The Ongoing, Hideous Lie About 'Victimized' Mortgage Holders
On its most recent magazine cover with the "The Great American Housing Rebound" as the title, Bloomberg BusinessWeek featured characters that, as the New York Post put it, were "drawn to look like minorities." Perhaps eager to make a lot of noise, Ryan Chittum of the Columbia Journalism Review responded that "minority borrowers were disproportionately victimized in the bubble. But BusinessWeek here has them on the cover bathing in housing-ATM cash, implying that they're going to create another bubble. That's not okay."
Though it apologized for the alleged offense, Bloomberg BusinessWeek should have stood firm. It did nothing wrong. Though the cover would have likely been more accurate had it included people of all races, the notion that those who borrowed to buy houses they couldn't afford were the ones victimized is laughable, and it's Chittum who should apologize for promoting such an offensive falsehood.
Considering the individuals who bought houses they couldn't afford with the money of others, they were the self-destructive victimizers. In most instances well aware that they were taking on mortgages they couldn't afford, they with great dishonesty accepted the loans on the assumption that, if they couldn't make regular payments on them, it would be easy to pay them off in full by virtue of selling the underlying home for an amount greater than the purchase price. Far from deserving our sympathy, these people deserve our disgusted scorn.
Importantly, the true victims of their recklessness are many.
First off, for individuals to borrow irresponsibly such that they're unable to make their payments, there's logically another set of individual savers victimized by their wasteful profligacy. Fed Chairman Bernanke of course lives in a fantasy world where borrowing exists absent saving, but in the real world there are victims who don't get their money back, or who see the fixed income securities they own that are stuffed with dodgy mortgages decline in value. We heard a lot about the banks that were rendered insolvent by mortgage securities gone bad, but rarely about the individual savers with direct and indirect exposure to imprudent borrowers.
Some would doubtless reply that as the federal government is now the owner of the vast majority of mortgages, that there are no individual victims of borrower dishonesty. The problem there is that the government only possesses the means to purchase those mortgages insofar as hapless taxpayers are fleeced. Taking this further, the federal government's feverish buying of mortgages to prop up banks has come at the cost of a severely devalued dollar that has similarly harmed the savers victimized by borrower irresponsibility.
Considering the banks that made foolish loans to dishonest borrowers, the prudent were victimized by both sides for their tax dollars paying for the bailout of banks made insolvent by those same borrowers. And lest we forget, when home prices moderated such that reckless borrowers suddenly began to walk their mortgages, the wise were once again victimized in that the federal government went out of its way to keep these witless "homeowners" in houses they didn't deserve, and that they couldn't afford. The money necessary to support their ill-gotten shelter was ours.
Taking the above further, assuming massive home foreclosures back in 2008 with no government support of mortgage holders and banks, it's not a reach to assume that the housing market would have been flooded with sellers. If allowed, home prices would have fallen far more than they did. If so, the prudent in our midst who waited out the housing boom in the hope of seeing a correction could have purchased a great deal more in the way of house on the relative cheap. Sadly here, the wise were yet again victimized by government intervention that protected the unwise and reckless at their expense.
Looking into the future, though the federal government continues to do everything it can with our money to protect the banks and underwater homeowners alike, the contempt that borrowers not-too-long-ago revealed for lenders will continue to be felt. Assuming the federal government eventually exits the housing market a lot or a little, it will be harder for future home-interested borrowers to secure a loan thanks to the dishonesty of the victimizers who borrowed funds they couldn't or wouldn't pay back.
And then assuming a much worse outcome whereby the federal government remains the mortgage market, the prudent will yet again be victimized for having to support a market that should be free with their tax dollars. That on its own will be expensive and reveal itself through reduced take home pay, pay that comes in dollars worth a great deal less, and a less vibrant job market for so much limited capital being abused by the feds to support more housing consumption over investment that the markets actually want. And thanks to artificial housing markets, overburdened taxpayers will have to pay more once they choose to buy a home.
In light of all this, the one ongoing certainty is that the mortgage walkers naively sanctified by Ryan Chittum will never be the victims. Instead, they'll remain what they've always been: the irresponsible, imprudent, revolting victimizers of their prudent fellow citizens who have been, and will continue to be forced to pay for their egregious errors committed with money not their own. Chittum owes Bloomberg BusinessWeek, taxpayers, and prudent savers an embarrassed apology.