Was the financial crisis caused by “systemic failure” or mortgage fraud? Or a combination of the two? And why are so many American homeowners still paying the price?

When Travis Paules worked as a branch manager for American General Finance in Pennsylvania in the late 1990s, he tried to do things by the book. He didn’t cut corners, he recalls, because his bosses at the finance company made it clear that it didn’t want him to cut corners, and that he should balance the need for loan production with the need to make sure his front-line staffers weren’t sticking borrowers into deals they couldn’t afford. Back then he liked to say: “My personal morals aren’t good, but I have good business morals.”

Things changed for Paules in 1998.

Ameriquest Mortgage, one of the nation’s most aggressive home-loan shops, lured him away from American General. At Ameriquest, Paules recalls, he found an employer that encouraged – and rewarded – his unscrupulous instincts. Paules pushed his underlings to do whatever it took to book loans, and they responded by employing a variety of tricks, such as inflating borrowers’ incomes on official documents. In some instances, he says, he even allowed his workers to alter the dollar figures on elderly borrowers’ Social Security award letters.

“You’re a creature of your environment,” Paules told me. “You don’t have to be. But most people fall into that trap.”

I thought about Paules recently after I read an article in The New York Times by Chrystia Freeland, a global editor-at-large for Reuters. Freeland praised the work of investigative reporters who had exposed wrongdoing in the financial sector, but added that “the bigger, more complicated truth about the financial crisis is that it wasn’t caused by evil businessmen. The overarching story is one of systemic failure, not individual wrongdoing. It wasn’t the Bernie Madoffs who plunged the world into recession. It was low capital requirements, weak limits on leverage, over-the-counter traded derivatives, soft rules on mortgage lending and global financial imbalances.”

Freeland is correct that all these factors contributed, in a big way, to the making of the crisis. But her argument has some holes in it.

First, it doesn’t acknowledge that real people were behind the systemic failures. The financial crisis wasn’t an act of nature; it was a man-made disaster. Corporate executives lobbied hard to get regulators to weaken oversight of banking and lending, pushing for the “soft rules” that helped create the home-loan mess.

Second, it minimizes the role that deception and corruption played in the debacle. As the housing market heated up, and the hunger for mortgage-backed investments grew, Travis Paules and other mortgage professionals cut corners and crossed lines. Appraisers falsified property reports. Mortgage brokers and loan officers forged borrowers’ signatures on key paperwork and faked tax documents to qualify homeowners’ for loans that they couldn’t afford. Lenders and Wall Street banks misled investors about the quality of the loans and the quality of the securities that were backed by those loans.

Read more: Mortgage Fraud: The Untold Story of the Housing Meltdown

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