Is the principle of “buyer beware” the dominant principle in the American system?
Question/Comment: Are you willing to argue that the subprime mortgage practices that started this problem can be deemed to be fraudulent in any way? Should anyone be convicted of anything for the devastation wreaked upon so many home buyers by people who made millions from their devastation? Or is the principle of “buyer beware” the dominant principle in the American system?
Paul Solman: Yes, caveat emptor IS the dominant principle. Too much so in recent years, it would now appear. Which is why regulation is no longer a dirty word.
It reminds me of one little-discussed reason for the current crisis: the financial illiteracy of the American people. A lot of people just shouldn’t have TAKEN these ludicrous loans. But hey, their debts were going to consolidated, their payments would be lower (at least for awhile). It was the American Dream come to life: something for nothing. The salesmen were slick, the people were strapped – and they didn’t know any better, many of them.
We launched a “FinLit” project here at the NewsHour months ago to try to address the illiteracy problem both via the program and the web, with initial support from funders as diverse as the Employee Benefits Research Institute (EBRI) and the Pacific Investment Management Corporation (PIMCO). And we’ve got various grant proposals pending. Let me know if you’ve got a spare million or so lying around. We could use it to help get the effort off the ground and into classrooms and adult education programs around the country.