Every time I read about the housing “crisis” there is always the use of the word “greed” worked into the story, often times more than once. It’s a word with a lot of emotional appeal. That’s why certain politicians and media like to use it so much. What “greed” means, according to the Webster’s Deluxe Unabridged Dictionary, is a “desire for more than one needs or deserves.” The dictionary doesn’t specify who gets to determine need or deserts. So, what “greed” seems to mean as a practical matter is “anyone who already has more than I do (or when politicians use it, more than you do), and wants more. The upshot is, “greed” means a lot of different things, depending on who’s talking.

The “greed” of the lending institutions which have caused the problems in the sub-prime housing market was manifested in “predatory lending practices.” That phrase is also nebulous and emotion packed, and I’ve been wondering since I first read it exactly what it means. So, I set out to find some specific examples of those practices. Despite the glut of stories that allude to those practices, specific examples, I discovered, are hard to find.

After some research, I did find a story describing a borrower who was preyed upon.  It was about a woman in California who had an existing mortgage. Her income was $1,600 a month. She was contacted by a lender and offered a refinancing package that would lower her monthly payments and provide cash for “needed repairs.” According to the anecdote, she welcomed the prospect of reduced payments because the existing mortgage was far more than she could afford. Unfortunately, when she applied for the loan, the potential lender told her she needed to show a greater income to be able to qualify. She was asked to send a letter that said her income was $3,000 per month. She knew her income was not $3,000 per month. But guess what. She wrote the letter. She lied to get the money. The writer of the story blamed the lender for its greed, and deceptive, abusive practices.

I think it’s important to note here that the borrower surely had options other than lying. She could have applied to another lender. She could have asked for an exception. She could have sold her house and bought one with a lower mortgage payment. She could have done a lot of things. She could have been honest.

My point is that nowhere in all my research did I find a single instance in which the lender held a gun to any borrower’s head and demanded that they sign the loan papers. The people who signed up for sub-prime mortgages saw it as a way to get something they knew – or at least strongly suspected – they couldn’t afford. But they wanted it anyway and they signed the papers. They did it to themselves.

Lending institutions may rely on the tendency of borrowers to want more and being willing to risk, foolishly or not, losing it if they can’t make the payments. That may be why they make those loans available. That and a little governmental coercion thrown in for good measure. But it’s no more predatory for lending institutions to invite people to borrow money they probably can’t pay back than it is for the State of Washington, or any other state, to continually exhort people to throw away their money on Lotto tickets they probably can’t afford, (often the same people who sign up for sub-prime loans) with a near zero chance they’ll ever get anything in return.

You buy a Lotto ticket, you take a gamble. You sign a high-interest loan, with low income, same deal. Only the economics lesson you get if you lose the loan gamble is much more pointed and memorable. From the looks of things, it’s a lesson more people, including some senators and congressmen,  need to learn.