Alan Braunholtz: Rich blame poor for meltdown |

Alan Braunholtz: Rich blame poor for meltdown

Alan Braunholtz
Vail, CO, Colorado

There is a lot of talk of individual responsibility, but few of us seem capable of doing it.

We all make mistakes, but without an honest personal debrief, we will never learn from them. Instead, we point fingers at others, blaming them for our failings. That’s sad and dangerously foolish behavior when those we point at are poor minorities or others in similarly weak positions.

At the moment, rich white males are blaming the financial meltdown on the poor and those who’d dare to help them. The masters of Wall Street’s poor judgment, avarice and deception apparently had nothing to do with this.

Even one of our local county commissioner candidates, Dick Gustafson, irrelevantly did it when discussing future county finances. He stated that the county should have started preparing for this 30 years ago when Jimmy Carter, in a fit of goodwill, “insisted on reducing mortgage regulation.”

Wow! That’s either one of the more prescient or ludicrous statements I’ve ever heard. Take your pick, but I didn’t hear Mr. Gustafson say or do anything about this impending catastrophe when commissioner from 1984 to 1992.

I’m guessing he’s referring to the Community Reinvestment Act of 1977 that encouraged lending to minorities. This is, at best, confusing a symptom of the problem for the cause. Most of the “toxic” loans came in 2006-07. I guess the poor just bided their time for 30 years.

Historically, the working poor have a high repayment rate. According to Daniel Gross, a New York project that builds and sells homes to them has a low default rate of 0.25 percent.

The Community Reinvestment Act had nothing to do with predatory lending practices, inept lending decisions, loans by unregulated banks, credit default swaps or leveraging yourself to a 33-to-1 debt ratio like Bear and Stearns. Not to mention all the foreclosed loans that aren’t subprime or the collapsing leveraged buy-outs.

That was the free market at its less than finest. Check out “Subprime Suspects,” by Daniel Gross, online in Slate Magazine. Or for a more political and prescient view, check out the Hightower Lowdown August 2007 edition to get a detailed breakdown.

Freddie Mac and Fannie Mae followed the market and didn’t create it. They got burnt but didn’t start the fire that threatens to consume us.

Financial snake oil salesmen are ever present, and I can see how homeowners could be duped into these loans, though, to be fair, some brokers acted fraudulently, switching fixed loans for adjustable and changing interest rates (see the Oct. 12 Businessweek column by Robert Berner and Brian Grow).

It’s harder to understand how the investment banks and credit rating agencies allowed their fees and profits to override evidence and common sense when they bought, bundled and sold this snake oil onto the global market. This demand for snake oil is what really fueled the fire.

Their own executives warned them of its unsustainable nature, too. One Lehman Brothers’ memo described a lender as a financial sweatshop preying on the weak with high-pressure sales and no ethics. Lehman then invested half a billion dollars into this operation.

I want these lenders to pay for their hubris. That’s one reason I prefer Obama’s economic plan to McCain’s. In Obama’s plan, the banks have to write down their loans. McCain wants the government ” i.e. us ” to pay full cost and take the hit.

Transparency is the major reform I’m looking for. If a deal can’t be shared with the employees, shareholders and public and only looks good in the secrecy of the boardroom then it shouldn’t be done. Interesting to see if the banks have the nerve to foreclose on taxpayers’ homes, now that the taxpayers have saved and to some extent own them.

As a rule, rich white men are a bigger threat to your finances than any poor minorities.

Woody Guthrie’s song “Pretty Boy Floyd” sums it up: “I’ve seen lots of funny men; some will rob you with a six-gun and some with a fountain pen.”

The fountain pen got us all this time..

Alan Braunholtz, of Vail, writes a regular column for the Daily.

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