Andrew Martinez
Research Paper 1) The Exposition
In Christopher Papagianis’s and Arpit Gupta’s article, “Making the Housing Market Work Again,” the two provide a descriptive summary of the causes of the housing market collapse in the United States which spurs the Great Recession of the late 2000s. The authors use the actions taken by two groups before, during, and after the recession, as tools to show what not to do when dealing with the housing industry. They then build off these mistakes and offer advice for the future to the two main players in their article, the borrowers and the policy makers. The article does a great job of identifying the problems and raising flags on mistakes made by all parties, but in my opinion the authors did not redirect the blame equally. I believe that the general public was not criticized enough for their part in the collapse, as illogical decisions, specifically with their reliance on credit, led large scale loss in the long term. Where the authors point fingers at borrowers and policy makers for allowing ill-fit people to take out a loan, I blame the people for taking out a loan that they should have known they could never afford in the first place, and explain how we can avoid these economic downturns in the future.
The two begin their article by discussing the causes of the housing market crash. They pinpointed the main reason for the crash by discussing how a large number of loans being taken out for things such as homes, cars and boats, were being accepted regardless of credit score or down-payment. When a borrower is no longer able to pay for the loan, the bank who lent the money out, must repossess the purchase. This is not too bad for the bank, but as more and more people began defaulting on these loans forcing the lenders to repossess the purchase, the value of these items begin to drop and the lender now loses money on the item. For example, if I take out a loan to buy and home for $500,000 and only pay back $100,000, the bank now has a house but lost out on $400,000. Now if the value of the house goes down because everyone else loses there house and nobody want to buy it, the bank no longer is going to make up the $400,000 that they lost when giving me the loan. The key problem here is that it was too easy for someone to take out a loan, which eventually hurt banks in the long run. In some cases, lenders did not even ask for a down-payment making almost anyone qualified to get a loan.
In order to fix this problem, Papagianis and Gupta suggest that people taking out loans, in this case those who take out a mortgage on their home, need to be willing to make larger down-payments when paying for a home. With higher down-payments in order to qualify, lenders will feel safer in giving out loans knowing that you are able to survive the length of the loan. In addition, borrowers must better understand and be willing to take out recourse loans as they are better in the long term. Not only does a recourse loan have a lower interest rate, but it also builds your credit score over the life of the loan. As long as you plan to make all your monthly payments, as you should, in the eyes of the authors there is no reason why a borrower should be scared to take one out.
In the case of the policy makers, Papagianis and Gupta ask the government to lower its involvement in the housing industry. They played their own part in the collapse from the beginning as they passed legislation that allowed banks to lower the qualifications for getting a loan. This made it easier for people who would not previously be able to take out a loan, be qualified for one and when they eventually defaulted on their loans, the banks would lose money. After the housing market, crash many banks, businesses and other investment companies went down with it, tanking the economy and bringing the United States into the worst economic recession since the Great Depression in the 1930s. The legislation that followed the recession however has had negative effects on the US economy in an attempt to fix it. The economic stimulus package passed in 2009 had good intentions in attempting to recover the economy. The main idea was that by cutting taxes, consumers would have more money which in theory would lead to an increase in consumer spending and stimulate the economy. Unfortunately, this had negative effects as the public kept the money instead of spending it. Other programs put in place to help home owners have cost billions of tax-payer dollars and all have had minimal effect on the situation. Although an optimist may say that some help is better than no help, the authors state that the lack of efficiency is costing the public millions dollars and has caused lowered consumer spending over the last five years when compared to spending in the mid-2000s.
Although the authors of the article, “Making the Housing Market Work Again,” spend a majority of their time summarizing the causes of the housing crash, I believe that there is a few things that they overlooked when writing the article. In the article, Christopher Papagianis and Arpit Gupta, spend the entire time blaming two separate parties, the borrowers and the policy makers, and though the two are not free of blame, I believe that the authors are do not put enough of the blame on the public of making poor financial decisions on an individual basis.

2) Critical Analysis
While the article summarizes the events leading up to, during, and following the recession well, the two groups blamed receive almost all of the punishment from the authors. My view on which party deserves more blame differs as the mistakes made by the general public fuel the later errors of the policy-makers and borrowers. In the case of the policy-makers, they were simply told what to do by the people they represent, while the borrowers were given an offer that was just too enticing to pass on. As Papagianis and Gupta stated previously, legislation passed before and after the housing crash played major roles in the recession that was soon to come. However I do not believe that their argument justifies the blame they receive. The job of a politician is to represent the people who voted them into office. Though I am sure that there was some personal benefit involved in passing this legislation, I have a difficult time believing that these congressmen and congresswomen attempted to destroy the economy by passing unpopular bills into law. The authors specifically targeted the legislation that made it easier to take out a loan, but how would this benefit these politicians voting on it? These laws passed by congress made owning a home easier by lowering the interest rates on loans, lowering the necessary credit score to take out a mortgage, and asking for very low down-payments on home purchases. A politician would certainly not be able to keep their job if they could not afford to buy a house, or if their credit score was too low to qualify for a loan, or if they could not afford to make a down-payment on an expensive purchase, so this decision must have been asked for by the people represented by the congressmen/congresswomen. If the politician does not act in favor of their people, there is no way for them keep their job and be re-elected, meaning that despite their uncertainties with passing these bills, the pressure from the people did not give them much of a choice. Without being able to use their better judgment, the authors unfairly target politicians for the cause of the housing market collapse. Next, the borrowers are blamed for being unable to pay their loans back when they were never really qualified to begin with. While it is important to keep your finances in check and know what you can and cannot afford, the choices that were made by borrowers should not surprise anyone at all as it happened about eighty years earlier. One of the few similarities that this recession had in common with the Great Depression, was the idea of a housing bubble that was growing every day that seemed would never pop. This was the case with stocks in the late 1920s where everyone was becoming richer and richer by buying stocks and then selling them after earning a profit. The same happened with houses in the mid-2000s until all of a sudden, the bubble popped and all the people who could not afford to hang on to, or sell the house, or the stock during the market collapse in 1929, ended up losing a lot of money. With “too good to be true” deals offered by banks to take our mortgages for homes, it should come as no surprise that many people jumped on the opportunity. Another incentive for buying houses about a decade ago was the belief that a house was an investment that would gain value and could be sold for profit in the future. Referring to the scenario earlier stating that I buy a house for $500,000, if I made my payments for a year and the value of my house rose to $600,000, I have the opportunity to sell the house for more than I bought it. The idea is that now with $600,000 dollars I can do the same with a more expensive home and repeat, but when the housing bubble burst if I did not have enough money to pay for my really expensive house, I would lose a lot of money as well as the house. These incentives were too good to miss and most people who had the opportunity to try and make money in the housing market took a gamble and hoped for the best. This is why it should be to no one’s surprise that borrowers only made short term decisions with their money and should not be singled as one of the main causes for the collapse. 3) New View
We may want to point blame at others and say that we were misinformed before making purchases, I think we the consumers need to be held accountable as well for this financial crisis. By shining a light on mistakes made by the public, we can begin to see how they were very much catalysts in the collapse and put the big picture together of how we got into this mess. The downturn led to many unfortunate things, but I am not arguing that people deserved to be laid off or lose their jobs, my argument is based on decisions we made before the crash which led to the economic recession.
In order to avoid economic downturns in the future, the best thing that we can all do is educate ourselves. As I stated earlier, the housing market collapse has a few similarities to the market crash of 1929 and by simply repeating our past mistakes, we almost dug ourselves into another Great Depression. Although the situations and causes for this recession were not identical to the Great Depression of the 1930s, by informing ourselves and learning how to manage our money better, we can avoid these types of economic downfalls. Simple rules to abide by when dealing with your money may not appear to save you money in the short term, but will yield significant savings in the long run. One example is making a large down-payment that you can afford, regardless of the minimum needed to qualify for a loan. You will lose money right now by paying it up front, but over the life of a thirty year mortgage, the interest you save by doing so is a lot greater than you think. By putting $100,000 down instead of $50,000 on a $500,000 home at an interest rate of 5% over thirty years, you would save about $96,000 over the length of the loan. As long as it is within one’s budget to do so, pay as much up-front as you can afford. If people made these decisions before the burst of the housing bubble, instead of losing their homes when the housing market went south, they would have been able to recover quicker and kept the house. Instead of putting blame on someone for making it cheaper and easier to buy a home, blame the person who is foolish enough to buy the home when they cannot afford it.
Another danger that comes with buying things such as homes, cars or boats is credit. Now when buying such items you cannot be expected to pay the cost upfront, so credit does have a place in the world, but we should know better than to take out enormous loans when we cannot afford it. Credit is the enemy of savings and we can forget when swiping a card just how much money we are losing when we make purchases. When people tried to turn a home into an investment, they spent a lot of their savings making these purchases and used credit to help pay for the rest of the home. The credit that pays for the other half of the house is not your money, it is the bank’s money, and when people started using it to purchase other luxury goods such as cars and boats, and they forgot how little money was actually theirs. It is not the fault of anybody but the consumer for making these decisions to pay without using their money so they should take the responsibility for it, and when the market crashed they did.

4) Conclusion
The Great Recession and housing market collapse have already occurred and there is no way of changing the past. Christopher Papagianis and Arpit Gupta did well in outlining the events that led up to and followed these two economic periods as well as explained how we can protect ourselves from letting it happen again. In addition to this, they also let it be known that two of the main factors of the downturn were the borrowers and the policy-makers, for not only making poor decisions which were some of the causes of the market crash, but also poor decisions after that led to an extended recession. Although both of these statements are true, I feel that the general public deserved to also be cited as one of the offenders for what happened. They helped to fuel the mistakes made by policy-makers and borrowers and a lack of simple financial knowledge had long-term damaging effects on not only their own individual finances, but also the whole US economy. By better educating ourselves about what we can and cannot afford, in addition to other more complex things such as taking out a mortgage on a home, these types of downturns may not be completely avoided, but will not have such negative effects. The topic of the US economy and the movement of money world-wide is not free of politics and there are many different angles taken on what went wrong, how to fix it, and how to prevent it, so there will never be a definitive answer for these questions, but with simple steps on educating ourselves in finance and economics, anyone can protect themselves from market failures, and recessions, such as the Great Recession of the late 2000s.