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Financial products sold to the unsophisticated

By Cathy Moran

Quick:  how is a small Tennessee town like a California family facing foreclosure?  The New York Times suggests it’s because they were both sold risky financial products to meet their borrowing needs.  The unemployment-wracked town of 11,000 was not told about the interest rate risk in the bond derivatives that financial advisors promoted and sold the town.  The interest payments on the town’s bond debt have quadrupled.

That’s essentially the same story I hear from clients with adjustable rate, pick a payment loans on their homes.  The financial professionals advising them talked only about the immediate consequences of the loan, and downplayed the risks.  Over and over, clients tell me that when they questioned the broker about how they were going to make the full principal and interest payment, they were assured the broker would get them a better loan before any damage was done.

Why is it that politicians opposing mortgage modification in bankruptcy want to demonize the unsophisticated borrower without regard to the supposed professionals who sold and profited from these exotic financial products?  Are we going to hear that the city council of Lewisburg, Tennesee bought more sewers for the town than they could afford?

When are we going to put our energies into a solution to the foreclosure crisis, rather than finding a scapegoat?

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About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

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About The Soapbox

You've arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said "try").

Here, I allow myself to tell stories and express strong opinions on how I think law should work for the consumer and small businesses when it comes to debt.

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Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

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