The Foreclosure Crisis Touches All and Spares None

December 2nd, 2008 | Tags: Foreclosure Crisis

The foreclosure crisis is touching all and sparing none. Many might think that the foreclosure related financial crisis is about jumbo New York based financial bodies falling or about credit default, mortgage backed securities and the wild ups and downs of the New York stock exchange. While that it true to a large extent it is not merely about the bailout funds popping out of Washington, economic meetings and congressional news conferences. The foreclosure crisis is about all and every part of the country plastered with the dreaded Foreclosure sign. It is the root cause of unemployment as layoffs are taking place. Small companies are collapsing. Credit card companies are raising their conditions and people with impeccable credit ratings are finding it impossible to raise loans.

The foreclosure related crisis is spreading horizontally and vertically across the country. Although this does not create headlines it is affecting the day-to-day lives of ordinary Americans.

The trucking community is one such group that is adversely affected. G. David Gerard runs the largest truck dealership in the country in Chicago. He said, “Even in good times, the trucking community works on razor-thin, single-digit margins. If somebody bumps your lending costs by three basis points it is a big deal. There is no price elasticity.” Three basis points calculate to three hundredths of a percent. He added that a 50-year-old company has just closed down. It had put “all of its eggs in one basket. 80% of its revenues came from an auto parts company that just liquidated.” He cited the instance of another company that employed 280 drivers. It had to layoff 20 drivers. It was the first time in its history of 40 years. One truck deal was cancelled when the fellow concerned was found to be four months defaulting in mortgage payments. There were many who regularly bought 25 trucks each year but this year the number is nil. He bemoaned, “We sold 38% fewer units in 2008 than we did in 2007.”

Another tragic story is that of Navistar – the only independent manufacturer of trucks and buses in USA. It was in business since the close of the last century manufacturing agricultural machinery. It was known as International Harvester till the 80’s. The company had seen through two great wars, the Great Depression and the depression of the 90’s. But recently it got humbled and de-listed from the New York Stock exchange – all thanks to the foreclosure related financial crunch.