Today in the New York Times Edmund L. Andrews explains how, despite his training and experience as an economic reporter, he fell disastrously into debt — and also, perhaps inadvertently, how this great country of ours really works.
His reasons: he was in love (“Patty was brainy, regal, sexy, fiery and eclectic”), and wanted to give his inamorata and himself a $460,000 Silver Springs, Maryland home to consecrate the bond. Andrews was still paying child support to a previous love of his life, which put a bite in his $81K take-home pay*. But it was the mid-oughties, when everything was groovy, and his broker at American Home Mortgage (“I am here to enable dreams”) was willing to do business at a reasonable, if unfixed, rate, telling him not to worry about the large payments, because “the value of your house will be higher in five years.” (In the movie version, this will be the equivalent of a montage of jazz-age flappers driving jalopies with their feet while drinking bathtub gin.)
To make the complex plan work, Andrews had to cash out his Times stock — so, you see, there is a silver lining.
But while house-rich, the couple became cash-poor, which caused problems: Patty “refused to scrimp on top-quality produce, Starbucks coffee, bottled juices, fresh cheeses and clothing for the children and for me,” though Andrews was running out of money before paydays. He began using his overdraft protection and accumulating outrageous fees (“$5 overdrawn because of school supplies for Patty’s daughter Emily — $100 from the MasterCard”). He tried rotating his credit cards to get a better rate but, like many who have done that, wound up deeper in debt with worse rates. Edmund and Patty were tens of thousands of dollars in debt.
Here our favorite line occurs: “Granted, the beach house was an embarrassing mistake.”
AHC’s answer: a new sub-prime mortgage. (Cut to an old Berliner sighing, “This Hitler will be the death of Germany, mark my words.”) “The paperwork was so confusing,” admits Edmunds, “that I was never exactly sure who was paying what.” Things got better, but not better enough that Andrews didn’t have to borrow “shamefacedly” from his mother. Then Patty lost her job. The debts were now absurdly out of control and so were the life partners (“What I saw as an uncontrollable moment of panic, she saw as another deliberate attempt to browbeat her”).
Eventually they just stopped paying bills. Fortunately the economy collapsed, and “the rest of the world was falling apart so fast that [JPMorgan] Chase barely had time for us.” We leave our heroes in limbo: obviously not off the hook, but reprieved by the inattention of their debtmasters.
You have to read Andrews’ book, Busted: Life Inside the Great Mortgage Meltdown, to get the whole story. But we are betting Patty and Edmund don’t end up hobos. The Obama Administration is basically trying to work things so that they and all the other folks who succumbed to the unlimited growth fantasies of the late age can remain in their palaces. People may squawk about big government, but nobody really wants these houses cleared out to stand empty or, even worse, be rented at “market value” far below what everyone wanted to believe they were worth. Why, that would be like New York in the 70s, when ordinary people could afford to live in the East Village! Next they’ll be living in Silver Springs!
Andrews’ story purports to show how nice, educated, “middle-class” (that is, pretty rich by our standards) people could get caught up in the meltdown. But actually they were the kind of people who had to get caught in it: people who had been trained to think of themselves as representative of their society, their middle-classness pandered to by every politician, had to live in a manner that befit their status. And the people to whose benefit this society is actually run — hint: it ain’t the poor — were willing to sustain their illusion, so long as they could make an ever-increasing amount of money off it. And who, in the age of unlimited avarice, was going to say they couldn’t? None of those enablers are worrying about how they’re going to pay a mortgage — some because they are now wards of the state, but most just because that’s the way the game is rigged.
And the middle-class folks they suckered are left to analyze (sometimes, as with Andrews, at eloquent length) their actions and try to figure the psychology of the thing, when their musings are actually about as meaningful as such thoughts might have been had they magically occurred to Pavlov’s dogs. Photo via UnlistedSightings.
* We originally and erroneously referred to this $81K as “salary” rather than take-home pay.