“We tend to forget that happiness doesn’t come as a result of getting something we don’t have, but rather of recognizing and appreciating what we do have.” ~ Frederick Keonig (1774 – 1833) (H/t to Financial Philosopher)
$300 billion this week. $700 billion last month. It sounds unfair – piles of money flying out the door of our nation’s taxes to fix a mess we hardly understand, let alone took part in.
But it’s that very point of view that’s part of the problem. Looking back upon the decade-long run-up in home prices and easy (dare I say, careless) credit, it’s hard to find a soul who didn’t contribute in some way. There were rogues and instigators – for sure. Predatory lenders deliberately targeted unsavvy borrowers who they knew could easily be wooed by the promise of a new home: the realization of the American Dream. Wall Street investors continuously pushed lenders to just keep writing loans, whatever the terms. It didn’t matter. But get real: what the hell were these borrowers thinking? Many were just as much a part of this as everyone else. Imagine actually believing that you could afford a $700,000 home on a $30,000 annual salary with no proof of income and no money down. That’s just as irresponsible as the lender who passed it through.
Now the ugly clean-up is in full swing. It’s sad, but we have to grit our teeth and continue to write these multi-bilion-dollar checks to the major institutions that screwed up – Citibank being the latest. Otherwise, our jobless numbers would be much much worse. Our economy may continue its freefall to much deeper depths for much longer than now anticipated.
There will be more. We haven’t seen the bottom yet. Taxpayers will continue to foot the bill, and we might as well just get over the bitterness and blame game now so we can focus on what each of us CAN do to not repeat this incredible period of financial irresponsibility that brought us here.
For some, it may be a matter of saving more, paying down credit cards and (gasp!) living within our means! For others, it may be losing a job, a house, and starting over. For them, I feel truly sorry.
Walking around a Target store today, I found myself amazed at all the crap we buy – myself included. Why do we need a $20 rolling pin made of silicone? Would a plain jane recycled wooden one at $7 not suffice? I understand that the buying and selling of consumer goods stands at the heart of the modern economy, but it feels like a House of Cards right now, like we bet all this money on a structure that could collapse at any moment.
If the administration starts telling me I need to shop in order to help the economy, I’ll throw a brick through my television and refuse to replace it.
This year, my resolution is to become more fiscally conservative, cut down on the amount of waste I contribute to the earth, and invest in my experiences and my future over my possessions. Great change comes from dire crises. I believe this one will be a change not only at the policy level, but at the personal level. Or at least, it will be a forced change for many.
Fiscally conservative or broke – whichever camp you happen to be in, may the times not be as bad as they could be and may we make it out having learned the valuable skill of living frugally.
While I certainly agree that it does no good to blame the idiot that that thought they could afford the $700,000 house on a $30,000 salary, I simply cannot feel sorry for such a fool. And I will, as I have already been, also be blaming the mortgage lenders. Both of these parties should be held responsible for their actions. Often suffering consequences is the best way to learn lessons in life. Had I not had to learn my own lessons the hard way, without being bailed out by anyone else (family included), I may be making the same mistakes now as I did then. Had I not spent years saving and skimping to buy my own home without the aid of anyone else, I would not understand the true value of such a purchase.
So if the predatory lenders and the ignorant home buyers both get bailed out, what does anyone learn?
I’m certainly no expert in finance nor am I a mortgage broker. But let these greedy lenders go under. Let the predatory AIG insurance companies go down in flames. Let the houses be foreclosed upon and the families that reside in them (gasp!) rent. Sometimes the worst of circumstances bring about the best ideas, like say a rental arm of the banking industry that can make money off these foreclosed properties by renting them out in the meantime until they can be sold for closer to their true value.
I realize my views on this are harsh, but damn if I read about one more bailout my head might explode. Why are we rewarding businesses that make bad decisions? If you are not fit enough to survive, then perhaps you should not survive for the sake of the unknown.
I tend to agree with you that many of these companies need to be left to fail. But unfortunately, from what I’ve read on the subject, if some particular banks fail then everyone suffers – either indirectly or directly. People lose jobs, people lose assets from their 401ks, businesses don’t have the ability to borrow money and expand workforce, etc. The real solution then becomes accountability. We shouldn’t be writing blank checks with no evidence of change. All management teams at failing banks should be replaced if you ask me. Anyone with a brain could see the risk problem from a thousand miles away so I really don’t get how they could be so stupid.
And the auto industry? Don’t even get me started. This industry was doomed to fail regardless of all else that’s going on. They saw a chance to get a handout, flew in to meet with Congress on their private jets and expected all to work out. Meanwhile, they haven’t designed a modern, innovative car in decades. I think rather than bailing them out, the government should let them fail and start devising a plan for foreign automakers to have a presence or transition into their spots. It’s what most Americans buy anyway.
I definitely don’t feel sorry for those who were reckless with their finances, borrowed way too much and just hoped for the best. Like you, I’ve also lived within my means, watched home prices triple in neighborhoods around here, and decided to wait because it just didn’t pencil out for me. But I do feel sorry for those who bought a house under reasonable terms, lost their job due to the reckless behavior of lenders and investors and now face foreclosure. Maybe the climate has changed, but a professor from Dartmouth (John Volt? can’t quite remember) presented a case study earlier this year showing the majority of foreclosures were actually due to this reason. Who knows.
At any rate, for all those who’ve never understood how to live on real money and not credit – I feel like now is the time they’ll be forced to change their ways. I’m all for personal responsibility.
I hope our economy begins to build on something more real than consumer spending alone.
I guess my point in letting the unfit companies fall is that I’m not afraid of the suffering that it will cause. As a matter of fact, I welcome such suffering. I think it’s exactly what Americans need to get over their selfish gimme gimme ways. No one learns anything when it doesn’t hurt. I see a lot of people talking the talk right now about living frugally, but to them that maybe means foregoing their starbucks a few times a week or shutting off premium movie channels. Way to sacrifice yo.
We’ve already seen the positive changes that were so quickly embraced when gas prices were at their highest. People started riding bikes, using public transportation, cutting down on driving, hypermiling and planning better. The human race is very adaptable when faced with circumstances that dictate the necessity of such behavior.
I am hearing a lot of doom and gloom surrounding these bailouts right now and I think it wise to remember that it is all conjecture. Sure if these companies fail there will be consequences and a credit crunch. But that time is already here, the credit crunch and recession are already upon us. And oddly enough, the bailout is already in full force and money is being dished out so quickly, there is no accounting for where it is going. Yet the economic problems persist…hmmm. What is AIG up to now? 150 billion? Granted, I don’t think this is an issue that is going to be fixed overnight. But the current trend is to throw money at the problem and ask questions later and I don’t buy into it. I agree with you that what is needed is some accountability if throwing money at it is the course we’ve decided to take. Now who do we tell our grande idea to?
Call me a skeptic, but we’ve been hearing the voices of fear mongers for the last 8 years wearing the guise of government using similar tactics to dupe the American people into giving them whatever they wanted. And now we’ve got insurance companies, banks and the auto industry using the same strategy of “you better give us what we want or else”. I guess I’m simply tired of being afraid of that “or else”. Also, I don’t mean to sound like a wingnut conspiracy theorist, I’m just tired of all the Chicken Littles running around.
Knowing that the auto industry has willfully shelved electric car technology for years and years, while making bigger and more gas guzzling vehicles in the meantime, I want them to fall. Why they don’t just declare bankruptcy like the airline industry does every other week is beyond me. I realize they say that would deter customers from buying into their warranty programs, etc. But come on, their customers are going to be just as deterred by them accepting a government handout too.
As for the cause of all the foreclosures, I’m sure there are plenty of reasons homes are being foreclosed upon. And I certainly am sympathetic for the true victims here, as I’m sure there are many. But I think a lot of this boils down to people getting in over their heads, either not understanding the terms of their mortgage or buying an over-valued property (and assuming the housing bubble was going to last forever although the writing has been on the wall for years). Holy run-on! Sounds to me like ignorance and greed though.
I guess if I lost my job today and job prospects looked grim, one of the first things I would consider is selling my home and scaling down my lifestyle. I’ve done it before and it’s really not as sad as it’s made out to be. The people I feel the most sorry for are the ones with medical bills they cannot pay that had to borrow against their home’s value and eventually lost their homes because of it. That is the true sad story in all this.
But the point to all my babbling is that I really do welcome the hard times ahead. Maybe it will get people to think about the things in life that really matter. Seriously, bring on the Great Depression II, at least we’ve got an FDR-like president coming aboard next year.
Totally. That is why I say great change comes from dire crises. People will never change themselves unless forced to — which reminds me: remember that PSU class we took many moons ago that was all about “forced options”? This feels like one of those situations.
I agree that people are much less likely to change their ways unless forced to and it is precisely that reason why I disagree with the bailout. Throwing money at the problem is just prolonging the inevitable and wasting money in the meantime.
I think I’ve still got “Forced Options” floating around. I may have to give it a looksie for old time’s sake.