The Mortgage Crisis Morality Play

The foreclosure crisis has created a kind of Rorschach test of moral judgment. Different observers look at the same events and make very different assessments of fault and responsibility. Furthermore, more than any recent issue, the cutting point is social class.

If you search the Issues menu on John McCain’s website you will not find the words housing, mortgage, or foreclosure. Instead the candidate has an issue category called “Taxes & Economics,” and the title at the top of this page is “McCain’s Tax Cut Plan.” This is a dramatic contrast with both Democratic candidates who have extensive sections devoted to on the real estate crisis. However, elsewhere on McCain’s site you can find the text of his March 25 speech to Orange County Hispanic Small Business Roundtable, which reveals his moral judgment. Here is the crucial section:

A sustained period of rising home prices made many home lenders complacent, giving them a false sense of security and causing them to lower their lending standards. They stopped asking basic questions of their borrowers like "can you afford this home? Can you put a reasonable amount of money down?" Lenders ended up violating the basic rule of banking: don't lend people money who can't pay it back.

This is a remarkably carefully worded section. It appears to blame lenders—at least in part—for being “complacent” and signing up people who “can’t pay it back.” But who is the bad person in this narrative? The text makes it sound like the lenders’ only mistake was being too nice, which opened them up to victimization by unscrupulous borrowers. Lenders are guilty of “lowering their lending standards” to allow the riff-raff to buy homes. Further blaming of homeowners is evident later in McCain’s speech in a section on solutions:

In our effort to help deserving homeowners, no assistance should be given to speculators. Any assistance for borrowers should be focused solely on homeowners, not people who bought houses for speculative purposes, to rent or as second homes. Any assistance must be temporary and must not reward people who were irresponsible at the expense of those who weren't.

The mention of speculators is, of course, a red herring. It serves to make the victims of the housing crisis seem less sympathetic, and it will tend to discourage any relief programs. It gives the false impression that much of the current problem has been created by reckless speculators.

This kind of rhetorical strategy is reminiscent of the approach used by the banking industry during its long campaign to strengthen bankruptcy laws. In his signing ceremony statement for the 2005 bankruptcy bill President Bush said: “In recent years, too many people have abused the bankruptcy laws. They've walked away from debts even when they had the ability to repay them.” Of course, the overwhelming majority of people who filed for bankruptcy were suffering from a variety of real financial problems and were genuinely unable to handle their expenses. The focus on those who “abuse” the system strengthened the banking industry’s case but also misrepresented the problem.

McCain is using a similar victim-blaming strategy in the housing crisis. In his March 25 speech, the words “irresponsible” and “responsible” appear once each and in both cases they are used to refer to borrowers, not lenders. Don’t the lenders and the “speculators” in the securities market bear some responsibility?