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发帖数: 29846 | 1 By Dan KadlecOct. 25, 2012
It’s widely accepted that unscrupulous bankers tricked unknowing consumers
into loans they could not afford, leading to the financial crisis. No doubt,
plenty of that occurred—underscored Wednesday with a $1 billion federal
suit against Bank of America’s mortgage arm Countrywide Financial.
But it turns out the “victoms” were not, by and large, unsophisticated
rubes. A new study finds that highly educated Americans were most likely to
take on unmanageable debt in the pre-crisis years. What’s more, gross
personal financial mismanagement occurred across the population and not just
in the mortgage market and not just among the unsophisticated.
The study draws a line at the point where monthly payment on household debt
equals 40% of income. That’s where default or bankruptcy becomes most
likely should the household experience a decline in income, say researchers
led by Sherman Hanna, professor of consumer sciences at Ohio State
University.
Overall, the percentage of Americans exceeding this 40% threshold jumped to
27% in 2008, from 17% in 1992. College graduates were more likely to be in
this group than those without a degree, according to the study. Those
describing themselves as optimistic about the future also were among the
most likely to have unmanageable debts, the study found. Says Hanna:
“People who piled on debt may have been too optimistic about their
economic future, but you can’t blame that on a lack of education. People
with college educations may have thought they were immune to any economic
problems.”
Meanwhile, folly in the mortgage markets was only part of the problem. One
in three renters had unmanageable debts, versus just one in five homeowners,
the study found. The percentage of homeowners who had heavy debt burdens
increased to 22% in 2007 from 15% in 1992. But the increase was even more
dramatic for renters, going to 35% from 20%. Says Hanna:
“The percentage of renters who piled on debt really surprised me. It
shows that the financial crisis wasn’t all about housing speculation. There
was too much debt in all parts of the economy.”
None of this minimizes the foul play of bankers as detailed so masterfully
in Michael Lewis’ The Big Short. Indeed, the suit against Bank of America
charges that the bank’s home loan program, known as “the hustle,” was
designed to churn out mortgages without proper checks. The bank would
collect fees and sell the mortgages into the secondary market.
The government alleges the program was “intentionally designed to process
loans at high speed and without quality checkpoints, and generated thousands
of fraudulent and otherwise defective residential mortgage loans.”
Clearly, lots of homeowners were duped. But many signed the loan papers
without reading them and bear some culpability, as surely as renters who ran
up their credit cards. It’s time to stop pretending that people with
resources or a good education necessarily know what they are doing with
their money. Financial ignorance afflicts all classes and leaves us
vulnerable to another financial crisis at any time. |
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