Buying a house is a hugely intimidating process. At least it was for me. It was more expensive than what I make in years — incomprehensibly more expensive than anything else in my whole world — and I felt like I was signing over the rest of my life when I signed the papers.

Which brings me to the papers. There was a stack of them, I think it was six inches high (around 15cm for those of you who live in the civilized world). Theoretically, you read and understood every word before signing. There was what felt like a damn ceremony, where I went to some office, and signed papers for a few hours. If I started reading any of them, there was a pregnant stage wait. I could just feel the professionals thinking, “Oh my God. If this pointy-haired buyer keeps doing this, we’ll be here all day!” I’ve got news for them. If I’d read all those papers, we would have been there for several weeks.

So, in some respects, I was one of those ignorant buyers you hear about. (For instance, Krugman discussing the subprime situation, “the hundreds of thousands if not millions of American families lured into mortgage deals they didn’t understand.”) The only real difference between me and them was that when I tried to make sure I had a real estate agent I could trust, I was lucky and turned out to be right. But — and that’s a legal hole you could drive a bankruptcy through — if I’d been wrong, there could have been anything buried in that mountain of paper and I wouldn’t have known until the bills arrived. That’s true even though I’m absurdly over-educated, can do statistics and calculus, and understand a little bit about accounting and finance.

Given how easy legal obfuscation has made it to cheat people, all the professionals in the real estate and finance industries who had a part in this process do bear a great deal of the guilt for creating the situation we’re in. I’m not arguing with Krugman or anyone else who says that. The heaviest costs of digging ourselves out of this hole should fall on the financiers. Agreed.

It’s also clear that some buyers really were actively and unethically (if not criminally) cheated. There are too many stories of creditworthy people being steered toward higher-profit subprime loans when they could have qualified for ordinary ones. People whose ignorance was used to cheat them should have that wrong made right at whatever cost to the damn financial industry. I’m completely agreed on that, too.

However.

Some of the ignorant buyers were more than just ignorant. They were greedy, just like the bankers. Unlike the bankers, the only people they’re ruining are themselves, but the fact remains that they were not the unwilling dupes of Wall St.

They were willing. They were out there, scooping in the free money with both hands. I had people tell me that it didn’t matter how much a house cost because the monthly payments were “only” $3000, or whatever. (I live in California.) That’s called charging whatever the market will bear, but it didn’t seem to matter, because everyone knew that houses would coin hundreds of thousands of dollars a year for them from now till doomsday. I saw people re-mortgaging their houses to their maximum, then-current market value so that they could go buy Stuff.

Some buyers weren’t paying close attention to the terms of their loans because they thought none of that mattered. The money was going to keep growing forever.

That’s exactly the same mistake Wall St. made, and for the same reason. If we’re ever to get a handle on Enron-style scamming, we’re going to have to acknowledge that the greed of some of us little people is right in there with the greed of the big people, creating the problem. Our greed may be a lot smaller than theirs, but there’s more of us.

And that’s why I get angry when I read about all the poor people lured into loans by Wall St. Suddenly everyone’s transformed into a Hispanic family who had trouble reading the contract.

Bullshit. There are plenty of people out there who didn’t know because they didn’t want to know. There always are and there always will be. So when we’re thinking about reforms to the financial system to prevent these sorts of meltdowns in the future, let’s try to remember that the rules are there to stop the little people from going crazy, too. The financial industry is a problem, but it’s not the only problem.

Crossposted to Shakesville
Technorati tags: politics, subprime, debt, housing, current events