Jessica Rabbit: I’m not bad. I’m just drawn that way.
— from Who Framed Roger Rabbit? (1988)
I know that many people are nodding in drunken agreement with an NYT piece today about how second mortgages in America went from verboten to ‘vonderful, but I’m going to demur on the love-in. Sure, there is a great story here somewhere — second mortgages rose remarkably to implausible prominence over the last twenty years — but saying that the root cause was sneaky mortgage marketers snowing stupid consumers is grossly trivializing and oversimplifying things.
For starters, I don’t accept that mortgage marketers get so much of the blame. Sure, they exaggerated the merits of second mortgages etc., but if we’re going to start indicting marketers for exaggerations — even doozies — there is a long, long line of such people out there to point to, from weight loss products to golf equipment to erectile enhancement thingies.
Matter of fact, you could argue that boundedly rational people responded fairly predictably. They saw that home prices had been rising for some time, and that they had equity in their houses and could cut payments and take money out of their real estate, and so they did it. Is it so surprising that mortgage marketers saw that happening and responded to it? I don’t think so.
To me, this is another example of absolving consumers of responsibility. It’s not my fault; it’s those evil mortgage marketers who did it to me! I am tired of that sort of thing. I am tired of the line of argument that says consumers responded stupidly to what was happening in real estate markets, goaded, in large part, by evil mortgage finance companies. That argument is too convenient by half.
If people want more regulation in mortgage markets, I’m cool with that. But putting mortgage marketers at front of the blame line turns things around in an unhelpful way. Consumers figured out that the societal shibboleth against second mortgages was wrong, that there are more circumstances in which such things make sense than received wisdom said, and they acted accordingly. Did consumers go too far? You bet. But blaming mortgage marketers for marketing mortgages is like blaming Jessica Rabbit for being curvy: She’s not bad. She’s just drawn that way.