The Mortgage Crisis Perpetrators and Their Victims

As bad news about the mortgage crisis continues to flow unabated, my emotions vacillate between pity and ire.

The lending institutions knew — or at least had a moral responsibility to know — exactly what they were doing and the possible ramifications.  They engaged in fiscally risky behavior and got burnt.  I have no remorse for them per se.  Unfortunately, most of their employees and stockholders are innocent victims of greedy business practices.  I am sad on their account, but how do you punish the businesses and protect the stakeholders?

Some borrowers fully understood the risks, optimistically assuming ever-appreciating property values and easy access to credit to refinance their highly leveraged real estate portfolios.  I don’t pity their plight.  They took an aggressive gamble — and lost.  They’ll get exactly what they deserve — unless the government bails them out, then they get what they don’t deserve — compassion.

Other borrowers didn’t understand the ramifications of sub-prime loans.  Some were duped by aggressive lenders and I’m sure others were lied to.  Their risks were downplayed or dismissed, while being assured they could “own” a house they really couldn’t afford.  True, they should have been more careful and could have been more prudent, but the reality is that they were preyed upon and taken advantage of.  Now they’re in over their head, with seemingly no way out.

We don’t hear too much about a fourth group: renters in repossessed properties.  They paid their rent on time every month, but when their landlords lose the property, the renters are evicted.  They are innocent victims.  My heart aches for them.  They weren’t greedy, they didn’t make a bad decision, they weren’t duped or lied to; they merely had the misfortune of renting from the wrong people.

The US government (who is complicit in this mess by creating the convoluted laws that allowed it in the first place) has and will continue to bail out some of those affected.  Unfortunately, I see no attempt to rescue the hapless renter who is now homeless as a result — and that’s who most deserving and needing help.

What do you think? Please leave a comment!