I recently saw a film called “Money & Life,” which examines the circumstances behind the 2008 crash and the lack of a real recovery since that catastrophe. This production is being offered to schools and libraries as a nonfiction production, but its grasp on facts is so shaky and politically selective – the film firmly blames Reagan-era deregulation as being the root of our problem, ignoring the more substantial Clinton-era damage including the Glass-Steagall Act repeal and the lethal tinkering with the Community Reinvestment Act – that it is impossible to treat is as anything except an unintentional comedy.
But there is nothing funny about efforts by certain elements to rewrite recent history as an excuse to push a political agenda. Some of this historical rewriting has been repeated so often that, to borrow a classic line from “The Man Who Shot Liberty Valance,” too many people are now printing the legend instead of the fact.
Perhaps it is time to put the facts front and center and to reclaim history. Here are some whopper-sized lies that need to be refuted:
1. The financial crisis took everyone by surprise. This is complete nonsense. By early 2007, there were dire warnings that the housing market was in grave danger. At that period, the Center for Responsible Housing issued a warning that 2.2 million American households were likely to go into foreclosure, while the combined efforts of Bank of America, Citigroup and the Neighborhood Assistance Corporation of America produced a $1 billion endeavor to help refinance the mortgages of at-risk homeowners.
The fact is that the George W. Bush Administration, along with the Congress and the mainstream media, utterly refused to acknowledge there was a percolating problem. Lest we forget, Chris Dodd, the head of the Senate Banking Committee, actually walked off his job and relocated to Iowa for his failed presidential campaign during this period. And even Doug Duncan, who was the chief economist at the Mortgage Bankers Association, studied the data and pooh-poohed the coming storm as being limited to seven states, with no possible impact on the wider economy.
2. The crash was driven by greedy Wall Street executives. This has become the mantra of many so-called progressives, but it absolves the other parties involved in the debacle.
In many ways, the crash was the ultimate collaborative efforts: borrowers who took on ridiculous amounts of debt during a shaky economic period; lenders that failed in their underwriting and who valued loan quantity over loan quality; secondary marketing officers that failed to perform adequate due diligence on the loans they were packaging for securitization; government-sponsored enterprises that abused their power in Capitol Hill lobbying and blatantly lied to Congress about their solvency; federal and state regulators that completely failed to keep an eye on the problems swirling around them; the mainstream media – especially the Wall Street Journal, with its praise of a “snappy economy” – and too many corners of the financial trade media that ignored the growing maelstrom; and an Executive Branch that would not admit anything was amiss until Lehman Brothers collapsed.
3. Homeowners were the victim of “predatory lending” and were tricked into signing loans they did not understand. Huh? Buying a house is not an impulse purchase, and the idea that originators did a variation of a Three-Card-Monte on dum-dum potential homeowners is patently absurd.
The idea that homeowners were too stupid to understand the loan documents they were signing has been vigorously pushed by that self-proclaimed advocate of the middle class, Elizabeth Warren. “The system … permitted some borrowers to take risks that not only hurt themselves, but also hurt their neighbors by driving the value of property higher and then pushing it off a cliff when those borrowers defaulted on their loans,” she wrote in 2011. Of course, blame the “system” and not the people taking the risks with somebody else’s money.
4. Mortgage servicers were responsible for forcing untold numbers of people out of their homes. Many servicers were caught off-guard by the enormity of their workload after the housing bubble burst, which created confusion and frustration among homeowners trying to get assistance. However, the popular slander against the entire servicing industry has never been supported by cold, hard numbers.
Since 2007, 6.5 million people have received loan modifications from mortgage servicers – this is irrefutable data. Also irrefutable is data from the Consumer Financial Protection Bureau: its Consumer Response Annual Report, which was released this month, found that more than three-quarters of the servicer-related complaints received by the bureau in 2013 were dismissed as being without merit, while a tiny two percent of complaints resulted in monetary compensation based on servicers’ misdeeds.
And as for the much-derided practice of robo-signing (which was, admittedly, not a bright thing to do), no less a figure than Housing and Urban Development Secretary Shaun Donovan quietly acknowledged that no data existed to link robo-signing with massive waves of wrongful foreclosure.
Daniel Patrick Moynihan, the great senator and diplomat, once famously remarked, “Everyone is entitled to his own opinion, but not to his own facts.” We need to stop the rewriting of recent history and to start demanding that the full story of the 2008 crash be presented. Nobody triumphs when everyone is fed a diet of lies.
About The Author
Phil Hall has been (among other things) a United Nations-based radio journalist, the president of a public relations and marketing agency, a financial magazine editor, the author of six books and a horror movie actor. Also, as you will discover, he is not shy about stating his views.