The rest of the story: A few thoughts on sub-prime mortgages

One of the best things about going out and grubbing around in the dirt is that it tends to take your mind away from other, less pleasant things. But the universe is stacking pointers up on me again, so I need to abandon gardening for a moment and get some thoughts down here.

Yesterday I got a few things planted. Then it started to rain, and I came inside to find that the mail had arrived. It included the latest issue of The Economist. If you’re not familiar with this publication, I recommend it for its breadth, if nothing else. But there’s plenty more else, too. ;^}

The headline story for this issue is the current implosion in the U.S. mortgage market, complete with lots of speculation, both optimistic and pessimistic. It also contains a few exemplary stories. This whole thing depresses me almost beyond belief. It also raises a bunch of questions that I’ve been asking myself for some time now. It doesn’t, unfortunately, help me answer them.

The 19th century English novelist Anthony Trollope wrote a book titled The Way We Live Now. Several years ago, PBS made it into a wonderful miniseries, for “Masterpiece Theater,” I think. It starred David Suchet (the wonderful Hercule Poirot in another miniseries) as Melmotte, the greedy financier with a gift for pyramid schemes. He would go to any lengths to advance himself, and “to the devil” was his attitude toward anyone who got hurt in the process. He had an equally greedy and self-centered daughter on whom he doted. Sophie (I think that’s the right name, but I’m not sure) only wanted whatever she wanted and she wanted it right now. If ever there were two icons for our time, these two are it.

Winston Churchill is reported to have said that if a person is not a liberal in his twenties, he has no heart, but if he’s not a conservative by the time he is forty, he has no brain. This is a position with which I largely agree. I’m a firm believer in personal responsibility. I’m more than willing to forgive youthful foibles (even well past the age normally associated with such things), but it seems to me that part of becoming a fully functional person is to understand not only yourself but your environment. In short, we all have an obligation to know the rules and play by them. But we also have an obligation to look out for our own interests rather than expecting someone else (or many someones, aka “the government”) to do it for us.

But that’s the perspective of someone who was raised in a fairly poor household but by intelligent parents who wanted their children to a) play by the rules, and b) better themselves. If our family didn’t have a lot of money when I was growing up, we had extraordinary assets in our parents and the amount of parental attention we got. I’m not foolish enough to think that everyone has those assets. Nor am I foolish enough to believe that everyone is willing to “play by the rules.”

So, one of the questions this whole thing raises in my mind is this: When is government intervention appropriate? I certainly don’t think any level of government should step in and rescue people or companies who have been too foolish to manage their assets. I’m including all sorts of things here, from individuals who live beyond their means to Chrysler Corporation.

On the other hand, I think it is fairly evident in this situation that predatory lending practices were employed and that greedy mortgage brokers deliberately misled folks who were naive for the sole purpose of collecting their loan fees. Some of these stories are truly heartbreaking. But what should be done about them? It strains credulity to think that a 75-year old woman who had struggled for 30 years to make the payments on her home would really believe that someone wanted to give her $25,000 with no downside. But someone obviously persuaded her that was the case.

I’ve heard a few remark, “She should have read the loan agreement.” Well, that’s true, but I can’t help but think of all the times I signed paperwork without reading four pages of very fine print. I did it because I trusted the person I was dealing with, and I’ve never been burned. But that makes it hard for me to blame someone who acted the same way.

If you’ve read my previous rants about the chaotic nature of society today, you’ll know why I’m not surprised that a 19th-century work of literature would have so much relevance for us today. I think what we’re living through bears more resemblance to the Industrial Revolution than to any other period in human history, and I expect the results to be equally momentous in whatever form they take.

But I’m bothered by this story, as I’m bothered by other stories where significant numbers of people seem to have forgotten that we are all human, One of the main responsibilities associated with that recognition is that we must treat each other with respect. These things frighten me. It frightens me that our government would condone this type of behavior to be able to point to a “strong economy” bolstered by “high levels of home ownership.” I wonder what sort of spin they’ll find when this house of cards finishes collapsing. I can only hope that it’s not a tailspin that affects all of us.