Corporations

The Mortgage Crisis: How We Got Here

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Memo to Jim Cramer: YOU ARE DUMB.

But you provide me with an important entry point into something I've been meaning to do for a while now. The financial crisis caused by the slow collapse of the mortgage industry is a big and complicated topic, and lots of people have been saying a lot of things about it. And since I hate to be left out, I thought I'd strip the situation down to its essential elements.

And one of the essential elements is this: I may not have a cable TV business show where I leap around screaming like an economist who is desperate for attention, but I still know that Jim "Mad Money" Cramer is completely full of shit. I know this, because he ranted and raved about how Andrew Cuomo, Attorney General of New York, was a "communist".

What made Cuomo a "communist" in Cramer's eyes? Cuomo's moves to investigate and regulate the mortgage industry. Cuomo seems to believe that financial institutions have been fucking with people for years, and that perhaps we should do something about that. Cramer thinks different. I, of course, side with Cuomo, because like him, I've been paying attention for the past few decades.

If you want to understand the mortgage crisis in a nutshell, it's very simple. Once upon a time, lying to people in order to take their money from them was, at least publicly, frowned upon. In some instances, it was even illegal. This annoyed any number of what are kindly referred to as "free market capitalists", because free market capitalists understand that there is a cap on the total amount of money honest work, innovation, and the providing of useful services can pull in. This is when free market capitalists started pushing heavily for their holy grail, DEREGULATION.

And starting, oh, about 30 years ago, they had more and more friends in high places. And the regulations started coming down. All kinds of things that used to be prohibited were no longer prohibited. And we were promised that the lack of oversight would be taken care of by "market forces". After all, if a company does horrible things, the invisible hand of consumer dissatisfaction will drive them out of business!

So all kinds of things that Jim Cramer's so-called "communists" thought might be bad for consumers, or for society, were made OK. Like stated-income loans, based on the amount you said you made - no proof required. Or negative amortization loans, where you actually owe more after a few years of payments than you actually took the loan out for. And thanks to a bunch of OTHER deregulation, the people that made these kinds of crazy loans never had to worry about giving out all this money up front and possibly not getting any of it back - because they could immediately sell the loan to someone else, who could in turn sell it to someone else, who could then have a bunch of you invest in it.

If you're anything like me, from time to time, you take a look at the whole world of the stock market, and high-level economics, and think to yourself that it all looks like a bunch of people lying to each other and making shit up as they go along to maintain the collective illusion that all the numbers they throw around at each other accurately represent the movement of goods, services, and value. And if you're like me, you dismiss those feelings as the paranoia of the uninformed. It's just very complicated, and you haven't studied it for years and years like these people have. And you reassure yourself that they know what they're doing.

And maybe they do. But what they're doing appears to be getting whatever the fuck they can, from whoever the fuck they can, before we all come to our senses, stop listening to Jim fucking Cramer, and KEEP THEM FROM DOING IT. Keep them from taking advantage of the ignorant and powerless for their own financial gain. Keep them from exploiting people and gaming the system to always dump the inevitable reckoning onto someone else. And if that's Communism, then by fuck, paint my ass red and call me Trotsky.

Tomorrow we'll discuss the future - as this elaborate house of cards starts to come crashing down, what will it mean for the country, the economy, and the average dude reading an Internet column when he should be working.

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