Who Was Greedy?
I find the current narrative, about the housing market meltdown, to be extremely disingenuous. Take Barack Obama, for example.
He described this summer's subprime lending crisis as a case study of greed among mortgage lenders and the agencies that provide information about them. ...
Well, that's certainly one way to describe what's happening in the housing market. But I don't think it's very honest. As I've said before, I don't see how giving mortgages to people who are unable to afford them, then going bankrupt when they default on the loan, qualifies as greed.
Instead, I prefer to consider Hanlon's Razor: "Never attribute to malice that which can be adequately explained by stupidity."
Stupidity, sure. Giving money to people who can't give it back is about as far from greed or theft as a business can possibly get.
However, I'll be happy to accuse home buyers of greed. What would you call it when someone earning $40,000 a year decides to buy a home costing $200,000 or $250,000? Many of the families now defaulting on their loans were looking to get in on a "hot" housing market that had the potential to double or triple the value of houses in the area. They saw cheap money and jumped at the opportunity to get rich.
That's why I'm convinced that this won't do any good:
Mr. Obama of Illinois called for regulatory efforts to increase transparency and accountability among financial companies. Mr. Obama zeroed in on the housing market, proposing tighter federal rules on mortgage fraud and government rating systems for mortgages and credit cards.
"If more Americans were armed with this kind of information before they purchased risky mortgage loans," he said, "the current crisis might not have happened."
If Senator Obama really believes that, he's delusional. We were buried in paperwork when we bought our house. We had to sign sheet after sheet of paper, giving us all of the details about our mortgage. Our Realtor and mortgage banker answered all of our questions, throughout the entire process. Even if they hadn't, website after website offered comprehensive information about every different type of mortgage. Americans had plenty of opportunity to arm themselves with whatever information they needed.
The housing meltdown happened because everyone involved believe that the market would continue to go up forever. Consumers got greedy and banks began taking irresponsible risks thanks to easy money. This "crisis" can't be blamed on any one group and I'll not respect anyone that tries to do so.