I’ve been thinking that sooner or later, someone’s going to have to take the blame for the credit crisis. Of the people involved, the easiest target are the poor: the people who took out subprime mortgages and then defaulted on them. They’re not organized and don’t have much in the way of media representation, and would thus make the perfect scapegoat. I was wondering why none of the talking heads or representatives of the banks had gone after the poor yet.
I was wrong: Larry Kudlow blamed the poor in a roundabout way, pointing the finger at Congress, who “forced” banks into giving subprime loans to people who’d never be able to pay them back. What’s even more surprising is that MSNBC’s Joe Scarborough called him out on it:
The fact that bankers had an ironically humourous term for high-risk customers — NINJAs (short for No INcome, Jobs or Assets) should be a tip-off to you that they were a necessary part of their get-rich-quick scheme. Their debts were terrible investments that weren’t worth the paper they were printed on, but when used as “filler” for packages that contained much better investments, they could create investment vehicles with triple-A ratings, which would then sell at a huge markup. Think of it as being like an unscrupulous butcher in the old days: he can make a more money by making sausages out of sawdust with just enough meat to hide the taste rather than making sausages entirely out of meat.
(I posted an explanation of how subprime sausages were made in this entry.)
Crooks and Liars and Oliver Willis have more to say on the Kudlow piece.
2 replies on “Blaming the Credit Crisis on the Poor”
This American Life had an amazing program just on the subprime fiasco and how it came about. Well worth a listen.
I really don’t see how his comments could reasonably be interpreted as blaming the poor.
He did however indirectly tie the financial situation to the existence of people who really can’t afford a house and shouldn’t have been offered subprime mortgages. Many people would consider this heresy, because there is a common belief in rich countries like the United States and Canada that any poverty is merely a temporary thing that is someone’s fault and should be easily correctable. And if poverty doesn’t exist, then of course everyone can own a house, and anyone who says otherwise is just trying to keep other people down.
The beliefs of people like Joe Scarborough enabled this mess. And the poor people are worse off than before.