Hedge fund manager and derivatives trader turned CNBC personality, Rick Santelli was the author of a highly publicized rant against Obama’s plan to deal with mortgages. The gist of it was that he didn’t work so hard so that he could foot the bill for his neighbor’s bigger house or extra bathroom that caused his deadbeat neighbor to default, apparently. Said Santelli, “This is America! How many people want to pay for your neighborâ€™s mortgages that has an extra bathroom and canâ€™t pay their bills?”
He’s right, this America, there is always room for discussion of the philosophical position of “I’ve got mine. Fuck you. It’s better for everybody (especially me) in the long run.” But really, right now, guys in the exotic financial products industry probably want to keep their heads down and shut up. Because whatever bad decisions were made at the ground level, they were magnified hugely by the financial hucksters who bundled the mortgages, removed the risk from the banks and brokers who originated the deals, slapped a AAA gold star on the financial product, and started making leveraged bets on derivative products.
These guys, if they are smart, do not want to draw attention to themselves. There is a lot of ambient anger out there looking for a place to land. Because the “financial industry” is nameless, faceless, and complicated for the “Average American” (including this one), very few individuals have taken too much heat for the economic collapse. But if a guy like Santelli wants to stand up and tell honest folks who got in over their head despite hard work and good intentions that this is all their fault, I just have to say “good luck with that.”
The moral hazard of a homeowner paying a fixed rate mortgage instead of an adjustable rate mortgage just isn’t that worrying to me after reading about how loan originators were able to remove themselves from any real risk for the mortgages they arranged. I could have missed it, but I am not aware of public statements by Santelli about the moral hazard of bank bailouts.
If anyone is going to credibly advance the pure market philosophy in the current climate, it will have to be a pure libertarian walking the talk and unaffiliated with the financial industry. A guy like Santelli is just begging to be tarred and feathered.