Warren Buffet Blames Credit Crisis on Banks
Whose fault is all this blood and gore in the financial markets? According to Warren Buffett, mortgage lenders are to blame. They made risky investments and got a little too greedy with the money they could make off of subprime borrowers. Reuters reports on remarks made by Warren Buffett:
Blame for the sub-prime crisis lies at the feet of banks who took too many risks in mortgage lending, U.S. billionaire investor Warren Buffett told newspaper El Pais in an interview published on Sunday.
“The banks exposed themselves too much, they took on too much risk …. It’s their fault. There’s no need to blame anyone else,” he said.
Warren Buffett does have a point. Mortgage lenders began looking for ways to get just about anyone into a home. They pushed home mortgage loan options that were beyond the means of some using such devices as interest only loans, ARMs with ridiculously low teaser rates and other offerings. Some mortgage lenders were less than forthcoming about the loan terms, and what repayment would entail.
But what about personal responsibility? Some would say that no matter how much prevaricating mortgage lenders do, it is up to the consumer to research the home mortgage loan and its terms. To a certain extent, this is true. And some borrowers — who knew they couldn’t really afford a McMansion but got the loan “creatively” — are certainly to blame. However, not everyone who got a subprime mortgage falls into this category. Some were genuinely tricked into their home mortgage loan options. Not everyone has the means or the resources, or the knowledge, to cut through all of the double talk that some mortgage lenders employ.
In any case, what with losses mounting, Buffett may be right when he says that we may end up with a recession that is deeper and longer than many are willing to admit.
Tags: credit crisis, Warren Buffett, home mortgage loan, mortgage lenders,
mortgage loan blog, credit crisis banks, ARMs
