Kudos to TIME Magazine over the last year. They’ve really done some fantastic journalism since this recession started. Today I want to talk about a great list they put together: “25 People to Blame for the Financial Crisis”. Your typical expected names are there, Bernie Madoff, George Bush, Angelo Mozilo etc, but there were plenty that I’d never heard of, like Joe Cassano and Lew Ranieri. If you want to know what they did just check the list.
TIME is even allowing readers to vote on who is more to blame. At the time of this writing Phil Gramm is in the lead, followed by Chris Cox, and Angelo Mozilo. There are some on the list that perhaps don’t deserve to be there. And there are others still that should be voted higher. Either way I’ve picked the top four that you might not have heard of.
Kathleen Corbet was behind the world’s largest credit rating agency: Standard and Poor’s. S&P is responsible to analyzing companies and various investments (like bonds) for their creditworthiness. They stamped their highest rating AAA on many of the biggest players and their packaged loans up until the end. Simple ignorance wasn’t at play here either. The company obtaining the rating pays S&P for the rating. That’s like paying a police officer’s salary every time he pulls you over – throw in an extra buck or two and you’re free to go.
Burton Jablin is HGTV’s head of programming. Some of his shows glorified the real estate industry like House Hunters (a personal favorite), My House Is Worth What?, and Designed to Sell made real estate look like fun. Frankly it is ridiculous that his name was tossed in to theses ranks. TLC, a competing network made Flip That House which I would find to be worse. Even that isn’t as bad as some people think. Ultimately the responsibility for not falling for the glamor of something is on the consumer, which is thankfully on the list of people to blame.
Ian McCarthy‘s company, Beazer Homes is a big player in the home building game. I don’t blame him or his company for building too many homes or pushing people into buying more than they might be able to afford, they were doing what they thought was best for the company. In a capitalistic society, we can only expect as much from them. However, Beazer Homes knowingly lied on application forms about income and creditworthiness, basically setting home buyers up for failure. It wouldn’t be their problem though, only the banks, and home buyers would lose there. Now Beazer is suffering because NO ONE can afford to buy a home, and government agencies are investigating their misdeeds.
Herb and Marion Sandler are the sweet couple that started World Savings Bank. They created a mortgage product called the “option ARM” which not only allowed borrowers to have a flexible interest rate, they could postpone payments with no penalty. Sounds great but you eventually do have to pay it off, and if it is postponed due to financial hardship, you and the bank are screwed. They pushed this product aggressively for more than 20 years until finally selling, conveniently, to Wachovia in 2006. By then they were called “Pick-a-Pay” loans. Wachovia thought they were getting a good deal, methinks the sweet old couple knew they were screwed and found an out. Wachovia collapsed because of it and was bought by Wells Fargo.
Please go check out the rest of the list and cast your votes on who is to blame. Come back here and let me know who you think we should be blaming more or less.