“Now, you would think some of these parties (especially the government and mortgage lenders) would have…learned the very painful lessons of the 2008 financial crisis and not repeat them, but they have not. Why? Because as Upton Sinclair said: ‘it’s difficult to get a man to understand something if his salary depends on his not understanding it.’”, Mike Perry, former Chairman and CEO, IndyMac Bank
Comments from Mike Perry, former Chairman and CEO, IndyMac Bank, January 30, 2015:
I just received Peter J. Wallison’s (of the American Enterprise Institute) new book Hidden in Plain Sight: What Really Caused The World’s Worst Financial Crisis And Why It Could Happen Again and am going through it….love the Preface, Basics, Introduction, and fabulous testimonials (some very smart and important people said very nice things about it book and his non-mainstream view about the root-cause of the 2008 financial crisis…). I mostly a agree with Mr. Wallison….although he is a little short on macroeconomic, monetary policy, balance of payments, etc. that also played important roles. I have already made a few postings from his excellent book and plan to make some more. Also saw his AEI colleague Edward Pinto’s WSJ OpEd this week: “Building Toward Another Mortgage Meltdown”.
I also read in an LA Times article this week that FHFA’s Mel Watt testified that they (the government) put such underwriting controls in place that a 3% down mortgage is now as safe as a 10% down one….B.S.….go price the mortgage insurance difference in the private markets. (I just made a blog posting about this article at Statement #585.)
I read this line below in a recent article (about something else) and then lost it and googled it:
“You know, more than 100 years ago, Upton Sinclair wrote this, that ‘It’s difficult to get a man to understand something if his salary depends upon his not understanding it.’”
I would say that this is the real estate brokerage, home building, and mortgage finance industry in a nutshell…..aided and abetted by the consumer groups and the federal government…..they all push for reduced underwriting standards in the good times (to help the economy, jobs, low-income borrowers, and industry profits/salaries), when the economy is strong and home prices are rising.
And then it inevitably goes too far (because of the free market distortions caused by well-intend government housing and housing finance policies) and fails, when the economy suffers and/or housing prices decline and the mortgage lender is the one who is blamed by all of these parties.
Now, you would think some of these parties (especially the government and mortgage lenders) would have studied the true, root-causes of the crisis (like I and Mr. Wallison have) and permanently learned the very painful lessons of the 2008 financial crisis and therefore will not repeat them, but they have not. Why? Because as Upton Sinclair said: “it’s difficult to get a man to understand something if his salary depends on his not understanding it.”