Barry Ritholtz this morning posts the teaser opening anecdote from Michael W. Hudson's The Monster. I've been working my way through the book myself lately although I must say it is slow going. Not that it's particularly abstruse: it's well organized and briskly narrated. The trouble is rather that it is so full of simply awful people--not quite 100 percent of the cast, but pretty close. Well: some are perhaps amiable enough in a superficial sort of way (they are, after all, mostly salesmen). But they're all such desperate losers: empty-headed and gawk-eyed youths who strain to make $100k a year so they can blow it all on booze and broads. You can't even quite say they are misbehaving because they are such innocents about it: for the most part they just don't seem to grasp that their might be anything wrong with extracting the widow's mite for their own entertainment. Perhaps the one really telling factoid is that the most conspicuous whistle-blower in the story--the one for whom it all became just too much--is a former car salesman. If subprime looks bad to car salesmen, we've got a problem.
Beyond that, for me the most depressing--but also the most instructive--part of the story is the account of subprime bootcamp: the training sessions where their masters teach the apprentices how to cheat, lie and ultimately steal their way to profit for themselves and the the company, not necessarily in that order.
There's moral here for regulators: these guys are and will always remain hard to tame. The bad guys have 24/7 to figure out how to screw you out of your money; the regulators will always get distracted.
It's also a melancholy reminder of the ineffectuality of "discloure" legislation. I introduced students to the standard-form contracts under the Consumer Credit Protection Act, "Truth in Lending," the first great piece of Federal consumer protection legislation. Senator Paul Douglas, who engendered CCPA, was a great ,man, one of the smartest, best informed and public spirited legislators of the 20th Century. But students would look at a CCPA form and seize up; I'd have to say--look, every word of this stuff is here because some legislator believes you need it for your protection. They saw it as a trackless void. It's been a few years now since I taught that stuff and it's back to trackless-void mode now for me, too. It is, of course, precisely this density and opacity that makes it so vulnerable to manipulation.
I don't have a ready answer to this but here's a pennyworth: maybe this already happens but I wonder if some consumer law centers might get into the business of running mortgage boot camps of their own--not just general-abstract introductions to "Your Financial Life," blah blah, but hands on sessions in which renegade professionals undertake to show you just what the %^$#@! are going to try to do to you when you go to the loan store (they may be quiescent at the moment, but they're only restin', believe me, they're still back there).
A bit like the infiltration course in Army basic training--do they still do that, I wonder? The metaphor is apt. The infiltration course trains you to face the enemy, and from Hudson's account, the enemy is just what you will face.
Afterthought: Wretched title, though, tells you nothing. He'll be lucky if they don't file it in science fiction.