by Dan Krell
What is it about Occupy Wall Street that has everyone talking? Sure, everyone seemed to be against the bailouts, but it seemed as if there was not much agreement among the protest groups about other issues. Some expressed anger about capitalism; some were against student loans, while others seemed to focus on debit card fees. The buzz about OWS has allowed us to define it in our own terms.
While recently sitting in on a continuing education class about fair housing and predatory lending, an OWS discussion begins: the banks’ were responsible for the housing crash and the resulting financial crisis.
The discussion quickly turned into a tirade about the evils the banks would have us do for their gain. Two agents in the class were clearly angry and claimed that the banks knew what they were doing before the crises ; the banks forced people to take loans they couldn’t afford; the banks need to cut the loan balances to match the market; and the banks need to repay those who lost their homes; and so on.
Of course these two are always entitled to express themselves. However, I seemed to upset the apple cart by asking a question. I asked, “Do you feel you contributed to the housing crisis because you sold homes during the years that lead up to the crash?” They explained they had no way to look into the future and did not have a crystal ball. I asked, “Did you ever ask the lender to push your client’s debt ratio or get exceptions to underwriting requirements? There was no answer. One final question, “Would you return all or some of your commission you earned during that time?” Thankfully, the instructor got the point and quickly turned our attention back to subject of the class.
It’s not ironic that this conversation comes almost two months after the Federal Housing Finance Agency (FHFA) filed 17 suits against issuers of mortgage backed securities. According to an October 10th editorial in Mortgage Banking, the FHFA is seeking damages on behalf of Fannie Mae and Freddie Mac. The complaint cites “negligent misrepresentation” in disclosure documentation and “some allege state securities law violations or common law fraud.”
The editorial points out a statement made by Mortgage Bankers Association Chairman Michael Young as understanding the FHFA’s actions to attempt to recoup taxpayer losses tied to the GSEs; however, he “noted responsibility for the mortgage crisis extends far beyond the banks and includes the credit rating agencies, mortgage insurers, borrowers and even the GSEs.”
As time passes, we are increasingly provided new information and facts that allows us the opportunity to have a broader perspective of the housing and financial crises. Nazneed Ahmed, in a 2010 enlightening essay, Greed, financial innovation or laxity of regulation? (Studies in Economics and Finance, 27(2), 110-110-134.), discusses the mortgage and liquidity crises that affected the US and Global economy. Using Bernie Madoff as an example of poor financial oversight, he surmises that the liquidity crisis “evolved with the advent of poorly supervised financial products, especially the credit default swaps and subprime mortgage loans.” The conclusion is that greed that is the root cause.
Like the Greek Sirens, greed entices people to their peril. From home owners and buyers to Wall Street, greed is the apparent culprit that fueled the crises the evolved from 2007-2009.
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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of October 31, 2011. Using this article without permission is a violation of copyright laws. Copyright © 2011 Dan Krell.