We've been discussing here the saga of the mortgage deadbeat Edmund Andrews who writes for the New York Times. The story's still making it around the blogosphere with the advent of his new book: Busted: Life Inside the Great Mortgage Meltdown
The Amazon "Product Description" reads thusly:
"The fiasco that sank millions of Americans, including one journalist, who thought he knew better. A veteran New York Times economics reporter, Edmund L. Andrews was intimately aware of the dangers posed by easy mortgages from fast-buck lenders. But, eager to buy a home and start a new life, he gave in to temptation and began a surreal adventure into the mortgage mayhem that nearly wrecked our economy".The Atlantic's Megan McArdle last week wrote a sympathetic article about hard times for writers. But after reading the book, she blogs:
"Andrews spends a lot of time defending not feeling bad, because after all, the banks shouldn't have lent him money. This is true, they shouldn't, and anyone who did should be profusely apologizing to their shareholders. But when you read the book, what you discover is that while the book is ostensibly about our Great National Borrowing Binge, for Andrews, the debt is really a sideshow. He couldn't afford to get married. At all.
. . .
Andrews took on the obligation to support two adult women and, by my count, six children. Middle class people can't do that. That's something that's only ever been possible for very rich men".
18 comments:
Bumper sticker I'm not brave enough to use:
"Wall Street's Only Mistake: Believing Americans would honor their mortgage debts".
Good find, Harriet, on the Atlantic Blog.
Fantasyland self-underwriting, the best kind, and to think they're still living in the house...
The guy is an idiot financially and he deserves whatever he gets. Now that that's out of the way...
It takes two to tango and someone had to loan him that money knowing that it wouldn't be paid back. Without the complicity of banks in all of this there would not have been a housing bubble. This isn't merely a case of someone making stupid financial decisions. It's of someone that obviously makes stupid financial decisions being handed the power to do a lot of financial damage. There will always be people (heck probably a majority of people) that aren't financially savvy. Maybe those people shouldn't be running our banks.
As for the bumper sticker, that was indeed Wall Street's only mistake - utterly failing at their job in estimating the risk of absurd mortgages. I would amend that to say half of Wall Street though...the other half was making money hand over fist shuffling this crap around. It was a game of musical chairs.
OMG. He's totally trying to cash-in on this. I can't believe I'm the only one that can see through the fact that blaming it on the housing bubble is a farce. He's only doing it to sell books. I only thought he was doing it to get a headline in the NY Times.
He maxed his credit cards. He borrowed money from his mother. It doesn't matter whether he took out an equity loan on his home or not.
He didn't even get his car inspected. He's just an idiot.
A book? I can't believe it. If he makes money on this, I'm going to do it too.
So, essentially this guy had a big fat mid-life crisis, left his wife for his high-school crush, spent a bunch of money he didn't have, took on way more house than he can afford ... and parlayed his idiocy into a book deal.
Yuck. I need to go bang my head on a wall now!
Also my personal take on personal responsibility in all of this:
I worry about my own decisions, not those made by other people. I'm not responsible for the financial choices made by other people. But if I'm in a position to give a mortgage to someone that I KNOW won't pay it back then I'm responsible if that mortgage gets written. It doesn't matter if that person reneges on their agreement to pay the mortgage. What they do or don't do is irrelevant. I was faced with a decision to either grant an excessively risky mortgage. Saying "well they accepted the mortgage so I assumed they would pay it" is utterly inexcusable to me. It is YOUR fault if you gave it to them knowing that they would default.
robert,
You're not the only one. I, for one, just felt it went without saying.
Maybe it was his backup plan all along, hey, I'm an excellent journalist, I can always just get a book deal and pay it all off. One hopes it wasn't his primary plan, but without paying the money to read the book (or creating more demand for it at the library) it's hard to say.
Bumper sticker I'm not brave enough to use...As Jeff put it so eloquently, "Yep, the only mistake Wall Street made was also the only thing that they were required to do: make legitimate loans, and mitigate their risk." Poor banks.
But funniest of all is the knee-jerk sympathy folks have for large corporations with incredibly idiotic business models.
The whole point of due diligence is to avoid the sorts of mistakes that a naive 7-year-old would make.
And finally, the whining, puling, and tsk-tsking over other folks' decision-making is just the icing on the cake.
When I saw a snippet posted over at CR it showed Andrews looking at his take home salary pre- and then post-alimony charges. Brutal. His take-home was well over $6K a month $80K+ per year after tax and other deductions, hardly shabby, middle class to upper middle class by almost all standards.
Then alimony at $4K per month to support his ex-wife and their kids. That left him a shade under $2500 monthly take home.
This author is absolutely right, he couldn't afford to get remarried. He honestly couldn't afford to get divorced.
Well,
mid-life crisis and divorce is a quite popular path in this country.
In my opinion the only bad luck this guy had is the choice of his new girlfriend --- she should have been getting alimony and child support from her previous marriage making this guy's household income whole. Well, in that case she probably wouldn't pick this journo up though.
But i do not have any hard feelings against this guy, it is tough to be in this position, being almost fifty, divorced, and cash-poor even while making a decent salary. Usually such a pressure leads to the bad decisions. And banks definitely helpled him (also convincing him, that it will work out fine through the home price appreciation). At least he is not a speculator who believes that he has a right to healthy profits. He is still working to provide for his former wife and kids, without enjoying the pleasures of the real family, takes some gut in my opinion. Probably would be better off psychologically if he ran away to Argentina.
There is some inherent problem with people who are poor --- they have to be extremely conservative with their finances since they really cannot afford any risks, while sometimes poverty leads to such a situation, where betting in a casino seems like a great idea, forget about the odds, it is just a possibility of a big payout that looks good compared to the prospects of being poor forever. That's why we don't have debtor's prisons in this country and bankruptcy laws exist, err is human.
Oh wow Harriet. You'd get a friendly honk + wave from me, but I can't imagine how scared I'd be to drive with it on my car!
http://tinyurl.com/q6cq2w
"Wall Street's Only Mistake: Leveraging ourselves to the hilt based on the belief that Americans would honor their mortgage debts, even though we knew such an outcome was impossible. (Oh well, At least we get to keep the bonuses)."
(Oh well, At least we get to keep the bonuses)Including the ones we got after we drove our companies into insolvency, thanks taxpayer (idiot)
I'm with Robert's opinion on this. For me the bullet on his NYT article is that this crisis is a bit more than bad business models by "Wall Street"(whatever that is), people trying to live beyond their means and the greater fool theory run amok. It is too convenient and simplistic to try to lay this on any one side.
Well my purchase is going south. The appraisal is 45k under purchase price which is 8k over 2009 assessed value. I am sure thaey will put it back on the market. I had a great unapproved short sale going before this that I opted out on. I just hope I do not have to work as hard as Tabitha!
http://online.wsj.com/article/SB124276441945635993.html
Erick Exum, a NACA official, told those present: "What happened is not your fault. The mortgage crisis is the result of abuses and exploitation by Wall Street."
This is like Thelma and Louise pointing at each other as they drive off the cliff and saying "This is your fault."
This guy is a complete moron. I hope any book profit gets zapped by a deficiency judgment.
Just because others are jumping off a bridge, doesn't mean YOU have to.
Stupid, stupid, stupid.
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