and carefully directed by a wagon master.

The financial industry meltdown is the result of unbridled capitalism. The horses are running wild and the wagon is stuck in the mud.

Dad