The Culture of Blame and Victimhood

Let’s say I decide to buy a house I can’t afford.   My decision is based on the following two assumptions:   (1) my income will keep going up, and (2) the house will appreciate in value.   If my assumptions are wrong, then you may think I made a bad decision for which I should accept responsibility.  I say, however, that my inability to repay the loan that I obtained to buy my house is the bank’s fault.   I am a victim of the bank.   The bank should have known I couldn’t afford the house and should have refused to make the loan that allowed me to buy it. 

But the bank president says, “It’s not my fault.   Congress passed the Community Reinvestment Act, which forced banks to make loans to borrowers who couldn’t afford to repay them.   In addition, Fannie Mae and Freddie Mac were willing to purchase the bad loans from me, so why shouldn’t I make them?   If my bank had refused to make loans to unworthy borrowers, then the bank regulators would have withheld approval for me to open new branches or do other things for which I needed their approval.”  

Well, then, it must be the fault of Congress.   Congress not only passed the Community Reinvestment Act, but it also created Fannie Mae and Freddie Mac and encouraged them to buy subprime loans from the banks so that the banks would have the funds to make more subprime loans.   The intentions of Congress were pure.  Congress simply wanted to make “affordable housing” available to everyone.   In the dictionary used by members of Congress, “affordable housing” means housing you cannot afford. 

So who should we blame in Congress?   As you would expect, the Democrats are blaming the Republicans, and the Republicans are blaming the Democrats.   The Democrats say we need more regulation, even though they ignored repeated warnings of the need to rein in Fannie Mae and Freddie Mac, and they voted against Republican-sponsored legislation in 2005 and 2006 to reform Fannie Mae and Freddie Mac.   The Republicans say the problem is not too little regulation but too many bad regulations, including regulations supported by Democrats to promote “affordable housing”.   Both sides blame the other for the Gramm-Leach-Bliley Act, which allowed mergers of commercial and investment banks, and which was approved by a Republican-controlled Congress and proudly supported and signed by President Clinton, a Democrat. 

Both Democrats and Republicans in Congress also blame the Federal Reserve Board, one of the few federal agencies over which Congress has no control, and greed on Wall Street.   The Federal Reserve kept interest rates too low for too long, which made it possible for financial institutions to borrow money at unreasonably low rates and to incur too much debt.  The financial institutions blame the banks for making so many bad mortgage loans to people who couldn’t afford to repay them, and they blame the Federal Reserve for making it too easy for them to borrow money.   Alan Greenspan, the former Chairman of the Federal Reserve, blames “a global savings glut”. 

If it wasn’t already obvious to you, it should be now.  We live in a culture where there is no individual responsibility.  Someone else is always responsible for anything bad that happens.   We are all victims.   But there’s no need to worry because the government will take care of us and protect us against our bad decisions.   This gives me great comfort until I remember that the government’s money comes from the taxpayers—victims like you and me.