3 yrs later: I finally understand the housing crisis

The “Return to the Giant Pool of Money” radio show from This American Life was really interesting and insightful. I am a little embarrassed to have to admit that I never really understood the “housing crisis” completely. I knew big banks and greedy investors were at fault and that they were giving people bad loans, but I had no idea how complex the whole system had gotten and how many players were actually involved. This radio show definitely cleared a lot of things up for me!

Two things that really suck out to me (that I didn’t know before):

1. The Wall Street people were looking at BAD DATA. No wonder this practice of giving NINAs, creating CDOs, etc., went on for so long. The data was telling them it was a good idea. This was a triumph of data over common sense. 
2. No one was looking at the big picture and thinking about the long term effects to the economy. There were lots of players in the game, from mortgage brokers, to banks, to investors and no one took responsibility, because everyone thought it was not their problem. 
3. These players were earning A LOT of money to make this system work. A ridiculous amount of money on commissions. These high commissions and high ROIs definitely propelled the problem and encouraged the loosening of the rules.

The show included the story of two people who started at the complete opposite ends of the spectrum and ended up in similar situations: Richard Campbell, the Marine facing foreclosure, and Glen Pizzolorusso, the sales manager making a lot of money selling bad loans/mortgages (and ending up losing everything).

I liked how they started with Glen and his lifestyle before the housing crisis and then transitioned to Richard and the beginning of the crisis and finally, back to Glen and the outcome of the crisis. Through interjecting these personal stories throughout the show in between the technical talk, it was really easy to understand how the mix of personal behavior, bad banking products, and loss of oversight lead to such a severe economic downturn.

I realize now that from the outside it’s very easy to point fingers and blame all the people who made lots of money from taking advantage of low-income individuals and families. But, really, we need to look at the whole financial system and the governmental laws put in place to support these risky actions if we really want to change things.

Go ahead, listen to it! "Return to the Giant Pool of Money"