Blame the Homebuyers Only if You Reject Your Doctor's Advice….
This post is for those who reject (or simply don't understand) the Occupy Wall Street movement.
Libertarian, bank-apologists who are against "the 99%" all too often make two particularly specious arguments that I will definitively debunk here. They fraudulently claim...
1) "It's not the banks' fault at all. The only guilty people are the homebuyers who took out loans they couldn't afford."
2) "It's not the banks' fault at all. The government 'MADE' the banks loan to non-creditworthy homebuyers."
BOTH OF THOSE STATEMENTS ARE VIRTUALLY 100% BULLSHIT.
Here's why…
1) Consider this analogy: You go to the doctor thinking you are OK but he hypothesizes that you may be sick with cancer. He states the only way for him to find out for sure is for you to get an expensive high-tech scan.
Now, how often do you reject the doctor's recommendation? I wouldn't be surprised if the average person (with insurance) probably gets the recommended test 99 times out of 100.
Why? It's because the doctor is the professionally-educated, government-regulated expert with explicit obligations to look out for the patient's interest. Well over 99% of the time the patient is necessarily less-educated than the doctor is on medical issues. So, naturally, the patient defers to the expertise of the doctor. In an advanced economy with an increasingly specialized division of labor this is as it should be; standardized deference to expertise.
Now examine how analogous that is to a typical homebuyer going to his "personal banker" at the bank where he has been a checking/savings customer for years. He goes in because he wants to buy a house. (Maybe he was even "cold-called" and invited to come in by that banker). This typical homebuyer knows what he spends every month for rent but has no knowledge whatsoever about the rules, norms & pitfalls of home-buying.
Virtually identical to the doctor's relationship to a patient, the banker is a professionally-educated, government-regulated expert with explicit obligations to look out for the customer's interest. But instead of sticking to decades-proven norms of "Always put at least 20% down" and "Mortgage shouldn't be more than 30% of your income" the entire banking industry (most especially from 2000 to 2008) was exploding with "Liar Loans" that were outright fraud as well as "Interest Only Loans" that doubled after an introductory period. These shady loan sharks might have delusionally rationalized to themselves "Hey, if the real estate prices keep going up these poor schlubs can always refinance." But these bankers were wrong and you simply can't blame the customers for trusting their banker.
"Caveat Emptor (Let the Buyer Beware)" the libertarian, banker apologists scream. But unless you expect everyone to become expert in everything then you don't really believe that. The world has simply evolved to a level of complexity that requires expertise and therefore trust in experts.
(See my post "Libertarianism is a Quaint Anachronism")
If you don't think the customer should be able to trust his professional, regulated expert then how do you feel about the following hypothetical situations?
a) Your accountant says certain deductions are legitimate (which seems intuitively plausible to a reasonable person) but when the IRS comes to arrest you for tax evasion he flees and bears no responsibility.
IN TRUTH: You can sue your accountant in such situations and the judges in tax court generally give such suckered filers some leeway (at least compared to self-filers).
b) Your lawyer assures you that it is completely legal to use Mickey Mouse's image in your company's advertisements because the Mickey Mouse character first appeared in the animated short "Steamboat Willie". Copyrights expired 50 years after the death of the author and Walt Disney died in 1956. But then Disney corp sues the crap out of you and your attorney flees responsibility claiming that he told you true facts.
IN TRUTH: I am not a lawyer but you CANNOT use Mickey Mouse's image in your advertisements without permission from Disney (in part because copyrights have since been extended and in part because Mickey Mouse is also protected by trademark law).
C) While getting your oil changed on a cross country trip, the mechanic (who is very sinister, unbeknownst to you) advises you to get new brakes and, in the interest of safety, you agree. But he switches your fully-functional brakes with used/worn-out garbage brakes. You drive right on to the highway and the brakes fail completely causing you to rear-end another car. The accident kills the baby who was going to grow-up and cure cancer.
IN TRUTH: (again I'm not a lawyer) While there is such a thing as a true non-negligent accident it doesn't really apply here. In this example the mechanic is more culpable for manslaughter than you are. Plus that baby was just going to save his cancer cure for his cult-followers on his racist micro-nation island and then unleash a cancer epidemic on the world like a Bond villain. So don't be too hard on yourself for getting your brakes changed.
Ok, that's enough for one post.
On my next post I will address libertarian, bank apologists' second specious argument - "It's not the banks' fault at all. The government 'MADE' the banks loan to non-creditworthy homebuyers."
Don't worry I will completely debunk that, too.
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