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We all know that the current economic crisis was caused by a lot of things: Reaganomics, greed, stupidity, insane military expenditures, Wall Street and, of courses, bankers.
By this point, everyone knows that unscrupulous banks helped set off the worst economic meltdown since the First Depression by lending money at criminally high interest rates to people who could not possibly afford to pay the loans back. The Subprime Mortgage Crisis probably began as early as 2006 but was ignored since it primarily occurred in urban areas and in Black and Latino neighborhoods. It was the inevitable collapse of these mortgages that was the gasoline on the slow burning embers of 30 years of unregulated greed.
In fact, the bankers (more than the politicians who deregulated the banks or the culture industry that justified greed as good) have become the target of much of our populist anger. I personally would never allow a banker to move into my neighborhood, let alone have dinner at my house or date my daughter.
Which is why it is surprising that the banks are still not behaving any better. In fact, when the Obama administration met with mortgage bankers this week to ask why the hell they were not using government incentives to stop foreclosures and renegotiate loans, the bankers rather unabashedly said "Because we can make way more money screwing homeowners than helping them."
Okay, that's not a direct quote, but it's more or less what they said.
According to the article in today's Times, when the Treasury asked the bankers to do more to stop foreclosures, they more or less admitted that it just didn't pay as much as screwing homeowners with incomprehensible fees and fines.
But industry insiders and legal experts say the limited capacity of mortgage companies is not the primary factor impeding the government’s $75 billion program to prevent foreclosures. Instead, it is that many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans.For Mortgage Servicers, an Incentive Not to Help Homeowners - NYTimes.com. This ho hum attitude of the bankers toward the real life pain and suffering they're causing exists despite the fact, or maybe because of the fact, that foreclosures reached a record high this year. According to a May Washington Post article,
About 12.07 percent of mortgage loans were delinquent or in the foreclosure process during the quarter, according to a survey by the industry group. That is the highest level ever recorded by the survey, which has been conducted since 1972. It is up from about 8 percent during the first quarter of 2008.Making money off of fines and such, what economists call the financialization of banks, is exactly the sort of thing that the government should step in and say no to and in many respects the Obama administration has been trying, But fincialization, the idea that it's better to make money off of thin air, has been growing as the major source of revenue for banks for decades and it's a difficult habit to break. In some ways, fighting fincialization might require a radical restructuring of how we educate young MBAs, a sort of Ethics 101, as well as a lot more federal regulation. A recent article in Utne suggested that we first kill all the MBAs. That is, that we should really blame the finance professors for starting this mess by teaching things like financialization as good practice. Maybe we can just send the MBAs, the Mortgage Bankers, and all of Wall Street to re-education camps? How about in the blighted neighborhoods where they are making money off of some of America's most struggling citizens? I hear there's some cheap real estate- easily coverted into Ethics for Bankers and Other Criminals Centers.