Responsibility? What’s That?

13358_marco_rubio Responsibility? What's That? BLOG VIEW: Way back during my early days as a chubby toddler, I spent my summers at my grandparents' home. One sunny afternoon when I was around 18 months old, I was on the front porch with my grandfather, who was assigned to keep an eye on me. Grandpa, however, was more interested in following the world drama via the Wall Street Journal, so his attention was focused on the newspaper rather than on his grandson.

At the time, I was already out of diapers. Unfortunately, I didn't quite master the basic tenets of bladder control. When my grandmother came out on the porch, she found a miniature Lake Huron at her feet.

‘Who did that?’ my grandmother asked, looking across the watery mess that covered the porch. Without saying a word, I lifted my right arm and pointed my index finger at my grandfather, who was still absorbed in his Wall Street Journal and unaware that he was being falsely charged with public incontinence.

I often think of that anecdote as evidence that human beings are born with a refusal to accept responsibility for their actions. Indeed, even a toddler is old enough to know that it is always too easy to blame someone else for your errors. The notion of taking responsibility for mistakes – and being mature enough to accept the consequences for reckless and erroneous decisions – is something that needs to be instilled into the human character.

I bring about this observation in view of a fleeting comment made by Florida Sen. Marco Rubio during the Republican response to the president's recent State of the Union speech. While nearly everyone zeroed in on Rubio's awkward pause to take a sip of bottled water during his presentation, my radar went off as Rubio made a comment that few people among Washington's power elite – either Republican or Democrat – would ever dare make.

‘This idea – that our problems were caused by a government that was too small – it's just not true,’ Rubio said. ‘In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies.’

Yes, Rubio was able to openly admit something that few elected officials dare to admit: The roots of the housing bubble debacle were firmly planted in Washington's politically motivated desire to artificially inflate homeownership rates. And it was hardly the fault of one party – take a serious look at recent history, and you will find a bipartisan mania to pump up homeownership numbers stretched across several administrations and congressional environments where power shifted back and forth across the aisle.

Every now and then, some effort is made to remind the folks on Capitol Hill that they were not shocked observers to the housing fiasco. Not surprisingly, these politicians prefer to play a grown-up version of my blame-Grandpa-for-the-puddle strategy.

Do you remember the Friends of Angelo program, in which Countrywide Financial Corp. was able to win friends and influence people in Washington via generous home loan deals? Needless to say, this ran afoul of congressional ethics standards.

But don't waste the time of the House Ethics Committee with those facts – in December 2012, the committee quietly dropped its leisurely probe of allegations that Countrywide Financial Corp. sought to peddle influence on Capitol Hill, claiming that it was thoroughly unable to pursue ‘any specific credible evidence of actual violations that remain within the jurisdiction of the committee.’

Further back in April 2011, political activist and former presidential candidate Ralph Nader tried to seek a federal investigation to determine if government officials made intentionally misleading statements about the financial health of the government-sponsored enterprises (GSEs) in the immediate period prior to their seizure by the federal government. Nader based his charges on July 2008 statements from the GSE executives and federal officials, including Federal Reserve Chairman Ben Bernanke and former Rep. Barney Frank, D-Mass., that gave the impression that the GSEs were financially sound. Not surprisingly, Nader's request was arrogantly ignored in Washington.

Frank, of course, stands out for pointing the blame finger in every direction except toward his chest. Last year in an interview with New York magazine, he acknowledged being mistaken in his 2003 comment that the GSEs were ‘not facing any kind of financial crisis,’ but insisted that his remark should not be used to suggest he played any role in the GSEs' downfall.

‘I was wrong in 2003, but I wasn't in charge,’ he said. ‘This is the most intellectually dishonest argument from Republicans. Remember, I was in the minority from 1995 to 2006. They were in charge. Their argument appears to be that I stopped [House Speaker] Tom Delay from doing something. But this is all on their watch.’

Yes, but the Dodd-Frank Act that the former representative co-authored occurred on his watch, and Frank and his fellow Democrats angrily swatted away efforts by Republican legislators to add GSE reform and a covered bond market framework to the 2,300-page law. After the Democrats lost the House of Representatives in the 2010 election, Frank blamed the GOP for failing to encourage cooperation across party lines.

‘People ask me, 'Why don't you guys get together?'’ Frank said. ‘And I say, 'Exactly how much would you expect me to cooperate with Michele Bachmann?'’

Of course, the federal government does not deserve to single-handedly carry the blame for the mess that persists to this day. Incompetent underwriting by lenders and the absence of due diligence on the part of secondary marketing officers made a bad situation worse, and we're still paying for that stupid behavior.

Sadly, the private sector is taking a cue from the public sector by refusing to accept responsibility for its actions. This explains the incomplete feeling that accompanies the endless parade of so-called settlements that have been squeezed out of financial institutions by federal and state officials – in almost every case, these settlements are conspicuously absent of any acknowledgment of responsibility by the financial institutions.

And don't hold your breath expecting an apology from the private sector. The poster child for this environment is Bank of America CEO Brian Moynihan, who recently shrugged off the billions of dollars that his institution was forced to pay in settlement fees by dismissing these sums as merely being ‘like a bad hour’ for his bank. Nice one, Moynihan – thanks for making the industry look good!

– Phil Hall, editor, MortgageOrb

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