Last week, Secondary Marketing Executive hosted a webinar called ‘An Industry in Transition.’ (If you missed it, you can hear the playback for free at www.sme-online.com). During the webinar, we received a question that initially seemed a bit odd: ‘What's a GSE?’
In all seriousness, I thought someone was having a bit of fun. After all, how could a person come to a webinar – sponsored by a mortgage banking industry magazine that focuses on the secondary market – and not know the definition of a government-sponsored enterprise? But then a few more people began asking the same question: What's a GSE? That was soon followed by another question: ‘What's TARP?’
Clearly, there is no shame in asking a question if you don't understand something. And I assume, in retrospect, that perhaps the people who asked those questions had a perfectly valid reason for not recognizing what those acronyms mean.
But after fielding these questions, I began to wonder about a bigger picture: do people actually know how mortgage banking works – not just within the industry, but in the nation as a whole?
The general public, for the most part, probably never heard the acronym GSE prior to this year's financial crisis. And even if they heard the names Fannie Mae or Freddie Mac, they may not have understood their exact functions. And I suspect many Americans are still wondering why Fannie and Freddie are in conservatorship.
In many ways, I believe the ongoing crisis could have been less severe if there was a greater understanding by the American people of how the mortgage banking system works. Perhaps if more average Americans knew the full depth of how long it wasn't working properly, there would have been a major hue and cry some time back that could have saved us a lot of grief today.
What can be scary, however, is when people are given half-missing or thoroughly inaccurate information in the guise of explanations. Remember the popular ‘greedy Wall Street’ catchphrase that permeated the presidential campaign when the subject arose about what caused the current economic crisis? I don't recall any of the candidates speaking about mortgage brokers, appraisers, mortgage fraud, the lack of due diligence, etc. Of course, it wasn't politically feasible for any candidate to put blame on borrowers who went in far over their heads – but that's another story.
And the media isn't much help in educating people, either. After all, was the $700 billion intervention by the federal government a ‘rescue plan’ or a ‘bailout’? It depends which newspaper or Web site you read or what television news program you prefer.
Not having school age children, I don't possess a first-hand view of what is being taught in today's classrooms in regard to the ongoing situation. I suspect the depth and scope of the crisis's roots are not being examined in depth, and the myriad of interconnected issues would probably be boiled down into easy talking points.
The problem, of course, it that it trivializes the problem and often puts an unfair onus on a single entity rather than acknowledging the full extent of the calamity. It would be atrocious if today's youth were to grow up thinking the crux of the crisis was strictly the result of ‘greedy Wall Street.’
In the past, I've written about why it is important for the industry to get its message out in a concise and cogent manner. By providing proper information on how the industry operates and what it is doing to help solve the ongoing problems, the industry will stand a better chance of not being excoriated as being the weak link that broke the economic chain.
– Phil Hall, editor, Secondary Marketing Executive.
(Please address all comments regarding this opinion column to hallp@sme-online.com.)
