Fascinating and somewhat long article from New York Times economics reporter Edmund L. Andrews about how he and his wife managed to run up tons of mortgage and credit card debt.
While one has to applaud Andrews’ courage in writing the article, certain bits have an almost surreal quality.
Between humongous loan balances and high rates, we had hung ourselves with the rope they gave us. In the previous December alone, we charged $2,845 on the Chase card for Christmas gifts, food, gasoline, clothing and other expenses. The charges included almost $350 for groceries, $700 in clothes from J. Crew, $179 at GapKids and $700 for airplane tickets for two of Patty’s children to visit their father in Los Angeles. Our balance climbed from $14,118 to $17,135, and in January 2006 we maxed out at our $19,000 credit limit. And there were other expenses on other cards: $1,200 in dental work for Patty’s son Ben; $1,600 to rent a beach house the previous year for us and all the children. Granted, the beach house was an embarrassing mistake. But given that Patty had landed a solid job, it seemed like an indulgence we could work off later.
Obviously this man has been coming to terms with stuff, so good for him.
Everyone knows stuff costs money, and lots of circumstances can cause difficulties. Andrews was divorced and paying alimony and child support, but people have difficulties due to illness and all sorts of other life events as well.
But good lord, if you spent $700 at J. Crew while drowning in debt, you had a problem. My kin ate squirrels, catfish and possum during the Great Depression, and while I’ve managed to avoid that particular experience, the wisdom my ancestors passed on about not wasting things and living within one’s means does come to mind. Somehow my kids have been clothed just fine at Fred Meyer and Target.
The key point to take away from the article is that the banksters became societal faith healers, temporarily solving problems with suspect mortgages and HELOCS. Whether it was lust for a woman or lust for material goods, the banksters could rub that out for you.
Tons of people needed to make their self-worth about material things that they couldn’t afford. It’s sad, but it’s true.
Don’t get me wrong, our family has stuff, we like our stuff, and many times I try to impress upon our kids how lucky we are to have stuff. But in the end it’s just stuff. Well, it’s stuff we paid for either with cash or with a credit card that is paid off monthly, excluding the mortgage and one car loan at a time.
If you’re buying tens of thousands of dollars of other stuff on credit, you have a problem. And the banksters will gladly give you a lap dance in hopes of making you feel better about yourself.
The speculative orgy wasn’t, in the end, about capitalism, economics or any other “rational” endeavor, it was about selling the supposed good life to anyone who would fall for it. Never mind that the granite counter tops are too expensive, or that the BMW adds too much to the monthly budget. The banksters were gyrating, the music was loud and tomorrow was for the suckers who play by the rules.
For some reason, many otherwise rational people needed to scratch an itch, and the time period coincided with the reign of George W. Bush. The excessive materialism and condescension towards us were part of the same social malignancy that yielded the invasion of Iraq, the Schiavo madness and the indifference to massive suffering after Hurricane Katrina.
A society doesn’t go mad in one little corner, it goes mad everywhere. The mindset that excuses torture can easily excuse a few little financial excesses, can’t it?
Interestingly, those who were conservative in their personal lives and finances probably didn’t get hit so bad. Funny how that works out.
(Props to Atrios for noticing the article.)
“Neither blindness nor ignorance corrupts people and governments. They soon realize where the path they have taken is leading them. But there is an impulse within them, favored by their natures and reinforced by their habits, which they do not resist; it continues to propel them forward as long as they have a remnant of strength. He who overcomes himself is divine. Most see their ruin before their eyes; but they go on into it.” — Leopold von Ranke, quoted by Joachim C. Fest in “Hitler” (Vintage Books, New York: 1975), p. 4.
Something’s wrong with the picture Andrews paints. He and his missus charged ordinary expenses like food, gas, and clothing to their credit cards and didn’t pay off the monthly balances. They bought these items by going into debt. So where did their income go? He doesn’t fully explain. He mentions a couple things like airline tickets and the beach house rental, and says they were spending $3,000 a month more than their income, but where did it all go?
Sad that someone that writes about economics doesn’t understand credit card debt.
I guess that explains why he works at the ny times.
Damn, aren’t americans greedy and materialistic? I’m sure some of the greediest even brag about owning a porsche or two.
Think about it: People work at jobs they hate to buy things they don’t need to impress people they don’t like. That’s self-inflicted slavery. It results from egotism run amok. I have no ego. I’m a feral rabbit living in a public park, and natural fauna don’t have egos, only survival instincts. Believe me, I’m not trying to impress the dogs that people bring to the park! Why should I bother? I know that I’m vastly superior to dogs in every way. I have better things to do, like keeping my eyes and ears peeled for reckless cyclists and peregrine falcons. Nor do I feel any compulsion to impress their human masters, because I also know I’m way more intelligent than humans. (That’s not hard to do; many humans are stupid as hell — see, e.g., #3 above — and just about everything else in the biosphere is smarter than them; you didn’t see any rabbits, birds, or earthworms saluting Hitler. Dogs are a different story; dogs did work for the Nazis in the death camps, which tells you everything you need to know about dogs.) After you stupid humans exterminate your own species, rabbits will run this place, and I’ll be their king!
Why would anyone feel sorry for bankers who can’t make a profit from paying savers 1% and lending their money to credit card customers at 27%?
Private Socialism Okay; Public Good Not Okay
That’s Republican philosophy in a nutshell. Trust me, you won’t hear a conservative outcry about this Associated Press article in today’s news:
“Pfizer says it will provide 70 of its most widely prescribed prescription drugs — including Lipitor and Viagra — for free to people who have lost their jobs and health insurance. … The announcement comes amid massive job losses caused by the recession …”
… just as you didn’t hear Republicans complain about car dealers offering to make consumers’ car payments for them if they become unemployed.
For that matter, Republicans have always been big fans of the concept of private charity. But what is private charity? Privatized socialism.
The problem with depending on private charity is that you’re totally at the mercy of someone else’s generosity and goodwill, which may not be there when you need it. For example, a private benefactor who runs a soup kitchen for the hungry during a period of high unemployment may put up a sign that says, “No Gays Allowed.” Whereas if you and your employer are required by law to pay taxes into a government-run unemployment insurance fund, you’re entitled to benefits as a matter of legal right if you satisfy the eligibility criteria, and if someone denies your benefits claim you’re entitled to a due process hearing before an administrative law judge whose decision can be appealed to the courts.
So why do Republicans love the first system, and hate the second system? Why are Republicans so antagonistic to the idea of a majority of people voting to tax themselves to establish an economic safety net so they won’t be at the mercy of private charitable donors? Why are they against everything government does that benefits our own citizens, and think government’s only legitimate function is killing citizens of foreign countries?
The only rationale I can think of is: Because Republicans are pricks.
Can you imagine the conservative outcry if the government gave free Viagra to the unemployed? Where’s the outrage when Pfizer does it?
There is a big difference.
I am free to choose if I want to support pfizer or the car companies.
The government uses the threat of force to accomplish their socialist goals.
I remember the day that democrats believed in pro-choice. What happened to those democrats?
@8 I get it now. Republicans like Marvie Boy believe the public good should be optional. (Of course, I got that all along … )
@3 Marvin, make that a luxry porche!
@7: The unemployed need something to help keep their “spirits” up, given the Bush recession.
public good as in the upkeep of the infrastructure, police/fire or public good like free cars, and other entitlement programs that NEVER accomplish their goals.
America has been fighting the war on poverty how long?
Have you ever noticed how many people that win their state lottery end up bankrupt, or how many of the recipients of new homes on the tv show extreme home makeover end up losing their homes?
Giving to others does not help, it only makes the giver feel good. Or in the government’s case, it makes people dependent on the government.
Know what happens to you when you don’t pay off those credit cards and tell the collectors to take a hike?
Nothing.
That’s because the ‘contract’ you sign for the credit card is not a contract. You can’t offer as a contract a document that gives you the right to change terms at will, but the other party must live up to the letter of the supposed contract.
You might have a crappy credit rating for a few years, but that will pass.
How can a credit card company expect a person to pay off a credit card debt when their ‘fines’ make the debt greater than the amount of credit they offered you?
Remember: They gave you the amount of credit based on numbers that told them what credit they gave you was all you could afford to take on. How could they reasonably demand MORE?
The answer of course is that they have it figured that you will never pay them back. You will be their indentured servant forever.
People, before they decide not to pay off their credit cards, should figure how much they borrowed from the credit card company + 8% interest. If you have already paid that amount + the 8% interest, you’ve already paid them back. You can morally say to yourself that you have paid them back — with interest.
The credit card company will write off the amount that you ‘owe’ them as a loss (even though they did get paid back)and sell the ‘debt’ to someone else.
There are ways to force them to stop calling, as well. Time to play hardball folks.
When your credit card company changes the rules and wants to keep you in their debt forever: Just say NO.
re 12: “America has been fighting the war on poverty how long?:
I don’t know Marvin. How long?
Please give the exact length of time, how much money was spent, and the names of the programs and if the programs are still in operation.
You’ve been creating straw-man arguments for how long, Marvin?
What’s wrong headless, can’t you figure out how to google for yourself?
I learned in school (public) how to do basic finances. I get a check (monthly as a contractor), I pay all my bills (rent, food, cable, phone, etc) and at the end of the month, ANYTHING left over is ‘bonus’ money to use next month for fun (or save). How F**KING SIMPLE is that? Pay your bills, then do what you want with the leftover.
If there’s something big you want (vacation, new computer) that you can’t pay for in ONE month, then figure how long you want to pay on it (2,3,6 months) and set that much aside each month as a “bill”.
Yes external circumstances happen (death, illness, fire), but it sounds like 99% of the time these folks aren’t managing their BASIC bills.
GOD folks…grow up! This ain’t rocket science! It’s 3rd grade math!
@2
Something’s wrong with the picture Andrews paints. He and his missus charged ordinary expenses like food, gas, and clothing to their credit cards and didn’t pay off the monthly balances. They bought these items by going into debt. So where did their income go?
—————
Andrews writes:
“I was handing over $4,000 a month in alimony and child-support payments. That left me with take-home pay of $2,777, barely enough to make ends meet in a one-bedroom rental apartment.”
So, what he had left was paying the mortgage. However, after the refi to the subprime the mortgage jumped to $3700 a month, making the wife’s job crucial. Of course, she subsequently lost that job.
This also was a major factor:
“Between humongous loan balances and high rates, we had hung ourselves with the rope they gave us. In the previous December alone, we charged $2,845 on the Chase card for Christmas gifts, food, gasoline, clothing and other expenses. The charges included almost $350 for groceries, $700 in clothes from J. Crew, $179 at GapKids and $700 for airplane tickets for two of Patty’s children to visit their father in Los Angeles. Our balance climbed from $14,118 to $17,135, and in January 2006 we maxed out at our $19,000 credit limit. And there were other expenses on other cards: $1,200 in dental work for Patty’s son Ben; $1,600 to rent a beach house the previous year for us and all the children. Granted, the beach house was an embarrassing mistake. But given that Patty had landed a solid job, it seemed like an indulgence we could work off later.”
That is, they were in denial (or she was, his reaction was to get on top of the spending from my read). Without making some major spending adjustments they were sealing their fate.
I did not try to make the point. You did.
So, once again, you are blowing smoke. You don’t know the answer.
You are a failure.
@12 It appears Delusional Marvie believes we should stop spending public money on infrastructure, police, and fire because these investments don’t “accomplish their goals” … this tidbit is brought to you by a numbskull who supports a party that showered taxpayer money on no-bid contractors who built showers that electrocuted American soldiers … yeah, I see the objections to that kind of “infrastructure” but that’s not what we’re talking here …
@13 “You can’t offer as a contract a document that gives you the right to change terms at will, but the other party must live up to the letter of the supposed contract.”
Sure you can. That’s exactly what every Army enlistment contract is. You can’t get a discharge just because the recruiter lied or because the Army decides to send you to infantry school instead of welding school.
re 20: What the recruiter told you is probably about as enforcable as a vacuum cleaner salesman’s puffery.
Marvin, headless still hasn’t figgered out how we whom think right spot his bile.
re 22: This is the last time I will ever respond to a troll.
Sounds like an admission that you do post under different names.
Why is that headless, is replying to yourself the only way you can get someone to agree with your socialist beliefs?
Or are you doing the old dixiecrat thing and hoping if you change your name people won’t know you’re a racist still.
I’m late to the discussion, but I disagree with this conclusion very strongly.
I manage my money very well, have the high credit score to prove it, got a mortgage that I could afford, the only J Crew items in my closet came from Value Village, and we even (gasp!) canceled cable TV when money was tighter after the birth of our first child, etc. Every credit card is paid in full each month, and money is put aside for retirement.
Last year, I was on track to retire when my daughter gets out of college. Now, thanks to folks like the author of this NY Times piece, who has not paid his mortgage for 9 months now, and the ensuing financial crisis, my IRAs have lost at least 40% of their value. I no longer believe that I will retire in the next 20 years.
And that pisses me off. I’ve done everything “right” and been responsible, yet my goals have been shattered by those who were not.
#25. It’s too bad there wasn’t some sort of, I donno, regulation that would have prohibited the bank from making risky loans, just for a fatter short term profit margin and bigger bonuses?
Oh wait, all regulation is bad, and according to the republicans, you are on your own. If you lose money, then you just weren’t smart enough. Sucks to be you.