Who’s Fault Is It?Posted: October 24, 2008 | |
Congress is looking for a scapegoat for the current financial crisis. The Democrats are blaming the Republicans. The Republicans want the voters to think that it’s the Democrats fault. They want the voters to forget that the Democrats have only been a majority for two years. The Republicans are also blaming Fannie Mae and Freddie Mac. Both the Democrats and the Republicans are blaming Allen Greenspan for everything. This is fair. After all, Greenspan served Bush the Elder, Bill Clinton, and The Shrub.
If Alan Greenspan was police chief on New York City, he would be standing in front of a City Commission explaining why street mugging has reached the point where the muggers are driving Mercedes. Poor Greenspan would have to hem and haw and explain that he was partially wrong for deregulating the anti-theft laws. Greenspan would elucidate by explaining that he assumed that self-interest would make the muggers regulate themselves. He never imagined that the muggers would allow themselves to get out of control the way they had. Greenspan would have to admit that he should have enforced some of the mugging laws.
Now let’s take a look at Fannie Mae and Freddie Mac. Neither company actually makes the loans. A representative from the Mac family doesn’t come to the customer’s house and take the application and the supporting documents. Somebody who works for a broker does that, or, in the case of a subprime lender, somebody who works for a registered corporation.
People who work in subprime are under constant pressure to sell, sell, sell. I remember working for Aames Home Loans during the stock market crash of 2000. The corporate office had every satellite office in California calling Oakland because the property values had risen so high. Those poor people were getting a call from Aames every ten minutes. Salespeople would intimidate a customer into signing and then quit as soon as the commission check cleared. I had one manager who was caught with a complete fraud kit. She had letterhead from several banks, phony pay stubs; everything needed to send phony documents to the underwriters. Once the loan went through and the three days passed, it was a legal contract and Aames could not rescind the loan, although they prosecuted the manager.
The same mentality dominates the prime loan industry. The idea was to get the loan no matter what. I once got fired from a brokerage for trying to kill a bad loan when the customers were hiding credit cards. The loan went through anyway. When no laws are being enforced, how are the Macs supposed to tell a good loan from a bad one? Tarot cards? To give them credit, The Macs turned down their share of bad loans. Yet considering that your average mortgage officer has to submit 15-25 files a week, and needs to fund 3-5 of them, the Macs cannot be blamed if one out of the three to five is a bad loan.
There is also another fact that is not being considered, which is that not all mortgages are bad when they are sold. A refinance or a second mortgage could be sold with all the honesty and good will on earth and could go bad for any number of reasons. The first mortgage meltdown occurred in April of 2007 after GM sent one of their plants to Mexico and the laid off American workers could no longer pay their mortgages. That was the domino that started this whole collapse. More loans have gone bad from outsourcing and unemployment than any other reason.
Which leaves us with the Democrats and the Republicans pointing the finger of blame at each other. Who elected these people in the first place. What does this say about the voters who elected Nancy Pelosi? These people claim to be liberals, but their favorite girl habitually gives Bush everything he wants and a bag of chips. What does this say about voters who supported Bill Clinton as he signed NAFTA into law and then tore our social safety net to pieces? A lot of people who cheered Clinton on are now homeless.
Maybe we, the American voters, are responsible for this mess for listening to ideology rather our own best interests. Perhaps this is our fault for looking at the surface of the issues rather than the substance. We, the voters, have consistently confused personal liberty with the corporate license to steal. We swallowed Greenspan’s idiocy about deregulation hook, line and sinker. The American voter welcomed Reagan with open arms because he promised us that deregulation would make us all richer. As Will Rogers once said, “we don’t always get the government we want, but we always get the government we deserve”.
You want to get out of this mess, start voting smarter. The SEC does not threaten your personal freedoms. If you paid a little more in taxes, the SEC may have been able to save your retirement account. The social safety net may have allowed you to save your job. Speaking of jobs, maybe if the American voter supported the labor unions, the U.S might still have a labor base. That way our currency would not be exclusively based on petroleum production.
It’s time to start ignoring politicians and demanding what we want. We want a secure economy. A single payer health system. More than anything else, we want a government that listens to us instead of dim-weeds like Allan Greenspan.