Pay Off Your Secondary Mortgage

As the stock market falls and economic news worsens and far-ranging explanations flood the airwaves, ONE explanation is absent—the de-equitization of housing. Clinton’s blessing of Greenspan’s easy money policy did not just encourage banks and financial intermediaries to leverage. It also encouraged middle Americans to leverage.
The elderly were encouraged to take the equity out of their homes to live a little better--equity that was normally reserved for their children.
Worse yet, young wage earners were urged to avoid taxes by hocking their houses for low-interest, tax deductible home loans (second mortgages) instead of paying non-tax deductible, outrageously high interest for credit card debt.
The middle class has learned the evils of debt. They are de-leveraging. That is what causes the stock market to falter as many good mortgages are paid off. As net debt recedes so does purchasing power, at least temporarily. This is a good sign, not a bad sign.
It helps banks absorb their sub-prime losses and shores up balance sheets. It also reduces the inclination to make bad loans. Banks with net cash returning will survive—let the others fail—but cut off bonuses for those responsible for the failures.