Depends on your definition of the truth….
“Among my favorite anecdotes of the mortgage-industry decadence that preceded the global financial crisis is the one about Ameriquest’s wind machine. A motivational tool for managers, it made its appearance in the late ’90s at an executive conference at Las Vegas’s MGM Grand Hotel, where the future subprime leader hooked up a powerful fan to a plastic tent. Inside, exuberant branch managers jumped around amid a cascade of cash, allowed to keep as many swirling bills as they could grab.
That was how it went at mortgage-firm retreats: Here, a money-grabbing contest; there, a round of ritual chanting—“The power of yes! The power of yes!”—at a 2004 Washington Mutual gathering that was like the high ceremony of some bizarre money cult. Before long such incentivizing was part of the daily culture, if not official policy. Countrywide, for example, had a marketing program called the “High-Speed Swim Lane” that linked the bonuses of sales reps working in football-field-sized call centers to the volume of loans they originated. Compressing the programs initials—and cutting to the chase—employees nicknamed it “The Hustle.”
Mere excess was never enough for these companies. Though we’re all aware, by now, of the crookedness that infected the mortgage business last decade, the particulars are still striking. Did you know, for instance, that WMC Mortgage Corporation, owned by General Electric, hired former strippers and an ex-porn actress to entice brokers into selling their mortgages, according to a report by theCenter for Public Integrity? Or that Wells Fargo gave its mortgage stars all-expense-paid vacations to Cancun and the Bahamas and treated them to private performances by Aerosmith, the Eagles, and Elton John? Or that New Century sent top loan sales reps toPorsche driving school?
The upshot is clear enough: With Wall Street’s demand for mortgages unending and some loan producers managing to book up to 70 loans per day, the system didn’t just crash. It was brought down.
But we’ve also been made to understand that subprime lenders and their Wall Street funders didn’t act alone. Instead, they were aided by the avarice of the American people, who were not victims of the crash so much as accomplices in it. Respondents to a Rasmussen poll done during the throes of the crisis overwhelmingly blamed “individuals who borrowed more than they could afford” (54 percent) over Wall Street (25 percent). To this day, the view is widespread and bipartisan: Main Street was an essential cause of the meltdown. The enemy was us.
“It all goes back to the increase in the tolerance for debt,” David Brooks wrote a couple of years ago. The Brookings Institution, meanwhile, has argued that of all the possible crisis narratives, “ ‘everyone was at fault’ comes closest to the truth.” The “wider society” must face the music, it said in a 2009 paper. “People in all types of institutions and as individuals became blasé about risk-taking and leverage.”
Or, as Michael Lewis, our financial-writer laureate, observed: “The tsunami of cheap credit … was temptation, offering entire societies the chance to reveal aspects of their characters they could not normally afford to indulge.” Reveal themselves, they did, and it wasn’t pretty. Writing for Vanity Fair, Lewis quoted at length Dr. Peter Whybrow, a British neuroscientist at UCLA, who posited that human beings have “the core of the average lizard.” Lewis, running with the analogy, relayed Whybrow’s conclusion, which was that “the succession of financial bubbles, and the amassing of personal and public debt” were “simply an expression of the lizard-brained way of life.”
Is that not the truth?
Actually: No, it’s not. The notion that American consumers share the blame for the mortgage crisis is a lie. And it is one of the most pernicious out there.
Everyone-Is-To-Blame (or EITB, for brevity’s sake) has done much to mute the public outcry essential for sweeping efforts to respond to the financial catastrophe. To the extent that Dodd-Frank fell short of the root-and-branch reform that followed the last great crash in 1929, EITB is to blame. The fact that banks too big to fail before the crisis have been allowed to grow to twice their pre-bubble sizes can be traced to a nagging sense that they didn’t act alone. And if you wonder why, six years after the fact, no significant Wall Street figure has been criminally prosecuted, I would suggest that EITB has muddied perceptions just enough to allow the administration to sidestep the necessary legal mobilization. If everyone is to blame, then criminal indictments of individual executives can be framed as exercises in scapegoating……”Twitter