Housing+&+Credit-Period+6


 * FISHING FOR RED HERRINGS**

For your group's assigned topic below, read one or more of the articles provided, then use the Times Topics pages to find more articles that address this issue and how it has played out in recent news. Work to both understand the larger issues as well as to identify a "microcosm" of the issue—such as a person involved who people can relate to or focus on, like Bernie Madoff, or a small part of a larger problem, like the A.I.G. bonuses—that you can use to "sell" the issue to the public.


 * Issue: HOUSING AND CREDIT **

[|Times Topics: Housing]

[|Times Topics: Credit Crisis Essentials]

**Selected Related Articles**

**[|Where are the Pitchforks and Torches When You Need Them?]**

[|Obama’s Ball and Chain]

[|Toxic R Us]


 * What Is A Red Herring?**

A "red herring" is something that diverts attention from a more significant issue. With regards to politics and media, the media often covers insignificant or small news (in comparison to the larger issue) called microcosms. These red herrings receive a large amount of attention because the media industry is first and foremost trying to make money. Stories that make money often have nothing to due with real events. Reasons for this vary, but the some of the largest are that these stories are entertaining or they feed on fears that people previously have. At any rate, red herrings can take over the news and divert the public's attention from the real issues at hand.


 * ISSUE BACKGROUND**

The housing industry began a slump in 2006 and reached an all-time low in 2009, after which it began a modest recovery. What caused the slump was years of buying too much, building too much, and lenders lending too much. All this began to catch up with people and started a housing recession. Already a plethora of houses on the market, less people could afford their homes and began putting their houses up for sale, creating a large supply to virtually no need.

'Housing faced a lot of struggles. A lot of the houses flooded the market leaving millions of home owners in foreclosure. Builders built too much, lenders lent too much, and future home owners bought too much.

Credit also experienced a recession, beginning around 2007 and beginning a slow recovery in 2009. This recession was caused by a variety of factors, including unemployment in America and the sovereign-debt crisis in Europe.

Bankers didn't research people's financial credit risks and made loans to people who couldn't afford to make the payments. It was a case of irresponsible banking and regulations that weren't being enforced.

The housing industry has began to slump down, meaning the demand of buying more supplies to build houses has decrease, this affects other countries such as China. With the decrease in the demand of buying more resources, 130 million migrant workers of China have become jobless after the shutdown of labor-intensive factories.

This shows that the housing crisis doesn't stop at any countries border. What happens in one country can affect what happens in another country.


 * POTENTIAL MICROCOSMS**

A microcosm arose in 2009 when the executives of A.I.G. (American International Group) received $165 million in bonuses. The microcosm entertained the existing fear that tax money goes into a few people's pockets and not to the general welfare like it's supposed to. The scandal, which was small in comparison to the desperate state of the housing industry and credit, caught fire because it was as if this scandal confirmed this existing fear.

The news media also went wild when it came to light that Vikram "Pandit the Bandit" at Citigroup received $50 million in bailouts, and used $10 to renovate his Park Avenue office. Outrage ensued, diverting attention from the real issue and focusing too much of the public's time and efforts, not to mention the president's, on an issue of insignificant value.

Advertisment and media programs encourage another microcosm. They tell people that everyone should own a house even if you can't afford it and they encourage you to get loans. They make people think that 0 % financing is there right there is no such thing as free money when it comes to a loan. It's distracting them from examining their own spending and thinking as a cause of the housing crisis.