I have been a commercial real estate lawyer in the DC area for 26+ years. I find it remarkable to hear conservatives repeat over and over how the American people are in some sense responsible for this meltdownm because they made all of these crazy loans that were beyond their means.  And on a very superficial level, that argument has some appeal.  But it is more propaganda by the forces that gave us this mess, and are now being baliled out of it at our -- the Amercian people's -- expense.

In the last great commercial real estate meltdown (1989-1991), what struck me more than anything was that banks had become so oblivious to risk in their zeal to place large loans with the (so-called) best borrowers of that era. Banks were always stuffy, conservative places when I was growing up. The post-depression era mandated strict banking regulation. By the 1980’s, the real estate developers I worked for after law school were risk-taking entrepreneurial capitalists. They were in the business of putting deals together and leveraging their own capital with money loaned to them to try and turn a relatively modest cash investment into a large profit. Well intentioned (and more than a few evil and dishonest) developers made mistakes (or worse, committed fraudulent acts) during that time period, which led to losses on a massive scale -- but what developers did was at least within the bandwidth of risk that one would expect from an entrepreneurial capitalist. By contrast, banks are and have always been fiduciaries to their accountholders – they are not risk-takers, they are supposed to act cautiously, make loans conservatively, based on sound underwriting and careful due diligence. In the late 80’s, the banks got caught up in a frenzy of short term profit making and rising bank stock prices – a premium was placed by management on churning loan placement fees, increased volume, increased year-to-year “sales”, etc. There was, of course, record high compensation and bonuses, and risk-taking took place on a scale that was, at that time, far outside what banking regulations ever allowed in the 50’s, 60’s and 70’s. Reagan had changed things forever, by beginning a movement towards broad deregulation of financial markets, often deregulation for the sake of deregulation. It was if the depression had never happened.

The GOP initiated deregulation effort of the late 90’s allowed banks to engage in high risk/high leverage investment businesses. And with the advent of the Bush era, we witnessed complete GOP abdication of executive branch and congressional oversight.  John McCain was a willing participant in both parts of that equation, by the way.  But putting that aside, this new hands off approach by those who were supposed to perform oversight greatly magnified “banking industry” risk-taking, taking it to levels far beyond any scale previously imagined. The fact that the most well known companies being bailed out this week range across several discreet industry types is a reflection of just how blurred the lines have become. But make no mistake about it, corporate giants pushed these loans out there, created the derivatives which made them possible, guarantied them, insured them and made short term profits off of them – let’s face it, they sold the crap out of them.

So the notion that middle class borrowers were doing something venal or un-American by making these loans – by seeking to get their share of the “low investment, high leverage” real estate boom of the 90’s and 00’s -- is a complete double standard. The borrowers were doing exactly what the lenders were doing, but the lenders were doing it on a much larger scale. Now many of these borrowers did not appreciate that their jobs might be at risk to a Bush economy, or that real estate values as a whole might be at risk, or that interest rate increases on ARMs would likely outstrip their ability to make the payments. Many were told that the rising real estate values would enable them to sell at a profit “long before” those loan rate increases kicked in. I’m sure there were more than a few who knew better and did it anyway. But in a society where people are encouraged to spend beyond their means by maxing out on high interest rate credit cards, the notion that they should have avoided easy loans being sold to them to buy new houses at seemingly very low interest rates is crazy. People want to improve their lives – this was not only predictable, it is why an industry was created for it.

Lenders are the ones who traditionally put the brakes on this, but they didn’t . . . because it was thousands of mortgage brokers placing loans funded from overseas or from large mortgage pools, where the borrowers all fit into some nameless, faceless “box.” It was easy money for all concerned. And it fueled a residential real estate boom that created income at all levels of the economy and made it seem like it all made sense. And once again, short term greed in the form of fees, bonuses, faceless funding sources, check the box underwriting, and a system that did not punish the failure to perform due diligence properly in the interests of short term corporate profits, conspired to make the people who are supposed to be fiduciaries for other people’s money into promoters and speculators. So the notion that the middle class people who got caught up in this whirlwind of the Bush-GOP economy and GOP economic theory in practice, are as or more culpable than the people being bailed out here, or the legislators and “regulators” who not only did nothing to stop it, but actually made it possible and facilitated it, when all of them they should have known better, is so wrong on so many different levels that it is nothing less than infuriating – a grievous insult to the intelligence. And the sad reality is that almost nobody is letting average people onto this big secret – that another generation of billionaires have been created out of what will likely turn out to be largest taxpayer funded bail-out in history, yet another GOP transfer of wealth and capital from the masses to the ruling class. And here comes John McCain advocating more tax cuts for the rich. Does anybody wonder why it so often feels like our heads are going to explode?