Sunday, July 18, 2010

Football writer wants to tell you who the real culprit is in the economic meltdown

In an otherwise interesting profile of Green Bay quarterback Aaron Rodgers, ESPN's Tim Keown unleashes this head-scratcher:

We've tried to eliminate disappointment, run it off like a deadly virus. The world's most potent economy collapsed when too many people decided they couldn't bear to be disappointed. They bought houses they couldn't afford and cars they didn't need. They believed that a parent's most appalling failure is a disappointed child. Oh, no, we can't disappoint the children. Lord forbid we allow our kids to be deprived. The dirtiest word in the English language: no.

Tim, I hate to break it to you, but the world's most potent economy didn't collapse because some people bought mortgages and cars they couldn't afford. If that was all that happened, we'd have a minor problem in the housing and car loan sector of the economy. The reason everything turned to shit in 2007-08 is because insane people on Wall Street used those garbage mortgages and loans as play money to make crazy, Ponzi-scheme-type "products" called Collateralized Debt Obligations and Credit Default Swaps, which, if you didn't know any better, looked like they were programmed to fail. The nitwits who ran our large financial institutions were either clueless or complicit in the scam, and the American taxpayer was ordered to foot the bill for their stupidity.

Also, Tim: No one forced anyone to take out a mortgage they couldn't afford. Loan originators resold their stuff up the chain, and didn't have to worry whether what they "originated" was good or not ("Liar Loans" anyone?) -- In fact, if you believe Michael Lewis's new book, the people in charge of packaging this stuff actively sought out suckers like recent immigrants with thin (but decent) credit histories so that the ratings agencies would give their stamp of approval on the package. Is that the fault of the mortgage-holder?

Stick to football, dude.

Permalink posted by Jonathan : 3:55 PM

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