Sunday, October 5, 2008

Economic Crisis: Why it's Our Fault, Too.

Everyone is blaming the predatory lenders and whatnot for our economic crisis today.

What a load of crap.

This is symptomatic of a larger cultural problem, one where we all have this sense of entitlement, where we believe that we should have what our parents worked for years and years to attain. We attach our self worth and our identity to our material possessions, and if we think we could do better (and can't we all "do better"?), we'll do whatever it takes.

For twenty-somethings just out of college, it might be a desire to garner respect. How much respect can one get living in an apartment, after all? Can you be a respected professional driving around a twenty-year-old car held together with duct tape?

Of course not.

And so we bought the car, we bought the house. Once we had the house, we looked at our empty rooms and thought, "Wow, my ripped up couch won't do. This isn't respectable. I need furniture."

So we got a couch and other furniture. On credit, of course. Who has that kind of cash laying around, after all?

This goes on and on, and to maintain the Joneses facade, we all took out home equity loans. Some even bought houses to "flip" so they could swim in the sea of green, even when talk of a busting market escalated.

When it didn't work, we kept at it. We're not a nation of quitters, after all (just ask John McCain). No. We secured debt consolidation loans, second or third mortgages, etc. to cover ourselves. We called everything an "investment" to make it sound legit - and not just to others, no. To ourselves, too.

Because we "deserve" it.

So we allowed something or someone to cloud our better judgment. That someone often came in the form of Joe Schmoe, who would pop on our television screen or stop by our place and say "I can get you a $300,000 house no problem... No, no, I don't care about your credit or income. And guess what? You can still take that vacation - because you 'deserve' it, you hard-working-American-you."

And we jumped at it without thought to the consequences of getting into a debt that is beyond most people's capacity to handle. Because Joe said we could. Because Joe said there were options if we fell into hard times (never mind that these "options" are fraudulent in their own right. Look up "loan flipping"--refinancing doesn't always work.) Because Joe promised us things weren't as bad as that damn media wanted us to believe. Because we really do want a house. Apartments suck and renting sucks. We want to be rich. The American Dream, anyone?

We decide that we want to keep up with the proverbial Joneses sooooo bad that we'll just take the chance. Joe says we can do it, and he's the lender (why would he steer us wrong?), so why not?

I'll tell you why: because we cannot afford it.

Yes, I know that these lenders often go after people with limited incomes, limited-to-no education, the elderly, etc, etc, etc., but that's rarely an acceptable excuse - and besides, Mr. Schmoe took whatever schmuck came into his office.

And now we're crying victim.

Come on now. You're adults, right? Not everyone who did fell into these traps were high school educated only. Some of you make $90k a year. College degrees. Otherwise smart people.

I'm not saying everyone is being a baby about this. I don't know each individual situation, and I don't pretend to. I do think that, for the most part, people were lazy and let the lenders pull the wool over their eyes despite our better sense.

This is so analogous to so many things, it's ridiculous.

Just because some man showed up at our apartment door four years ago saying he could get us a house doesn't mean we jumped at it. Just because our bank took...well, I don't know if they looked at all, but they said we could get into a house no problem doesn't mean we did.

It was interesting, and we did consider it for a time, but ultimately we didn't do anything because we realized three things:

1) Houses were easily selling at $400k. Really. My dad lived next door to a dilapidated house that sold for half a million.

2) Once we looked it up, we realized we didn't make enough to handle a $150k house (which was, at the time, equivalent to a shack).

3) After a while we realized "no down payment" also equaled more interest paid in the end (down payment goes toward your premium)

We didn't know about negative amortizations, loan flipping, etc. back then, but we knew enough to know that it just wasn't a good idea. It also helped that we weren't ready to settle down at all, either. That probably saved us.

Yes, we could have rationalized ourselves into a house. We certainly gave it some thought. I'm glad we didn't though, and we've all learned a little lesson or two:

1) Do your research.
2) If you can't afford it, or think there's a chance you won't be able to afford it, don't buy it.

It's not like you're going out to eat and think maybe you can't afford it. This is a house. This is 30 years of monthly payments in the thousands. This is "if-your-roof-caves-in-you-have-to-pay-for-it-yourself" scary. There's no landlord to foot the bill, here.

We need to stop thinking for just a second about bailing out "Wall Street" OR "Main Street" and think about enjoying what we have for now and saving up for what we want.

Owning a house does not security make. Knowing, not hoping, that your house won't go away when the market starts throwing a fit, is.

We're not entitled to as much as we like to think we are. You have a roof, you have food, you have love, deal. Save up. It's not fun, not easy. I know it. I really, really don't want to do it, either. You'll have to trust me on that. Real respect comes from knowing you did things the right way - the smart way.

This is just so much bigger than the public is making it out to be, so much more fundamental and basic. Don't put a band aid over this. We need to change our mentality...badly. If we don't, this will only continue, and it will cost us so much more than $700 billion. I promise.

1 comment:

Amanda said...

I love this post! I get so frustrated, because people want to blame the banks for this problem. Now, the banks DID have something to do with it, but so did the purchasers!!! I know the consequences would have been bad, but I personally thought it would have been a better idea NOT to bailout anyone. Let them fail. That's how they learn lessons. That's how I teach my three boys lessons - by letting them see the consequences of their actions. If you live by greed and out of your means, you're going to one day suffer the consequences of that. We've been too irresponsible as a nation, and we should learn our lessons.

Beyond that, I heard a statistic that was quite interesting right when the bailout first passed. It said that Bush's tax cuts over the last 7-8 years have resulted in less income tax revenue (of course). How much less? 700 billion dollars. How's that for irony? Why don't the American people realize that paying taxes is an important sustainer to the country? It's always "I'll lower taxes." At some point, we're going to have to suck it up and pay higher taxes again, and this should come as no surprise to anyone. We've been paying a lot less than we should have been for awhile now. Of course, those who make more should pay more, that just makes plain ol' common sense!