Gordon Gecko* was wrong.
All we hear about now is how the banks are failing, foreclosures are rampant, investment firms are belly-up, etc. It's gloom and doom as far as the eye can see.
Why? What does it all stem from? I'm putting my money on greed (pun intended).
I remember when Frances was a baby and I got the umpteenth phone call about some guy trying to get me to buy a cookie-cutter home in some horrible subdivision way out in the boonies. Tired of fending off these guys (all apartment renters must be on a list somewhere), I decided to go out there and PROVE that I couldn't afford it so that once and for all they would stop bugging me.
Well, they ran the figures and I COULD afford it! Maybe not that house, maybe not that subdivision, but maybe something, somewhere.
That got my little brain a moving. Before I knew it, I had a whole new group of friends--an army of mortgage brokers and Realtors--who were trying to help me get my own little piece of the American dream.
I soon learned that my new found "friends" wanted me to buy the biggest house possible, even though we ALL knew that I couldn't afford it.
"Smart people buy the most house for the most money"
"The bank is willing to lend you that amount, so you should take out a loan for the entire amount"
"You can get a much bigger house if you do an interest only loan"
"Adjustable rate mortgages are the way to go, interest rates will only go down and if they don't, just sell it and make a profit!"
I stuck to my guns and bought a modest little condo for well below what the bank was willing to loan me at a fixed interest rate.
My Realtor thought I was making a huge mistake (was he really for my best interest, or mad that he didn't make as much commission?) and my mortgage broker thought I was an idiot (because he cared for me or because he gets more money for selling the "creative" loans?). Did I make the wrong decision?
One year after we bought our condo as I returned to work after taking my maternity leave (with Jeffrey), I was laid off of my job. I knew that we could live off of one income and still easily pay our mortgage. I got another job and then a few years later Nigel was out of a job. Again, we didn't have to worry because I had planned for that while house hunting.
Sure, I WANT a huge house with a big yard and a garage, but I don't NEED it and more importantly, I can't afford it.
Now all of us Americans are paying for the greed of others.
Do I blame the homeowners for getting in too far over their heads? Were they too greedy? Possibly. But I also know how hard it is to stick to your principles when everyone is telling you to do something else and that you're dumb for not following their advice.
Do I blame the mortgage brokers and banks? Possibly. They certainly did know what they were doing.
I think I blame Gordon Gecko. Maybe greed doesn't work. Maybe greed isn't good. Maybe greed is just...greed. Maybe that's why it's one of the seven deadly sins.
*Character from the movie "Wall Street."
10 comments:
Great post, Lois. You have always been a wise woman since I can remember.
I totally agree b/c we too bought the condo with the fixed 30yr and it annoys me that ppl live outside their means like they do...
Amen! You hit the nail on the head perfectly.
Seriously!!!!!
I blame Bill Clinton. In an effort to "boost the economy" he passed a law that required lenders to give high-risk lower income people more money. The front entrance people (loan officers, realtors, etc) loved it. They didn't care if their clients hit rock bottom some day, they were making lots of money on commissions!
Now there are loads of people with 50k in credit card debt on top of their adjustable rate mortgages. They're in debt beyond their eyeballs, gas is out of control expensive AND taxes will go up to bail out the lenders.
Okay I'm done now, thanks for allowing me to vent.
Great post, Lois. Too bad everyone couldn't figure these things out earlier, huh?
GEO -- at the time I didn't feel so wise. I thought I was making a huge mistake. But now I realize that although it's not the home of my dreams, it's a home I can easily afford.
SHILLIG -- yes, but it's so hard not to! I'd like to think that I'm above "keeping up with the Joneses," but it's something I struggle with every day.
MONICA -- thank you.
RABIDRUNNER -- yes, I just found that out! It was under the Clinton administration that they wanted to up the percentage of homeowners. I just wish that it would've been done more responsibly. Again, greed got in the way.
SUZIQ -- I think I was just lucky. They were really pushing me into one of those fishy loans and telling me to just sell in a few years. Now I don't do anything in just a few years (heck, I was married for seven years before having my first kid!), so I'm glad that I stood my ground.
This should be on the op/ed page in the New York Times,Newsweek, or something. Local girl makes the "L" sign on her forehead and says "Duuuuuh" to the economists.
I've come to detest the people who make a living "working the angles".
Lending money (in reasonable quantities) to people who were in the habit of paying their bills (despite being poor) certainly would've boosted the economy.
If I had a dollar for every person who told me and Lois we could afford a mortgage for $25,000 to $50,000 more than our checkbook said was possible...
NIGEL -- I'm very lucky to have you by my side.
Exactly.
RYNELL -- good hearing from you again!
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