How predatory lenders eat the poor

And Republicans and Democrats alike are letting it happen

A foreclosed house.
(Image credit: Illustrated | Tatomm/iStock, AP Photo/Mel Evans, file)

As we approach the 10-year anniversary of the collapse of Lehman Brothers, it is worth considering how much progress we have made, not only towards stabilizing the mortgage industry, but at protecting vulnerable Americans from exploitation by unscrupulous lenders in general. The story of the financial collapse that took place a decade ago is essentially one about the fecklessness and irresponsibility of regulators. Timothy Geithner, former President Barack Obama's first treasury secretary, wrote about this problem with candor — if somewhat woodenly — in Stress Test, his memoir of the 2007-08 crisis:

The financial crisis exposed our system of consumer protection as a dysfunctional mess, leaving ordinary Americans way too vulnerable to fraud and other malfeasance, while leaving the financial system vulnerable to sudden crises of confidence. Many borrowers, especially in subprime markets, bit off more than they could chew because they didn't understand the absurdly complex and opaque terms of their financial arrangements. Underwriting standards deteriorated dramatically, producing flimsy loans that were quickly packaged into complex securities; the eagerness of investors to buy them does not excuse shoddiness of the products … The financial cops weren't authorized to patrol the system's worst neighborhoods. [Stress Test]

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