- The Washington Times - Sunday, October 5, 2008

For every “greedy” Wall Street banker, there were millions of Main Street Americans willing to live beyond their means.

And for every predatory lender, there were stupendously more home buyers willing to suspend fiscal reality for mortgages they didn’t understand, couldn’t afford, or in many cases, didn’t even bother to read.

From the California congresswoman who defaulted on several mortgages to credit-card holders with sky-high debt and escalating interest rates, financial experts, lawmakers and average citizens say the behavior of Americans is as much to blame for the nation’s financial crises as was the lax oversight by Congress and manipulation by the nation´s financial movers and shakers.

David Jones, president of the Association of Independent Consumer Credit Counseling Agencies, places much of the blame directly on the borrowers.

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“They are the ones who signed those contracts and should have known what could happen. They think the government should let them stay in their homes or force the lender to alter loans to make less money.

“They call the [original mortgage] deal usurious,” he said. “Certainly, most responsible people in this country would disagree with that.”

The delinquency rate for home-mortgage loans hit 6.41 percent of all loans outstanding at the end of the second quarter of 2008, a historic high in the Mortgage Bankers Association survey.

The survey showed the rate of foreclosure starts varied by loan types from a low of 0.34 percent for fixed-rate loans to 6.63 percent for subprime adjustable-rate mortgages, or ARMs, that let borrowers purchase pricey homes with low interest rates that later inflate.

“We’re seeing a disavowal of individual responsibility,” said Hunt Burke, president of the Burke & Herbert Bank & Trust Co. in Alexandria.

“People want to blame Wall Street ‘fat cats’ when their 401(k), which they elected to load up with stocks, takes a tumble because stocks are nose-diving. Instead of accepting responsibility for taking risks with their 401(k), people are saying all of a sudden that the ‘fat cats’ are the villains and the entire economy is at fault.”

But what’s being lost is the money made when those funds were paying well.

“When my 401(k) was earning 20 percent, I wasn’t complaining about fat cats on Wall Street,” Mr. Burke said. “But those same fat cats are running things now, and now they’re scapegoats.”

Mr. Burke says his medium-sized bank has assets of about $1.6 billion and is “awash with liquidity” and eager to make loans to qualified borrowers.

Rep. Laura Richardson, California Democrat, could be a poster child for America’s culture of overreaching in the housing market.

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