Treasury Secretary to Subprime Mortgage Victims: "I did not create this problem."

We attended today's Senate Banking Committee hearing on the State of the U.S. Economy and were surprised to hear the Secretary of the Treasury of the United States say, in response to a question from Senator Robert P. Casey (D-PA),

"I did not create this problem..."

Not only is this poor customer service (imagine a General telling you "I did not start this war," or your doctor telling you "I did not create the health issue you are having..." or a Chef telling you "I did not grow this corn...") but some will tell you that the statement itself may, in fact, be false. Several market analysts feel that Mr. Paulson may have, at some level, helped create the problem. They point out that the firm he once ran, Goldman Sachs, made millions by facilitating the creation and distribution of subprime-backed investments. We would point out that Goldman has not been implicated in the most egregious subprime mortgage market practices.

Still, the statement is especially troubling coming from the Administration's top economic policy official. Some will believe this statement reflective of the prevailing attitude within the Administration: those who are in trouble are, somehow, at fault for falling prey to sophisticated, well designed, well executed, misleading and fraudulent financial market practices.

As we noted on November 9th, 2007, most of the people losing their homes are low to moderate income people of color. Those with new ideas and solutions to the problem were carefully excluded from providing suggestions to help with the problem, due to the same bigotry that gave rise to it.

What some will see as even more troubling is the fundamental lack of understanding of the seriousness of the problem. We did not hear, from any of the witnesses (Federal Reserve Board Chairman Bernanke, Treasury Secretary Paulson and Securities and Exchange Commission Chairman Cox), any statement that would lead anyone to believe they know:

1. How many subprime mortgage loans there are currently;
   
2. The terms of the average subprime mortgage loan (interest rate, maturity, points paid to originator, who originated the loan, who owns the loan...and how it got to its current owner..), and;
   
3. How many subprime mortgage loans might default over the next month, year, five years, etc.
4. Who got paid? What were the total fees paid by subprime borrowers? Who got these fees?
5. Who, and I mean who EXACTLY, owns these subprime mortgages now?
6. How did they come to own them? By what mechanism?
   

..in other words, a complete and stunning lack of relevant information that policymakers need to effectively address the problem.

Now we are worried....