Ethics Newsline®

Several readers commented on last week’s commentary by Rushworth Kidder, in which he asserted that the root causes of the problems faced by Fannie Mae and Freddie Mac, the government-backed institutions guaranteeing the majority of home mortgages in the United States, were the millions of “little gray lies” and “petty fudgings” in mortgage applications and the subsequent investments based on those loans.

One reader had this reaction: “The plague of ‘little lies’ which beset the mortgage market had behind it a stiff wind of profit without risk. I — wink, wink, nod, nod — write the mortgage and collect unreasonable fees, then bundle them and pass along the risk to the aggregator. Obscene profits are made at each step, but there is really inconsequential risk to the profit takers as the market is too big to be allowed to fail. This is simply a pyramid scheme dressed in the cloth of making possible the American dream of universal home ownership.”

Another expressed frustration with U.S. leadership in general and wondered how a government so “deep in red ink and not embarrassed at all” could be expected to impose effective regulation on banks and business that have “grown up in a culture of sharp practices.”

And a reader who maintains that the complexity of the process removed the consequences of the actions from the actions themselves posited that “Jefferson once opined that every generation or two, all institutions should be abolished and started all over. Perhaps he was right.”

– Compiled by Ethics Newsline® editor Carl Hausman