The Blame Game

OK, I think I am getting to the breaking point with all of the finger pointing when it comes to this financial crisis. We all know the usual suspects when it come to the guilty. Wall Street, government regulators, predatory mortgage agents, banks, etc. These groups are certainly the most obvious of the culpable. The less obvious are the regular folks who went ahead and purchased homes by leveraging themselves to the point of bankruptcy.

I think the problem was insidious because it was very gradual in its nature. Little by little, as the lending standards loosened, and people on main street just like the ones on Wall Street began to adjust their actions to the new landscape. This meant it was actually acceptable to take out second mortgages to finance the renovation of a new kitchen. It was acceptable for somebody without much business experience to use their homes as collateral to raise capital to start a small business. It goes on and on. It became a money grab as people thought of new ways to consume as available cash was everywhere.

I think when a person making $50,000 a year qualified for a mortgage to buy a $600,000 home and decides to go ahead with the purchase because they believed the value of it will rise to $800,000 in a few years at which point they will sell it and downsize with a tidy profit before the mortgage rate resets really knows exactly what they are doing and cannot possibly claim ignorance and pass the responsibility to the banks. To do something like this one must already have an understanding that there is considerable risk being taken or they will not plan on taking such drastic actions before their rates increase to an unaffordable rate. Perhaps they did not understand just how big the risks were because in recent past the landscape has temporarily shifted where nothing could go wrong.

For average folks to claim that they were not educated enough or were swindled by cunning bankers and mortgage brokers is really just passing the responsibility. I don't think this is very constructive because as long as people blame somebody else for their mistakes, a valuable lesson will not be learned.

This is analogous to the gambler or alcoholic who blames everyone but themselves for their transgressions.

Lets be perfectly clear, there is plenty of blame to go around. Sometimes you might have to start with the person in the mirror.