Wrongful face of capitalism

By Mick Pattinson

Before Congress and the eyes of the world, the executives of financial giant Goldman Sachs admitted that they bet against America. They created financial instruments so that they and their clients could place big bets on mortgages and housing.

For the winners, fortunes to be made, even if our financial system was taken to the point of destruction and our children handed a debt of unimaginable proportions.

In his latest best seller, “The Big Short,” author Michael Lewis tells of others who made the same bet against subprime and the financial institutions who pedalled them. Savvy investors from their insider's vantage point could predict the end game: the mass of foreclosures, the broken dreams and busted businesses. They saw the evaporation of life savings and the arrival of massive unemployment.

They placed their bets in the Wall Street casino. Big bets that paid off when our financial institutions were forced to beg for a bailout to save our financial system.

This is the unacceptable face of capitalism. Worthless mortgages given triple A ratings because the big financial houses paid the agencies to do it. A rigged game if ever there was one.

With all of our regulatory agencies asleep at the switch or outsmarted by Wall Street operators, law-abiding citizens were left defenseless. None more than America's homebuilders. Big Builder magazine recently predicted that 80 percent or more of the nation's private homebuilders will close their doors before the recovery arrives.

One of the great mysteries for builders: Unlike previous downturns when lender and borrower would come together to solve problems and mitigate the damage, this time, lenders just rushed for the exit door.

The events leading up to the great bank bailout of 2008 are revealing. Why did solvent builders suddenly lose their funding? Why were projects appraised and reappraised until the lender got the number he was looking for? Why were performing loans torpedoed for no apparent reason?

We now see the scale of the catastrophe created on Wall Street and what it meant for our industry: a trillion dollars lost on the subprime fiasco and the total undermining of housing markets.

Do we need bank reform? Of course we do, but streamlined and efficient regulatory oversight is more important.

And while U.S. citizens have suffered mightily, the culprits have not. This, too, is unacceptable. Those who put their personal greed ahead of the national interest need to pay a price as well.

Mick Pattinson of Encinitas, Calif., heads the Building Industry Coalition for Economic Recovery. Comments: mick

pattinson@verizon.net