Still don’t understand the financial crisis of 2008? Haven’t had time to see The Big Short? Then you could do worse than to watch this new Quicken Loans advertisement that aired last night during the Super Bowl.
Sure, the goal of the ad isn’t to explain why the housing market collapsed beneath the weight of millions of defaulted sub-prime mortgage loans—-the cheap, easy loans that banks made to people who could in no way actually afford to take on that kind of debt. Nor does it directly touch on how big investment banks packaged these bad mortgages together and re-sold them and re-sold them again as "secure" investments called collateralized debt obligations.
What the commercial does do is unintentionally and unironically explains these things by showing exactly how history might repeat itself. Because if history repeats itself, Quicken Loans will make a lot of money while we all deal with the consequences.
Quicken Loans was advertising a new service called Rocket Mortgages that asks: "What if we could do for mortgages what the Internet did for buying music and plane tickets and shoes?" It claims users of the service could get a mortgage on their phone. "If anything could be so easy, wouldn’t more people buy homes?" the friendly narrator inquires.
Let’s get real. Getting a mortgage and buying a home is not supposed to be as easy as an impulse purchase of a pair of heels. And if anything at all should be done from the bigger screen of a desktop where you can read the fine print (or in person, at a bank, even), buying a home is probably it.
The larger, seemingly patriotic premise of the commercial that more home buyers will magically boost the economy, creating "tidal wave of home ownership" flooding the country with "new home owners who must now own other things." These new homeowners will buy lots of well-designed lamps and locally hand-crafted furniture pieces (no IKEA here) from businesses that give jobs to others who can now afford to buy homes too! (There’s an odd assumption here that renters don’t need to own lamps and couches and whatnot.) Altruism as over-consumerism is what America is all about, the commercial implies.
But what happens when people can't pay for those easy mortgages they got on a whim on their phone? They default, banks crash, people lose their jobs and their savings. In 2008 alone, 2.6 million jobs disappeared, making it the worst jobs year since 1945. At that point, very few people were buying any more hand-crafted furniture. Hopefully, the handcrafted-furniture makers had prudently saved their windfall. We know, though, that they did not, because everyone though the good times were going on forever.
Sure, the technology of getting a mortgage should be brought up to date. But selling such a service as the path to anyone quickly and magically owning a home with the snap of a finger—and that quick and easy mortgages will have only positive effects on the economy when we have very recent evidence that precisely contradicts that argument—is specious at best, gratuitously irresponsible at worse.