Michael Lewis on Subprime Mortgages

Writer Michael Lewis has a typically inverted take on the subprime mortgage meltdown. The infrequent Bloomberg columnist wonders how it is that the media portray rich people who lent money to people who didn’t have the means to pay it back as crooks, while the recipients of that largesse are made to look exploited.

Moving is never pleasant or cheap, but that is the main cost to the subprime defaulter: He hands back the house, whose value has presumably plummeted, to the people who lent the money to buy it, and walks away. He rents. (Shrewdly!) In effect he bought a very cheap call option on the U.S. housing market. While he waited to see if his call option made him richer, he lived in a much nicer house than he could otherwise afford and probably wondered why rich people had become so recklessly open-
handed. His behavior was irresponsible, but the markets let him do it and so it’s hard to blame him for taking a flier.

Am I the only one who wonders how a person who borrows money he can’t repay, buys a house he can’t afford, and then stiffs his creditors, is allowed to play the victim?

A more convincing victim, I would have thought, is the person with weak credit but strong resolve who stood to benefit from a subprime loan — and who now can’t get one because the market is scared of his shadow.

More here on some of the people playing subprime victims.


  1. Why is Lewis saying either party has been or should be portrayed as the “victim”? I don’t agree that the media’s been biased in either direction, and I don’t think it’s necessary to assign victim status to either party. Each party participated according to the rules laid out, and as it turned out when the game was over, there was a winner and a loser (or in this case, 2 losers). 2 losers indicates flawed rules to me, so look at who drew them up if you feel the need to assign blame here.

  2. Franklin Stubbs says:

    This simple little booklet could have saved a lot of headache: http://tinyurl.com/37gth4

  3. worth wrote: Why is Lewis saying either party has been[…] portrayed as the “victim”?
    Because they have been.