The Meltdown

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THE MELTDOWN….OK, this is probably sort of a dumb question, but: Has anyone figured out yet how America’s financial giants all managed to misprice the risk of the subprime mortgage market so spectacularly? Yes, I know bankers have been doing this forever. Centuries of experience tell us that they have the impulse control of five-year-olds. And yes, the rating agencies screwed up in a big (and possibly fraudulent) way. That certainly helped things along.

Still: it’s not as if the bubbly nature of the U.S. housing market was a secret or something. It’s been a hot topic of conversation for years. Everyone knew that there was at least a decent chance that the bubble would burst at some point. Even if you were an optimist, you’d concede the possibility.

So what happened? I don’t buy the “black swan” theory. What happened wasn’t that unusual or that unlikely. Anyone with access to a Case-Shiller chart and even a vague notion of what was going on in the mortgage market knew that a bursting of the bubble was a distinct possibility. So why did bankers get into a frenzy bidding each other down on the size of that possibility? Were their risk managers all out to lunch? Or did they all get overruled by the suits in mahogany row? What’s the deal?

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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