Warning signs were noted, but still mortgages crashed
Warning signs were noted, but still mortgages crashed
More than four years before the collapse of the U.S. mortgage markets, a senior FBI official recognized the potential danger posed by shady investors and sounded a warning.
Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004 that low interest rates, skyrocketing home values and unscrupulous investors could combine to cause a crash that would eclipse the savings and loan crisis of the late 1980s and early 1990s.
At the time, however, Swecker was confident that the FBI was on the case and disaster could be averted.
Alas, he was wrong.
Too few eyes
As reported recently by the Los Angeles Times, Swecker’s warning came at a time when the FBI was reducing rather than expanding oversight of banking industry procedures. For instance, the FBI had about 1,000 agents deployed on banking fraud during the S L bust two decades earlier. By 2007, the number of agents pursuing mortgage fraud had shrunk to around 100, despite warnings from Swecker and others.
In a classic case of locking the barn door after the horse has gotten free, the number of agents has been recently doubled, to about 200. Critics say the agency might have averted much of the problem had it heeded warnings from within.
Our purpose here is not to cry over spilled milk, but rather to sound a new alarm.
The collapse of the subprime mortgage markets, which has cost financial institutions and homeowners hundreds of billions of dollars, is only one of a number of catastrophes that could have been averted or minimized. It demonstrates what happens when warnings are ignored. The American people — and some of the politicians they elect and the bureaucrats they pay to protect their interests — seem incapable or unwilling to recognize a crisis in the making.
We — a very collective we that includes citizens, politicians, academics, civil servants and journalists — don’t seem to be able to focus on danger, even after we see it or have it pointed out to us.
Pick a topic: abuse of power, pollution, energy consumption, education, infrastructure, migration of jobs, trade deficits, budget deficits, natural disasters, terrorism or any of a dozen others. In almost every case, this nation knows there are looming crises and suspects that we are not prepared to cope with the consequences.
Some of these threats we’ll debate more than others. A few may even over-react to. But all too often we choose to live in a state of denial. We brand those who carry the warning as alarmists. If Paul Revere rode through the streets shouting, “The British are coming,” today’s Americans would question his motives or his sanity and roll over and go back to sleep.
Another wake-up call
It’s too late to do anything about Chis Swecker’s warning that U.S. mortgage markets were in jeopardy. But here’s another warning to think about.
Rep. Paul Ryan, R-Wisc., the ranking Republican on the House Budget Committee, told CNSNews.com in a video interview that the U.S. government is headed toward bankruptcy if it stays on its current fiscal course.
“We know that for a fact,” said Ryan, “all the actuaries, all the objective scorekeepers of the federal government, are predicting this.”
Fiscal conservatives have been sounding similar alarms for some time, not in such stark terms. Among them has been George V. Voinovich, Ohio’s senior U.S. senator, who has been telling his fellow Republicans and the Democrats in Congress for years that something in the federal budget has got to give.
Americans — all of us — better start paying attention.