Intersecting Minds: Education, Business and Technology at the North Carolina State Jenkins Graduate School of Management

A Personal Story | January 29, 2009

Over the last couple days, I’ve found myself telling a story to a few of my classmates and friends whenever the economy comes up as a topic of conversation. Inevitably, people bring up the topic of why? Why did this happen? How did we get here? I have somewhat of a unique perspective on these questions because I was at ground zero of the economic crisis BEFORE it happened. For two years, from late 2004 through mid-2006, I worked as an Account Executive for a subprime mortgage lender…

Usually when I drop that little nugget of biography, people respond in one of two ways. Either they start pointing and laughing, or their jaws drop in disgust. The word subprime has become a dirty word in our lexicon. That’s no surprise considering everything that’s happened over the last few months.

Then I tell people about what I did and what I saw, and those who were laughing quickly stop. I worked in the San Francisco Bay Area, one of the hottest real estate markets in the country during that time period. The office I worked in serviced loans from all over the West Coast, but the majority came from the Bay and from the central valley of California. I could probably write a book about what I saw, what I think happened and why things came crashing down so suddenly. But to me, the answer keeps coming back to one word: Greed.

Greed on the part of the borrowers, who wanted to get into homes they knew they couldn’t afford. Greed on the part of the real estate agents and loan officers who could make upwards of 5-10 or even $20,000 on one loan. Greed on the part of the subprime lending institutions who were making millions selling their securitized loan packages on the secondary market at ridiculously high margins. Greed on the part of the investment firms who purchased those securitized packages and who are now having to get bailed out by the government.

And people thought this cycle could last forever. Homeowners could just keep taking equity our of their homes and running up their credit cards. Banks could just keep making terrible loans on overvalued assets. And the Merrill Lynch’s and Lehman Brothers of the world could keep purchasing those packages. Credit default swaps, derivatives and other complex securitized instruments could keep the whole story underwraps. Here’s a video that pretty much sums up the approach and attitude of American consumers and the corporations over the last decade:

In any case, the real story is more complicated than that. Excessive government regulation in some areas and a complete lack of government oversight in others helped push this along. A Presidential administration completely out of its league in terms of foresight and then the handling of the crisis at its onset helped push this along. But at the end of the day, I can’t help but think that the root fundamental cause of our current economic situation starts and ends with one word: Greed

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