Gary V. Powell, Author

I've been in Houston training bankers this week, earning a little money to support my writing and cooking habits. It's not a bad gig--the facilities are comfortable, the pay is good, and the people are friendly.

But it's caused me to focus more on the economy, lending practices, and the sub-prime mortgage market than I have in recent months.

Several conclusions emerge.

First, the mortgage lending industry likes to tell the story that the sub-prime market arose due to the low interest rates introduced by the Fed following the bursting of the dot com bubble and the 9/11 financial crisis. No doubt, lower interest rates stimulated consumer demand. But what the lenders' story fails to address is the push side of the equation. Lenders aggressively targeted "sub-prime" borrowers and engaged in deceptive sales practices. They hawked teaser rates without fully disclosing (except in the finest of print) the potentially disastrous results of a rising interest rate environment. The loans were designed irresponsibly so that the adjustments on the mortgage were unreasonably large and triggered by seemingly innocuous (to the consumer) economic indicators. The underwriting of these loans was also irresponsible, with lenders bending over backwards to sell product to anyone and everyone who walked through the door. The banks and other mortgage lenders and their individual brokers made a killing with little concern for the people they took advantage of or the potential for harm to the economy in general. The commercial banks and the mortgage lenders made a second killing when they packaged their sub-prime loans as a security that could be underwritten by investment bankers and then resold in the secondary market to hedge funds and other large institutional investors.

Second, the Bush Administration has given the lenders and investment banks a bye. The Administration's story is that this debacle was caused by consumers making  poor investment decisions. But that ignores entirely the fact that consumers were preyed upon by realtors and lenders who placed themselves in a position of trust, betrayed that trust, and then hid behind the ultra fine print of their contracts. The Administration's story ignores the fact that consumers had nothing to do with the securitization of their sub-prime loans and certainly shared in none of the profits made by such financial engineering. As usual, Bush and his boys have taken care to protect the people who put them in office and have ignored the legitimate concerns of consumers.

Finally, the entire debate about the sub-prime mess has ignored one very important point. The American Dream of home ownership, once realizable by the many, is increasingly realizable only by the few. While home prices have skyrocketed, real wages have remained flat to down. As income and wealth gaps have widened, the only way an increasing percentage of Americans can own homes is through "creative financing." The "correction" the economy is experiencing is more a reflection of this economic reality than anything. What's troubling, and what's missing from the public debate, is a recognition that the widening wealth and income gaps will have other implications in the near future. Not only will it become increasingly diffucult for ordinary working people to own homes, it will become increasingly difficult for them to obtain medical care (the issue isn't insurance, it's care), receive retirement benefits, enjoy personal security, afford personal transportation, and receive quality education for their children.

But this parade has tooted by before. My guess is that somewhere in the future is another "correction" followed by another "New Deal." The sub-prime mess and its fall out is merely the harbinger of more to come.