Sufficient Blame To Go Around
It's the economy, stupid, and it has always been the economy. Recent events have certainly shown that to be true. The question, of course, is whose fault is the current financial mess that will eventually impact every person in the United States and quite possibly their grandchildren and great-grandchildren as well. The answer is fairly easy to come up with. We are all to blame. Let's start with our legislators at all levels who bought into the principle that every American has a right to own his or her own home - whether they can afford it or not. That ideal begat the no money down, no credit check mortgage. That belief and the greed of a few market-related mega-companies with ties to the Republican Party led to the deregulation of the industry, which had been put in place after the Great Depression. It was an "anything goes" culture, where wealth and massive bonuses were the ultimate goal. Homeowners, however, are also at fault. We cannot buy the idea that a person earning $50,000 a year really believed that he or she could afford a $700,000 home, even if it were a two-family home that would include rental income. Homeowners also bought into the "anything goes" hype of the industry by refinancing their homes each time mortgage rates fell, using the money to purchase consumer goods or to pay college tuition. Then, we have the real estate brokers who slathered over the high home prices, telling prospective buyers that they could extend themselves for the home of their dreams. Next, come the mortgage brokers and the banks, the middlemen that never had a worry, because they would not own the mortgages any longer when the ball came down and foreclosure loomed. Next in line were the brokerage houses, that had gnomes down in the basement, packaging the individual mortgages into blockbuster, billion-dollar high-risk securities, such as collateralized debt obligations, which were not regulated in any way by any government agency. "The more mortgagebased securities I could package in a week, the more I would get on my bonus check," one ex-Lehman Brothers clerk told a daily paper last week. "That was the bottom line, that was all that counted. It is unfair that we lost our jobs because of the greed of our bosses." Next in line were insurance giants like AIG, who made millions by insuring those securities, made mostly of loans that were destined to fail. Everybody was riding high: the homeowners lived in their dream house; the realtors made huge amounts on commissions; the mortgage brokers were bringing in a fortune, working with banks that were glad to get their cut; the packagers got their six-figure bonuses and the insurers smiled because they counted their premium payments and never expected to have to pay off on the loans. Then, the bubble burst and the foreclosures came. The homeowners found themselves facing default because they could not find tenants to pay the freight and their homes were now worth less than their mortgages. Brokers could find neither buyers who could get a conventional mortgage nor sellers who were willing to sell for less than what they owed on their mortgage; banks began to worry about cash flow. The packagers collapsed completely and the insurers were taken over by the government. Who is to blame? Look in the mirror. We all bear a share. The Republicans, however, have to take a larger share of the blame than some others for the decision to deregulate and empower the runaway economy and the people who used it to their own ends. We are not sure of how to fix the economic mess, but it is surely not the program pushed this week by the Bush administration that would give mountains of money to the same people who made the mess in the first place and then mandate that there can be no oversight, either from the legislature or the courts no matter what those companies do. That is just asking for more of the same.