George Will and the simple world

George Will’s recent column on “economic hypochondria” is both simplistic and elitist. While his point about the extent to which media and politics have magnified the currrent sense of economic doom have substance, his comments on sub prime mortgages and student loans are the product of an Ivy League education and a black and white view of today’s economy.

Will’s put down of sub prime borrowers is that anyone should have known what it meant when they signed up for a variable rate mortgage loan. Why should we be concerned about the mere 4% of American homeowners who are at risk for losing their homes, he asks. The rest of us are paying our mortgages as we promised.

I agree that some borrowers departed from common sense, but to say that there is no broader problem here is to discount the role of those on the other side of these transactions.

The financial institutions were pushing these loans on borrowers that the institution should have known, if they cared to, were unlikely to be able to make the payment beyond the introductory period. When that predicable default occurred in a world of rising real property values, the bank gets an appreciated property back at foreclosure, plus whatever fees and interest it collected prior to foreclosure.

Government and the financial industry have pushed homeownership for years as an unmitigated good and the embodiment of the American dream. So, we castigate those who believed?

Further, both adjustable rate loans and credit cards come with written agreements that challenge me to understand them, and I’m a lawyer with nearly 30 years of experience and an education from the “Harvard of the West”. It is utterly unreasonable to expect the average citizen to understand these agreements or to discount the advice of “their” mortgage broker in these transactions who unfailingly assured hesitant borrowers that the broker would get them a better loan before the present loan bit them.

Will ends his piece railing about a sense of entitlement in the population with a reference to student loan borrowers, the next group he imagines will ask for relief from their debts. As one who has college aged sons and who sees clients with horrendous student loan debt, I’m adamant that some change in the student loan program are absolutely needed.

Two things about student loan programs as they now exist are rotten: one is the marketing that pushes on youngsters money to live well as students without adequate disclosure about the consequences of that debt. What kid will choose to live poorly when the student loan folks will provide money for beer and pizza every night?

The second issue is permanence of the decision to borrow. Student loans are now forever: the debt has no statute of limitations and is generally non dischargeable in bankruptcy. I cannot think of another economic decision with such momentous consequences that we allow 18 year olds to make with less disclosure or counseling.

The “forever loan” makes no allowance for changes of career or incapacity that is less than permanent. Why wouldn’t the lending industry be elated with a program that allows them to make loans to anyone that are collectible until death?

Mr. Will needs to talk with some real people and consider that the world, as it really exists, is more nuanced than he allows.