My Money Blog has a great analysis of the subprime mortgage meltdown that puts most of the blame squarely where it belongs: on the borrowers, not the lenders. (It's based on this WSJ letter about a family losing their home.)
Take Ms. April Williams, who is the main character interviewed for this story and also featured in the box to the right.“This has stripped us of our whole pride,†says April Williams, 47 years old, who has until August to pay off her mortgage or vacate the two-story Colonial at 5170, where she and her husband have lived for 11 years. “There’s going to be no people left in Detroit if they keep doing this to them.â€They did this to them? Let’s see here - they have an unstable job, but still decide to purchase stainless-steel appliances, custom tile, a new bay window, central air-conditioning, a backyard koi pond… and is that a $50,000 Lincoln Navigator luxury SUV parked in her driveway??
For this specific situation, I feel like both sides are in many ways getting their just desserts. Borrowers like Ms. Williams were greedy, bought more toys than they could afford, and now have to deal with the penalties. Their lenders were also greedy in extending them so much undeserved credit, and I’m sure will be losing money in the event of a foreclosure.
The power to borrow can be used for good or for evil. Our modern economy would be impossible without it, but many people either never learn to borrow responsibly or just aren't mentally capable of the feat. Our monetized society is far more complicated than the average hunter-gatherer brain can comprehend, so it's no surprise than some people can't handle it.
