John Stumpf: who's responsible for subprime

On the Record: John Stumpf, president and CEO, Wells Fargo & Co.

Excerpt:

Q: Who is responsible for the crazy loans made in the last five to 10 years?

A: There's a shared responsibility here. The Federal Reserve reduced rates to 40- and 50-year lows. Real estate became a very hot asset class. People started buying homes.

Because of such low rates, new people came into the marketplace. People bid up prices and everybody wanted to be in the game.

Certain mortgage lenders - especially those that were not regulated - helped fill the investor market for mortgage paper. And people who purchased homes in 2001 and 2002 and then sold them in 2005 or 2006 made a lot of money, which fueled this whole thing.

Q: Is there a lender responsibility to set a fair marketplace so that people don't get in over their heads?

A: I totally agree. We've been responsible and we didn't do certain things. We could've made a bunch of money doing those things. We put people in products they could afford. All of our loans were underwritten to a fully indexed rate. We have full income verification and full appraisals.

We couldn't understand negative-amortization loans. You owe more than the mortgage you started with. It didn't make any sense for us to do stated-income and stated-asset loans for subprime customers.

Comment: Has Minnesotan common sense! "Stumpf, the second of 11 children who grew up on a Minnesota farm, raised chickens and milked cows as a youngster. "