Monday, February 25, 2008

Deserving What You Get

There's been quite a bit of conversation back and forth about the mortgage crisis. I've been watching it, with many thoughts jumbled in my head, as well as some worry about my own situation.

As usual in a crisis, everybody has to point a finger. Somebody needs to be blamed. It's all George Bush's fault. Or Allen Greenspan. Or the lenders themselves. I agree with all three of those, but I still think that blame wastes time. I remember this blame habit when I was hiding out (unsuccessfully) in corporate America. When something went wrong, the very first thing people did was make sure that their own ass was covered and the second thing they did was to start looking for a scapegoat. There always had to be a sacrifice. Somebody ended up with their head (or balls) on the chopping block, waiting for the blade to descend.

Meanwhile, nobody spent much time thinking about how to redesign things so that the problem didn't happen again. Shit happens. And it's not always somebody's fault. When the CAE/CAD/CAM industry took a nose dive in the late 80s because of the advent of cheap, desk-top computers, everybody spent a lot of time trying to find a culprit, when the culprit was simply innovation. Somebody figured out how to make a desk top computer, for a great price, that had the speed of a mainframe. So...companies no longer had to pay $25,000 for an engineering workstation, plus another $50,000 for a printed circuit design software package. But, as I watched the industry begin to crumble, everybody started blaming the sales guys for not selling enough.

Meanwhile, the guy that owned the company where I was employed, saw the future, and started manufacturing his own low-cost engineering workstations. I didn't like the guy. But he was smart. And he's still in business.

But...back to the mortgage crisis. I bought a condo in 2001. I didn't have a downpayment. So I rolled it into my mortgage. A few years later, I think in 2003, I wanted to get out of credit card debt once and for all. So, I got a new mortgage, and rolled my debt into it. It was a great decision, because five years later, the market surged, the value of my equity surged with it, and I have nooooo credit card debt. I saved a fortune in rapacious credit card interest by doing this.

At the time I took out my first mortgage in 2001, I was considered high risk. But Countrywide gave me the loan. In less than a month, they sold my loan to some fly-by-night flea-bag mortgage company, and I hated Countrywide forever and ever for that. Then, when I refinanced, I went through my bank. Like many other people, I was enticed by the lower payments of an ARM, even if they carried the risk of fluctuating interest rates. There was a 2% annual cap, and a 12% cap over the entirety of the loan. So, I figured I was safe. So far, I am.

At the time, one of my friends said I should do an interest-only loan. That kind of thing was available. Something in my bones said...nah. I'm sooooo glad I didn't go in that direction.

In America, home ownership means something. It carries a certain amount of prestige. It means you made it. It means you're reliable, trustworthy, stable. You can be none of these things, but you look like you are, through home ownership. Yes, I had the gut feeling, backed up with no facts, that an interest-only loan could bury me in the future.

Maybe I could brag and say that I'm smart. And all those people that signed up for those easy loans, because the lender assured them that they qualified, are stupid hillbilly bastards. But this isn't necessarily true. In a country where home ownership is part of the "American dream," and where authority figures (i.e. bankers and other lenders) are God, I don't think you can call all of these unfortunate people stupid. They took the advice of their "betters." And now they're bankrupt, or trying to negotiate repayment (in the UK it's called an IVA), or they're out on the street.

It's the right-wing elite that look down upon all those risky mortgagees and sneer and say, "Buyer beware! If you were stupid enough to take out a risky loan, then you deserve what you get!"

And it's the right-wing elite that profited hugely from the bubble created by their banking and lender pals. If they got out before the bubble burst, they're still sitting pretty. If they were greedy and stayed in there to try and milk it to the end, then...they deserve what they get.


Hungry Mother said...

I saw greed in all parties' hearts leading up to the bust. Everybody was gambling and they all lost. I don't feel good about it, but the blame goes all around.