Today it is being reported that California has jumped on the lawsuit bandwagon, and officially filed suit against the Goliath of mortgage brothels, one Countrywide Bank, for what it calls deceptive practices in lending. The state accuses The Country (ahem) of lowering its lending standards to sell homes to any old Tom, Dick or Mary with a pen and hand to use it.

So let me get this right: With this lawsuit (on behalf of thousands of foreclosed consumers), is California Attorney General Mr. Jerry Brown suggesting that banks have some sort of :gulp: ethical obligation to ensure American-Dream-hungry working class stiffs don’t get into something they can’t afford, and they failed to meet that obligation?!

If so, it’s about time!

I am jumping for joy today. I’m betting Ralph Nader is, too. I have said all along (right, Dad?), that WORKING CLASS CONSUMERS SHOULD NOT BE HELD RESPONSIBLE FOR THE MORTGAGE MELTDOWN. Am I saying people should be rewarded for using bad judgment? NO. I’m saying banks have an acute responsibility to make sure those with bad judgment don’t end up with loans they can’t afford, and banks failed in that endeavor.

Look, everyone wants a piece of the American Dream home. Hell, everyone wants a nice car, too. But not everyone can have those things until they meet certain standards in our society. That’s why we have standards like MINIMUM CREDIT SCORES in place in the first place. That’s how good ol’ Fair Isaac ever came to be.

It doesn’t take a genius to see how predatory banks opportunistically took advantage of some people. You just have to filter out all the holier-than-thou critic noise, and look at the essence of the banks’ marketing campaigns. Think about this term for a minute: “TEASER RATE.” TEASER rate? Man, they didn’t even try to spin it, did they?

TEASER rates are meant to TEASE, right? But TEASE *WHO*? Financial planners? Accountants? Lawyers? Doctors? Mayors? Council people? Governors? Regents? Hardly.

Ok granted SOME people who took advatnage of these rates were an opportunists who knew better. But by and large, banks used these rates to TEASE every day people who–prior to the advent of teaser rates–could not even fathom owning a home. To the devil’s advocate I respond: Yes, ideally sub prime borrowers SHOULD have noticed the asterisk next to that low payment teaser; and, yes, ideally they SHOULD have read the fine print, but really, at the end of the day, a tease is a tease in every language.

The bottom line for me: TEASING American-Dream-hungry consumers is unethical any way you slice it. Not all consumers have the same background, upbringing, and sense of fiscal responsibility as others. If they did, we wouldn’t have some people making $20 million per year, and others making $20 per day. Lending Institutions have standards and rules in place to ensure people don’t get in over their heads and bite off more than they can chew. The standards are meant to PROTECT both bank and consumer. They protect the consumer from acquiring something (like a home) they fall in love with, but then can’t afford and must surrender; and they protect the bank from losing its ass when that happens.

The banks made a fundamental mistake when they lowered these tried and true standards. They ignored the age-old adage by GK Chesterson that I just posted here earlier in the week: “DO NOT TAKE DOWN A FENCE UNTIL YOU KNOW WHY IT WAS PUT UP IN THE FIRST PLACE.”

Here’s to an assterisk-free country. Jerry Brown rocks.

In closing I should add that I am NOT excusing any consumer (or loan broker), who intentionally falsified documentation to obtain a loan. Those people should absolutely be held accountable for any crimes they committed. The lawsuit (and my article), is focused on predatory lending practices.

-Joe