Can’t be an expert in everything
This video (hat tip) is very good at clearing up some of the more confusing aspects of the credit crisis. My main objection is the way the subprime borrowers are stereotyped as ne’er do wells. I’m sure there were some, but the real issue is that people who previously (and correctly) thought they didn’t have enough income or savings were targeted for a bunch of really risky loans, including variable rate mortgages, which were never supposed to be something you used for your primary residence. With most foreclosures, the issue isn’t responsibility, but economic inequality—mortgages being approved for people below an income and savings threshold that makes the mortgages manageable.
Blaming people for accepting these mortgages is like blaming people for filling out prescriptions and taking them as indicated by their doctors. People put their trust in mortgage lenders, and why shouldn’t they? You have to apply for a loan, and you can get rejected, which says to the person applying that the mortgage lender is interested in making sure they can pay it. And since the lenders understand money better than you, Average Joan, why shouldn’t you trust them? That’s why you hire professionals. For anyone who’s ever bought a house, there’s a lot of people you pay a lot of money to in order to make sure you don’t make mistakes. You feel, if you’ve paid that, your ass should be covered.
The notion that everyone should be an expert in everything to protect themselves from unethical professionals—instead of having systems to keep the professionals ethical—makes no sense. Our society would come to a complete halt if we didn’t work on systems of trust, systems based in no small part on regulation. If you take the “you shoulda known better than your lender” logic to its logical ends, then medicine, law, teaching, even selling food would all become unmanageable systems. The every man for himself ideology probably couldn’t even work in a completely agrarian society where most people get everything they need from their own land, but if it could work at all, that’s how it would have to be. Unfortunately for libertarian fantasists, the completely agrarian society was overrun by population hundreds of years ago. There’s billions of people more than the world could handle in a your land/your life/don’t need no one else system.