When George Will starts sounding good to you, is it time to pack it in?
Reading him today on the subprime mortgage collapse, I found myself experiencing some serious cognitive dissonance; rather than turning my stomach, he messed with my mind. He’s got me seeing the problem from a different angle. What were people thinking signing up for mortgages the rates of which increased astronomically, far beyond their ability to pay, capped off by balloon payments of tens and hundreds of thousands? Brokers shouldn’t have dangled the loans in front of our eyes but once dangled, who’s really at fault for borrowers having bitten? I rent and I got all those “magic bean” mortgage emails. I deleted them.
The Democratic candidates are talking about 90 day moratoriums on foreclosures and 5-7 year interest rate caps on these ridiculous mortgages. Which leaves out in the cold homeowners who scrimped and saved for a down payment and religiously make their monthly mortgage (93% according to Will). It also leaves out those who invested in mortgage-backed securities who will now have no say in the future of their investment.
Senator Clinton is arguing that this 5-7 year freeze remain in place until the borrowers can have been transitioned to “affordable” loans. Which means what, when you live paycheck to paycheck, have crappy credit and never had a prayer of affording the house you then sucked all the equity from and which is now worth nowhere near what you agreed to pay? Far from worries that the subprime mess will make homeowners renters again, is it even arguable that “renters” is all they ever effectively were? Yup, neighborhoods will crumble as foreclosures mount, local business will fail. But what about our whole system of contract law, not to mention how much more difficult, and costly, it will be for even the credit-worthy to get a mortgage after this.
Will is on much less firm ground in scoffing at the notion that “predatory” and “aggressive” brokers and mortgage companies are in anyway culpable:
So, lenders knew their loans would not be fully repaid?
Jesse Jackson speaks of “victims of aggressive mortgage brokers.” But given that foreclosure is usually a net loss for all parties to the transaction, what explains the “aggression”? Who thought it was in their interest to do the luring and leading that Clinton alleges?
So, all those MBAs thought Mrs. Jackson, with her bedpan-emptying wages and 15 credit cards was actually going to hit the lotto and make that $30,000 balloon payment.
C’mon, George. Lenders were looking at the front end, not the back. Fiddle dee dee, how the marginally solvent were going to maintain their unmaintainable mortgages was a problem for an other department—they had quotas to meet.
Still, it took two to manage this tango—greedy and/or naive borrowers and greedy and/or greedy lenders. Unless it can be shown that borrowers were actually duped, I’m starting to wonder if we should save people from themselves this time. There are just some offers a grown up might have to say no to.