POINTING FINGERS IN THE SUBPRIME MESS

Ever see those Three Card Monte schemes? Guy shifts around three cards; all you have to do is follow one. You point to it, you double your money.

Looks so easy. So does the subprime mortgage world. Get a loan. Pay below-market rates. Don’t worry if you haven’t got money. By the time the rates go up, you’ll find some.

Both are essentially con games. But nothing forces you to play.

You choose to.

This is hard to hear in a world where homes are being lost and lives are being ruined – and it does not apply to Michiganders’ losing houses because of job layoffs – but let’s be real: Not all the fingers in the subprime mortgage crisis can be pointed at brokers, lenders, builders or credit-rating agencies.

Oh, they were greedy, for sure. They were rabidly hungry for more money, new money, and because they weren’t satisfied with safe, qualified home buyers, they shamefully chased after the pockets of poorer and riskier ones.

But they didn’t reach inside those pockets. Instead, they lured people to reach inside themselves. And while some of those people were desperate and should never have been taken advantage of, others got stung by a seductive American philosophy:

If you want it but you can’t afford it, don’t let that stop you.

Who really needs money?

Recently at a Federal Reserve symposium – as foreclosures reached an all-time high – top economists suggested that the housing boom we saw from 2000 to 2006 was caused less by marketplace rules than by “speculative thinking” and “boom psychology,” code words for “I’m gonna get rich.”

Too many people bought too many homes they couldn’t afford, figuring, in a weird way, that by buying them they could one day afford them. Others bought houses, saw them rise in value, then snatched the new equity and borrowed more. Others bought, sold and bought bigger – flipping to their riches.

And some bought simply because they wouldn’t accept the sentence “you can’t afford it.” They took no-money-down loans or loans that were low but would shoot up later. Some even lied on their documents – claiming assets they didn’t have.

Meanwhile, firms were racing to package loans without checking assets, or with inflated home values, anything to snatch a fee.

Both sides ignored facts, the way you ignore the weather report when the sun is out. Who’s at fault then, folks who ignore warnings or merchants who know they will?

Or maybe the better question is not who’s at fault, but what?

Finally paying the price

There was once an ad campaign for L’Oreal that ended with the phrase “Because you’re worth it.” That’s catchy. It is not a philosophy of life.

Sadly, it has become one in America. Saving for the future is out. Spending for the present is in. Dying and sticking it to creditors is an endgame.

You need go only to certain pockets of this country – southern California comes to mind – to see how “beyond your means” is a way of life. Expensive cars are leased, not owned. Plastic surgery is bought on credit. Credit cards are maxed. And houses are not an investment, but a bank account to be drawn from.

For people who live this way and got tagged in the subprime mess, it is hard to work up much sympathy. Whatever happened to working, saving and THEN buying? Too many folks thought buying a house and counting on prices to rise was a skill for which they should be paid.

If so, then you have to pay when it goes backward. This is not to be unkind or insensitive. And Michiganders caught in a web of bad economy and unemployment are indeed to be pitied, especially if their homes are lost.

But around the nation, as borrowers sue lenders and lenders sue financial institutions, it’s worth remembering the Three Card Monte rule.

It takes two to play the game.

Contact MITCH ALBOM at 313-223-4581 or malbom@freepress.com. Catch “The Mitch Albom Show” 5-7 p.m. weekdays on WJR-AM (760).

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