Calculated Risk picks on the financial media’s penchant for framing the housing crisis as a “White Hat vs. Black Hat” narrative. There aren’t really any good guys or bad guys here (with a few notable exceptions), only a failed system:
Some days I cannot decide whether the media requires a simple, black and white morality tale, and therefore wittingly or unwittingly filters and distorts the details of events in order to present this a priori narrative, or if they are, indeed, such incompetent and uninformed reporters that they really do accept only half a tale to begin with, duly typing it up as presented by an unhappy borrower without any attempt to verify facts or arrive at the other side. That would, given a borrower’s frequent need to self-justify, rather inevitably produce a tale of an innocent victim preyed on by an unscrupulous lender. (Of course the opposite case would be equally a problem; it’s just that these days we’re not pushing the lender’s need to self-justify.)
The slanted story makes for more interesting reading–and the media is in the story-selling business–but the real story is more nuanced and complicated:
Many [subprime borrowers] don’t make it. That is why subprime lending—and borrowing—is so risky. That is why the big boom in subprime lending in the period in which the Atchleys got their loans was such a disaster. But they are not, as far as I can tell, evidence that servicers are foreclosing on non-delinquent borrowers, and if anybody involved made all that much of a “profit” on them except the lender who originated their loan and the builder who sold them the house, I’ll be shocked. Indeed, the fact that servicers are racking up so much operational expense in foreclosures and bankruptcies right now is, well, part of the subprime disaster. Pretending that it’s a way for these Bad Guy lenders to practically print money is a very bad joke.
Agreed. The housing crisis is tragic for millions of Americans, but painting lenders as scheming super-villains is ridiculous.