It's time to stop blaming the lendersOctober 15, 2010: 7:00 AM ET
Before we take the entire banking industry to task on the foreclosure mess, it bears reminding that the source of the problem is people who bought homes they couldn't afford. Let's blame them, too.
As even Shakespeare might have told us, when caught in a jam, blame your lender. No one loves a Shylock, and they're pretty much the easiest target going in these financially troubled times. But have we really come to that -- a default position that it's always the lenders' fault? Apparently so, and we should be ashamed of ourselves.
Allow me to get a few things out of the way before I receive the anticipated full-throated responses to my suggestion that the blame-avoidance culture in this country has finally jumped the proverbial shark.
One: I am not a righteous fiscal (or social) conservative, spouting self-reliance. People make mistakes and they also experience sudden turns of fortune. But I find it very hard to process the notion that the onslaught of foreclosures in this country does not have more to do with a failure of conservative financial planning than with some insidious criminality by lenders. My wife has wanted a bigger house for years, but we have chosen not to buy one. Why? Because we couldn't afford it.
Two: Like most rational folk, I take issue with outright fraud. If laws were broken, send the crooks to jail. That said, I'm amazed that the country has congealed into the belief that every single borrower who signed a mortgage document has an escape hatch that somehow puts blame on their lender when they can't pay their debts. While I am much more inclined to believe that buyers of so-called securitized debt instruments might have been defrauded by their packagers, I am at a loss to understand how so many individual homeowners signing loan documents for debt they could ultimately not afford were somehow the victims of a crime. We used to say that there was no free lunch. Now, we're demanding a refund when we didn't even pay for it in the first place.
Three: I wrote a book about Jamie Dimon called Last Man Standing. In it, I praise him for a sense of ethics often found lacking in financial services CEOs. And yet this week, JPMorgan Chase (JPM) is taking the brunt of a populist firestorm that is shocked – shocked! – that the processing of millions of foreclosure documents may have taken on somewhat of a robotic quality. Again, I take no issue with the requirement that we all follow the law, and if JPMorgan Chase or others broke it, then they should pay the appropriate price. But the law also holds that people who default on their loans must forfeit the property pledged as security. It's as simple as that, and Dimon agrees. "We're not evicting people who deserve to stay in their house," he told shareholders on Wednesday.
Blaming others for our excesses
Back to our main point, though: in this remarkably blameless moment in American history — it's not my fault, it's not yours, it's not anybody's but some corporate bogeyman's — have we not lost the forest for the trees? It's okay that people made the mistake of borrowing more than they could afford. But is it really the lenders' fault? Really? Maybe the banks didn't deserve to be bailed out for their own poor judgment, but do the rest of us really deserve to bailed out for our own?
Forget about the oft-mentioned fact that we're in the midst of destroying our long-held beliefs in the notion of property rights and contract law. Does anyone realize what a bunch of babies we must look like to the rest of the world? As Bethany McLean and Joe Nocera point out in their new book, All The Devils Are Here, there's more than enough blame to go around, and the American public is well past due the time for accepting its own share.
Should we be concerned that a foreclosure freeze will delay the recovery of the housing market, as Dimon recently said? I feel that's missing a different forest for a different set of trees. President Obama may have disappointed a lot of people in a lot of different ways, but the idea that he – or any president – could instantly heal the wounds from a generation of excess in this country is absurd. These things take time, people. Throw the scoundrels out of office if you want, but their replacements won't be able to speed up the cleansing.
In the past, I was always amazed whenever I visited people in London or France at how small their dwarf-like refrigerators were. How do you keep all the food you need, I used to ask them? Now I realize that the fact that I was recently compelled to buy a freestanding freezer for my basement is just a fitting symbol of our need to have more, more, more. Maybe we don't need restaurant-sized fridges in our own homes. Or, for that matter, 4,000 square-foot homes in which to put those fridges.
Bring on the vitriol, because I know it's coming. But for God's sake, people, buck up. China won't lend to us forever, and when they turn off the tap, we're really going to feel what it's like to face up to our own spendthrift ways.