On Monday I wrote a heated commentary on the suspected back door bailout of Bank of America which essentially called out every participant in the housing finance system as a culprit behind this oh so brutal economic meltdown and corresponding loss of investor confidence.  Of course our most vocal readers had very harsh words for the "too big to fail" bankers.

Here is an excerpt from that commentary...

"Everybody involved in the home buying process played a role in reps and warrants breaches. Consumers, Realtors, Brokers, Builders, Bankers, Originators, Attorneys, Appraisers, Accountants, Underwriters, Processors, Receptionists. EVERYBODY INVOLVED. The blame cannot be localized.   We might as well just put the entire housing industry on trial now and get the "burning at the stake" over with so we can begin earning back the trust and respect of consumers again...through education."

The following article, published in the WSJ, states that borrowers are actually feeling regretful about their personal housing investment decisions....but it doesn't do much to shift the blame away from one sole source. If anything it actually adds culpability to the banks and creates a feeling of martyrdom among main streeters.

Writing On The Wall: Mortgage Borrowers Take Blame, And Banks Agree

by David Weidner

Banks and borrowers surely can agree that they didn't have one of their best  decades together.

The difference is that one group clearly learned its lesson, while the other seems content with business as usual.

As the new year begins, two new surveys show that U.S. consumers are full of regret over their financial mistakes of the last few years. They recognize that they didn't save enough--and spent too much.

They are committed to changing, and when it comes to their misfortune, most  consumers don't blame anyone but themselves.

Financial firms, of course, couldn't agree more. In their view, it was a failure of borrowers, not indiscriminate or misleading extensions of credit, that led to the financial crisis and Great Recession. It is a disconnect that has fueled the foreclosure wave rather than stemmed it.

The majority of Americans concede making mistakes, but Bank of America Corp. (BAC) Chief Executive Brian Moynihan, faced with charges that the Charlotte, bank pawned bad mortgages on investors, promised "hand-to-hand combat" on loan repurchases.

With his bank accused of sloppy-to-fraudulent paperwork on mortgages gone bad, Moynihan promised a "diligent" fight to keep the foreclosure machine at Bank of America running.

Former Citigroup Inc. (C) executive Robert Rubin told the Financial Crisis  Inquiry Commission in July that no one on Wall Street saw the risks in mortgage finance. Rubin also said to the panel that he didn't "hold significant operational responsibility" at Citigroup, which eventually got a $45 billion bailout and nearly $300 billion in government guarantees.

Similar explanations flowed throughout 2010 from current and former bankers at Goldman Sachs Group Inc. (GS), Washington Mutual Inc. and Countrywide Financial Corp.

Even James Dimon, the chairman and chief executive of J.P. Morgan Chase & Co. (JPM), who once admitted that banks did "some really stupid things," has been feeling less culpable, especially when it comes to his own bank's practices.

On Oct. 13, Dimon laid the blame for the foreclosure wave with borrowers. Dimon told analysts and investors that "maybe mistakes were made" with foreclosure paperwork, but "not where someone got evicted out of a home that shouldn't have been."

Really? Out of more than 100,000 loans that J.P. Morgan has said it was reviewing, not even one?

Dimon's inflating confidence is a jarring contrast to downtrodden borrowers who feel guilty and take full responsibility for failings in their handling of personal finance.

According to a survey released Tuesday by online broker TD Ameritrade, more than half of Americans wished they could turn back the clock and do things differently.

Seventy-one percent said they would've spent less and saved more, while 65% said they would have "lived within their means" and 60% would've have taken more personal responsibility for managing their money, the survey showed.

In addition, many responded that they have paid a price for their mistakes. Between 17% and 36% said they weren't able to travel, pay down debt, invest and save for retirement and had to forego purchases.

A separate survey of 1,000 adults, this one sponsored by J.P. Morgan and U.S. News & World Report, found that most Americans, especially younger ones, made New Year's resolutions aimed at saving more, spending less and living within a budget.

If anything, the self-reflection of consumers fits neatly with the narrative presented by big finance firms and some political voices. They argue that a lack of personal responsibility was the main cause of credit woes, including the recent wave of foreclosures, not banks playing fast and loose with credit.

They argue that it is strategic defaults, which make up as much as 31% of foreclosures, not hardship and falling home prices, that really hurt the housing industry.

It is certainly true that some borrowers have "walked away" from their commitments. But many borrowers who sought to salvage their mortgages failed.

The U.S. government's loan-modification program has reached 1.4 million of the more than three million borrowers estimated to be eligible. More than half of the modifications have failed, and only 35%, or about 500,000 loans, had been permanently modified at the end of November, according to the Treasury Department.

Among the banks with the biggest failed modification rates: Bank of America and J.P. Morgan.

This isn't to pass judgment on the banks. After all, borrowers blame themselves, too. But as Brent White, a professor at the University of Arizona and author of "The Morality of Strategic Default" points out, double standards are at work.

Banks operate to maximize profits and minimize losses, but most borrowers have a moral and ethical obligation to pay. Knowing that, it shouldn't come as a surprise that most Americans feel responsible. They're the only ones who are capable.


While I cannot argue with big bank haters who point toward underlying "greed" as the prime motivation for sloppy lending decisions, I must ask, were the bankers the only ones being greedy? Was there no speculative investing in the housing market? Did consumers stop and ask, "hey man, how am I gonna cover that payment?".  Where were the Realtors when home prices were rising at an unsustainable pace? Where were the appraisers? Why didn't underwriters put up a fight against Janitors who said they made $90,000 a year? Where were the regulators??? 

The answer is simple: money and credit were flowing freely to all parties involved...so all parties involved were content with their own personal prosperity aka GREED.

Banks are still here, they are not going anywhere. We can either dwell on the past and complain about the wrongdoings and injustices committed against all of humanity, or we can come up with a solution that prevents this mess from ever happening again. And then we can move on with what will be a long slow recovery process.  At MND we are doing our best to bridge the knowledge gap between the primary and secondary mortgage markets. We do our best to create transparency in the lending environment for all parties involved. Now is the time to look in the mirror and ask what you are doing to fix the problem.

America is for sale. If we don't get our act together soon this is going to become the United States of China. We did it during WWII, there is no reason we can't do it now.