As this is written, there’s an interesting juxtaposition of business stories on which the mainstream media (and some of the less than mainstream media) has a completely wrong take.
The first is the return of sub-prime lending.
The universal media response is horrified. Sub prime lending caused the economic meltdown of 2008, didn’t it?
No, it didn’t.
If we’ve said this once we’ve said it a thousand times, there is nothing inherently wrong with sub prime lending. If you give a person who has less than perfect credit an opportunity to buy a house at a reasonable price with a slightly higher interest rate, the odds are he or she will make every payment on time and in full.
Because they need the house and appreciate the opportunity.
If, however, you get them into a mortgage that is designed to be foreclosed upon, it will be and you will have an economic mess on your hands.
It was the greed and irresponsibility of lenders that caused the melt-down. Many of them made their money when the loan was made, not when it was collected. They had no incentive to make good loans. So they made crappy loans and the credit rating agencies called them good loans. Those were the people who should have gone to prison.
If you sell someone a house for a reasonable price which is related to the functionality of the house, charge them a higher but not loan shark interest rate, for the most part they will not let you down.
Further, there are so many unoccupied, unsold houses out there that sub prime lending is the only way they are going to be sold.
One can only hope that lenders will understand that and take their cues from the auto lending industry which fully understands that without sub prime lending there is no auto industry.
Another event which the media doesn’t understand is the incident aboard a Southwest Airlines 737 where the skin of the fuselage failed at 36,000 feet and the plane had to land in Yuma.
This is Southwest’s second incident with an aging 737-300, again, the crew performed admirably and nobody was hurt.
The media started pointing fingers before the plane landed.
Now it is not out of the realm of possibility that the 737-300 series, of which Boeing has made about 800, may have a flaw which only shows up at about 40,000 take off and landing cycles. Or, it may well be that the conventional maintenance wisdom for a 15 year old airliner which is worked as hard as Southwest works its fleet needs to be adjusted.
But one thing is most assuredly not true.
Airline executives—particularly those who run Southwest—do NOT sit around looking for ways to cut costs at the expense of safety.
Imagine the marketing of an airline which did.
“We just had an accident so we’re not due.” “Sure we’re not safe. But we’re cheap!”
As a very frequent flier on Southwest I can assure you that they have done some things to make me mad recently including changing their Rapid Rewards program but they have never in my very experienced eye skimped on safety.
The problem with the media diagnosing complex issues like airline safety and mortgage lending is that they don’t know what they don’t know and they usually rely on “experts” who have a particular ax to grind.
It makes for bad reporting and has the potential to cost their readers, listeners and viewers real, serious money.