BR bloggers, you know who you are. You live in economically-distressed, forlorn areas such as Great Falls, McLean or the Countryside subdivision of Henrico County. Your brains are secretly hard-wired to the platform committee of the Republican Party. You project tolerance, but well, not exactly so.
In your collective opinion, the housing crisis has been brought on by Freddie and Fannie lowering standards and giving money away to undeserving, dark-skinned Latinos or African-Americans or under-class whites. They have no right to aspire to a better way of life and a bigger house in a classier neighborhood. Who do they think they are? You?
So it is indeed revealing that today's Wall Street Journal has an intriguing book review. The author is Edmund Andrews, an economics reporter for The New York Times, who reveals all in "Busted," how he fell for another woman and got divorced, how much alimony and child support he had to pay out, how he lied to get that huge house and how it all fell apart. Somehow, his experience rings very, very true.
Like myself, Andrews is a member of the liberal news media. He was pulling down about $130,000 clams a year, not exactly BR bucks, but enough. Then, at age 50, he went through a midlife crisis.
He rediscovered a high school flame who was "brainy, regal, sexy, fiery and eclectic." The affair cost him his marriage and big payouts of alimony and child support. Still, the new wife and he had to live well. So, he bought a $460,000 house.
Problem was, the net from his $130,000, given all the messy alimony and support, meant that in real life, there was no way he could qualify for a mortgage that big. But his mortgage broker said that he could use a "liars" mortgage application in which he didn't have to list all of those painful liabilities. He didn't have to pay principal for five years and given the skyrocketing market, he could simply refinance if things didn't work out.
Well, guess what happened? Things didn't work out. Andrews started to miss the big payments. Pretty soon, he was in deep doo-doo. As for the trophy, No. 2, wife, she skeedaddled, and filed for bankruptcy (the reviewer notes that Andrews left this detail out).
The lesson learned? "This crisis would not have been possible without breathtaking cynicism on the part of the brainiest people and the biggest institutions in American finance." Everyone let themselves believe what they wanted, bottom line be damned.
It also goes to show what can happen when mid-life crisis get out of hand. Andrews had to have the big house. Some people want Corvettes. Personally, I wanted, and got, a 20-year-old center-console fishing boat which I was lucky enough to sell at a good price after I realize that no one else in my family was interested in going out in it and the damned thing was eating up about $1,000 each season in repairs.
Andrews points to a higher truth. If you want to understand the kind of greed that caused the financial crisis and the worst recession since the 1930s, don't blame dark-skinned, poor people. Look in the mirror. Fellow BR bloggers, I am not going to name any names. But you know who you are.
Peter Galuszka
31 comments:
I don't know where you came up with that idea. I think most of us agree this crisis was made possible by people biting off more than they could ever afford to chew.
I usually like your posts but on this one You played right into the liberal sterotype of trying to play the race and class victim card though so congratulations. Quit the racial and class warfare b.s.
NMM
NMM
I can think of numerous instances where BR bloggers believe the No. 1 cause for the financial crisis was the policy of Fannie Mae and Freddioe Mac, responding to calls from Congress and the White House, to ease standards and make housing more affordable. This was a factor, but hardly the primary one.
As for me playing into the "liberal" stereotype, you aint' seen nothin' yet.
Peter Galuszka
Only a thousnad in repairs, and no one elese wanted to go?
Sounds cheap for peace and solitude. And at $5.00 a pund you only need 200 lbs of fish to break even on repairs.
Could be worse, could be a tractor....
"A bad day fishing..... "
RH
Ont the housing problem there was plenty of blame to go around.
If I had to pick a root cause, I would blame the ratings agencies: without good ratings for the bonds and other investments, none of this could have happened.
RH
McLean has been voting primarily Democrat for years. Great Falls is still a Republican area, but is becoming less so. The Delegate, state Senator, county Supervisor, and school board member from that area are all Democrats.
re: "crisis = biting off more than one can chew"
well.. maybe...
how come we didn't have this problem before.. and all the time?
if we accept the premise that this mess "just happened" and we really don't think anything went wrong..then I fear we are in big trouble.
I think Peter gave an example... albeit with a tad bit more info and editorial slant than acceptable to everyone but then he gets to share his opinion...
I still do not think that anyone in business ...any business... but especially so in the business of loaning money. is going to give someone without an employment history or verifiable income or assets and a less than stellar credit record - $400,000.
and they did not... because as soon as they closed the loan someone further up on the food chain bought that mortgage for 400k and the originator got all their money back and a hefty fee for the transaction.
No one will convince me that the Government "forced" these guys to do this.
Nope.
further up the food Chain.. Fannie and Freddie would put the full faith and credit behind these loans when they were bundled into securitized "investment-grade" products .. very conveniently rated AAA by Standard and Poors and others.
Again.. I'm trying to see where in this process that the Government said "thou shalt give mortgages to people who cannot repay them and whose credit histories and verifiable income and assets would warn you up front that they would likely default.
Now this whole mess has turned into a culture war between those who say the Government caused this to happen and those who say that the private sector caused it.
my vote - not the govt... they just enabled it...
Larry Gross,
When you say I gave a "tad bit more info" are you referring to the column or the accompanying art? The column is nothing more than a note of a book review. Completely innocent, with some good natured ribbing of fellow bloggers thrown in.
Peter Galuszka
There you go again, Peter, looking for racists under the bed and in the closet. Ordinarily, I would have to chastise you, but I like your "trophy wife" photo so much that I'll just have to forgive you this one time.
Maybe you can forgive him Bacon, but I want to know where he got that picture of my wife.
So your point is that readers of this blog are to blame for the financial crisis? Maybe I missed the point, but if not, I would be very interested to learn about your source or sources for this conclusion.
John Kalitka,
Common deceny prevents me from naming any BR bloggers complicit in this. But, as I say, they know who they are.
Peter Galuszka
re: tad bit more info = racy pictures
editorial slant = a slight whiff of "free market folks loved the 'everyone gets a home and everyone benefits mentality" until something bad selling hit the fan.....
Lest there be any debate as to my thinking - here are my top 3 culprits for the financial meltdown:
1. The Fed
2. The Fed
3. The Fed
After that, I'd hit the rating agencies, loan originators and applicants who lied on their applications (in that order). The Community Reinvestment Act didn't help but it wasn't a top tier cause of the problem.
Blaming Fannie Mae and Freddie MAc for the crisis is like blaming gravity for a plane crash. Technically there is some truth to the idea but it misses the bigger point.
When the government, acting though its proxy - the federal reserve (I refuse to use capitals as a measure of my distaste for that organization), artifically holds down the price of a good (in this case capital) it simultaneously also artifically increases the demand for that good. Our economic system is built to take advantage of imbalances in supply and demand until balance is again reached. The fed broke that system with its myopic artificially low interest rates. From that, all other problems flow.
So, Peter, if you want to mark me as a rabid Republican - you'll have to aim at my intellectual nausea at the American central banking system, the New Deal and the propensity of all recent presidents and congresses to solve our problems by printing money (with the possible exception of Bill Clinton - I am still thinking about that).
The original CRA was written in 1977. It has been changed again and again by Congress. The biggest isssue that I have with the CRA is that it opened a door for unsound lending practices by banks under the guise of compliance with the act. Meanwhile, Fannie and Freddie were conjuring up mortgage securitization products to let the banks sell off their bad loans instead of keeping them on their own balance sheets. And rating agencies all went along for the ride - getting paid by the very companies they rated.
However, none of this happens if the fed isn't manipulating interest rates to an artifically low level.
Jim Rogers was one of the few investors who actually predicted the crisis before it happened. When asked what he would do if appointed fed chairman he replied, "I'd abolish the fed and then I'd resign.".
As an aside, in my opnion, your picture of a half naked woman is both sexist and inappropriate for a political blog. I thought objectifying women was contrary to liberal dogma. I guess not.
As a further aside, too bad you sold the fishing boat. Maybe you would have had some fishing photos to post on the blog instead of the half naked woman. Also, the dolphin are running hot out of Nags Head right now. There are even some late season tuna and the odd mako thrown in. It's a good time to be fishing.
Right on -- on all counts.
The Feds holding interest rates down to stimulate "groth" left millions with no where to Invest.
They had to gamble in the stock market, in hedge funds and in land / building speculation.
Agree on the photo too.
Bad taste.
Someone can say 'common decency' prevents saying who he is talking about but then posts a picture like that without the journalistic requirement of source?
Oh yes, Fanny and Freddy have a little more blame -- no locational criteria for loans they bought up.
Dr. Risse talks about this all the time.
re: "When the government, acting though its proxy - the federal reserve (I refuse to use capitals as a measure of my distaste for that organization), artifically holds down the price of a good (in this case capital) it simultaneously also artifically increases the demand for that good. Our economic system is built to take advantage of imbalances in supply and demand until balance is again reached. The fed broke that system with its myopic artificially low interest rates. From that, all other problems flow."
and...
"The Feds holding interest rates down to stimulate "groth" left millions with no where to Invest.
They had to gamble in the stock market, in hedge funds and in land / building speculation."
I'd listen to a few more words from you guys on this.. if you were so inclined.
what policy enacted/practiced by the Feds... DIFFERENT from prior behaviors ... was responsible ?
just FYI - most ordinary work-a-day folks just dumped their money into mutual-fund type plans ...expecting the fund manager to maximize the returns on it.
how did that ... become a cause or an effect?
60 minutes had a repeat on Sunday outlining how some city in Scandinavia was BORROWING money to BUY Collateralized Debt Securities on the premise that they could make money on that transaction.
but explain further.. if ya'll don't mind so some of us unsophisticated types can learn.
EMR also tends to agree with Groveton on most points and with the Anon on the item you quoted.
Mutual Funds are gambling too.
What sane folks wanted were CDs with reasonable returns.
The low interst rates forced EVERYONE into gambling venues.
The cheap, easy money for dwellings (Fannie and Freddie) fueled the false impression that buying a bigger house (in the wrong location because that is where they could be built at the lowest per square foot cost) as a good "investment."
It was not.
At a different level all the cheap money caused Households and Enterprises to gamble and Enterprises to come up with shaky investment 'vehicles' to rake in the money that citizens wanted to 'invest.'
The item that Groveton does not note is that in addition to cheap money via the fed (no capital either) humans were burning up Natural Capital and converting it to cash they wanted to invest and at the same time borrowing from the Chinese.
Sad affair.
EMR
Well, gee,
I guess I'll go back to running pictures of coal-fired electrical generation plants. I assume they are politically acceptable?
Peter Galuszka
I vote for the racy pictures myself.
the rest of you curmudgeons need to loosen up.
I think the criticisms about the photo are, to some extent, valid. But, on the other hand, I think that the photo makes Peter's point in a way that his words alone would not. Bottom line, I give Peter benefit of the doubt. The photo strengthens his argument.
TMT
Larry, TMT,
Thanks for saving me from the Mullahs. A few points. She's not "Half" naked. She is mostly clothed. And why the hell can't we have more of a sense of humor here?
PG
"What sane folks wanted were CDs with reasonable returns."
Where do you suppose the money from CD's was invested?
For the past thirty years my return form mutual funds has ALWAYS, even today, exceeded what I could get from a CD.
Not that CD's don't have their place, but then, so do unsecured loans.
RH
"They had to gamble in the stock market, in hedge funds and in land / building speculation."
How do you make money without gambling? I put a few thousand dollars in seed on the ground this year. You think that isn't a gamble? Especially since I had to take the money out of one of my mutual funds.
I'm gambling twice, once that I make money on the seed and then that I make MORE money than the mutual fund would have.
RH
I will relent on the photo if one female reader of Bacon's Rebellion will post a comment saying she likes the picture.
As far as having a sense of humor - that picture is funny? Erotic? Yes. Seductive? Sure. But funny?
As far as the photograph itself I managed to avert my gaze from the young lady's "assets" and examined the surroundings. This is pure Gooze. There's a psychedelic picture of a heart on the wall and a lime green chair next to the dear girl. Can Austin Powers be far behind (pun intended)? There is also either a bunch of incense sticks or a quiver of arrows on the table behind her. Either way, it's an interesting room.
"Where do you suppose the money from CD's was invested?"
geeze... here I was hoping to hear why CDs pay lower interest rates when the bank is able to take that money and roll it into any investment that they want (or am I wrong and they cannot)?
re: women approving of the girlie photo...
no no no...
Peter needs to post a Chippendale Photo for the womenfolks and THEN ask for support.
I thought what Peter did with that photo - is he made a point - I agree with TMT.
the rest of ya'll can and should "avert" your eyes but that does not strengthen YOUR arguments...
ha ha ha.
I love the photo. It's funny and makes a good point, which is actually more about men than women. However, the 'womenfolks' reference is completely out of line.
my apologies to the womenfolk.
It just shows when you allow the religious facists right wing to control America (for the last 8 years) along with greedy corporate American counterparts, you sew what you reap!
Was Dick Chaney around just to make Bush look good?
Living the American dream! Nothing like Credit Card companies offering the homeless credit cards with limits no poverty stricken soul could pay, and when the first payment is missed, the percentage rate goes up 100%!
Isn't Reagan and Bush nothing but a front and liberal tactics for allowing Corporate America's take over? Blame it on the minorities while the rich get richer, and the greedy come up with greedier ways to scam the American general public.
Who voted Republican, you BR readers?
Postscript: This was one of the best blogs ever! Loved it!
"Just because you don't doesn't mean I can't!" The Rev and Friends.
The Gooze Rules! Not sure about FD...
Regarding the "girlie photo" I agree with "girls love a good joke said", 5/28 @ 5:47 - "...which is actually more about men than women..."
Men always think visually and with their little head first. Also very typical of a man to drop all for "pot of gold at the end of the rainbow" or in this case "the trophy wife".
And isn't that typical of Americans to be visual (the bigger house, the fancier car, the better vacation)? Women and men! It's all relative.
Earn before you yearn. It's a hard lesson for all.
True Story: A Republican Couple. White, two income family, no children, $175K income between the two.
Do they invest? Absolutely, if you count their respective 401Ks.
Do they own a respectable home investment to help defer taxes? Surely. A first @ $500K and a 2nd @ $50K - between the two $4K monthly.
Hobbies? Boating, motorcycling, drinking & gambling after a long 60 hour work week each. Who doesn't want to blow off a little steam after all the high stress decision making responsibilities of these white collar jobs?
Current status? One paycheck away from disaster. $100K in cc debt, a first and a second, a pool, a hot tub, a decadent floral yard to match their imaculately kept house.
But hardly food and drink anymore to enjoy their luxurious surroundings as they are living all within the approved mortgage and lending guidelines.
Their credit score is a solid 750 with all loans & credit cards maxed. Who needs a credit limit of $25K?
You do! Isn't that the point? Isn't that what THEY WANT?
Who's in control? It's not you, hippie freak, it's the establishment!
"geeze... here I was hoping to hear why CDs pay lower interest rates when the bank is able to take that money and roll it into any investment that they want (or am I wrong and they cannot)?"
They can, and so could you if you did not "choose" the CD. But if th ebank does it for you then they take the risk instead of you.
You get a guaranteed return, and a lower rate. The bank gets a profit, maybe.
RH
Post a Comment