McLean and Nocero were on the PBS NewsHour last night to talk about the roots of the crisis, and they said that -- to no one's surprise -- both Democrats and Republicans were culpable for the lack of regulation and foresight that led to the housing crash. They also said a number of other interesting things, including that the ratings agencies (Moody's and Standard & Poor's, among others) were at the top of their list of culprits most responsible for the crisis.
McLean also said that she "started this book with a bias toward personal responsibility," but found out the extent to which:
...these loans were sold; they weren't bought. And one of the most telling moments were these internal documents from Washington Mutual, one of the big subprime lenders, around 2003 talking about how to get consumers who really wanted safe 30-year fixed-rate mortgages to take out these dangerous option [adjustable rate mortgages] instead ... how to sell those to people, and how to confront a consumer who said, "But it doesn't feel right to me. I want to pay back my mortgage every month." ... How do you get these people to take out a risky mortgage instead? You told them that home prices could only go up. And the reason Washington Mutual wanted to sell these option ARMs, instead of the 30-year fixed rate mortgages, is that Washington Mutual could turn around and sell these to Wall Street for a lot more money than it could sell the old 30-year fixed-rate loans.Nocero adds, "I was stunned, in the reporting of this book, how much subprime was about predatory lending." He notes, also, that most of these transactions weren't for new homes, but for "cash-out refinancing" -- people remortgaging their homes in order to use the money the could get. "And that," said McLean, "enabled consumer spending through the 1990s and through the early part of -- of this decade."
Maybe the most telling, and most disturbing points, the writers make are at the end of the interview, when McLean says that Wall Street and corporate America saw that cash-out refinancing was a way for them to reap billions:
...in order to keep the U.S. economy going, you had to keep consumer spending strong. In order to keep consumer spending strong, you had to have consumers whose income otherwise wasn't keeping up have a ready source of cash. That was cash-out refinancing, by using their homes as piggy banks, and no one wanted to stop that party.The party may be over for American homeowners and consumers, but big business and the financial sector are still laughing all the way to the money trough.