The financial crisis is my fault

The financial crisis is all my fault!

It’s all my fault!

The financial crisis that has triggered a global financial tsunami is my fault. While I’m not prepared to own responsibility for fixing the problem, I am prepared to do the next best thing--feel guilty.

To understand my guilt, I have to go back to the fall of 2006 when times were relatively good. I had just finished reading the book The World is Flat and was weighing three separate job offers. The book spent a lot of ink on outsourcing and I found the industry intriguing. While I was aware that outsourcing created anger in some, I know that protectionism is a poor alternative and I ultimately took the job with an outsourcing firm with call centers in the US, Europe and India.

As a new employee my initial goal was modest: learn the business. My boss had dozens of businesses to choose from, but felt that his pet-project was the right place to start. Our company ran a service for Mortgage Brokers where we generated “sales leads” for the brokers and connected them to people who wanted to refinance. For about $75 a lead we would transfer “warm” leads directly to our broker customers (We actually charged more for a sub-prime lead than we did for someone with good credit). My job was to build demand for the service.

I immersed myself in the mortgage industry and very quickly discovered that I needed to refinance my own mortgage. Within two months of taking the job I had a new mortgage, while I took no equity out of our home, I was able to shift from a variable to a fixed rate and dramatically reduced my monthly payment at the same time.

I started to feel great about the service we offered. I calculated, there must be millions of people just like me that were too busy to pay close attention the mortgage market and didn’t realize that they could save money by refinancing.

My efforts to generate demand worked pretty well. For example, a Google search for “mortgage leads” when I first started delivered our website on Google’s third page, but after a few months our ranking rose to the first page and our success at generating interest scaled with our Google position.

After six months I made a trip to India to meet the team. It was then that I learned in much more detail exactly how a sales lead was created. There were virtually no people like me. Instead here’s how the average call went:

INDIA: Hi, I’m calling about your Bank of America mortgage.

USA: Oh, is there a problem?

INDIA: No, not at all, but I thought you might need some extra money. I’m sure by now you’ve built up some equity in your beautiful home.

USA: I don’t know.

INDIA: I’m sure you and your family deserve a vacation or a new car.

USA: Well, yes….

INDIA: Well let me ask you a few questions to see if I can help you.

USA: OK.

INDIA: What is the highest amount you would guess your house is worth?

USA: Well, I’m not really sure, but I heard there was a house that sold for over $200,000 down the street.

INDIA: Wow, that’s quite impressive. I’ll put down $200,000. And how much do you owe on your mortgage?

USA: Well I owe about $140,000 on my mortgage, but I don’t think there is anything I can do because I just refinanced one year ago and my credit isn’t great.

INDIA: Your credit doesn’t have to be great as long as it is fair. Is it fair?

USA: I guess so.

INDIA: Excellent. Well based on my calculations you would qualify for $20,000. Would you like to speak to someone who can get you a check for $20,000?

And so it went. I was concerned with much of what I heard. I had to balance my personal concern that these people couldn’t afford to refinance, with my professional concerns that this was a profitable business. I fought for a number of subtle changes that all dealt with the script the agents read and the level of aggressiveness we employed, but most of my changes were met with resistance from a team that was paid based on the number of “good” sales leads it generated every day.

After returning in March of 2007 there were other issues bubbling up. Interest rates were rising and property values were plateauing. Our operations team found it harder and harder to deliver enough leads to satisfy the demand that I was creating. As they pushed harder and harder to meet the demand, they delivered lower and lower quality leads. After paying $75 for a bad lead, few of my newly generated customers were returning.

Later that month I attended a large national conference for mortgage brokers and the chief economist for the mortgage industry delivered the keynote speech. He took great care to reassure the conference that all economic models suggested the slow down would be short-lived. He predicted a bottoming in July and growth again before December 2007. Needless to say, like all professional economists, he was wrong.

In May we shut this business down altogether and exited the mortgage business altogether and I moved on to much more exciting parts of the company.

While my contribution hyping sub-prime loans to low income families struggling to make ends meet, was limited to just eight months, my role in toppling the global economy like a house of cards most certainly weighs heavy.

For what it’s worth, I’ve since decided that I’ll only use my marketing super powers for good.

October 12, 2008