The difference is easy: when your neighbor is out of work it is a recession; but when you are out of work it is a depression. I would like to say that I made that up but I didn't. I would also like to say this discussion isn't very important today, but unfortunately it is very important. Furthermore, your financial future can be greatly affected by your understanding or lack of understanding of what I am trying to say. We are heading straight toward a very serious financial calamity in this country and are nearing the point of no return. A couple of days ago a major bank, Indymac Bank, quit doing residential loans in both their retail and wholesale divisions. One year ago I was negotiating with this institution to bring my Company into their fold. They were at that time a $2 billion bank. Now they have a market cap of about $50 million. How can a bank lose $1.95 billion in less than a year? Measured against what bigger and more prominent banks have written off it is peanuts. Is that why we don't care? Thirty four hundred people are losing their jobs in an industry that has shed over 500,000 jobs in the last 12 months. Unless you are one of these workers is it just a recession?
Now we hear that a major bank, very near to calling it quits, is being carved up in the board rooms of several other financial institutions. This will rock Wall Street and Main Street alike, but unless you are part of it it's just another aspect of the impending recession. Washington politicos are trying to show their hearts and souls are in the right place by passing some litigation that most likely won't work. The government will help to rewrite about 400,000 loans for borrowers that haven't any equity in their respective houses , but only if the banks are willing to take a loss. The banks are turning losing into an Olympic event with totals beyond any ones wildest dreams. But stop and consider this if you will. Who are the banks? Aren't they the institutions that are holding yours and my money. Is it okay with you if they lose your money, because it isn't okay with me?. But then again if it is your money it is only a recession to me; if it is mine, then we are beginning to talk depression.
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.