Blaming The Victim

Thomas Frank writes about blaming the victim in the WSJ:

Most of the mistakes for which we are paying now, Mr. Black told me, were actually made "by four entities that under conservative economic theory should have exercised effective market discipline -- the appraisers, the originators of the mortgages, the rating agencies, and the investment banking firms that packaged the subprime mortgage-backed securities." Instead of "disciplining" the markets, these private actors "served as the four horsemen of the financial apocalypse, aiding the accounting fraud and inflating the housing bubble." It is they, Mr. Black says, who "turned a crisis into a catastrophe."

Ah, but truth is no ally to a conservative with his back to the wall. So much more helpful are the trusty narratives on which the movement was built. So when we have dispatched this first canard, we learn from other conservatives that it is the sub-prime people who are to blame; that by taking out loans they couldn't possibly pay off, these undesirable borrowers have ruined us all.

There is no way to measure the number of people who took out mortgages they knew they couldn't afford, of course, but for what it's worth, a 2007 report by the Mortgage Bankers Association reports that the FBI estimates "80 percent of all reported fraud losses arise from fraud for profit schemes that involve industry insiders." That means the lenders, not the borrowers.

Just imagine the flights of fancy that the theory of borrower malevolence and Wall Street victimization requires conservatives to take: All these no-account folks, you see, got together and forced investment banks to engineer subprime mortgages into highly leveraged securities. Then they tricked all manner of hedge funds and pension funds and financial institutions into buying these lousy products. Just for good measure, these struggling homeowners then persuaded bond-rating agencies to misrepresent the risk associated with these securities.

I don't know what it is about the conservative defense of this economic mess that enrages so much. Maybe it's their blatant, full frontal offense against the truth.

I remember having drinks with the hubby's broker friends as they were trying to goad him into joining their ranks by telling him tales of easy money. These guys worked on commission only; they were out there cold calling prospective borrowers, pushing their too-good-to-be-true products just like any other sleazy commission-only salesmen. The worse the terms of the deal were for the borrower, the more money the brokers made on closing. I'll leave you to imagine for yourself what lengths they might have gone to in order to entice the folks they were soliciting. Seriously... think about it for a minute. Should these buyers have known better? Maybe, although it seems to me that obtaining a mortgage didn't used to include a high-pressure sales job. Was there fraud perpetrated in this high-stakes, big money industry? You betcha there was.

All of this is not to say that there weren't plenty of people who gambled against the real estate bubble and got in over their heads. Shame on them. And they have found out -- just as one of my children is now learning -- that there are consequences for living above your means. But this was not the case across the board and it certainly doesn't give conservatives the right to blame the victim for what was clearly a market failure of the most garden variety. Marketeers always want us to marvel at how greed is harnessed by capitalism to become a force of good. But you can't change the intrinsic nature of greed... sometimes it really is just as bad as it sounds.