I suppose the 'By clicking here[..]' text was supposed to be a link?
It is a link.
Note: these links always take at least a few seconds to show up, so if you happen to see one of these posts the minute they're published, and you don't see hypertext, just wait a couple of seconds and refresh the page. The way it works is that Blogger has to "publish" the post before there is a destination for the link.
I don't know why I can't seem to find it online, but the print edition has an very interesting graph on page 19 that is related to this story. Well, this story is more like the 'hook', IMO.
Re: "Picking On Poor Gretchen". Even though this is a good and necessary thing, don't you ever get the feeling that you are shooting fish in a barrel, using a sawed off 12ga shotgun? GM just makes such an easy target....
Just be sure to keep demolishing the other side: that POS Ken Lewis is still yammering about people "walking away".
The implication is that if the credit card lenders had taken control of the situation and cut Diane off, she wouldn't have spent so much. (Somehow I can imagine the credit card lender calling Diane to tell her she was over her limit, and the phone ending up in the dishwasher.)
I think not approving purchases that would put her over the limit would get the message through, even if the phone is in the dishwasher, and even if the bills are in there with the phone.
As you point out later, that would just bring us back to the "WHERE'S MY HELOC" articles, but at least the reporter's various narratives would agree with each other. Or at least be forced to confront each other.
I'm not detecting the dissonance that you see in this. (Caveat: I read the story but didn't see the video.) To me, it seems like that this person has some significant personal problems, and also that various corporations offered her deals that were far away from being good for her.
Neither of these two things particularly surprises me. We all have personal problems--some worse than others, but only the inexperienced or feeble-minded cannot relate.
And as for the corporate behavior, well, there are some things that we as persons won't do to a person we perceive as being helpless or "in trouble" in some way, but there is NOTHING that a corporation won't do.
Is there something that needs to change here? Probably, unless we want our society to change dramatically (which will be the result if we allow corporations to run free).
Now we know how GM feels about openness, transparency and accountability as well.
No, that's not fair to GM and is not what I meant.
I was not trying to say, coyly, that she has emailed me. In fact, she has never done so.
I was simply trying to say that if she sent an email response to me and gave me permission to publish it, I would do so. Of course she doesn't have to email me, she can comment here like everyone else if she wants to.
However, people do from time to time email me but refuse to let me publish their emails. I will not publish emails without permission, so that means that the complaining goes only to my ears, not everyone else's.
I don't know why they do that either, but there it is. In any event, I am NOT accusing GM of this. I've never heard from the woman. My impression remains that she doesn't really give a rat's ass what I say about her writing, but that is merely my impression. And yes, I believe that people do have the right to not give a rat's ass what I have to say about their writing.
I take it back. Poor Gretchen doesn't care about inaccurate portrayals in her articles so I can fully understand that she doesn't care about her own impressions.
I'm not american - so i missed the class cues completely, but there you go. She seemed pretty on the ball to me, just didn't have time between working 2 jobs to give herself the bachelor's in finance that seems required these days to deal with all this.
I felt there was a much better story, lurking under the surface, if somebody had done the math on all the refinancing costs and interest payments. How much was the original debt, how much was actually charged to the credit cards, and how much did 27% interest, late fees, 10k for mortgage refinancing etc. end up costing?
If somebody is negligent with their wallet and a pickpocket grabs it, that's a crime. So why isn't it also a crime if somebody is negligent in their understanding of compound interest, and somebody else takes advantage of it, nay builds up an entire industry to take advantage of it?
But i suspect that'd be another of those class things...
"There's an America in which spending is 'healthy' and is only interrupted by 'misfortune,' and another America in which spending is always 'unhealthy,' a dysfunctional attempt to compensate for the rather frequent experience of lost jobs, failed businesses, divorces, illness."
When we start propagating the Cult of Tanta in the postholocene era, this will be part of the scriptures. Some apostle just needs to point out that only the latter America existed. The former has always been a crock of shit.
I disagree. Her problem has been one of serial health problems and spending. Smoking and YooHoos are absolutely germane to the discussion.
Which only goes to show that this little tactic worked on you, Rob.
When did you go to medical school? And when did you get access to Diane's medical records? The article says her medical problems were involving a hysterectomy (for undisclosed reasons) and appedicitis with kidney complications. And you just KNOW those were caused by smoking and weight. Because the fashionable thing to think these days is that EVERY health problem is caused by smoking and weight.
All that business with the smoking shots did was give you an excuse to be self-righteous and play armchair medical doctor. And it was totally gratuitous because the cameraman could very easily have just stopped filming when she went out for a smoke, and then resumed when she came back. (My impression is that she doesn't smoke in her house.) That is what makes it so gratuitous.
This is a fantastic post. GM is exactly the sort of journalist I think Taleb has in mind when says that the overwhelming majority of them are simply entertainers. She's got her shtick, it has an audience and so she keeps doing it over and over.
I'm not her audience (though I am that dreaded NY Times reader), and so I come here.
What a wreck of an individual. My brother is married to a trainwreck who might be even more of a sociopath than Diane. Job losses are only getting started. I think it's safe to short credit issuers and the American consumer. Tough road ahead for the illusion of an American standard of living.
That seems similar to what happened 150 years ago in America:
Exloration of the West in two acts, repeatedly played:
Drama, first act -
Pioneers appears, banker gives them credit to settle the land, banker is heroe.
Second act -
Uncertainty rises, bankers demanding money back (not only denying further credit), banker is villain.
The difference to today seems mostly that so much lending is for consumption.
A few light years ago, gambling was mostly illegal in 49 states, and people joined the Christmas Club at their bank, putting away a few bucks from every paycheck all year long, so there would be money to pay for the stuff under the tree at year-end.
Today, gambling goes on everywhere, and people buy everything on credit. Nobody protects you from the casino or the credit card company. Both make their profits on human folly.
Should it be illegal to make profits on human folly? Should it be illegal just because it's immoral? Just asking.
great post,
The media continually tries to protray us as all victims of the evil banks.
We must save these people by bailing them out - it is not their fault!
This is good news.
I think I am somewhat tainted by living is southern cal. I have looked at over a hundred houses the last few years - and all i ever saw was greed on part of the seller.
Which only goes to show that this little tactic worked on you, Rob.
I posted on this same article and the related Nunez problems earlier today. I don't care if she had debilitating hangnails. People in this much debt shouldn't be smoking or drinking YooHoos for financial reasons.
Pat of what I get from Tanta's post, and from Diane's story, is this: We need to start questioning the assumption that easy access to credit is a good thing, and that credit ought to be used as much as possible. The best part of Gretchen's story is the math, the amount of money that goes to the banks at the end of every month. This ought to be drummed into the heads of school children.
People borrow money with the idea that this will enable them to get more stuff. But at the end of the month, the bank gets more, and you get less. Less of everything.
Just more media tendentiousness. Got to be a villain and a victim. No one is 'stupid' or irresponsible. They are simply the jetsam of a mean and heartless society.
This is how you win a Pulitzer. The Washington Post's Janet Cooke wasn't able to find such a story in the real world so she made one up about a child
heroin addict. Now that'll get you fired if you are caught but you are allowed to take liberties with the facts and twist and distort them to conform to this villain/victim template.
Now that'll get you fired if you are caught but you are allowed to take liberties with the facts and twist and distort them to conform to this villain/victim template.
I partly agree with this, but in reading the NYT piece, I don't come away thinking this is that kind of story. Diane portrays HERSELF as a fool, not a victim--the difference being that a fool pursues short-term gratification over long-term consequences, in the full knowledge that those consequences are coming.
For all of your doggedness in handling GM's twists of reality, I am glad to see you putting her in her place; she is just doing her job, which is to confirm her employer's and target reader's "wisdom", and if reality conforms, well that's an added bonus. If she didn't do it (so well, I guess), they'd find someone else, though.
Is there really a public appetite for stories along the line of "Can you believe lenders are so dumb they lent money to this schmoe". There's a great lesson to be learned in this epic failure of well intentioned public policy. Is increasing homeownership a laudable effort? Haven't lenders traditionally denied credit to deserving people unjustly? The efforts to solve these initiatives with less government involvement and less regulation created a set of new moral hazards to deal with. Can we deal with these in a more prudent and less risk averse fashion. I'm still waiting for that story.
People in this much debt shouldn't be smoking or drinking YooHoos for financial reasons.
You're starting to sound like one of those self-appointed arbiters of the public morals who leans over the grocery store to examine the contents of food-stamp shopper's cart. Or those 19th century social workers who allowed as how unemployment insurance was OK, but only if poor people weren't allowed to buy alchohol.
I am so tired of all these perfect people whose first instinct in any situation is to micromanage other people's lives.
You know when I first got the idea to write this post, I considered just not doing it. I thought, I cannot bear another thread where a bunch of hostile jerks leave comments suggesting that the "fat chick" deserves hostile commentary just because.
Then I thought maybe there might be a purpose to be served by calling out that kind of response for what it is. And calling out the Times for playing into it.
Further on the financial theme. I would be very unhappy if incautious borrowers were limited in their ability to borrow. Firstly, some of them no doubt use credit to get over a 'rough patch' and without it might end up as burdens. Second, these people keep my borrowing costs down. I wouldn't be able to be arbitraging a 1.99% until November card and having the same money in a CD unless these people were paying enough to keep the lenders solvent and liquid.
Most financial problems get intertwined with divorce, health and job issues. Diane hit the trifecta and I doubt her situation would be substantially better had things worked out better because like California she doesn't really have a revenue or credit problem, she has a spending problem. Thus my suggestion to save the price of a pack ciggys and six pack of chocolate soda.
"Diane McLeod's debt is the result of financial missteps, unfortunate circumstances, and a lending industry willing to extend her more credit than she could possibly repay."
If it weren't for Ms. McLeod's "financial missteps" and "unfortunate circumstances", who's to say she couldn't have "possibly repay(ed)" her obligations?
Tchotchke? This almost goes back to that other playful word, once used long ago... brickabrack, bricolet....what was that, not imbricate, but some French thing??
But yet it's as if GM cannot hear Diane say this about herself. The voiceover and GM commentary just don't match the bits of Diane on tape. It's as if the commentary is boilerplate, and Diane's narrative is just an excuse to say these things.
Or else it's a variant on the old "false consciousness" thing. That is, since Diane is a self-admitted impulse buyer who doesn't think clearly about debt, it must be the case that she is incapable of understanding what happened to her or articulating her own motivations. Therefore, some educated reporter has to "tell her" what happened to her.
Maybe I found myself liking Diane so much because she just sticks to her own story, as unflattering to herself as it is, and doesn't let herself be led into parroting the "victim of evil lenders" storyline.
And it was totally gratuitous because the cameraman could very easily have just stopped filming when she went out for a smoke, and then resumed when she came back. (My impression is that she doesn't smoke in her house.) That is what makes it so gratuitous.
Actually, it was presumably the cameraman's job to record what s/he was asked to record. It was the person who actually edited/assembled the video (my low-speed connection precludes watching) who made the value judgements you (rightly, I think) find annoying. It's certainly a technique commonly found in the 'upper' segments of the MSM.
Frankly, I find the smugness of folks who fail to find any shared humanity between themselves and people like Diane to be insufferable. I fear that includes some of the posters on this board.
From the article, it states that the average undergrad leaves school with 20K in student loans (I've seen figures up to 30K); also, much of the interest on this debt is subsidized by the federal government. To me the easy availability of student loan debt has not only increased the cost of tuition, but ignites a credit binge that many never get out of. IMO, student loans only aggravates class distinctions.
At what point do policymakers realize that direct subsidies to colleges, as well as students, could be spent elsewhere (e.g. technical schools)? Many of my students I tutor would rather be a factory drone making $35/hour then getting a BA in history with no job prospects whatsoever.
"where a bunch of hostile jerks leave comments suggesting that the "fat chick" deserves hostile commentary"
The bar just keeps getting lower. Individual lack of responsibility is an epidemic. As a society we should have compassion for physically and mentally handicapped. Stupidity laziness and greed don't qualify.
But that shouldn't give creditors free reign. I think we need regulation that limits interest rates on consumer credit to say 4% above prime. Then creditors will decide who they will take a chance on. I know there will be challenges from both free market purists that the market should decide and lefties claiming that such rules discriminate against the poor but it's clear the current system doesn't work. We need active regulation in financial markets.
Tanta, as you've proved previously, journalists are some of the most idealistic, ignorant (sometimes stupid) people in the world. What the MSM cannot understand is the bloggers ability to provide real expert commentary on these issues. I have law blogs I visit for law insight, military blogs for military info, etc, etc. And I visit you for the economic understanding and commentary you offer. Do you believe the woman in the article has freewill? Could there be a genetic impulse control issue? I have seen this crisis capture a lot of people that have poor impulse control and analytical skills. I still get looked at like I'm retarded by Realtors for not buying here in FL.
Banks (and other creditors) were making money hand over fist while interest rates were at ultra low rates. They didn't have time to care that they were in a slow motion train wreck. Nothing new here - read "Why Smart Executives Fail" by Sydney Finkelstein for some insights.
How and why did Gretchen get hold of this particular person to interview? It's not like reporters for The New York Times ever socialize with people like this. Near Philadelphia, no less! Couldn't they find an overweight woman deep in debt in Queens or Staten Island?
How did Mrs. McLeod come to the attention of the swells at the Times?
The current environment is clearly predatory. As I've discovered to my dismay, the US doesn't run on skills or effort, it now runs on how well you lie, to others as well as yourself.
I suppose the best liars are unconcerned with being consumed by a predatory system.
I think that I blame the eeeevil lenders for their own stupidity.
I give the lady some blame, but the story is downright ridiculous in how much credit she was handed.
Like credit card companies should hand out credit like popcorn, to anyone without regard to potential losses is what starts to drive me nuts.
Right after Citibank took it's last toke of cheap equity sovereign money it sent me fricking slews of checks- the last one was at 2.9% until I pay it off!!!
Is that really managing credit or acting beyond rationality to do something exceedingly stupid.
The class issue bandwagon is growing, and GM has hopped aboard. The sad part is that credit will neverever be as easy as it was over the five years ending in 2006/7. The greatest cutoff will naturally be among the poor, but the middle class will also suffer the loss of Modigliani's "income smoothing" debt shock absorber.
All of America reveled in free easy money, (just don't read the fine print), including a huge amount of business folks.
Do you believe the woman in the article has freewill? Could there be a genetic impulse control issue? I have seen this crisis capture a lot of people that have poor impulse control and analytical skills.
People are human. Some are born with a silver foot in their mouths, but most are not. If everyone was as smart as some of us, we wouldn't need regulations, would we? This is not rocket science. It is very easy to pick on the ignorant, they are sitting ducks. My ancestors were all fair game, as a matter of fact. They came here with nothing, including the language. They begot me, and I went to Ivy League schools -- because of them. How quickly we forget. Thanks to them, and thanks to Jeffersonian sanity that allowed them, in their pathetic ignorance, to survive, and flourish. So many of us act and talk as if we are our own creations. Take a breath, and get real. We must protect the ignorant, that is our job.
...Individual lack of responsibility is an epidemic.
Is that really the issue? Were we so much more enlightened in the past? I'm still amazed by the procession of events that's led to this current crisis. Some of the biggest mistakes were made by institutions that would override individual common sense. Individual underwriters were run right over with platitudes like "we're helping people get into homes", "That's not in the guidelines, the loan is priced for that risk". I don't see the mess we're in as a crisis of individual responsibility as much as one of institutional failure.
Take a breath, and get real. We must educate the ignorant and protect the stupid; that is our job.
Agreed. I am all for protecting the 50% on the left side of the bell curve of intelligence (yep, I know we're all on the left side in some areas based on a standard distribution of traits). My point in a round about way was that the 'system' has to protect those who can't protect themselves, like this lady. As I learned a long time ago as an interrogator....predator, prey or parasite....categorize and approach. Also, 'everyone's normal 'til you get to know them.
I learned as a youngster, through an inculcation that might aptly be described as psychologically violent, that paying interest on stuff was just a step or two shy of finacial suicide. I didn't really let it sink in until I was in my early thirties, but sink it finally did. I now excercise nearly-paralytic due diligence. I read that Ms McLeod refinanced at one point, and paid the better part of ten grand in fees for the priviledge--I'd have sooner choked on dog poop.
I sometimes have considered that trading this "education" (bought with poverty, illness, the jeers of childhood peers, an occasional thumping from my dad, and so on) for the blissful ignorance of folks who never got the lesson...well, many times I have thought that it would be a good trade.
I doubt I will weather economic storminess, now looming Category Five-like on the horizon, any better than the rest of America. And all I have to show for my frugality is a modest pile of cash which will soon be inflated into obscurity. Meanwhile, debtors will reap a windfall on the same gust of government intervention--so who's the chump?
Do you believe the woman in the article has freewill? Could there be a genetic impulse control issue? I have seen this crisis capture a lot of people that have poor impulse control and analytical skills.
People are human. Some are born with a silver foot in their mouths, but most are not. If everyone was as smart as some of us, we wouldn't need regulations, would we? This is not rocket science. It is very easy to pick on the ignorant, they are sitting ducks. My ancestors were all fair game, as a matter of fact. They came here with nothing, including the language. They begot me, and I went to Ivy League schools -- because of them. How quickly we forget. Thanks to them, and thanks to Jeffersonian sanity that allowed them, in their pathetic ignorance, to survive, and flourish. So many of us act and talk as if we are our own creations. Take a breath, and get real. We must protect the ignorant, that is our job.
This story makes me think of all of the posts on Irvine Housing Blog where the borrowers often spent 10s of thousands of dollars of HELOC money annually, and usually not on home improvements.
You couldn't ask for a better class comparison. Who is the worse? I'm pretty sure no one smokes in Orange County.
And I think giving Diane money, especially a (somewhat) complicated finacing deal should have struck the lender as akin to giving money to a junkie.
The Nikkei finished the session 0.2% lower at 13,237.89, while the broader Topix index ended little changed at 1,297.88. The Nikkei lost nearly 8.5% during the past 12 sessions. Its longest losing string was 15 consecutive sessions in 1954, followed by 13 straight losses in 1949 and 12 in 1953.
Try filtering out a couple of groups--I set the Head of Household age to $150k. Only 3% of that demo have no debt, and the bulk have over 100,000 (with a significant spike in the 1mm range). Good times.
Treasury Secretary Henry Paulson predicted the Bush administration will prevail in its effort to convince Congress to pass legislation that would allow the government to rescue Fannie Mae and Freddie Mac.
Growth is slowing and not just in the U.S.,'' said Daphne Roth, Singapore-based vice president of equity research at ABN Amro Private Bank, which oversees about $20 billion in Asian assets.A lot of money has been put into the commodities space and with the underlying demand slowing, it makes sense to exit.'' Stocks On The Move - Bloomberg.com
a few points:
I would bet that a LOT of viewers will completely miss the tchotchkes and the cigarettes and the yoohoo. and many of US who saw it thought it made the house look HOMEY. I said "wow, here's a regular lady... she could be my older sister or mother..." I hate to tell you guys this, but a LOT of people decorate their homes EXACTLY like that woman, and won't think her "tacky" at all. Only you in your ivory towers decided that this was all "tacky".
Is it possible that you are all so anti-Gretchen Morgensen that you pounce on anything?
They filmed the woman's house for god's sake. They got the kitchen, the dining room, the living room, and a bedroom. they got the front of the house and the back of the house.
and you know what, she has tchotchkes, so what? she also had 1000 pictures on her TV. and she has a chain link fence. so?
it is my opinion that it was these shots that made her a PERSON. I guess they could have 'cleaned it up' for you guys, and turned it into a "Dwell" magazine with aquaturd colors and chopped pillows. Would that make you happy?
Perhaps take her and move her to a modern art museum for the interview and put a "New Yorker" in her right hand and a Starbucks coffee in the left? Had her exit her Toyota Prius?
I think you're stretching trying to imply that there was this sinister attempt to make Ms. McLeod look like trailer trash.
I usually agree with a lot of GM bashing... but not this time. Her story is SPOT ON.
"Diane McLeod's debt is the result of financial missteps, unfortunate circumstances, and a lending industry willing to extend her more credit than she could possibly repay."
what on EARTH do you have to gripe about this statement? Do you not agree? Ms. McLeod herself admits she had financial missteps. check.
she had unfortunate circumstances (hysterectomy, appendicitis, job loss, death of father). check
and she was extended credit that she could not possibly repay. check.
I'm sorry... but some people need to step back, and relax. GM is not the antichrist. Every word out her mouth is not evil.
Do you believe the woman in the article has freewill? Could there be a genetic impulse control issue?
My opinions on metaphysics and genetics are worth even less than my opinions on football.
I appreciate the compliment implied, but then again I often think that a lot of journalists and bloggers both get themselves into corners when they are tempted to opine on subjects on which they have nothing useful to say.
What I will say is only that I wonder why we think we have to decide those things. I have no idea whatsoever whether "compulsive shopping" is a mental illness, a normal variant of human behavior, a character defect, or just a bad habit some people have that they dress up in the language of "compulsion" in order to deflect responsibility.
The reason I have worked in the lending industry for twenty years and still don't know the answer to that is that it never occurred to me that as a lender I had any real business trying to decide that. You know, I spent years seeing loan applications come through, and thinking that this person was just spending way too much and saving way too little and I sure wouldn't buy that house or do that refi if it were me. But it wasn't me, and as long as they met our (generally conservative) underwriting guidelines, it didn't matter. It was never my business to decide whether you were buying this house because it was a rational economic decision for you, or because you fell for it over the weekend and felt that buying it would make you get over being dumped by your boyfriend, or because you think that buying a big house will impress the neighbors and make your wife like you better. Or anything else. If you had the income and the assets to support the deal and you were old enough to sign contracts, you got the loan. Lord knows we've all seen loans that "looked" rational go bad, and loans that "looked" like total foolishness do just fine.
What I begin to fear these days is a sense that for-profit companies (of any sort) should somehow be tasked with interpreting and evaluating consumers' judgment or aspirations. I buy that regulation should force them to stop offering financial poison pills--deals that have clearly no tangible benefit to the borrower. (Example: Diane's first cash-out, where the lender let her borrow $30K to pay off $25K in credit cards knowing she would have to pay an $8000 prepayment penalty to do that. I think the lender should be obligated to do the math for her to show how that ends up being an effective interest rate well over the usury limit, if you count the prepayment penalty as part of the cost of the new loan.)
But if she had the equity, had the income, and wasn't getting into toxic loan terms, when did it become the lender's right, let alone its obligation, to say "you don't need any more handbags or snow globes, kiddo"? We're talking capitalist corporations in America. As if somehow they are also going to be your mother or your counselor or your best friend. As if they could possibly help you decide what is "good spending" or "bad spending."
that said:
I will agree that they didn't need to do a close up on the cigarrette. but I also highly doubt that it was as persuasive as you all seem to think.
GM is totally correct (and you ignore this by the way) when she says that the CC lenders could simply have not allowed her to charge any more on her cards.
would she still overspend? yes. would she be $286k in debt? no.
It is a joy to read your writing. How you've managed to become so wise, stay so human, and be both so analytical and so articulate is a mystery, but I'm delighted that you are such paragon, and that you have chosen share your gifts with the rest of us. You're an inspiration. Thank you.
We must educate the ignorant and protect the stupid; that is our job.
Yeahbut ...
Who will draw that line?
I sure don't want to, and I 'professed' at so many ivy league institutions, i'm not going there. Stoopid, ignorant? You decide.
Is Tanta ignorant, or just forgetful, for having attributed my "Nude Descending a Staircase", to my midget rival, Pablo Picasso, many posts ago?
Or was she out in the hall swapping the bong-water, during that particular moment in the lecture?
"What I begin to fear these days is a sense that for-profit companies (of any sort) should somehow be tasked with interpreting and evaluating consumers' judgment or aspirations. "
I feel this is hyperbole. Most of us are asking that the lenders make a REASONABLE attempt to ensure that the lent amount can be paid back.
so you wanna borrow $250k for a house and you make $5/hour. sorry.
You wannt borrow $250k for a diamond encrusted tchotchke and you make $150k/year and have no other debt. fire away sugar!
the point with these articles is that the lenders are lending out MORE THAN THE PERSON HAS THE ABILITY TO REPAY. And they are doing it at huge profit... until they aren't. and then we as taxpayers have to swoop in and save the day.
so yeah, it isn't the business of the lenders to tell people how to spend their income. I agree. But it IS the responsibility of the lender to make a good faith analysis to ensure that the borrower CAN pay the loan off.
if they don't want to do that, then fine. Then we need to eliminate fractional reserve lending and FDIC insurance and all the other PUBLIC backstops that the lenders enjoy.
Tanta, I love you with all my rusty heart, but sometimes I think you forget just how shitty the lending got. These firms didn't have Tantas working the back room. or if they did they let Banker and Broker run roughshod over them.
I'll say this about the credit card companies. They are perverse. The more you use them the more they offer you.
Some years back I was buying thing on behalf of my employer who, rather than open an account at various vendors just told me to buy what we needed and he would reimburse me. I liked the deal because I got the points and....to Wells Fargo I looked like a real big spender as my monthly purchases soared.
My credit limits kept being raised even though I paid it all off in full each month. Wells probably had a model that predicted I would soon be unable to and therefore if they could hook me with a monthly purchase I couldn't make they would be in Finance Charge City.
Anyway the spending orgy came to an end but not before I had increased my credit limit 10 fold and was issued one of those impressive GOLD cards.
Over the years since then as I reverted back to my more modest ways and continued to pay my bills off each month they finally threw in the towel on me because when they sent me my new cards I saw it was no longer Gold and my credit limit was only $10,000.
Thanks for slapping me back into reality. I guess I had been in a metaphysical mood. There just has to be an objective criteria for a capitalist system and I guess the reason we're in this mess is that banks forgot their own rules. Again, I visit a few times a day during the week and have learned more than in some of my graduate courses.
Maybe I found myself liking Diane so much because she just sticks to her own story, as unflattering to herself as it is, and doesn't let herself be led into parroting the "victim of evil lenders" storyline.
Though I realize Tanta had bigger fish to fry (and fry them she did), I found Diane's story, as told by Diane, to be the most interesting part of the piece. She obviously has accomplished some self-reflection and clearly had the ability to articulate what she learned about how she ended up in that situation.
I, too, offer Diane good luck.
As to where to draw the line on protecting fools from themselves, I can only offer that articulate fools make that question more difficult to answer.
Paulson as usual claims to know everything beforehand, including what Congress will do. My impression is that some of what he says is true, other parts of what he says are partly true, and still others are not true at all. I don't take P. at face value. Does anybody?
I think your post misses the forest for the trees.
McLeod is proffered as a REPRESENTATIVE of the real problems underlying the credit crunch (in this case not only housing finance, but consumer credit).
I think it's a big stretch to think that GM is writing this, or narrating the video, in a way that makes McLeod look sympathetic. McLeod isn't good or bad here, she just is. She's pathetic, there's plenty of blame to go around, and in the end, it doesn't matter whether you think she's been milking the system (and is sophisticated) or she's a duped rube.
The point I take GM to be making is that McLeod, and many others like her, have been fueling the record profits of the financial system, but that that gravy train is unsustainable, for the reasons elucidated in McLeod's example, which are, according to both systemic data and I think most of our own anecdotal experiences with friends and relatives, very common indeed.
If I were boiling the essence of this piece down to a few sentences, they would be: people like McLeod have been overextending themselves, which has been extremely lucrative for lenders, but these borrowers are now teetering on the brink of insolvency, where one unexpected event will do the trick. The fact that there are so many folks out there like McLeod spells serious continued trouble for our financial system.
how to discriminate between those incapable of learning and those who don't
Gosh, here's a crazy, kooky idea.
How about if we stop promoting and rewarding this "free market", "whoever I can screw, whatever I can get away it' mentality?
How about we put the CEO of CFC in jail? How about Paulson in jail for lying to the public? What say we compoletely revoke all retirement plans for Congress?
A well-functioning nanny state requires children, hence Ms. Morgenson's valiant attempt to infantilize Ms. McLeod. However, I'm not sure what to make of the following NPR piece on high meat prices:
An HONEST raise of hands:
how many of you after watching the video LIKED this woman?
(YTL raises his hand)
how many of you after watching the video felt that she made some foolish mistakes?
(YTL raises his hand)
how many of you after watching the video felt that this woman should not have been allowed to overdraw her cc's given her situation? especially since we ALL know that this is reported to the credit companies immediately so the cc companies knew she was an "overdrafter" and they knew she had high balances on her accounts?
(YTL raises his hand)
so this is why I disagree with a lot of the commentary here. I think that this video did a fairly good job of presenting an engaging woman who made mistakes, but who was not helped by current lending standards.
where I'm from they say: "they sold her enough rope to hang herself"
it is my opinion that it was these shots that made her a PERSON.
So what are you saying, here? That those of us who don't have three hundred magnets on our fridges are not authentically PERSONS?
The other side of the coin is this romantic notion that people who fill their homes with "stuff" until there's no storage space left are somehow "authetic" voices of the PEOPLE. In other words, it seems to me that you don't disprove my assertion that these shots were intentional "class cues," you simply take the opposite view of what such class cues signify. For you, they mean "homey" authenticity. I'd be willing to bet that the knick-knack collection also signifies "homey" authenticity to Diane. Which is why spending the thousands of dollars it took to accumulate all that mass-produced abundance made her "feel better."
So what? So some people make themselves "feel better" by spending too much money imitating the expensively empty interiors of the aesthetes. Some people make themselves "feel better" by stuffing their houses with as many inexpensive figurines and souvenirs as they can hold. I have no idea why the latter are PERSONS to you but the former are not.
What I begin to fear these days is a sense that for-profit companies (of any sort) should somehow be tasked with interpreting and evaluating consumers' judgment or aspirations.
If there is that sense, it probably comes from the fact that lenders have fairly successfully shielded themselves from the consequences of their own failures of judgment. One point made in the wider article I agree with, and seems quite obvious, is that lenders are trying to create a customer base in perpetual debt.
Forty years ago, no bank would have lent that woman money after she had accumulated so much debt because it would be, for want of a better word, stupid.
No they have so insulated themselves from their own stupid lending decisions that the question of lending the next $1,000 to that woman becomes a moral or ethical one.
But I think the point may be rendered moot in the next few years. The dikes they put up to shield themselves will all springing leaks simultaneously. There is going to be a great unwinding of leverage, or debt, in this country.
First, dear Tanta, your desire to make Diane the victim of her own lack of self control or whatever, just because she admits it, forgets that whatever her character or habits, IF the lender had not been willing to extend credit to a person who had no business accepting it or was obviously incapable of paying it back there would never have been a problem. The old system was controlled by the LENDER who refused to extend credit to those who were credit unworthy. When that changed, so did the whole scenario.
"A feminist is someone who loves women in general and hates them in particular."
P.S. I don't think Gretchen would let you wash her car my dearest Tanta.
Your last two paragraphs, Tanta, are all wishywashy: is Diane responsible or is her lender? I would say it is her lender, plain and simple. There will always be Dianes who want to take whatever is offered them. The point to being a responsible lender is NOT to lend it to them. Period. End of issue.
"I found Diane's story, as told by Diane, to be the most interesting part of the piece. She obviously has accomplished some self-reflection and clearly had the ability to articulate what she learned about how she ended up in that situation"
Diane is a sociopath and, given the opportunity, she will end up right back where she is today. What's the downside ? She's selling trinkets on Ebay for 1/2 of what her credit card company paid for them. 50% more than noting is still a win.
Tanta:
you misread my meaning and go too far with the implications.
I never said that one must have tchotchkes to be a person
what I am saying is that the video of Ms. McLeod allowed us to get a 'glimpse' of her life. Her home, what she looks like, how she talks, how she holds herself.
when you take in the whole picture, you get a gestalt of the person, even if the gestalt might be in error. as opposed to this:
Name: Ms. McLeod
Total Debt: $2XX,000
Debt on household: $255,000
Debt on CC: $YY,000
Amount spent on Z: $MM,000
in the same way, we have a gestalt of YOU because once in a while you give us stories about yourself sitting in your robe with bunny slippers reading your Amazon-thingamabob. does it even matter if you really have bunny slippers? no. it is that these details help to "flesh out" the black and white on paper, and make you seem more like a person as opposed to an ethereal blog-bot in cyberspace.
In the same way, you would all know a lot more about me if you saw a video of my home and my family. And you know what, I'm sitting outside on my wireless laptop on a beautiful deck on a summer day... and there is a chain link fence right behind me. I can alllllllmost reach out and touch it with the tips of my fingers if I lean over the railing
so I'm sorry if I don't agree with you that a shot of a chainlink fence means "trailer trash". And I'm sorry if I don't agree that a shot of 1000 tchotchkes means "tacky". And I'm sorry if it offends you that this woman smoked and they decided to put it on the tape.
because at the end of the day, REGARDLESS (or just maybe because?) of those things I AND MANY OTHERS find her engaging and witty and a PERSON.
And in many battles that is what we need. PERSONAL stories. It's one thing to hear "1.4 million households are at risk of losing their homes". It's another to see a little vigniette of a woman who is losing her house. And make no mistake, it is THE HOUSE that is most important to this woman. She sells all the other stuff in her house and states (paraphrased) that it was almost as fun as buying it...
but the day her house was (not) sold at auction was the worst day in her life.
so the HOUSE is important. And the HOUSE is hers. And the HOUSE is lovingly decorated in a certain style. And thus it is worth videotaping.
No villains or victims here IMO. Just like IBs, individuals making bad decisions... with leverage.
Actually the case is Diane is not just " not good with money", but mostly she is "irresponsible" in her behavior. And it is not the credit cards' fault. Let us face it, she does not even know how to use credit cards safely: there have been plenty of ways to make sure balances stay at a fixed rate well below 6%. GM just describes the case of adults behaving like uneducated 10 year olds (and I am being generous... I can think of several 7 year olds who know better).
Everybody will have to deal with unfortunate circumstances. That is the test : how you react to them and how you prepare for them. Parents are supposed to teach that to their kids. How many do? It is all about responsibility.
It is also clear that anyone can overspend, no matter how much money they make. I am sure plenty of people on Wall Street fell like crap because they "only" make a couple mil. a year.
So it is about being accountable to yourself for the way you live.
What is it that they want? things, rather than freedom? is it that there is such a lack of imagination that owning things has become an aim? is this what these people stand for?
They feel bad : answer they eat or shop. Do they stop to consider whether they will indeed feel better with another 10 pounds on, or an extra $1000 on their bills?
My view is it is obviously fine to take risks to get education, start a business or invest. But even that risk should be controlled: with "what if" scenarios and a well outlined plan including monitoring-evaluating the progresses of your situation and specific time frames. Again, being accountable to yourself to begin with.
Considering the epidemic of "self pity and self gratification" in addition to all the stories of greed gone wrong, it is hard to imagine too much near term upside for the financial sector indeed.
...These firms didn't have Tantas working the back room. or if they did they let Banker and Broker run roughshod over them.
Or maybe they did. I don't think these horrible lending decisions were enabled by a few bad UWs, sales mgrs or even a few bad companies. In order to have failure of this magnitude you've got to have an almost complete industry wide delusion. From the Broker/LO, to the UW at the lender, to the investor that makes the underwriting guidelines, to investment bank that buys the loans, to the mortgage insurer that insures the loan, to rating agency that rates the securities etc.
Forty years ago, no bank would have lent that woman money after she had accumulated so much debt because it would be, for want of a better word, stupid.
I'll go with "stupid." Which of course suggests that the lenders should have to live with the results of their stupidity just as Diane has to live with the results of her own mistakes.
And what is pissing everyone off is that it appears that while Diane will take the consequences, the lenders won't. It gets all caught up with assumptions about the extent to which Diane's personal failure doesn't "hurt" anyone else but the failure of large corporations "hurts" the economy, and so on.
What is troubling me lately is the sense I get that a lot of people think the answer is lender paternalism, rather than convincing lenders that they are not insulated from stupidity.
That was why it bugged me that Diane is such an "easy target." As if somehow having the CC lenders act like bartenders now have to--legally responsible for cutting you off when you've had too many--addresses the question of why simple lender prudence doesn't already have the same effect (because there's too much moral hazard for lenders).
I find myself in agreement with Robdawg about
the cigarettes and Yohoos only because my taxes will probably be paying for the unhealthy choices.
However, I must add that any of us could find ourselves in her predicament despite our best
plans or intentions.
I didn't start working for a bank at the age of 15. Back then I was still drinking bongwater and listening to ABBA.
Mortgage lending wasn't my first job out of college, either. I wish I could say that I got sucked into it because I was too young to know better, but that would be a lie.
What is troubling me lately is the sense I get that a lot of people think the answer is lender paternalism, rather than convincing lenders that they are not insulated from stupidity.
I don't think any convincing will be necessary. I predict that within eight years, the bankruptcy code will be amended sot it is more in favor of debtors than it was even before the last "reform." It will almost certainly include a provision making mortgage debt subject to revision.
If Obama is elected and the Democrats increase majorities in both houses, make that two years.
At the same time, the secondary market for asset-backed debt will not recover and in fact will continue to contract.
I didn't start working for a bank at the age of 15. Back then I was still drinking bongwater and listening to ABBA.
I remember you voicing 'Free Man in Paris',
back in the day, next to the Iowa River.
We were skipping an art history lecture on ...
Marcel Duchamp ... of all subjects, and that staircase ordeal.
Ah, those were the days!
Conjure is aware of a solution to Diane's problems: it's call "D-IX," or "D9."
Invented by German Army doctors during World War II to enable soldiers to perform superhuman feats of endurance, D9 is a tablet containing amphetamine, cocaine and a morphine derivative.
Conjure says that D9 was "vastly superior to plain vanilla Pervitin," the Wehrmacht's favorite amphetamine.
With federally-subsidized D9, Diane could work three jobs and have that debt paid off in no time at all!
Assuming she has two of them, Diane could also sell one of her kidneys to a Japanese organ broker!
Remember, all of you optimists out there, the glass is never half empty, it's always half full!
I'd be willing to bet that the knick-knack collection also signifies "homey" authenticity to Diane.
I couldn't have said it better myself. And so you see, in the end, the collections are a part of Diane, and thus including them in the video is appropriate.
I have no idea why the latter are PERSONS to you but the former are not.
this is where you lose me. I said nothing of the sort. I said the tchotchkes are what makes DIANE a person. it's not a prerequesite to be a person.
I myself have almost no "things". so you could say that I'm defined by my LACK of things.
And so a videotape of my life would be very different.
You'd hear GM's voice "Dr. YTL is a blah blah blah"
But then you'd see that my home is in a working class neighborhood that gentrified. The exterior would show a very simple home, well kept up but not ostentatious. the interior shots would show a meticulously clean home with things that are well maintained but nothing of much monetary value. That might shock people if GM mentioned my household income or net worth...
and you'd see me, a 30 something biracial guy with a shaved head and a smile who talks way too fast and way too much, but in a way that's nothing like what you expected when you saw him. and you'd think: this guy's a doctor? he sure doesn't look like one.
I'd be wearing a backwards baseball cap and my shorts and a t-shirt and flip flops using my laptop on my deck.
and if they taped me during the day they'd show me biking around all the trails of Minneapolis and playing like a kid with kids in a kiddie pool (aged 12, 8, 8, 7, and 5.)
and you would probably learn something about me as a person.
but then other people would castigate the film and say:
"Look, geez, they use THAT GUY to typify doctors? I mean, c'mon look at him. And look at that house? And did you see his Target shirt and his backwards cap... what is he a gangster doctor or something? or are they trying to insinuate that black people are doing well in America? Because they're not you know."
I see Rob at least admits that it is the Dianes of the world who are "responsible" for the fact that he can get very inexpensive "convenience credit."
What surprises me is that no one is willing to take the side of the argument that says the Dianes of the world are the backbone of our consumer-based economy. You know, all those entrepreneurs who form small businesses to sell tchochkes couldn't be the backbone of the economy unless somebody kept buying tchochkes. Don't I remember a certain rather well-known politician making the comment not too long ago that eBay was some kind of economic model we should all feel warm and fuzzy about? Maybe I dreamed that . . .
I do seem to remember that seven years ago this fall, going out and shoppin' till you drop was a patriotic act. I don't remember any warning at the time about credit limits.
if the point is to cut off borrowing before it ends in disaster, then you have to cut off more than a few borrowers who don't happen to think they're anywhere near disaster yet
Um, who is "you", exactly?
This strikes me as an awful lot of fuss about nothing. If "you" lend to someone who cannot repay, then you are stupid, and your punishment is that you do not get repaid.
This looks like the most self-correcting "problem" in the history of the universe. Two parties enter a contract neither should ever have entered; both suffer in accordance with that contract and existing law; what's the problem?
I mean, what is the point of spilling all this ink on stories like this, both for you but especially for Gretchen? Is the idea to tell lenders "see had you not been so careless you would still be in business"? Or to fire people up to seek a bunch of legislation to prevent activities which are already never going to happen again?
Simply let everyone get precisely what she or he or it signed up for. Simple, effective, fair, and just.
Tanta, I'm sorry, but overspending is not a character defect. Overspending may be a bad habit, or a psychological crutch, or a symptom of depression, but it's not a character defect. Meanspiritedness is a character defect. Lack of empathy is a character defect. Pettiness is a character defect. But not overspending. I've never found that decency to one's fellows could be determined by looking at someone's credit card payment history.
I'll go with "stupid." Which of course suggests that the lenders should have to live with the results of their stupidity just as Diane has to live with the results of her own mistakes.
And what is pissing everyone off is that it appears that while Diane will take the consequences, the lenders won't. It gets all caught up with assumptions about the extent to which Diane's personal failure doesn't "hurt" anyone else but the failure of large corporations "hurts" the economy, and so on.
What is troubling me lately is the sense I get that a lot of people think the answer is lender paternalism, rather than convincing lenders that they are not insulated from stupidity.
I doubt any sensible person would disagree that lenders should suffer from the consequences of their stupidity. But the real responsibility lies with the lender side of the equation and not the borrower. Borrowers would and will probably take whatever they can get; to expect them to decline the caviar they are offered is too much to expect. It is the lender side of the matter that needs to be corrected. When that is done, the problem will large disappear. Perhaps you might make some suggestions about how to stick lenders with the responsibility for their own stupidity. That would be useful.
Mr. Mortgage has one of his best videos up on the Pay Option Arm scandal. If you put it all together, you can see why problems happened and how it's going to get much worse.
Banks loved pay option arms become the negative amortization let them book huge amounts of phantom income.
80% of people with these mortgages have chosen the lowest possible monthly payment, with highest neg amort.
A lot of these mortgages were 90%+ LTV at the start. Now, with neg amort. and falling prices, he says some of them are 200% underwater (value is one half loan principal).
When the limits are hit (such as 115% of original mortgage principal) some of these people will be facing a doubling of their monthly payments.
Come on. You really expect people to pay twice as much per month for a house that's 200% underwater? People made the smart choice to take these loans at the top of the market. Now, they'll make the smart choice to bail. Stop feeling so sorry for smart people doing the right thing for themselves.
It's not even immoral anymore to bail on a way underwater mortgage.
Such fees and interest rates are a growing burden on Americans, especially those who rely on credit cards to make ends meet.
How do you rely on credit cards to "make ends meet"? Isn't that function usually filled by somethng called "income"?
This after listing the absurd interest rates this woman is paying on her credit cards. Good lord woman, read your statements - the interest is broken out in separate line items at the bottom of each statement.
(Even so, once upon a time we had usury laws.) The movie "Maxed Out" is instructive on the games played by credit card companies, but it takes some stupidity on the part of the customers to get this royally screwed.
Isn't it true that when the limits are hit they will be facing a doubling of their monthly payment IF they had been paying the full amount instead of choosing to pay the least possible? So in reality they would be facing a higher multiple on the payment?
The way I see it, if 80% are choosing to pay the min, 79.5% of those will default.
I believe that is why the nice mr paulson wasn't so upbeat this morning on the TeeVee.
This looks like the most self-correcting "problem" in the history of the universe. Two parties enter a contract neither should ever have entered; both suffer in accordance with that contract and existing law; what's the problem?
Nemo:
I would agree with you FULLY, except:
-when the banks take their deserved losses then they may go under, and then the FDIC must bail them out. This is not a problem SO LONG AS the FDIC has adequate funding. Which by the way many people are worried about. If the FDIC doesn't have enough funds then the next stop is the TREASURY. so the taxpayer may be taking the loss as well
-The banks made these loans and sent them to fannie and freddie. if you haven't noticed, we may be on the hook for up to $5 BILLION. so again, I would state that we as a country DO have a need to "monitor" these private contracts
-the banks made these loans and then packaged them and there may be a lot of fraud there. and a lot of Pension funds bought these through securitization. Thus, our Pensions are at risk
-the banks made these loans and sold them through Fannie/Freddie to overseas central banks. Now that the gig is up we may have increased borrowing costs because of these.
-the banks did all sorts of shenanigans using these loans including Off balance sheet SIVs and what not. now that they're blowing up, they are asking for federal backstop (Bear Stearns)
so in the end: the problem is that the lenders have made this OUR problem
and since it is our problem, I feel we have a right to give input on HOW they can lend.
The visitor count must be malfunctioning. It goes down every time I refresh.
IMO my statement above is more interesting than this sob story - can we get back to discussing inflation vs. deflation? Which way will it go, Tanta? Do we hyperinflate or deflate? Are we more like Zimbabwe or Japan?
"What surprises me is that no one is willing to take the side of the argument that says the Dianes of the world are the backbone of our consumer-based economy"
LOL. All the bears believe the debt-fueled consumer based economy is the source of all that ails us. I have no problem with people spending their incomes minus something they set aside to pay for my medical care. I don't think Diane is prepared to help fund socialized helth care, or even contribute to her own, unless she can get $100000 a piece for slightly used snow globes on eBay.
It has seemed to me for a very long time that damned near every conversation we try to have on this blog about newspaper accounts that involve specific examples (namely, an individual's story) get immediately bogged down into whether the individual in question is "sympathetic" or not. "To blame" or not.
Honestly? I find that symptomatic of intellectual childishness. Examples are useful because they allow you to analyze one thing in depth, and then test the results of that to see if it fits in with whatever larger, impersonal data or trends or abstractions we are confronted with. I certainly would never deny the potential analytical power of looking at an example.
But I have no desire to confuse my emotional responses to "true life stories" with analytical purchase. I specifically mentioned the fact that the woman struck me as likeable because I think we should always be aware of our own emotional responses to people, and how they may or may not color our analysis of the "big picture" view the journalist is trying to get us to take. But beyond that, it's perfectly immaterial whether I like Diane or not. This isn't a soap opera. I hope Diane doesn't care whether I--some stranger on the internet--likes her or not, because she shouldn't.
I remain convinced that your response to the video, while perfectly legitimate, is not what its creators and editors had in mind. This only proves the fallacy part of the "intentional fallacy." But I suspect the typical reader of the NYT business pages is a whole different socio-economic demographic than Diane. Actually, either this blog's readership also is, or way too many of you lied out your ass on the last advertiser survey we did. According to that, the vast majority of you are a damned sight richer, better educated, and upper middle class than I am.
Nothing you've said really changes my view that "personalizing" economic discourse is at least as dangerous as it can be illuminating, because it so often degenerates into arguments that claim to be about economics but that are really about taste.
"I feel we have a right to give input on HOW they can lend."
Yearning, you have a right to say anything you want, so long as you do what you're told.
That's the way this country works. If Senator Grassley and the credit card companies had their say, Diane would be availing herself of D9 and the Japanese organ broker to pay her bills.
You can argue about who screwed the pooch but, at the end of the day, it's going to be the little people who pay the bills.
Haven't read the thread, but all too many of my clients are like Diane.
Getting a lot of money is a good job can be a bad thing for some people, it just sets them up to borrow more and more, and when something bad happens they are buried under a mountain of debt.
People really really think that money will make them happy and more and more money will make them happier and happier. Doesn't matter where or if they go to church, what they really worship is money. This really isn't so and someone should say so. Enough money makes you happy. Not too much and not too little.
There is a book called Class, which may not still be in print. It is worth a read. Just to make the blindingly obvious once you see it, obvious.
Well, also, the paper can't criticize the spending of the uber-rich or their advertisers wouldn't like it, so we get to focus in on Diane.
I wonder if Diane realizes how contemptuously she has been treated.
alifornia, Florida and Texas, the U.S. states with the most Starbucks Corp (SBUX.O: Quote, Profile, Research) stores, will see the most shuttered as the coffee chain axes more than 600 underperforming outlets in the coming year.
Starbucks is closing 88 locations in California, a loss of 5 percent based on store counts as of the end of March.
According to a list of store closures released on Thursday, Florida will lose 59 stores, or nearly 14 percent of overall outlets, while the coffee seller's move to shutter 57 Texas locations will lower store counts there by 11 percent.
"I've never found that decency to one's fellows could be determined by looking at someone's credit card payment history"
I donate modestly to the American Cancer Society every couple of months online using my credit card. I am getting ready to stop though, since they are on some kind of rampage to punish me with weekly phone calls for more money. I told them if they don't quit calling, I will quit contributing. We'll see if they can act sensibly as an organization...
mp writes:
Conjure is aware of a solution to Diane's problems: it's call "D-IX," or "D9."
Invented by German Army doctors during World War II to enable soldiers to perform superhuman feats of endurance, D9 is a tablet containing amphetamine, cocaine and a morphine derivative.
Conjure says that D9 was "vastly superior to plain vanilla Pervitin," the Wehrmacht's favorite amphetamine.
With federally-subsidized D9, Diane could work three jobs and have that debt paid off in no time at all!
Assuming she has two of them, Diane could also sell one of her kidneys to a Japanese organ broker!
Remember, all of you optimists out there, the glass is never half empty, it's always half full!
mp | 07.20.08 - 6:04 pm | #
the vast majority of you are a damned sight richer, better educated, and upper middle class than I am.
Count me in as your inferior: $11/hour full-time, apartment renter, no car or driving for 3.5 years, very poor sensory motor skills, mental illness, non-smoker, anorexic, near-sighted, perpetually 1 credit from college BA, no future. Now please! Will it be inflation or deflation?
As an aside, obesity is a risk factor for hysterectomy. (this probably isn't spurious. Increased levels of fat causes increased production of estrogen, which can cause increased risk for uterine cancer among others)
Cooper R, Hardy R, Kuh D. Is adiposity across life associated with subsequent hysterectomy risk? Findings from the 1946 British birth cohort study. BJOG 2008; 115:184-192.
That said, I think middle and high socioeconomic status is even more strongly correlated with a belief that "fat and poor" means
A- "hey brought any misfortune upon themselves because they are idiots"
and/or
B- "they don't know better".
I know I find myself slipping into this fallacy more than I should. Sometimes I even catch myself thinking both A&B at the same time, (in which case I know I'm the idiot)
Thanks for the post. I thoroughly enjoyed it, and the comments. Most of the people I know are either on their way to becoming Mrs. McLeod or coming out of the other end of it, debt free. They didn't spend it on the same types of things necessarily. Some did Mercedes, and Tank watches and Couture. Some did vacations and second (and third and fourth) homes. some did Vegas.
I tasted this very slightly back in the 80s and got burned and have been debt free since. Nothing to this extent.
what irks me to no end is the way the system (retail) PENALIZES people who pay with cash (or debit). I cannot stand it when I am offered an additional 10% off (because I almost always buy stuff off the Sale rack in the back) if I apply for the in-store credit card, which will automatically be approved (they know nothing of my credit or employment history).
Of course, I could take the deal, then pay the card off the first month and cut it up and get the extra 10%. I know that, But the Mrs McLeod's wouldn't, you see. And a part of my wonders if I wouldn't hold it in the card folder of my wallet "just in case".
I do buy impulsively. It is not something I am proud of. But I rarely get as far as the parking lot before I come to my senses and return it to the store. I literally get about 100 yards out into the mall before I realize that making that purchase just jeopardized my paying rent, or the phone bill, or something. That is an interesting phenomenon. And it lurks at the corners of this story.
I suppose it is a character flaw of mine that I cannot resist making the initial purchase. Some lack of knowing the value of money or something. But I do know the value of living within my means. I cherish it.
Like Kurtyboy I am only better off in the sense that I can sleep at night. I still remember the gnawing anxiety of being so far behind in debt, and the shame of not knowing how to get out of it.
Actually, either this blog's readership also is, or way too many of you lied out your ass on the last advertiser survey we did. According to that, the vast majority of you are a damned sight richer, better educated, and upper middle class than I am.
Based on how many times I've read the phrase, "I think i'm going to nibble some SKF" on this blog, I'm thinking your ad survey probably was pretty accurate. I don't hang out with the rich, well educated upper middle class in meatspace and I can assure you I have never heard that phrase uttered in person.
I would've found this article to be much more useful if they had found someone who was making $250K a year who was in well over their head due to excessive consumption and bad decisions. However, that might've made a bit too many of the Sunday Times readers spit out some coffee and start listing their flat screens on Ebay, so they profiled someone unlikely to get the sunday times on a subscription basis.
OT Sunday Times note: I don't get the Times any more since I have a reaction to Judith Miller like the one Tanta has to GM. But I do get to see it delivered on my street in the early AM. The current delivery guy drives a brand new Suburban. I still haven't wrapped my head around that one. More pain on the way if people are taking paper routes to pay for the suburbans.
FWIW - my world is full of the likes of Diane. After watching the video I think I'd rather spend a weekend at outlet malls with her than at an economic seminar with Gretchen. But maybe that's just me.
Diane has the bankruptcy card to play. One reason why America is a great country.
Then she can either do Dave Ramsey or Suze or whatever. Or else just borrow/spend her way back into debt.
She was going to spend as much as anyone would let her. The fact that she was able to borrow as much as she did is sort of immaterial. It would have been too much. BK clears the decks (mostly), so once again, hard to feel like it matters.
I doubt that she could actually get any of those credit card offers -- lenders may be dumb, but there are limits.
I have a question about the article that accompanies the video. Why does the graph compare debt to monthly savings? Shouldn't debt be compared to assets?
Overspending chronically is not a character defect. Expecting others to pay for it may be.
Lack of empathy is indeed a character defect: sales tactics are not exactly based on empathy. Seems that Diane was a good target: for both the CC lenders and the shops.
But Diane's case is only about a little bit of money and she had a choice. Plenty of people in the world are in situations where they may have no future to hope for, by no fault of their own. I'll save most of my empathy for them.
"I cannot stand it when I am offered an additional 10% off (because I almost always buy stuff off the Sale rack in the back) if I apply for the in-store credit card..."
With federally-subsidized D9, Diane could work three jobs and have that debt paid off in no time at all!
We've already got the Prozac to make people better more compliant workers. My mother just retired from being a first grade teacher. She told me how surprised she was when she went out to lunch with a group of her fellow teachers and they all took some Prozac like substance at lunch. All paid for under the insurance plan. Easier to teach today's ADD crowd if you are on the drugs. Very lucrative for Big Pharma. Everyone is happy. And the kids are all on Ritalin.
"I mean, what is the point of spilling all this ink on stories like this, both for you but especially for Gretchen? Is the idea to tell lenders "see had you not been so careless you would still be in business"? Or to fire people up to seek a bunch of legislation to prevent activities which are already never going to happen again?"
Heh. When I see the words "never going to happen again" in relation to a disaster of this magnitude, I am reminded of the "farces" of human history and the phrase, "Mr. President, we must not allow a mine-shaft gap!"
I think theories that the NYT wouldn't profile rich readers with too much debt because it would hit too close to home (and therefore lose readers) is way off base.
Look at Law and Order - the average viewer is far wealthier than the average American.
And nearly every episode involves a: stockbroker/doctor/lawyer
bludgeoning/stabbing/overdosing
a model/stockbroker/conceptual artist/rich homemaker.
Everybody likes to hear about people like them - most especially when it involves misfortune.
I was in a store the other day, the kind full of knick-knacks for the home. A SUV load of ladies drove up and got out and each got a cart and started just piling useless little items in their cart. One of the girls was fidgety and kept talking about how she was going to quit smoking soon but she wanted to go outside and light up. One of the other ladies was fidgety as well, she kept grabbing things and would start putting them in her cart and then would stop and say "No, I am watching my dollars" and put the item back.
As I was leaving later these 2 ladies were outside waiting for their friends to finish shopping. One looking soothed at having a cigarette and the other looking longingly at the store wanting to shop but trying to kick that habit.
Everybody likes to hear about people like them - most especially when it involves misfortune.
Look at Law and Order - the average viewer is far wealthier than the average American.
And nearly every episode involves a: stockbroker/doctor/lawyer
bludgeoning/stabbing/overdosing
Do you have some stats on this? I'm willing to bet it is more like the average viewer likes seeing stockbrokers and lawyers beat to death via blunt trauma. "Hey look, that lawyer's blood splatters just like us regular folk"
I really think the "class cues" in the video are just too heavy-handed to miss.
There you go again, Tanta. I didn't see any such class-cues in the video. I saw a middle class person, a smoker, yes, but with a nice tidy suburban home. She could be everywoman.
Perhaps you being a woman makes you read so many cues into that video that average geek men like me just don't see.
based on comment frequency there are obviously more than 17 people here. I'm wondering if Paulson has used the Patriot Act to take over the CR traffic meter? "nothing to fear here, only 17 people at Calculated Risk"
dryfly writes:
FWIW - my world is full of the likes of Diane. After watching the video I think I'd rather spend a weekend at outlet malls with her than at an economic seminar with Gretchen. But maybe that's just me.
I hope it's just you. Frankly, I would rather have a trip to the dentist than spend 5 minutes with that self indulgent moron.
You see, I can have sympathy for the woman, and yet still acknowledge that she is, indeed, a self indulgent moron. Pretending she is likable, or interesting, is just asinine.
Nothing you've said really changes my view that "personalizing" economic discourse is at least as dangerous as it can be illuminating, because it so often degenerates into arguments that claim to be about economics but that are really about taste.
I think theories that the NYT wouldn't profile rich readers with too much debt because it would hit too close to home (and therefore lose readers) is way off base.
I agree entirely.
I just think that if the NYT had profiled a richer, more "tasteful," more upper middle class borrower who spent too much and then crashed and burned when the cushy Wall Street job with the bonuses went away, GM's overlaid commentary would have made more sense. You know--"they earned a lot and spent a lot, but then they lost their jobs and the $2MM house in the Hamptons had to go to FC."
The video fails for me because the reporter finds someone who doesn't fit that "demographic," goes out of her way to make a video that clues us in that she doesn't fit that demographic, but then trots out the same analysis that works best for a different kind of borrower.
I didn't watch the video, that stuff bores me death. But the commentary here is a very interesting discussion.
When people talk about class they aren't really talking about money, they are talking about behavior - which comes down to knowing how to act. Society has unspoken rules about "how to act" that provide very clear distinctions. The terms you see are "poor breeding" and "hopelessly middle class." Social class is defined by behavior. Everyone knows somebody wealthy, but of low class. Most of us also know somebody who is on the low financial scale but has impeccable manners.
Class is about behavior, not money.
The smoking is not so much an indicator of lack of class, but an indicator of lack of impulse control. Diane's problem in life is that she lacks impulse control -- probably because she wasn't taught it as a child. Retailers love people with no impulse control (who they can't stand is those of us who spend 4 hours online researching and price comparing and know exactly what we want and how much we will pay for it.) Some people will never learn impulse control and we have to lock a lot of those people up, but someone like Diane could turn her life around tomorrow.
Bullshit. She would definitely fit the obese criteria. When someone is morbidly obese, they can't do things like wipe themselves.
I would never criticize someone like that to her face, and I don't make a practice of judging people who leave me alone, but this nonsense of trying to make a virtue from her situation is way beyond silly.
I believe, based on my knowledge of songs available for quarters in my favorite establishments, one of the most common being "Dueling Banjos", there is only one "L" in Dueling.
Was that a 40oz. bottle of beer next to her at the end of the video?
I know that this may sound insensitive, but I really could give a rat's as_ about a woman named Diane McCleod. We all have our own problems even though even though many of us have lived within our means.
I remain convinced that your response to the video, while perfectly legitimate, is not what its creators and editors had in mind
Possibly, but that still remains conjecture. You know more about the NYT and GM than I do. I rarely if ever read either her or the paper. However, you must then admit that your reaction to the snippet was NOT necessarily based on the video itself, but instead on what you believe was the intentions of the makers of that video.
You then pulled out parts of the video that YOU found offensive based on what you felt the NYT/GM was doing
I am not so sure. I feel that if the NYT really wanted to make a caricature of the borrower they have 100's of thousands of other borrowers they could have used that would have looked more "tacky".
I am ONLY rating the video that I saw. I am not rating the motivations of the movie-makers because I know nothing about them. and your argument does make sense to me: that there is this horrible elitist NYT and GM who are trying to fit poor Ms. McLeod into their story. but it isn't 100% proven.
so I just wanted to put up a counterargument to your claims. it is very rare that I disagree with you. I have no intention of changing your mind... I am not sure I could ever change your mind about anything... instead I am giving my thoughts on this, so that others have another lens through which to interpret the video.
and I feel that I am not alone in my assesment of the video. so although this may harm Ms. McLeod in the upper crust snotty Manhattan jet-setter set, it will also endear her to many people like me.
and I am exactly the kind of demographic the NYT salivates over. Extremely high income, high intelligence, liberal, blah blah blah. so not all of "us" are the same. in the same way that all "middle class" people are not the same. and all "working class" people aren't like Ms. McLeod.
.
Sorry, no stats. FWIW, a friend is a writer on the show, and that's what she told me.
I'm sure there is a fascination with the "person like me gone bad" when it comes to fiction. Very different from the "Person like me gone broke" reality show called the US of A.
as to whether or not we "should" have such a video is an entirely different debate. I agree with you that they can do more harm than good. but they also can increase awareness. And similar tacts have been used with success. for instance: the Matthew Shepherd story. few people cared about gay bashings but seeing that story changed a lot of people's minds. same with human rights issues.
(now I am not linking poor lending with gay bashing in terms of severity to our existence... only to say that using a person can be an effective method for social change.)
this can of course be abused or used for "evil" too (which is what you believe the NYT is doing if I understand you corretly)... such as the press showing the pictures of black convicts, but not white convicts... which leads to the erroneous assumption that all convicts are black
anyway: I gotta go and drink wine with some friends. I hate to leave now. I hope you don't get mad at me, because I'm really not trying to be a snot.
I'm just showing a different POSSIBILITY, that's all.
and like I said: I know nothing of GM or NYT, so you may have her pegged exactly right.
in which case: despite her elitism her article will still inspire others to do "good" because there are people like me who don't understand the elitism and take the story at face value.
The two big issues that are completely missed in both the Times and here is the fact that Diane is fuct, thanks to the legislation sponsored by the credit card industry regarding bankruptcy and who gets paid, and by the fact that a person has to work so many jobs just to get by instead of earning a living wage at one or perhaps two jobs.
The bankruptcy law is going to prevent a satisfactory outcome for Diane or the big bad lenders, because ultimately you cannot squeeze blood from a turnip, let alone a turnip being crushed from 5 directions at once. She will soon be in a homeless shelter or apartment struggling to get by and even more depressed knowing that she is making the American class transition in reverse, the hard way, and in the paper where snooty Manhattanites will mock her knick knacks and judge her smoking and other habits.
Secondly, the wages of American workiers have declined drastically since the 1970s and the prices of commodities have gone up severely of late. Tax burdens have been shifted from the wealthy to the poor and middle class and the shrinking middle class is desperate not to lose ground. At the same time, the middle and lower classes are the engine of consumerism in this country-rich people don't buy much stuff at Best Buy or Shopko. And recent reports show that while retail is suffering a 17 percent increase in bankruptcies this year, you have to wait years for a gulfstream personal jet or a custom yacht, which tells me this country is upside down and sinking. Luckily, Paris Hilton hasn't read HG Wells or she might not be so prominent in public-the Morlocks are always hungry, and we could return to that 1920s-1930s lifestyle damn quick, where kidnapping rich people is a career track. We are two nations right now, and the class war has wound up with the wealthy winning.
After watching the video I think I'd rather spend a weekend at outlet malls with her than at an economic seminar with Gretchen. But maybe that's just me.
No, it isn't just you.
I'm happy to confess that if someone made me live in Diane's house, my head would explode. I'm just like that. I respond badly to too much visual busyness. The fridge magnets would ruin every one of my mornings.
But would I rather hang out with someone who is capable of satirizing her own habits of denial by acting out that little scene where she shuts the phone into the dishwasher, than with GM? Absolutely.
I'm sorry, but my response to GM's persona on that vid is that she's the sort who would answer a call during an appointment I had with her, spend twenty mintues of my time dealing with her personal business down to the last jot and tittle, and then expect me to admire her because she never procrastinates or puts unpleasant things off.
The issue of "who is at fault" seems so beside the point.
However, reading through the thread (which is my own damn fault), it seems to be the central issue of interest. Either is a fairly abstract way (the original post), but tending to immediately get to the more visceral judgments.
I suppose my personal prejudice is to start at the top (those who bought crappy asset backed securities) and work down the chain with the borrower at the bottom (the demand for credit for those that can't repay is infinite).
However, it has been pretty well aired out by now, so what more is there to say about this?
We were at dinner at the FIL and my BIL and SIL (Both attorneys) were holding forth on one of their secretarys misfortunes. The women in the video is remarkably like the person they were discussing. Of course it was her fault and the BIL went on about how if she let him we could manage her life and money soooo much better. My wife got up and walked out.
Self-righteous and elitist yes. Ironic also in that they bought a 1.5 million house at the top of the market. Both work in a field that requires lots of credit to create the deals that fund their bonuses.
I know from personal experience that women like these, and men, will give willingly to those they see as less fortunate.
"Holiday In Cambodia"
So you been to school
For a year or two
And you know you've seen it all
In daddy's car
Thinkin' you'll go far
Back east your type don't crawl
Play ethnicky jazz
To parade your snazz
On your five grand stereo
Braggin' that you know
How the niggers feel cold
And the slums got so much soul
It's time to taste what you most fear
Right Guard will not help you here
Brace yourself, my dear:
It's a holiday in Cambodia
It's tough, kid, but it's life
It's a holiday in Cambodia
Don't forget to pack a wife
You're a star-belly sneech
You suck like a leach
You want everyone to act like you
Kiss ass while you bitch
So you can get rich
But your boss gets richer off you
Well you'll work harder
With a gun in your back
For a bowl of rice a day
Slave for soldiers
Till you starve
Then your head is skewered on a stake
Now you can go where people are one
Now you can go where they get things done
What you need, my son:.
Is a holiday in Cambodia
Where people dress in black
A holiday in Cambodia
Where you'll kiss ass or crack
Pol Pot, Pol Pot, Pol Pot, Pol Pot, [etc]
And it's a holiday in Cambodia
Where you'll do what you're told
A holiday in Cambodia
Where the slums got so much soul
"The video fails for me because the reporter finds someone who doesn't fit that "demographic"..."
Well, that's root of all GM's problem. She is congenitally incapable of writing anything other than a morality tale - facts be damned.
While this trait is maddening, it also sometimes a strength. Since she is always looking for corruption, she sometimes finds it. And the histrionics ensure that the topic gets attention. (NB- I'm hardly excusing her, but I think this trait explains why she has a good nose for news. It also goes some way to explaining why she wins prizes (along with the fact the members of the Pulitzer committee largely have no clue about financial issues - financial reporting is about as glam in the profession as, well, Ms McClead)
What's all the hub-bub? The lady has a somewhat tragic story but takes the responsibility. Most of these stories stem from a lack of understanding of basic finance.
Some of us older boomers got lessons from mom and pop on how to shop and why you don't buy what you don't need. Extended families back in the 40's and 50's exposed you to alcoholic uncle Fred, great aunt Em on the poor farm and why debt if not paid was a disgrace that could lead to suicide. Real life lessons.
Seems like the cycle will continue with stories about how mom and pop lost the house in 08 and had to move in with relatives in their doublewide. Lessons learned to be repeated every few generations.
The wife has run a Montissori pre school and head of a non profit grade school for the last 30 years. It was withgreat anguish that I finally persuaded them to teach common, everday economic survival skills to the little rug rats. We'll see if it helps.
I'm not holding my breath. Herding animals including us two legged varities seem to want to graze the same pasture. Everything is OK til you let Tooncies drive your car.
PS2: One thing I can sympathize with is the spending spree. 14 years ago my Mom insisted on my staying over her house after I had shoulder surgery. I woke up the first night in a medicated state and bought "Mega Memory" from an infomercial. Given my usual spending habits, this was a huge abberation. Alas, $150 lost (at least I think that's what it cost..can't remember).
Tanta/CR,
I think that you have the wrong reponse here.. IMHO, Gretchen is on to something..
My friend earns a pretty decent salary as a programmer but has never been able to shake off his credit card debts .. If you were to see his profile, you would have a hard time imagining him as a good candidate for the cc companies but he probably singlehandedly has been responsible for keeping atleast a couple of employees of the cc companies employeed.
Seems like the cycle will continue with stories about how mom and pop lost the house in 08 and had to move in with relatives in their doublewide. Lessons learned to be repeated every few generations...
Ross
Yes, definitely. I was born in 1958 and people still acted like the 1930s just happened. I remember when I was like 5 or 6 and the old TV we had been broken for several months and my Mother went out bought a the smallest b/w set you could find. When my father came home he was livid. It is one of maybe a half dozen times he was angry. He felt they hadn't saved enough. "What if x happens? What if Y happens?" And he had a degree and a secure job for 15 years by then.
Apparently, people like Diane forgot that X and Y can happen.
How about a little mud wrestling or something, us lower class roughs are getting a little bored over here. Bet you one thing we tend to have a lot more fun.
Wonderful article. There are those of us here who really appreciate insightful writing. Your analysis is spot on, in my opinion. The "judgers" and the micromanagers will be with us always. I try to avoid them myself. I've also had to work very actively to purge these traits from my own personality.
Under normal conditions this borrower would have told this to a reporter 4-5 years ago. What is different this time is that she was able to get even more credit than anytime in history and so the hole dug is even larger.
It is a person who was always going bankrupt the credit bubble just delayed the reckoning is all.
She needs to follow the money>>> She needs to ask, where is that stuff going, why is it going there, and hoe the hell can I be there before it drops from the sky???
"Apparantly, people like Diane forgot that X and Y can happen."
And why should people like Diane not forget? Because after she successfully BK's out, the cycle starts all over again. If the game does not have pawns it cannot have a knight.
In the U.S., you get very little bonus points for playing by the rules.
There was a famous impulse control study of some years ago. Little kids were left with a sweet and told not to eat it until the tester got back and then they would get 2 sweets. Years later the kids who could control their desires were found to have done much better in life (I forget how) than the ones who didn't. Maybe you can teach this and maybe you can't. I really don't know.
I have problems with depression myself. Due to side effects of drugs prescribed, I finally consulted my natural medicine book, which recommended, among other things, omega 3s. Really works for me. In fact, if I forget to take my fish oil tablets, I can feel this weird feeling creeping up on me. So now I am addicted to fish oil tablets. (Yeah, yeah, pharmaceutical grade.) Maybe my distant ancestors ate fish all the time and not eating it has caused a maladaptation. We Americans are the people who couldn't get on in the the places that we came from. We came here, and think that because we were financially successful (previously), that all problems were solved. Well, they weren't. Is it so suprising that having abandoned our cultures and our former eating habits, and the social controls that evolved where we came from that we have problems?
The Times piece is a thin shadow of the 'Maxed Out' film, which lays out in painful detail why the QVCs, the real estate industry, credit card companies burned up Dianes like jet fuel. And yeah, the Dianes allowed themselves be burned but that's another fascinating, complex and utterly overlooked part of the Times piece.
I was one of the last college-going generations to be refused credit cards till I could get a full-time job and prove myself worthy of credit.
All that changed when CC companies were invited to campuses to push credit cards-- even to pre-college kids. This is a generation that grew up thinking lots of debt is normal and credit is an entitlement.
It's like that meth addiction expose that showed addiction and use spiked when the purity of the drug went up. Sure, the addict is to blame, but the drug plays a very powerful role.
Smoking and obesity (yes, she is obese) are causes of health problems later in life. There is no distinction between mildly overweight and morbidly obese. Unless you're in shape, you're fat. This is a binary definition, there is no grey area.
Tanta, it's not "fashionable these days" to sound the clarion against obesity and smoking. Doctors have been saying the same things for over 3 decades, but nobody pays attention to doctors until it's too late. Then, they demand an instant fix from a doc.. and are shocked to find this condition can't be altered.
There is no pill, no operation, no treatment, no prayer regimen that fixes 50 years of poor treatment of the body's internal systems, and there never will be.
If you're fat, you're putting hundreds of extra PSI on your joints every minute you're walking. If you smoke, you're pushing shards of glass through your windpipe every second. OF COURSE this causes problems - not immediately, but after some number of years!
Look, the human body is essentially similar to a very complex car. The body of a person who smokes or is fat is equivalent to a car coming off the Yugo production line. A marathon runner, on the other hand, is a Honda.
Yes, I'm sure we're all familiar with one guy who drank Thunderbird and ate Popeye's Fried Chicken every day until the age of 110.. however, on the average (which is the only way medical statements are remotely relevant..) people who are fat or smoke will cost more per medical intervention - and even after the costly treatment, they'll still die sooner than healthy people.
Rant off.
Now if only we can go back to educating Gretchen - and the rest of the financial newsmedia around the nation.
Really the lenders are the stupid ones, would you lend her ten of thousands of dollars sight unseen.
Thats why there is a financial crisis.
The major bank's management allowed this to happen, profited immensely from it and knew it was unsustainable. But $10-15
Million a year in bonuses kept the party going along enough to cash out big.
And yeah, I was born in '46 and really heard about the depression a lot. My grandma was incredibly cheap. As I posted elsewhere, they lost some money, but really didn't have it bad at all.
People think I'm cheap. You never met my grandmother I say. We got a big new tv after hurricane Andrew. A copy of years ago, it broke. It was so heavy and we had a couple of other tvs so just left it to sit in its cabinet with the doors closed. We could have charged a new one on the ole credit cards, but just didn't. Now a new tv became necessary so we finally bought a replacement. Having grown up in the 50s, I'm here to tell you that it was ok for middle class white folk.
Unless you were black, or were gay, or otherwise just didn't conform. Also, there were still real neighborhoods, with neighbors who didn't hesitate to yell at you if you did something bad, with stuff you could walk to and a functioning mass transit system (in Balto) and a fair number of well paying, if polluting jobs in the manufacturing plants. Both the good stuff and the bad stuff are gone now.
My children didn't get spoiled particularly, but they also didn't get first hand stories of GD I. They don't quite believe how bad it can get.
"Based on how many times I've read the phrase, "I think i'm going to nibble some SKF" on this blog, I'm thinking your ad survey probably was pretty accurate. I don't hang out with the rich, well educated upper middle class in meatspace and I can assure you I have never heard that phrase uttered in person."
I put my whole 401k into skf @ $110. Sold at $190. Its looking pretty good again.
All these sob stories about homeowners losing their homes and then how the govt. will or should step in to "save" them. Oh, how pitiful. I'd love to see some sob stories about renters. Don't they count? Don't they play a role in supporting the economy? Don't they also deserve a bailout?
I read a lot, but I look forward
most of all to tanta's work at Calculated Risk. The style, the unashamed dive into the arcane, the
cultural knowingness: all are superb.
KEEP IT UP!
I agree with Tanta that the NYTimes piece is condescending and that Diane McLeod was chosen because she is happily far removed from the parameters of the Style section. She is chubby, she smokes, she has a house full of stuff, she may even enjoy a beer while dealing with the fallout from her debt.
Had the piece featured One of Our Betters, it would be a woman who is thin, who realized with her therapist's help that she has a chronic problem, who embraces a new zen aesthetic and has emptied her home of all the high end decorating follies, and has found joy and self-awareness in her newfound simplicity. She would also have networked with her pals to establish a non-profit to enlighten other souls so burdened while providing for herself a new income stream as director.
The NYTimes is usually servile in profiling Out Betters, even when they have suffered Hard Times.
Well the Dead Kennedy's were quoted upthread so I don't know if anything more can be said but...
I don't care that she is obese or smokes or wastes her money on YooHoo and cigarettes. That's her business. The problem is and we all know it "IT ISN'T HER MONEY." Her private behavior has crossed over into public impacts. That gives everyone sympathetic, apathetic or opposing standing to comment on how they are affected.
Diane is nowt a good consumer because she isn't paying her debts. She isn't a bad person for smoking or being obese. She is a bad person for not being able to afford her habits.
You know there's no telling if her health insurance considered her high risk and extracted more in premiums than they ever paid out for her medical costs. That's not important. What is important is the here and now. No doctor is going to tell a post-op obese woman it is okay to smoke and drink YooHoo. She admits to impulse control issues. It all boils down to yet aanother case of attempting to privatize sucess and socialize failure.
Indolence is heavens ally here,
And energy the child of hell:
The Good Man pouring from his pitcher clear
But brims the poisoned well.
- Herman Melville
Tanta:
Thank you for this social commentary.
I agree that the NYT is long-gone as the grey lady and has to compete with cable news by offering purple prose.
Another variation of Gresham's law.
I would guess that Ms. McCloud hass an addiction:
"QUESTION: Can shopping be an addiction?
ANSWER: While it's long been known that shopping tends to make people feel good, new research indicates that it has a direct effect on the brain's pleasure centers. It seems that a trip to Bloomingdale's can flood the brain with dopamine in a manner not dissimilar to that experienced by a drug addict getting a fix, or someone jumping from a plane for the first time, or someone tackling a new golf course.
That's because dopamine tends to get involved when someone is faced with something new, thrilling or challenging. A rack of designer dresses, apparently, holds the promise of the new and unfamiliar. And so a "shopping high" is the result. Which would also explain the somewhat empty feeling one has a few hours after making the purchase: The dopamine has, in effect, receded.
Psychology Today Magazine, Mar/Apr 2006"
Unfortunately this is not only a socially acceptable addiction but a mainstay of the mainstream culture (as smoking and drinking were in our youth)
But the question of attempting to set up any set of controls is increasingly difficult in our society.So in a true sense we are an out-of-control system. All such systems eventually crash. As ours is even now doing.
The truth for Diane is that there is no free lunch.
"In one narrative, debt-funded consumer spending is "sustainable" until you lose your job or get sick or get divorced. In the other narrative, unsustainable debt-funded consumer spending is the response to losing your job or getting sick or getting divorced."
While it may appear to be a contradiction, it really isn't. As philosopher (borrowing heavily from the psychoanalyst J. Lacan) makes clear, today's super-ego injunction is no longer that of discipline and guilt, but that of enjoyment. The super-ego injunction to enjoy serves to keep one in line, while also serving to maintain the status quo.
But what happens when this is no longer the case, when shopping no longer can serve the needs of enjoyment? Well, it is important that the enjoyment of shopping is not only buying things, it is the experience itself. Nothing like going to the mall for social (really privatized) interaction. So . . . as time goes on, more and more as people go shopping, they just won't buy anything. Eventually, the enjoyment of the shopping experience wanes, and then the mall closes.
The psychic adjustment will be very significant for the average shopper, that is the average US citizen, and it won't come without pain. Perhaps, over time, we'll be forced to really interact socially, and out of this new forms of social solidarity will materialize, and perhaps out of this class consciousness too will materialize. It will be then that things get truly interesting.
I put my whole 401k into skf @ $110. Sold at $190. Its looking pretty good again
kudos to anyone who put their whole 401K into SKF at any level. And anyone who didn't get out at $170. You have gambling tendencies that I happily will not emulate.
I bet you aren't in the same demo as the lady in the vid. Or I would, if i was a gambler.
More than 300 NACA counselors, certified by the Department of Housing and Urban Development, will be at the Capital Hilton Hotel to provide same-day affordable mortgage restructurings that may include reduced interest rates and/or loan balances.
Take the example of Melody Weathersby of Jackson, Miss., who was able to restructure her 14.625 percent loan with GMAC Homecomings to a 6.75 percent fixed rate. Additionally, she was able to cut her mortgage debt by $20,000.
nce all their information is verified, NACA will present restructuring packages, which may include drastically reduced fixed-rate mortgages, to loan servicers. And in some cases, it could result in a reduced loan amount. All the rates under their program are fixed for 30 years, Marks said.
Here are two examples of mortgage restructures that were approved by servicers working with NACA's Home Save program:
Joseph and Kathleen Renaud of Worcester, Mass., were able to renegotiate their 11.875 percent loan with Countrywide to a fixed 5.25 percent. Monthly savings: $830.
Melody Weathersby of Jackson, Miss., was able to restructure her 14.625 percent loan with GMAC Homecomings to a 6.75 percent fixed rate. Additionally, she was able to cut her mortgage debt by $20,000. She's saving $300 a month.Shes saving $300 a month.
Sue--lower Park Heights. Went to high school at Seton. Hub went to Hopkins U. I actually walked around the part of Druid Hill Park nearest to my house, (as did my mother before me) and emerged unscathed.
The hub went to city and lived near York Rd.
As the subprime meltdown continues and IMHO, more mortgages become fixed 30 year loans, how does this "fixe" condition impact the liquidity of say Fannie Mae .... LOL!
Tanta, I'm a big, big fan of this blog. That said, I honestly do not understand the attention you give with Gretchen Morgenson. I mean of all the important targets to pick on -- mismanagement at Citi, Bear and Merrilll, just to name a few -- you spend time picking on a reporter? One who has a history of some really impressive investigative calls, such as busting collusive trading on the Nasdaq market back in 1993 (a Forbes story, Aug. 16th that year, she wrote that nailed the problem and preceded by years a major restructuring of that market). That story alone should make people think twice before thinking she is some sort of lightweight -- absolutely laughable. I mean even if I grant you for the sake of argument that this story was a little more emotional or illustrative than some of her other work...so what? (And she did win a Pulitzer for some of her prior work.) The blogosphere vs. mainstream media sniping seems to miss a much more important story, which, in my view, is more worthy of your considerable talents.
I was actually talking about that in the latter part of my post. I do believe in free will and I believe Diane could solve her problems if she really wanted to.
The people who have a genetic impulse control issue end up in jail.
Broward Horne writes:
Perhaps this is escaping you, Rob, but Diane didn't loan herself the money.
and: The "Free Marketeers" decided to create a tragedy of the commons problem for everyone by replacing income with borrowing.
This was all very predictable.
Why did YOU let it happen, Rob? Why are you any less culpable than Diane?
I'm ready to take my share of the blame. Heck, I've been lucky and productive, I am ready to take more than my share. I am objecting to the butcher with his thumb on the scale telling me what my share is.
IF the lender had not been willing to extend credit to a person who had no business accepting it or was obviously incapable of paying it back there would never have been a problem.
I don't buy this. It seems to me this is a woman who for psychological reasons could never save, and by her own testimony, a woman who keeps spending even if credit is shut off. If she can get a job to fund it, she will, but if she can't, she stops paying bills to allow herself to buy stuff.
The one truly bad decision here is the first refi, and there her "friend" clearly worked her over. But at that point it was still recoverable if she had changed her habits. The initial $500 monthly surplus should have allowed her to knock out the IRS bill in no time, build a savings account to handle expenses, and refinance out of that loan into a prime loan before the payments rose sharply (if she had stopped spending and done that, she would have had equity, good credit and reserves to do it within two years). Clearly she continued spending. Believe it or not, there are people who do learn their listen and change their ways at this point, but no one's ever going to write a newspaper article about them.
There are people who will only pay their credit card bill because it allows them to keep spending. If you cut them off they stop paying. Diane appears to be one of those people.
I really liked her, but I was shocked at the fact that now her son is going to be forced to probably declare bankruptcy to avoid a deficiency judgment. It appears that she threw him over to continue her spending. He won't be able to buy a house because she was addicted to buying stuff.
My personal belief is that for some people credit cards are crack, and Diane appears to be one of those people. It's possible that selling her stuff on eBay may be teaching her a new way of getting her fix. I hope so.
I would like to point out that requiring a borrower to save for a downpayment (even if 5%) in order to buy a home sorts out people like Diane. I don't know if there is any meaningful regulation for credit card lending that can be put in place to prevent people like her from going into debt. If they don't have credit cards, they will use store credit. If they don't have any credit, they will simply buy stuff at yard sales and won't pay their bills. This is the story of a women with a psychological problem more than anything else.
Diane's story reminded me of Prof. Warren's lecture postered here last month. She pointed that even upper middle class people can fall through the rapidly disappearing social safety net that existed from the 1960's until the '80's. Divorce, job loss, medical problems, and skyrocketing education costs can result in financial ruin. Diane had two of the four problems. I thought GM did a good job pointing out how the credit industry helped Diane spiral downward into economic problems and personal misery.
Bogus mathematical models of risk allowed this to happen in many ways. The aggregated models used to price risk doesn't correctly capture the Diane's of the world. It is kind of like making assumptions and predictions about human behavior using a Newtonian model rather than a Shakespearian one. There's a huge philosophical fallacy at the root of this somehow...
MOM, yes that's certainly part of it, but then again, when we have a whole nation that went from positive to negative savings rate, and amassed the level of personal debt that they have (is it 9g a person now?) one has to wonder what other forces are at play. We're all subprime, but I don't think we're all Diane.
Well, i read the first hundred or so comments then realized no one was talking about how, as with the mortgage lending, banks would have self regulated if they had all the risk and/or were limited to some reasonable interest rate.
The question I'd like to see answered is how much of the credit card debt is/was securitized, and who owns it?
We are only concerned at this point (most of us anyway) about the Diane's because either we are diane, or we are suffering from her interaction with the lenders. I'm thinking that if the lenders had to bear all the risk with their credit card lending Diane would not have been given enough rope to hang herself.
As for our lack of grit and new propensity for debt, I saw the change most clearly when a friend of mine -- the most conservative and disciplined guy I've ever known, quit his job as a department head at a world class research hospital so he could go make far more money doing megabuck surgeries for wealthy foreigners.
This is a person that used to rise every day at 4:00 in the morning, work out, get to the hospital by 6:30, operate all day, come home, eat dinner, work until nearly midnight and then do it again the next day -- year after year for more than 20 years. He was number one in his field. His explanation for why he changed his life? He couldn't stand to see all the other docs leave and start making huge fortunes and buying huge houses while he had his nose to the grindstone.
From the way that he came stompin' in
He told me to leave Shorty there by himself
Come down and wait on a man.
The eyes of the little man narrowed
The smile disappeared from his face
Gone was the friendliness that I had seen
And a wild look of hate took its' place.
But the big one continued to mock him
And he told me that I'd better go
Find him a couple of glasses of milk
Then maybe Shorty would grow.
When the little man spoke, there was stillness
He made sure that everyone heard
Slowly he stepped away from the bar
And I still remember these words.
Oh! it's plain that you're lookin' for trouble
Trouble's what I try to shun
If that's what you want, then that's what you'll get
'Cause cowboy, we're both packin' guns.
There is an explanation for Diane's action: guilt, derived from the superego injunction to enjoy. The more one slips into debt by overspending, the more one is left feeling guilty, and as a result, the more one attempts to mask over that guilt by then buying more; a spiral downward.
Superego is like the extortioner slowly bleeding us to death - the more he gets, the stronger his hold on us.
Tanta: I am so tired of all these perfect people whose first instinct in any situation is to micromanage other people's lives.
Rob Dawg: The problem is and we all know it "IT ISN'T HER MONEY."
You're both right, but Tanta I believe you're taking Rob's comment wrong.
IMHO people can do what they want with their lives & money... as long as it's their money. The minute they can no longer support themselves, well, whomever is supporting them -- parents, friends, charities, government -- should definitely have a say in the nature of that support.
Jon Shayne - Tanta "picks on" GM because she is writing a series of articles about the current situation that fail to ask the important questions and instead promulgate a false narrative.
If you were in the lending industry, you'd understand.
Here we are talking about major spending of public money, and we haven't even stopped to consider how we got here. Tanta is angry at GM because she isn't talking about the real issues, but instead is writing for her next Pulitzer with a predetermined slant which obfuscates the real public policy issues.
The bottom line for most individuals is that to build wealth one must live within one's means, build a savings account to handle unexpected means, and keep one's debt obligations to reasonable limits in comparison to income.
Read Tanta's articles on DAP (downpayment assistance programs), and see the kind of info that GM could be giving us.
Alo We're all subprime, but I don't think we're all Diane.
We're not all subprime. About 30% of homeowners have no mortgages. Credit card debt is concentrated in about 30% of the CC-bearing population.
Many financial conservatives are doing extremely well.
The real problem is that many people with high FICO scores are essentially financially unstable because of high debt ratios. The overwhelming fact is that both companies and individuals have been encouraged and enabled to increase their debt to levels that generate a high systemic risk.
IMHO it is like this. If the national leaders allow or encourage great indebtedness rather than say savings and job protection, what does that say about what is patriotism and not.
By law and example, debt could have been more regulated, but that was not national policy.
Soooo the proper way to serve your country is high debt and default. The consumption is benefits your neighbor and the foreigner will take the fall.
Look -- Here she is again, our deadbeat house rep Laura Richardson. If you want to look deep into the human psyche to see how all this has happened, make this a featured stop on the tour.
She defaulted on 3 homes. One was foreclosed on, but she had Wamu magically rescind the foreclosure. The fellow who bought the foreclosure is suing to have the recission reversed. She was last seen riding around in the most expensive vehicle in D.C., subsidized by.... us. We are paying (hopefully were paying) $1,300 a month for her to lease a lincoln towncar. Yes. You read that correctly.
Now she's seen in New Orleans, commenting on what a shame it is to see people living in trailers. This is a person who almost certainly committed mortgage fraud to get her purchases and refi's approved, and most certainly received an illegal favor in having her foreclosure rescinded. No one in the house has the balls to even bring this to the ethics committee. No one has filed charges against her yet. Systemic.
May I suggest that the actions of the 30% may endanger us all.
It reminds me of a story about pre WWI Germany, there was a man with 2 sons one prudent and one a drunk. When the father died, he left his wine cellar to the drunk and his fortune in German Bonds to the prudent.
After awhile the drunk drank the wine cellar, sobered up and sold the empty wine bottles for a fortune. The prudent son was broke when inflation wiped out his bonds.
Citigroup's primary credit card business is the issuance of credit cards to individuals. In addition, the Company provides transaction processing services to various merchants with respect to bankcard and private label cards. In the event of a billing dispute with respect to a bankcard transaction between a merchant and a cardholder that is ultimately resolved in the cardholder's favor, the third party holds the primary contingent liability to credit or refund the amount to the cardholder and charge back the transaction to the merchant. If the third party is unable to collect this amount from the merchant, it bears the loss for the amount of the credit or refund paid to the cardholder.
The Company's maximum potential contingent liability related to both bankcard and private label merchant processing services is estimated to be the total volume of credit card transactions that meet the requirements to be valid chargeback transactions at any given time. At March 31, 2008 and December 31, 2007, this maximum potential exposure was estimated to be $60 billion and $64 billion, respectively.
However, the Company believes that the maximum exposure is not representative of the actual potential loss exposure based on the Company's historical experience and its position as a secondary guarantor (in the case of bankcards).
At March 31, 2008 and December 31, 2007, the estimated losses incurred and the carrying amounts of the Company's contingent obligations related to merchant processing activities were immaterial.
There are no amounts reflected on the Consolidated Balance Sheet as of March 31, 2008 and December 31, 2007, related to these indemnifications and they are not included in the table.
In addition, the Company is a member of or shareholder in hundreds of value transfer networks (VTNs) (payment clearing and settlement systems as well as securities exchanges) around the world. As a condition of membership, many of these VTNs require that members stand ready to backstop the net effect on the VTNs of a member's default on its obligations. The Company's potential obligations as a shareholder or member of VTN associations are excluded from the scope of FIN 45, since the shareholders and members represent subordinated classes of investors in the VTNs. Accordingly, the Company's participation in VTNs is not reported in the table and there are no amounts reflected on the Consolidated Balance Sheet as of March 31, 2008 or December 31, 2007 for potential obligations that could arise from the Company's involvement with VTN associations.
At March 31, 2008 and December 31, 2007, the carrying amounts of the liabilities related to the guarantees and indemnifications included in the table amounted to approximately $31 billion and $24 billion, respectively. The carrying value of derivative instruments is included in either Trading liabilities or Other liabilities, depending upon whether the derivative was entered into for trading or non-trading purposes. The carrying value of financial and performance guarantees is included in Other liabilities. For loans sold with recourse, the carrying value of the liability is included in Other liabilities. In addition, at March 31, 2008 and December 31, 2007, Other liabilities on the Consolidated Balance Sheet include an allowance for credit losses of $1.25 billion relating to letters of credit and unfunded lending commitments.
In addition to the collateral available in respect of the credit card merchant processing contingent liability discussed above, the Company has collateral available to reimburse potential losses on its other guarantees. Cash collateral available to the Company to reimburse losses realized under these guarantees and indemnifications amounted to $104 billion and $112 billion at March 31, 2008 and December 31, 2007, respectively. Securities and other marketable assets held as collateral amounted to $72 billion and $54 billion and letters of credit in favor of the Company held as collateral amounted to $498 million and $192 million at March 31, 2008 and December 31, 2007, respectively. Other property may also be available to the Company to cover losses under certain guarantees and indemnifications; however, the value of such property has not been determined.
IT WILL BE SITUATED BENEATH A LARGE UPPER-LEVEL ANTICYCLONE AND OVER SEA-SURFACE TEMPERATURES OF AT LEAST 28
CELSIUS. GIVEN THESE CONDITIONS...AND ASSUMING THE CYCLONE REMAINS
INTACT AND VERTICALLY ALIGNED AFTER ITS PASSAGE OVER YUCATAN...
STRENGTHENING OVER THE GULF APPEARS TO BE THE MOST LIKELY SCENARIO.
ALL OF THE PRIMARY OBJECTIVE INTENSITY MODELS FORECAST THAT TO
HAPPEN...AND ALL FORECAST DOLLY TO ATTAIN HURRICANE STATUS OVER THE
WESTERN GULF. THE NEW OFFICIAL INTENSITY FORECAST FOLLOWS THAT
GUIDANCE...BUT IT IS IMPORTANT TO REMEMBER THAT LONG-RANGE
INTENSITY FORECASTS HAVE A SIGNIFICANT AMOUNT OF UNCERTAINTY.
IT IS FAR TOO EARLY TO DETERMINE EXACTLY WHERE DOLLY WILL MAKE FINAL
LANDFALL.
For those interested/concerned, the Nikkie is closed for Ocean Day. Damn, the Japanese have all sorts of <a href="http://www.nni.nikkei.co.jp/FR/MKJ/marketholidays/>cool holidays.
The fair value of weather and energy derivatives is determined through the use of quoted market prices where available. Where quoted market prices are unavailable, the fair value is estimated using available market data and internal pricing models using consistent statistical methodologies. Estimating fair value of instruments which do not have quoted market prices requires managements judgment in determining amounts which could reasonably be expected to be received from, or paid to, a third party in settlement of the contracts. The amounts could be materially different from the amounts that might be realized in an actual sale transaction. Fair values are subject to change in the near-term and reflect managements best estimate based on various factors including, but not limited to, actual and forecasted weather conditions, changes in commodity prices, changes in interest rates and other market factors..
The Nikkei finished the session 0.2% lower at 13,237.89, while the broader Topix index ended little changed at 1,297.88. The Nikkei lost nearly 8.5% during the past 12 sessions. Its longest losing string was 15 consecutive sessions in 1954, followed by 13 straight losses in 1949 and 12 in 1953.
Department store chain Mervyn's LLC is fighting for survival after a lender pulled financing and some vendors stopped shipments, the Wall Street Journal reported on its website on Sunday
Your brain at this moment is composed of brigades of tiny Bolivian soldiers. They are tired and muddy from their long march through the night. There are holes in their boots and they are hungry. They need to be fed. They need a new post by CR.
The story of how a woman spend herself into bankruptcy and knew what she was doing nearly the whole long way.
A complete and accurate metaphor for the current state of not just homeowners' finances, but a lot of businesses and units of government as well.
Rather than being unusual, it is actually quite common.
I hate the predatory lending angle which is getting more and more ink, as that's what the lefty's and the do-gooders latch onto. With that viewpoint no one wants to hear about what is an individual's personal responsibility in managing their finances, instead its "the lenders' fault" because they "gave" me so much money "I can't now pay it back."
Sorry, I've been down that road, irresponsible borrowing helped to crash my by-then teetering marriage. Since then I've always bought exactly what I could pay for and saving the rest.
From Roubini's blog, on the games the banks are playing with their earnings statements:
Most financial institutions are low putting increasing numbers of assets in the illiquid buckets of Level 2 and Level 3 assets. While FASB 157 should prevent manipulation of the valuation of such illiquid assets forbearance by the SEC, the Fed and other regulators allows a massive amount of fudging. An insider told me that in a major financial institution the approach is as follows now: top management decided in advance what the announced writedowns should be and folks dealing with the toxic/illiquid assets come up with their totally ad hoc assumptions to make sure that such illiquid assets are valued consistent with the decided-in-advance amount of writedowns and losses.This is not earnings smoothing; this is active manipulation and falsification of financial results aimed at creating even more obfuscation of the true state of financial institutions. This obfuscation is actively abetted by the SEC, the Fed and all other regulators who are now in forbearance crisis management stage where the objective is to avoid at any cost anything that may trigger a financial meltdown. Thus, most of these earnings reports are not worth the paper they are written off.
Oh for the love of ..., Comments (260) Can we pleaze have a new BedTime story?? I tried to be off topic as much as possible and this is the thread that will not die.... WTF!
One has to wonder how many big big US banks are essentially broke. If you can't trust the values they give out, you need to REALLY be worried. And Roubini has a terrible record for being ACCCURATE.
Re: The story of how a woman spend herself into bankruptcy...
Ok, we call it self control... some people eat themselves, I mean they eat enough crap to become massive -- then, some people drink themselves to death, others like Belushi, or millions of others, go on binges and they can't stop. So, who does say stop -- in this case with credit, why not a bank. Actually I never saw that video, just this one:
I have a couple of thoughts that have been touched on but not really discussed much.
(1) I don't know how many people feel "sorry for" the credit industry, but they recently did a good enough job of convincing people that they were victims to get the bankruptcy law changed so that a lot of people won't be able to get rid of their debt through bankruptcy. This went through without any corresponding additional responsibilities by the banks, like capping interest rates or not doing double cycle billing.
(2) I saw a video about debt in America (I think linked from here) that said that creditors make most of their money from marginal people like Diane. Even if they eventually default, they have paid so much interest and so many penalties in the meantime that the creditor comes out ahead. And then they get to market credit cards to the people who have gone through bankruptcy, because now they can't go BK again for seven years.
I came away sympathetic toward the borrower that got in over her head. And I'm way more cynical than all of you.
She suffered the major life catastrophes that are most related to bankruptcy: Job loss, divorce and medical problems.
She blames herself, because she bought a couple of handbags and some jewelry she wanted. Honestly? Big deal.
Her real crime was trying to live a pre-Reagan middle class lifestyle in the George Bush era.
And that takes debt for the average person:
A lot of it.
Thirty years ago, this person would have gotten along just fine, warts and all. This should not have been a story about personal failing, but of the failure of the American system.
Has she been paying down her debt with the money she saves by not paying her mortgage since Nov 07?
Can she use that fancy laptop to post an ad for FREE on craigslist for a new tenant to replace her son (as a tenant)?
If she was making $50K with two jobs, how much is she making with one, and if she has to sell her stuff on ebay "to help cover her heating and food bills" how can she afford an apartment?
It will always be the same for this woman and many others just like her. There is always an excuse.....no on willing to make any sacrifices. Just hand me the American Dream, I am entitled to it!
Ms. McLeod used debt to keep going until she was fired from her job in March for writing inappropriate e-mail messages. Since then, she has been selling her coveted handbags and other items on eBay to raise money while waiting to be evicted from her home.
Rather than immediately shuttering or selling Superior, as it normally does with failed banks, the Federal Deposit Insurance Corp. continued to run the bank's subprime-mortgage business for months as it looked for a buyer.
The Superior situation could be costly for the FDIC. Texas-based Beal Bank SSB, which bought a portfolio of Superior loans, about half of them originated under the FDIC, is suing the agency in U.S. District Court in Washington.
In a recent court filing, the FDIC estimated that about 1,500 of the 5,315 loans it sold to Beal either have defaulted or are nonperforming. The FDIC already has bought back another 247 of the mortgages, most of them for violations of federal anti-predatory-lending laws intended to protect borrowers from unreasonably high fees or deceptive practices. Beal Bank has said in court filings that 73 of the repurchased loans were originated while the FDIC was running Superior.
Tanta: I am so tired of all these perfect people whose first instinct in any situation is to micromanage other people's lives.
That's an ironic thing to say, Tanta, since you are so desperately trying to micromanage our reaction to GM's piece.
I'm with Yearning To Learn on this one. I think your Gretchen Morgenstern hatred has driven you to distraction. You're way smarter than I am, Tanta, but my gut tells me you're wrong on this one.
You obsess about the shots of the cigarettes and the chain link fence (and yeah -- I thought the cigarette shot was cheesy). I know your heart is in the right place -- you're rightfully fighting on behalf of the little guy -- but in my opinion you're coming off as very defensive and you exhibit little faith in the average person to exhibit empathy or understand nuance.
Maybe I'm just a SNAG (sensitive new age guy) but what I saw in that video was a woman who was quite self-aware about her own failings and problems. She wasn't lashing out at the credit card companies -- she wasn't demanding a bailout or for her debt to be forgiven. She was taking responsibility for her actions even if she didn't know yet how to change. I also saw a woman who still had a sense of humor after everything she'd been through.
And in my opinion, on the basis of those two things alone she's is admirable and worthy of respect.
[But smoking is a filthy f&*&% habit.]
GM and the Times chose to show these things -- Diane's self-awareness and her sense of humor -- just as surely as they showed the tchotchkes and the cigarettes. Do they get any credit for that or was that just incidental?
What made Diane's story tragic to me wasn't that she was "low class" -- it was that she didn't have a support system. Her parents are dead. She's divorced. She has a son who's pissed off at her for screwing up his credit. When she's kicked out of her house, where's she going to go? Who's she going to live with?
Her debt and problem spending is a symptom of her crushing loneliness. She had no trusted friend to give her good advice on money.
If you think that most readers of the Times will look at Diane's story without empathy, that they will universally observe a tale of a lonely and isolated woman and think 'that's not me,' then I think you need to take a look at your own biases and resentment about the "upper class."
I'll admit, for my own part, that when this video offered the first glimpse I've had of Gretchen Morganstern herself, my first thought was, "Oh... she's a rich blonde chick." I'll cop to that. And I can't help but wonder if you had the same reaction. Is she one of the "perfect people" that you are so tired of? The only "perfect" people are people we don't actually know.
I choose to believe that a large number of New York Times readers saw something of themselves in Diane MacLeod. And if this article hastened their own self-awareness, and their own days of personal and financial reckoning, that on balance its publication was a good thing.
What penalty is appropriate for sending "inappropriate e-mail messages?" Losing one's job? The death sentence? Jesus Christ.
As far as "entitlements" go ...
Look.
The very richest among us push very heavily using every instrument at their disposal to fulfill their feelings of entitlement. Why shouldn't everyone else?
The vanishingly small payout that this woman might ever receive from government is nothing compared to what the average millionaire expects and gets from the social welfare state.
Yesterday, we were all outraged because two gals in Chicago were bilking the Illinois state welfare system out of $800 a month that they used for food and shelter.
Really, what the freak ...
We're paying 100x that, or more, to fill the trough of Halliburton/KBR executives by the week.
As I said above, this gal's mistake was in her aspirations, which are out of touch with the times. The average person can't live the American dream without debt, a lot of it.
I was a little too tall
Couldve used a few pounds
Tight pants points hardly reknown
She was a black-haired beauty with big dark eyes
And points all her own sitting way up high
Way up firm and high
Out past the cornfields where the woods got heavy
Out in the back seat of my 60 chevy
Workin on mysteries without any clues
Workin on our night moves
A lot of you guys saying this article isn't class-baiting reporting should read some Barbara Ehrenreich. Have you read the bullshit lifestyle articles that have mushroomed in the NYT over the past few years? Make no mistake, the snotty yuppies who make up a big chunk of the NYT readership would think Diane was trailer park material and judge her actions with that in mind.
Bitter Renter writes:
I have a question about the article that accompanies the video. Why does the graph compare debt to monthly savings? Shouldn't debt be compared to assets?
Yes technically, but the NY Times comparison tells you more. It's a barometer of Americans' ability to cope with adversity, such as a large medical bill, temporary loss of a job, or sudden spikes in gasoline and utility costs.
Personal savings is personal income minus personal consumption. It's the amount of progress the average household is making (in prime earning years) putting money away for "bad times." Lately, personal savings has been very, very low.
Steady increases in personal debt (in excess of national wage growth) tend to erode personal savings over time, due to debt service cost. Also, it increases vulnerability in times of difficulty or crisis, because debt payments can only be postponed so long before a household starts to face deprivation.
The ratio of personal debt to annual savings (the personal savings rate) is a barometer of how well prepared American households are to cope with a period of adversity. The higher the ratio, the more vulnerable households are. The graph shows that American households are a point of maximum historic vulnerability to any adversity.
They have very little backstop. The defenses are thin.
It's the best graphic depiction of this I've seen in print yet.
"herself the bachelor's in finance that seems required these days to deal with all this."
No, it requires 3rd grade math, a little discipline and a little good fortune.
3rd grade math and discipline isn't going to help you much when a little bad fortune rolls around. I doubt an MBA in finance would do you much good then either.
Nor will an MBA in finance and good fortune save you if you lack discipline. Look at Orange County, the refi-foreclosures are blasting through million dollar homes.
I suppose the 'By clicking here[..]' text was supposed to be a link?
I suppose the 'By clicking here[..]' text was supposed to be a link?
It is a link.
Note: these links always take at least a few seconds to show up, so if you happen to see one of these posts the minute they're published, and you don't see hypertext, just wait a couple of seconds and refresh the page. The way it works is that Blogger has to "publish" the post before there is a destination for the link.
Has Gretchen ever e-mail you regarding your continuous bashing of her work?
Has Gretchen ever e-mail you regarding your continuous bashing of her work?
If she did, and she gave me permission to share it, you all would know about it.
If she did, but she didn't give me that permission, you all would never know about it.
why is the journalist's narrative more plausible than the interviewer's?
typo.
great post.
If she did, but she didn't give me that permission, you all would never know about it. - Tanta
Now we know how GM feels about openness, transparency and accountability as well.
I don't know why I can't seem to find it online, but the print edition has an very interesting graph on page 19 that is related to this story. Well, this story is more like the 'hook', IMO.
by the way...bacon - can you say...SWEEP!?
Re: Rob Dawg
"Now we know how GM feels about openness, transparency and accountability as well."
I think all we "know" is that Tanta will respect something offered "in confidence." The rest must remain speculation.
Tanta you write; " the six! perfectly unnecessary shots of chubby Diane smoking,"
I disagree. Her problem has been one of serial health problems and spending. Smoking and YooHoos are absolutely germane to the discussion.
Hey Tanta,
Re: "Picking On Poor Gretchen". Even though this is a good and necessary thing, don't you ever get the feeling that you are shooting fish in a barrel, using a sawed off 12ga shotgun? GM just makes such an easy target....
Just be sure to keep demolishing the other side: that POS Ken Lewis is still yammering about people "walking away".
Thanks for everything you do.
Tanta,
You're such a meanie for telling the truth .
That being said, every part of a post that is supposed to be below the fold in firefox is above it
The implication is that if the credit card lenders had taken control of the situation and cut Diane off, she wouldn't have spent so much. (Somehow I can imagine the credit card lender calling Diane to tell her she was over her limit, and the phone ending up in the dishwasher.)
I think not approving purchases that would put her over the limit would get the message through, even if the phone is in the dishwasher, and even if the bills are in there with the phone.
As you point out later, that would just bring us back to the "WHERE'S MY HELOC" articles, but at least the reporter's various narratives would agree with each other. Or at least be forced to confront each other.
Wonderful read! I had just read the Morgenson piece, and really appreciate this post. Thank you.
Horse is out of barn, says Gretchen Morgenson YouTube - Charlie Rose - Gretchen Morgenson and Allan Sloan
Plan for Fannie? Gretchen wants..
I'm not detecting the dissonance that you see in this. (Caveat: I read the story but didn't see the video.) To me, it seems like that this person has some significant personal problems, and also that various corporations offered her deals that were far away from being good for her.
Neither of these two things particularly surprises me. We all have personal problems--some worse than others, but only the inexperienced or feeble-minded cannot relate.
And as for the corporate behavior, well, there are some things that we as persons won't do to a person we perceive as being helpless or "in trouble" in some way, but there is NOTHING that a corporation won't do.
Is there something that needs to change here? Probably, unless we want our society to change dramatically (which will be the result if we allow corporations to run free).
Bernanke not God, or a God?
I think all we "know" is that Tanta will respect something offered "in confidence." The rest must remain speculation. - Haralambos
Tanta is an extremely precise writer. Read her response very carefully several times. And no, she would never betray a confidence.
Wait, wait, wait.
Now we know how GM feels about openness, transparency and accountability as well.
No, that's not fair to GM and is not what I meant.
I was not trying to say, coyly, that she has emailed me. In fact, she has never done so.
I was simply trying to say that if she sent an email response to me and gave me permission to publish it, I would do so. Of course she doesn't have to email me, she can comment here like everyone else if she wants to.
However, people do from time to time email me but refuse to let me publish their emails. I will not publish emails without permission, so that means that the complaining goes only to my ears, not everyone else's.
I don't know why they do that either, but there it is. In any event, I am NOT accusing GM of this. I've never heard from the woman. My impression remains that she doesn't really give a rat's ass what I say about her writing, but that is merely my impression. And yes, I believe that people do have the right to not give a rat's ass what I have to say about their writing.
I take it back. Poor Gretchen doesn't care about inaccurate portrayals in her articles so I can fully understand that she doesn't care about her own impressions.
Great post.
I'm not american - so i missed the class cues completely, but there you go. She seemed pretty on the ball to me, just didn't have time between working 2 jobs to give herself the bachelor's in finance that seems required these days to deal with all this.
I felt there was a much better story, lurking under the surface, if somebody had done the math on all the refinancing costs and interest payments. How much was the original debt, how much was actually charged to the credit cards, and how much did 27% interest, late fees, 10k for mortgage refinancing etc. end up costing?
If somebody is negligent with their wallet and a pickpocket grabs it, that's a crime. So why isn't it also a crime if somebody is negligent in their understanding of compound interest, and somebody else takes advantage of it, nay builds up an entire industry to take advantage of it?
But i suspect that'd be another of those class things...
"There's an America in which spending is 'healthy' and is only interrupted by 'misfortune,' and another America in which spending is always 'unhealthy,' a dysfunctional attempt to compensate for the rather frequent experience of lost jobs, failed businesses, divorces, illness."
When we start propagating the Cult of Tanta in the postholocene era, this will be part of the scriptures. Some apostle just needs to point out that only the latter America existed. The former has always been a crock of shit.
I disagree. Her problem has been one of serial health problems and spending. Smoking and YooHoos are absolutely germane to the discussion.
Which only goes to show that this little tactic worked on you, Rob.
When did you go to medical school? And when did you get access to Diane's medical records? The article says her medical problems were involving a hysterectomy (for undisclosed reasons) and appedicitis with kidney complications. And you just KNOW those were caused by smoking and weight. Because the fashionable thing to think these days is that EVERY health problem is caused by smoking and weight.
All that business with the smoking shots did was give you an excuse to be self-righteous and play armchair medical doctor. And it was totally gratuitous because the cameraman could very easily have just stopped filming when she went out for a smoke, and then resumed when she came back. (My impression is that she doesn't smoke in her house.) That is what makes it so gratuitous.
You're simply proving my point, I think.
This is a fantastic post. GM is exactly the sort of journalist I think Taleb has in mind when says that the overwhelming majority of them are simply entertainers. She's got her shtick, it has an audience and so she keeps doing it over and over.
I'm not her audience (though I am that dreaded NY Times reader), and so I come here.
Well written and argued post. Thx!
Silver lining! At least her ex-husband got lucky.
What a wreck of an individual. My brother is married to a trainwreck who might be even more of a sociopath than Diane. Job losses are only getting started. I think it's safe to short credit issuers and the American consumer. Tough road ahead for the illusion of an American standard of living.
What is it about my ass, that people need to use it as the butt of either jokes or to punctuate thoughts? Gheeeze!
Tanta, I tried to read that article this morning - I really did.
But it was so fraught with inaccuracies and blatant distortions that I simply couldn't slog my way through to the end of it.
I salute your perseverance!
That seems similar to what happened 150 years ago in America:
Exloration of the West in two acts, repeatedly played:
Drama, first act -
Pioneers appears, banker gives them credit to settle the land, banker is heroe.
Second act -
Uncertainty rises, bankers demanding money back (not only denying further credit), banker is villain.
The difference to today seems mostly that so much lending is for consumption.
A few light years ago, gambling was mostly illegal in 49 states, and people joined the Christmas Club at their bank, putting away a few bucks from every paycheck all year long, so there would be money to pay for the stuff under the tree at year-end.
Today, gambling goes on everywhere, and people buy everything on credit. Nobody protects you from the casino or the credit card company. Both make their profits on human folly.
Should it be illegal to make profits on human folly? Should it be illegal just because it's immoral? Just asking.
Silver lining! At least her ex-husband got lucky.
What a wreck of an individual. My brother is married to a trainwreck who might be even more of a sociopath than Diane.
does this really have to be one of those threads?
John Stark writes: Should it be illegal to make profits on human folly? Should it be illegal just because it's immoral? Just asking.
Watch the video of the young couple from PA
in the NY Times piece.
great post,
The media continually tries to protray us as all victims of the evil banks.
We must save these people by bailing them out - it is not their fault!
This is good news.
I think I am somewhat tainted by living is southern cal. I have looked at over a hundred houses the last few years - and all i ever saw was greed on part of the seller.
Which only goes to show that this little tactic worked on you, Rob.
I posted on this same article and the related Nunez problems earlier today. I don't care if she had debilitating hangnails. People in this much debt shouldn't be smoking or drinking YooHoos for financial reasons.
Pat of what I get from Tanta's post, and from Diane's story, is this: We need to start questioning the assumption that easy access to credit is a good thing, and that credit ought to be used as much as possible. The best part of Gretchen's story is the math, the amount of money that goes to the banks at the end of every month. This ought to be drummed into the heads of school children.
People borrow money with the idea that this will enable them to get more stuff. But at the end of the month, the bank gets more, and you get less. Less of everything.
Just more media tendentiousness. Got to be a villain and a victim. No one is 'stupid' or irresponsible. They are simply the jetsam of a mean and heartless society.
This is how you win a Pulitzer. The Washington Post's Janet Cooke wasn't able to find such a story in the real world so she made one up about a child
heroin addict. Now that'll get you fired if you are caught but you are allowed to take liberties with the facts and twist and distort them to conform to this villain/victim template.
Now that'll get you fired if you are caught but you are allowed to take liberties with the facts and twist and distort them to conform to this villain/victim template.
I partly agree with this, but in reading the NYT piece, I don't come away thinking this is that kind of story. Diane portrays HERSELF as a fool, not a victim--the difference being that a fool pursues short-term gratification over long-term consequences, in the full knowledge that those consequences are coming.
Re: By clicking here I give informed consent to being exposed to a very long post.
2,719 words. It's a start, and a fine effort, which is probably why you wrote that and I write this.
Tanta,
For all of your doggedness in handling GM's twists of reality, I am glad to see you putting her in her place; she is just doing her job, which is to confirm her employer's and target reader's "wisdom", and if reality conforms, well that's an added bonus. If she didn't do it (so well, I guess), they'd find someone else, though.
Is there really a public appetite for stories along the line of "Can you believe lenders are so dumb they lent money to this schmoe". There's a great lesson to be learned in this epic failure of well intentioned public policy. Is increasing homeownership a laudable effort? Haven't lenders traditionally denied credit to deserving people unjustly? The efforts to solve these initiatives with less government involvement and less regulation created a set of new moral hazards to deal with. Can we deal with these in a more prudent and less risk averse fashion. I'm still waiting for that story.
People in this much debt shouldn't be smoking or drinking YooHoos for financial reasons.
You're starting to sound like one of those self-appointed arbiters of the public morals who leans over the grocery store to examine the contents of food-stamp shopper's cart. Or those 19th century social workers who allowed as how unemployment insurance was OK, but only if poor people weren't allowed to buy alchohol.
I am so tired of all these perfect people whose first instinct in any situation is to micromanage other people's lives.
You know when I first got the idea to write this post, I considered just not doing it. I thought, I cannot bear another thread where a bunch of hostile jerks leave comments suggesting that the "fat chick" deserves hostile commentary just because.
Then I thought maybe there might be a purpose to be served by calling out that kind of response for what it is. And calling out the Times for playing into it.
Further on the financial theme. I would be very unhappy if incautious borrowers were limited in their ability to borrow. Firstly, some of them no doubt use credit to get over a 'rough patch' and without it might end up as burdens. Second, these people keep my borrowing costs down. I wouldn't be able to be arbitraging a 1.99% until November card and having the same money in a CD unless these people were paying enough to keep the lenders solvent and liquid.
Most financial problems get intertwined with divorce, health and job issues. Diane hit the trifecta and I doubt her situation would be substantially better had things worked out better because like California she doesn't really have a revenue or credit problem, she has a spending problem. Thus my suggestion to save the price of a pack ciggys and six pack of chocolate soda.
"Diane McLeod's debt is the result of financial missteps, unfortunate circumstances, and a lending industry willing to extend her more credit than she could possibly repay."
If it weren't for Ms. McLeod's "financial missteps" and "unfortunate circumstances", who's to say she couldn't have "possibly repay(ed)" her obligations?
[i]blah blah blah blah[/i]
No one is impressed by your oh-so-bleeding hear, Tantra.
How do you like that narrative?
yours in Christ,
Isamu
Thus my suggestion to save the price of a pack ciggys and six pack of chocolate soda.
Rob Dawg
And by implication, your suspicion that that would make it all ... better?
Priceless.
Tchotchke? This almost goes back to that other playful word, once used long ago... brickabrack, bricolet....what was that, not imbricate, but some French thing??
Oh yes:
Bricolage
Diane portrays HERSELF as a fool, not a victim--
But yet it's as if GM cannot hear Diane say this about herself. The voiceover and GM commentary just don't match the bits of Diane on tape. It's as if the commentary is boilerplate, and Diane's narrative is just an excuse to say these things.
Or else it's a variant on the old "false consciousness" thing. That is, since Diane is a self-admitted impulse buyer who doesn't think clearly about debt, it must be the case that she is incapable of understanding what happened to her or articulating her own motivations. Therefore, some educated reporter has to "tell her" what happened to her.
Maybe I found myself liking Diane so much because she just sticks to her own story, as unflattering to herself as it is, and doesn't let herself be led into parroting the "victim of evil lenders" storyline.
EVERY health problem is caused by smoking and weight
You're not being fair to Rob's point of view, which is that all health problems are caused by smoking, weight or The E-ville Government.
And it was totally gratuitous because the cameraman could very easily have just stopped filming when she went out for a smoke, and then resumed when she came back. (My impression is that she doesn't smoke in her house.) That is what makes it so gratuitous.
Actually, it was presumably the cameraman's job to record what s/he was asked to record. It was the person who actually edited/assembled the video (my low-speed connection precludes watching) who made the value judgements you (rightly, I think) find annoying. It's certainly a technique commonly found in the 'upper' segments of the MSM.
Frankly, I find the smugness of folks who fail to find any shared humanity between themselves and people like Diane to be insufferable. I fear that includes some of the posters on this board.
There but for fortune, as Phil Ochs sang.
From the article, it states that the average undergrad leaves school with 20K in student loans (I've seen figures up to 30K); also, much of the interest on this debt is subsidized by the federal government. To me the easy availability of student loan debt has not only increased the cost of tuition, but ignites a credit binge that many never get out of. IMO, student loans only aggravates class distinctions.
At what point do policymakers realize that direct subsidies to colleges, as well as students, could be spent elsewhere (e.g. technical schools)? Many of my students I tutor would rather be a factory drone making $35/hour then getting a BA in history with no job prospects whatsoever.
"where a bunch of hostile jerks leave comments suggesting that the "fat chick" deserves hostile commentary"
The bar just keeps getting lower. Individual lack of responsibility is an epidemic. As a society we should have compassion for physically and mentally handicapped. Stupidity laziness and greed don't qualify.
But that shouldn't give creditors free reign. I think we need regulation that limits interest rates on consumer credit to say 4% above prime. Then creditors will decide who they will take a chance on. I know there will be challenges from both free market purists that the market should decide and lefties claiming that such rules discriminate against the poor but it's clear the current system doesn't work. We need active regulation in financial markets.
Tanta, as you've proved previously, journalists are some of the most idealistic, ignorant (sometimes stupid) people in the world. What the MSM cannot understand is the bloggers ability to provide real expert commentary on these issues. I have law blogs I visit for law insight, military blogs for military info, etc, etc. And I visit you for the economic understanding and commentary you offer. Do you believe the woman in the article has freewill? Could there be a genetic impulse control issue? I have seen this crisis capture a lot of people that have poor impulse control and analytical skills. I still get looked at like I'm retarded by Realtors for not buying here in FL.
As a society we should have compassion for physically and mentally handicapped. Stupidity laziness and greed don't qualify.
"Compassion" and "hostile commentary" don't cover the spectrum of reaction, I think, which is what you seem to imply.
John Stark writes: Should it be illegal to make profits on human folly? Should it be illegal just because it's immoral? Just asking.
It already is. It's illegal to build a house/sell a car/introduce a new pharmaceutical without meeting minimum safety regs.
Society spends a lot of time and effort protecting fools from themselves.
The real question is where you draw that line...
Good post, Tanta. Thanks.
Banks (and other creditors) were making money hand over fist while interest rates were at ultra low rates. They didn't have time to care that they were in a slow motion train wreck. Nothing new here - read "Why Smart Executives Fail" by Sydney Finkelstein for some insights.
How and why did Gretchen get hold of this particular person to interview? It's not like reporters for The New York Times ever socialize with people like this. Near Philadelphia, no less! Couldn't they find an overweight woman deep in debt in Queens or Staten Island?
How did Mrs. McLeod come to the attention of the swells at the Times?
Society spends a lot of time and effort protecting fools from themselves.
The real question is where you draw that line...
Yup.
The current environment is clearly predatory. As I've discovered to my dismay, the US doesn't run on skills or effort, it now runs on how well you lie, to others as well as yourself.
I suppose the best liars are unconcerned with being consumed by a predatory system.
I think that I blame the eeeevil lenders for their own stupidity.
I give the lady some blame, but the story is downright ridiculous in how much credit she was handed.
Like credit card companies should hand out credit like popcorn, to anyone without regard to potential losses is what starts to drive me nuts.
Right after Citibank took it's last toke of cheap equity sovereign money it sent me fricking slews of checks- the last one was at 2.9% until I pay it off!!!
Is that really managing credit or acting beyond rationality to do something exceedingly stupid.
The class issue bandwagon is growing, and GM has hopped aboard. The sad part is that credit will never ever be as easy as it was over the five years ending in 2006/7. The greatest cutoff will naturally be among the poor, but the middle class will also suffer the loss of Modigliani's "income smoothing" debt shock absorber.
All of America reveled in free easy money, (just don't read the fine print), including a huge amount of business folks.
A billion dollars of high interest mezzanine loans that most likely should have never been written:
Investors get in line to recover their funds from Valley lender
The rich are not very sympathetic when they lose, mainly 'cause they noisily litigate.
Someday this war's gonna end...
Do you believe the woman in the article has freewill? Could there be a genetic impulse control issue? I have seen this crisis capture a lot of people that have poor impulse control and analytical skills.
People are human. Some are born with a silver foot in their mouths, but most are not. If everyone was as smart as some of us, we wouldn't need regulations, would we? This is not rocket science. It is very easy to pick on the ignorant, they are sitting ducks. My ancestors were all fair game, as a matter of fact. They came here with nothing, including the language. They begot me, and I went to Ivy League schools -- because of them. How quickly we forget. Thanks to them, and thanks to Jeffersonian sanity that allowed them, in their pathetic ignorance, to survive, and flourish. So many of us act and talk as if we are our own creations. Take a breath, and get real. We must protect the ignorant, that is our job.
Someone needs to introduce this lady (Dianne) to Dave Ramsey.
Take a breath, and get real. We must protect the ignorant, that is our job.
I suggest, a minor modification to this:
We must educate the ignorant and protect the stupid; that is our job.
...Individual lack of responsibility is an epidemic.
Is that really the issue? Were we so much more enlightened in the past? I'm still amazed by the procession of events that's led to this current crisis. Some of the biggest mistakes were made by institutions that would override individual common sense. Individual underwriters were run right over with platitudes like "we're helping people get into homes", "That's not in the guidelines, the loan is priced for that risk". I don't see the mess we're in as a crisis of individual responsibility as much as one of institutional failure.
Take a breath, and get real. We must educate the ignorant and protect the stupid; that is our job.
Agreed. I am all for protecting the 50% on the left side of the bell curve of intelligence (yep, I know we're all on the left side in some areas based on a standard distribution of traits). My point in a round about way was that the 'system' has to protect those who can't protect themselves, like this lady. As I learned a long time ago as an interrogator....predator, prey or parasite....categorize and approach. Also, 'everyone's normal 'til you get to know them.
I learned as a youngster, through an inculcation that might aptly be described as psychologically violent, that paying interest on stuff was just a step or two shy of finacial suicide. I didn't really let it sink in until I was in my early thirties, but sink it finally did. I now excercise nearly-paralytic due diligence. I read that Ms McLeod refinanced at one point, and paid the better part of ten grand in fees for the priviledge--I'd have sooner choked on dog poop.
I sometimes have considered that trading this "education" (bought with poverty, illness, the jeers of childhood peers, an occasional thumping from my dad, and so on) for the blissful ignorance of folks who never got the lesson...well, many times I have thought that it would be a good trade.
I doubt I will weather economic storminess, now looming Category Five-like on the horizon, any better than the rest of America. And all I have to show for my frugality is a modest pile of cash which will soon be inflated into obscurity. Meanwhile, debtors will reap a windfall on the same gust of government intervention--so who's the chump?
Do you believe the woman in the article has freewill? Could there be a genetic impulse control issue? I have seen this crisis capture a lot of people that have poor impulse control and analytical skills.
People are human. Some are born with a silver foot in their mouths, but most are not. If everyone was as smart as some of us, we wouldn't need regulations, would we? This is not rocket science. It is very easy to pick on the ignorant, they are sitting ducks. My ancestors were all fair game, as a matter of fact. They came here with nothing, including the language. They begot me, and I went to Ivy League schools -- because of them. How quickly we forget. Thanks to them, and thanks to Jeffersonian sanity that allowed them, in their pathetic ignorance, to survive, and flourish. So many of us act and talk as if we are our own creations. Take a breath, and get real. We must protect the ignorant, that is our job.
Kurtyboy-
To paraphase the sainted Tanta,
We're all chumps now.
tanta - u rock girl. My sanity is restored.
This story makes me think of all of the posts on Irvine Housing Blog
where the borrowers often spent 10s of thousands of dollars of HELOC money annually, and usually not on home improvements.
You couldn't ask for a better class comparison. Who is the worse? I'm pretty sure no one smokes in Orange County.
And I think giving Diane money, especially a (somewhat) complicated finacing deal should have struck the lender as akin to giving money to a junkie.
Should it be illegal to make profits on human folly? Should it be illegal just because it's immoral? Just asking.
-John Stark
Not sure about how to answer that, but... check out the Interactive Time Line of Debt chart that is buried in there:
Click on "Full Series" instead of "Video", hit "Start" and then click on "Lifetime" and then "Launch Interactive"
2007:
Average Savings: $449
Average Debt: $121,650
Holy shit, we're doomed.
Nikkei slips for 12th consecutive session - MarketWatch
The Nikkei finished the session 0.2% lower at 13,237.89, while the broader Topix index ended little changed at 1,297.88. The Nikkei lost nearly 8.5% during the past 12 sessions. Its longest losing string was 15 consecutive sessions in 1954, followed by 13 straight losses in 1949 and 12 in 1953.
Doc at the Radar Station:
Try filtering out a couple of groups--I set the Head of Household age to $150k. Only 3% of that demo have no debt, and the bulk have over 100,000 (with a significant spike in the 1mm range). Good times.
I'm very optimistic that we're going to get what we need from Congress,'' Paulson said on the CBS NewsFace the Nation'' program. ``Congress understands how important these institutions are.''
Paulson `Very Optimistic' on Freddie, Fannie Rescue (Update1) - Bloomberg.com
Growth is slowing and not just in the U.S.,'' said Daphne Roth, Singapore-based vice president of equity research at ABN Amro Private Bank, which oversees about $20 billion in Asian assets.A lot of money has been put into the commodities space and with the underlying demand slowing, it makes sense to exit.''
Stocks On The Move - Bloomberg.com
I'm sorry.
I don't see what all the fuss is about.
a few points:
I would bet that a LOT of viewers will completely miss the tchotchkes and the cigarettes and the yoohoo. and many of US who saw it thought it made the house look HOMEY. I said "wow, here's a regular lady... she could be my older sister or mother..." I hate to tell you guys this, but a LOT of people decorate their homes EXACTLY like that woman, and won't think her "tacky" at all. Only you in your ivory towers decided that this was all "tacky".
Is it possible that you are all so anti-Gretchen Morgensen that you pounce on anything?
They filmed the woman's house for god's sake. They got the kitchen, the dining room, the living room, and a bedroom. they got the front of the house and the back of the house.
and you know what, she has tchotchkes, so what? she also had 1000 pictures on her TV. and she has a chain link fence. so?
it is my opinion that it was these shots that made her a PERSON. I guess they could have 'cleaned it up' for you guys, and turned it into a "Dwell" magazine with aquaturd colors and chopped pillows. Would that make you happy?
Perhaps take her and move her to a modern art museum for the interview and put a "New Yorker" in her right hand and a Starbucks coffee in the left? Had her exit her Toyota Prius?
I think you're stretching trying to imply that there was this sinister attempt to make Ms. McLeod look like trailer trash.
I usually agree with a lot of GM bashing... but not this time. Her story is SPOT ON.
"Diane McLeod's debt is the result of financial missteps, unfortunate circumstances, and a lending industry willing to extend her more credit than she could possibly repay."
what on EARTH do you have to gripe about this statement? Do you not agree? Ms. McLeod herself admits she had financial missteps. check.
she had unfortunate circumstances (hysterectomy, appendicitis, job loss, death of father). check
and she was extended credit that she could not possibly repay. check.
I'm sorry... but some people need to step back, and relax. GM is not the antichrist. Every word out her mouth is not evil.
crikey--used the symbols instead of the words. Less than 35yo, income grater than $150K
Do you believe the woman in the article has freewill? Could there be a genetic impulse control issue?
My opinions on metaphysics and genetics are worth even less than my opinions on football.
I appreciate the compliment implied, but then again I often think that a lot of journalists and bloggers both get themselves into corners when they are tempted to opine on subjects on which they have nothing useful to say.
What I will say is only that I wonder why we think we have to decide those things. I have no idea whatsoever whether "compulsive shopping" is a mental illness, a normal variant of human behavior, a character defect, or just a bad habit some people have that they dress up in the language of "compulsion" in order to deflect responsibility.
The reason I have worked in the lending industry for twenty years and still don't know the answer to that is that it never occurred to me that as a lender I had any real business trying to decide that. You know, I spent years seeing loan applications come through, and thinking that this person was just spending way too much and saving way too little and I sure wouldn't buy that house or do that refi if it were me. But it wasn't me, and as long as they met our (generally conservative) underwriting guidelines, it didn't matter. It was never my business to decide whether you were buying this house because it was a rational economic decision for you, or because you fell for it over the weekend and felt that buying it would make you get over being dumped by your boyfriend, or because you think that buying a big house will impress the neighbors and make your wife like you better. Or anything else. If you had the income and the assets to support the deal and you were old enough to sign contracts, you got the loan. Lord knows we've all seen loans that "looked" rational go bad, and loans that "looked" like total foolishness do just fine.
What I begin to fear these days is a sense that for-profit companies (of any sort) should somehow be tasked with interpreting and evaluating consumers' judgment or aspirations. I buy that regulation should force them to stop offering financial poison pills--deals that have clearly no tangible benefit to the borrower. (Example: Diane's first cash-out, where the lender let her borrow $30K to pay off $25K in credit cards knowing she would have to pay an $8000 prepayment penalty to do that. I think the lender should be obligated to do the math for her to show how that ends up being an effective interest rate well over the usury limit, if you count the prepayment penalty as part of the cost of the new loan.)
But if she had the equity, had the income, and wasn't getting into toxic loan terms, when did it become the lender's right, let alone its obligation, to say "you don't need any more handbags or snow globes, kiddo"? We're talking capitalist corporations in America. As if somehow they are also going to be your mother or your counselor or your best friend. As if they could possibly help you decide what is "good spending" or "bad spending."
Now that, I think, is a weird idea.
that said:
I will agree that they didn't need to do a close up on the cigarrette. but I also highly doubt that it was as persuasive as you all seem to think.
GM is totally correct (and you ignore this by the way) when she says that the CC lenders could simply have not allowed her to charge any more on her cards.
would she still overspend? yes. would she be $286k in debt? no.
as GM says: it takes two to party.
Tanta,
It is a joy to read your writing. How you've managed to become so wise, stay so human, and be both so analytical and so articulate is a mystery, but I'm delighted that you are such paragon, and that you have chosen share your gifts with the rest of us. You're an inspiration. Thank you.
elgraccho writes:
I suggest, a minor modification to this:
We must educate the ignorant and protect the stupid; that is our job.
Yeahbut ...
Who will draw that line?
I sure don't want to, and I 'professed' at so many ivy league institutions, i'm not going there. Stoopid, ignorant? You decide.
Is Tanta ignorant, or just forgetful, for having attributed my "Nude Descending a Staircase", to my midget rival, Pablo Picasso, many posts ago?
Or was she out in the hall swapping the bong-water, during that particular moment in the lecture?
"What I begin to fear these days is a sense that for-profit companies (of any sort) should somehow be tasked with interpreting and evaluating consumers' judgment or aspirations. "
I feel this is hyperbole. Most of us are asking that the lenders make a REASONABLE attempt to ensure that the lent amount can be paid back.
so you wanna borrow $250k for a house and you make $5/hour. sorry.
You wannt borrow $250k for a diamond encrusted tchotchke and you make $150k/year and have no other debt. fire away sugar!
the point with these articles is that the lenders are lending out MORE THAN THE PERSON HAS THE ABILITY TO REPAY. And they are doing it at huge profit... until they aren't. and then we as taxpayers have to swoop in and save the day.
so yeah, it isn't the business of the lenders to tell people how to spend their income. I agree. But it IS the responsibility of the lender to make a good faith analysis to ensure that the borrower CAN pay the loan off.
if they don't want to do that, then fine. Then we need to eliminate fractional reserve lending and FDIC insurance and all the other PUBLIC backstops that the lenders enjoy.
Tanta, I love you with all my rusty heart, but sometimes I think you forget just how shitty the lending got. These firms didn't have Tantas working the back room. or if they did they let Banker and Broker run roughshod over them.
I'll say this about the credit card companies. They are perverse. The more you use them the more they offer you.
Some years back I was buying thing on behalf of my employer who, rather than open an account at various vendors just told me to buy what we needed and he would reimburse me. I liked the deal because I got the points and....to Wells Fargo I looked like a real big spender as my monthly purchases soared.
My credit limits kept being raised even though I paid it all off in full each month. Wells probably had a model that predicted I would soon be unable to and therefore if they could hook me with a monthly purchase I couldn't make they would be in Finance Charge City.
Anyway the spending orgy came to an end but not before I had increased my credit limit 10 fold and was issued one of those impressive GOLD cards.
Over the years since then as I reverted back to my more modest ways and continued to pay my bills off each month they finally threw in the towel on me because when they sent me my new cards I saw it was no longer Gold and my credit limit was only $10,000.
Thanks for slapping me back into reality. I guess I had been in a metaphysical mood. There just has to be an objective criteria for a capitalist system and I guess the reason we're in this mess is that banks forgot their own rules. Again, I visit a few times a day during the week and have learned more than in some of my graduate courses.
Maybe I found myself liking Diane so much because she just sticks to her own story, as unflattering to herself as it is, and doesn't let herself be led into parroting the "victim of evil lenders" storyline.
Though I realize Tanta had bigger fish to fry (and fry them she did), I found Diane's story, as told by Diane, to be the most interesting part of the piece. She obviously has accomplished some self-reflection and clearly had the ability to articulate what she learned about how she ended up in that situation.
I, too, offer Diane good luck.
As to where to draw the line on protecting fools from themselves, I can only offer that articulate fools make that question more difficult to answer.
Marcel
Point taken about deciding how to discriminate between those incapable of learning and those who don't.
I guess my answer is that we should start by assuming ignorance and attempting education. That failing, an assumption of stupidity might be in order.
It would even be possible to apply that concept to loan origination, I suspect.
Paulson as usual claims to know everything beforehand, including what Congress will do. My impression is that some of what he says is true, other parts of what he says are partly true, and still others are not true at all. I don't take P. at face value. Does anybody?
Paulson `Very Optimistic' on Freddie, Fannie Rescue (Update1) - Bloomberg.com
I think your post misses the forest for the trees.
McLeod is proffered as a REPRESENTATIVE of the real problems underlying the credit crunch (in this case not only housing finance, but consumer credit).
I think it's a big stretch to think that GM is writing this, or narrating the video, in a way that makes McLeod look sympathetic. McLeod isn't good or bad here, she just is. She's pathetic, there's plenty of blame to go around, and in the end, it doesn't matter whether you think she's been milking the system (and is sophisticated) or she's a duped rube.
The point I take GM to be making is that McLeod, and many others like her, have been fueling the record profits of the financial system, but that that gravy train is unsustainable, for the reasons elucidated in McLeod's example, which are, according to both systemic data and I think most of our own anecdotal experiences with friends and relatives, very common indeed.
If I were boiling the essence of this piece down to a few sentences, they would be: people like McLeod have been overextending themselves, which has been extremely lucrative for lenders, but these borrowers are now teetering on the brink of insolvency, where one unexpected event will do the trick. The fact that there are so many folks out there like McLeod spells serious continued trouble for our financial system.
But you continue your GM hatred.
how to discriminate between those incapable of learning and those who don't
Gosh, here's a crazy, kooky idea.
How about if we stop promoting and rewarding this "free market", "whoever I can screw, whatever I can get away it' mentality?
How about we put the CEO of CFC in jail? How about Paulson in jail for lying to the public? What say we compoletely revoke all retirement plans for Congress?
A well-functioning nanny state requires children, hence Ms. Morgenson's valiant attempt to infantilize Ms. McLeod. However, I'm not sure what to make of the following NPR piece on high meat prices:
Struggling In Ohio As The Economy Tightens : NPR
Those who heard it on the radio are presumably are unaware that its two female subjects look to weigh about 300 pounds each in the photo.
One last GM-defending post and then I'll stop.
An HONEST raise of hands:
how many of you after watching the video LIKED this woman?
(YTL raises his hand)
how many of you after watching the video felt that she made some foolish mistakes?
(YTL raises his hand)
how many of you after watching the video felt that this woman should not have been allowed to overdraw her cc's given her situation? especially since we ALL know that this is reported to the credit companies immediately so the cc companies knew she was an "overdrafter" and they knew she had high balances on her accounts?
(YTL raises his hand)
so this is why I disagree with a lot of the commentary here. I think that this video did a fairly good job of presenting an engaging woman who made mistakes, but who was not helped by current lending standards.
where I'm from they say: "they sold her enough rope to hang herself"
it is my opinion that it was these shots that made her a PERSON.
So what are you saying, here? That those of us who don't have three hundred magnets on our fridges are not authentically PERSONS?
The other side of the coin is this romantic notion that people who fill their homes with "stuff" until there's no storage space left are somehow "authetic" voices of the PEOPLE. In other words, it seems to me that you don't disprove my assertion that these shots were intentional "class cues," you simply take the opposite view of what such class cues signify. For you, they mean "homey" authenticity. I'd be willing to bet that the knick-knack collection also signifies "homey" authenticity to Diane. Which is why spending the thousands of dollars it took to accumulate all that mass-produced abundance made her "feel better."
So what? So some people make themselves "feel better" by spending too much money imitating the expensively empty interiors of the aesthetes. Some people make themselves "feel better" by stuffing their houses with as many inexpensive figurines and souvenirs as they can hold. I have no idea why the latter are PERSONS to you but the former are not.
What I begin to fear these days is a sense that for-profit companies (of any sort) should somehow be tasked with interpreting and evaluating consumers' judgment or aspirations.
If there is that sense, it probably comes from the fact that lenders have fairly successfully shielded themselves from the consequences of their own failures of judgment. One point made in the wider article I agree with, and seems quite obvious, is that lenders are trying to create a customer base in perpetual debt.
Forty years ago, no bank would have lent that woman money after she had accumulated so much debt because it would be, for want of a better word, stupid.
No they have so insulated themselves from their own stupid lending decisions that the question of lending the next $1,000 to that woman becomes a moral or ethical one.
But I think the point may be rendered moot in the next few years. The dikes they put up to shield themselves will all springing leaks simultaneously. There is going to be a great unwinding of leverage, or debt, in this country.
First, dear Tanta, your desire to make Diane the victim of her own lack of self control or whatever, just because she admits it, forgets that whatever her character or habits, IF the lender had not been willing to extend credit to a person who had no business accepting it or was obviously incapable of paying it back there would never have been a problem. The old system was controlled by the LENDER who refused to extend credit to those who were credit unworthy. When that changed, so did the whole scenario.
that banks forgot their own rules
The banks didn't "forget" their rules.
They chose to discard them posthaste to fill pockets with loads of money in a short time frame.
Congress didn't "make mistakes".
They deliberately chose a course of action. We always want to make Mr. Average accountable for his ignorance.
Why don't we want to make Mr CEO or Mr. Congressman equally acountable for duplicity?
Congress lies.
Bernanke lies.
Paulson lies.
Bush lies.
CEOs lie.
CFOs lie.
Goldman Sachs lies.
JP Morgan lies.
Bear Sterns lies.
Where is the jail sentences? One measly charge against Bear Sterns underlings? Why is the entire staff of Bear Sterns not in jail?
Why is Mozillo not in jail?
Why is Dodd not in jail?
Why does anyone in Congress for the past twenty years still have retirement plans and payments?
15 consecutive sessions in 1954, followed by 13 straight losses in 1949 and 12 in 1953.
Or was she out in the hall swapping the bong-water, during that particular moment in the lecture?
I was probably out throwing a rose into a urinal at the time.
"A feminist is someone who loves women in general and hates them in particular."
P.S. I don't think Gretchen would let you wash her car my dearest Tanta.
Your last two paragraphs, Tanta, are all wishywashy: is Diane responsible or is her lender? I would say it is her lender, plain and simple. There will always be Dianes who want to take whatever is offered them. The point to being a responsible lender is NOT to lend it to them. Period. End of issue.
"I found Diane's story, as told by Diane, to be the most interesting part of the piece. She obviously has accomplished some self-reflection and clearly had the ability to articulate what she learned about how she ended up in that situation"
Diane is a sociopath and, given the opportunity, she will end up right back where she is today. What's the downside ? She's selling trinkets on Ebay for 1/2 of what her credit card company paid for them. 50% more than noting is still a win.
Re: "I have worked in the lending industry for twenty years "
That would put you at almost 35 +/-, so guess you started about the time new England was having a bit of a stir back in 1989?
Did you see the same type of things then?
Tanta:
you misread my meaning and go too far with the implications.
I never said that one must have tchotchkes to be a person
what I am saying is that the video of Ms. McLeod allowed us to get a 'glimpse' of her life. Her home, what she looks like, how she talks, how she holds herself.
when you take in the whole picture, you get a gestalt of the person, even if the gestalt might be in error. as opposed to this:
Name: Ms. McLeod
Total Debt: $2XX,000
Debt on household: $255,000
Debt on CC: $YY,000
Amount spent on Z: $MM,000
in the same way, we have a gestalt of YOU because once in a while you give us stories about yourself sitting in your robe with bunny slippers reading your Amazon-thingamabob. does it even matter if you really have bunny slippers? no. it is that these details help to "flesh out" the black and white on paper, and make you seem more like a person as opposed to an ethereal blog-bot in cyberspace.
In the same way, you would all know a lot more about me if you saw a video of my home and my family. And you know what, I'm sitting outside on my wireless laptop on a beautiful deck on a summer day... and there is a chain link fence right behind me. I can alllllllmost reach out and touch it with the tips of my fingers if I lean over the railing
so I'm sorry if I don't agree with you that a shot of a chainlink fence means "trailer trash". And I'm sorry if I don't agree that a shot of 1000 tchotchkes means "tacky". And I'm sorry if it offends you that this woman smoked and they decided to put it on the tape.
because at the end of the day, REGARDLESS (or just maybe because?) of those things I AND MANY OTHERS find her engaging and witty and a PERSON.
And in many battles that is what we need. PERSONAL stories. It's one thing to hear "1.4 million households are at risk of losing their homes". It's another to see a little vigniette of a woman who is losing her house. And make no mistake, it is THE HOUSE that is most important to this woman. She sells all the other stuff in her house and states (paraphrased) that it was almost as fun as buying it...
but the day her house was (not) sold at auction was the worst day in her life.
so the HOUSE is important. And the HOUSE is hers. And the HOUSE is lovingly decorated in a certain style. And thus it is worth videotaping.
No villains or victims here IMO. Just like IBs, individuals making bad decisions... with leverage.
Actually the case is Diane is not just " not good with money", but mostly she is "irresponsible" in her behavior. And it is not the credit cards' fault. Let us face it, she does not even know how to use credit cards safely: there have been plenty of ways to make sure balances stay at a fixed rate well below 6%. GM just describes the case of adults behaving like uneducated 10 year olds (and I am being generous... I can think of several 7 year olds who know better).
Everybody will have to deal with unfortunate circumstances. That is the test : how you react to them and how you prepare for them. Parents are supposed to teach that to their kids. How many do? It is all about responsibility.
It is also clear that anyone can overspend, no matter how much money they make. I am sure plenty of people on Wall Street fell like crap because they "only" make a couple mil. a year.
So it is about being accountable to yourself for the way you live.
What is it that they want? things, rather than freedom? is it that there is such a lack of imagination that owning things has become an aim? is this what these people stand for?
They feel bad : answer they eat or shop. Do they stop to consider whether they will indeed feel better with another 10 pounds on, or an extra $1000 on their bills?
My view is it is obviously fine to take risks to get education, start a business or invest. But even that risk should be controlled: with "what if" scenarios and a well outlined plan including monitoring-evaluating the progresses of your situation and specific time frames. Again, being accountable to yourself to begin with.
Considering the epidemic of "self pity and self gratification" in addition to all the stories of greed gone wrong, it is hard to imagine too much near term upside for the financial sector indeed.
...These firms didn't have Tantas working the back room. or if they did they let Banker and Broker run roughshod over them.
Or maybe they did. I don't think these horrible lending decisions were enabled by a few bad UWs, sales mgrs or even a few bad companies. In order to have failure of this magnitude you've got to have an almost complete industry wide delusion. From the Broker/LO, to the UW at the lender, to the investor that makes the underwriting guidelines, to investment bank that buys the loans, to the mortgage insurer that insures the loan, to rating agency that rates the securities etc.
Forty years ago, no bank would have lent that woman money after she had accumulated so much debt because it would be, for want of a better word, stupid.
I'll go with "stupid." Which of course suggests that the lenders should have to live with the results of their stupidity just as Diane has to live with the results of her own mistakes.
And what is pissing everyone off is that it appears that while Diane will take the consequences, the lenders won't. It gets all caught up with assumptions about the extent to which Diane's personal failure doesn't "hurt" anyone else but the failure of large corporations "hurts" the economy, and so on.
What is troubling me lately is the sense I get that a lot of people think the answer is lender paternalism, rather than convincing lenders that they are not insulated from stupidity.
That was why it bugged me that Diane is such an "easy target." As if somehow having the CC lenders act like bartenders now have to--legally responsible for cutting you off when you've had too many--addresses the question of why simple lender prudence doesn't already have the same effect (because there's too much moral hazard for lenders).
I find myself in agreement with Robdawg about
the cigarettes and Yohoos only because my taxes will probably be paying for the unhealthy choices.
However, I must add that any of us could find ourselves in her predicament despite our best
plans or intentions.
That would put you at almost 35 +/-
I didn't start working for a bank at the age of 15. Back then I was still drinking bongwater and listening to ABBA.
Mortgage lending wasn't my first job out of college, either. I wish I could say that I got sucked into it because I was too young to know better, but that would be a lie.
What is troubling me lately is the sense I get that a lot of people think the answer is lender paternalism, rather than convincing lenders that they are not insulated from stupidity.
I don't think any convincing will be necessary. I predict that within eight years, the bankruptcy code will be amended sot it is more in favor of debtors than it was even before the last "reform." It will almost certainly include a provision making mortgage debt subject to revision.
If Obama is elected and the Democrats increase majorities in both houses, make that two years.
At the same time, the secondary market for asset-backed debt will not recover and in fact will continue to contract.
I didn't start working for a bank at the age of 15. Back then I was still drinking bongwater and listening to ABBA.
I remember you voicing 'Free Man in Paris',
back in the day, next to the Iowa River.
We were skipping an art history lecture on ...
Marcel Duchamp ... of all subjects, and that staircase ordeal.
Ah, those were the days!
16% of the population has a IQ between 70 and 85.Do these peple need help?
Conjure is aware of a solution to Diane's problems: it's call "D-IX," or "D9."
Invented by German Army doctors during World War II to enable soldiers to perform superhuman feats of endurance, D9 is a tablet containing amphetamine, cocaine and a morphine derivative.
Conjure says that D9 was "vastly superior to plain vanilla Pervitin," the Wehrmacht's favorite amphetamine.
With federally-subsidized D9, Diane could work three jobs and have that debt paid off in no time at all!
Assuming she has two of them, Diane could also sell one of her kidneys to a Japanese organ broker!
Remember, all of you optimists out there, the glass is never half empty, it's always half full!
I'd be willing to bet that the knick-knack collection also signifies "homey" authenticity to Diane.
I couldn't have said it better myself. And so you see, in the end, the collections are a part of Diane, and thus including them in the video is appropriate.
I have no idea why the latter are PERSONS to you but the former are not.
this is where you lose me. I said nothing of the sort. I said the tchotchkes are what makes DIANE a person. it's not a prerequesite to be a person.
I myself have almost no "things". so you could say that I'm defined by my LACK of things.
And so a videotape of my life would be very different.
You'd hear GM's voice "Dr. YTL is a blah blah blah"
But then you'd see that my home is in a working class neighborhood that gentrified. The exterior would show a very simple home, well kept up but not ostentatious. the interior shots would show a meticulously clean home with things that are well maintained but nothing of much monetary value. That might shock people if GM mentioned my household income or net worth...
and you'd see me, a 30 something biracial guy with a shaved head and a smile who talks way too fast and way too much, but in a way that's nothing like what you expected when you saw him. and you'd think: this guy's a doctor? he sure doesn't look like one.
I'd be wearing a backwards baseball cap and my shorts and a t-shirt and flip flops using my laptop on my deck.
and if they taped me during the day they'd show me biking around all the trails of Minneapolis and playing like a kid with kids in a kiddie pool (aged 12, 8, 8, 7, and 5.)
and you would probably learn something about me as a person.
but then other people would castigate the film and say:
"Look, geez, they use THAT GUY to typify doctors? I mean, c'mon look at him. And look at that house? And did you see his Target shirt and his backwards cap... what is he a gangster doctor or something? or are they trying to insinuate that black people are doing well in America? Because they're not you know."
and so on.
I see Rob at least admits that it is the Dianes of the world who are "responsible" for the fact that he can get very inexpensive "convenience credit."
What surprises me is that no one is willing to take the side of the argument that says the Dianes of the world are the backbone of our consumer-based economy. You know, all those entrepreneurs who form small businesses to sell tchochkes couldn't be the backbone of the economy unless somebody kept buying tchochkes. Don't I remember a certain rather well-known politician making the comment not too long ago that eBay was some kind of economic model we should all feel warm and fuzzy about? Maybe I dreamed that . . .
I do seem to remember that seven years ago this fall, going out and shoppin' till you drop was a patriotic act. I don't remember any warning at the time about credit limits.
Tanta --
if the point is to cut off borrowing before it ends in disaster, then you have to cut off more than a few borrowers who don't happen to think they're anywhere near disaster yet
Um, who is "you", exactly?
This strikes me as an awful lot of fuss about nothing. If "you" lend to someone who cannot repay, then you are stupid, and your punishment is that you do not get repaid.
This looks like the most self-correcting "problem" in the history of the universe. Two parties enter a contract neither should ever have entered; both suffer in accordance with that contract and existing law; what's the problem?
I mean, what is the point of spilling all this ink on stories like this, both for you but especially for Gretchen? Is the idea to tell lenders "see had you not been so careless you would still be in business"? Or to fire people up to seek a bunch of legislation to prevent activities which are already never going to happen again?
Simply let everyone get precisely what she or he or it signed up for. Simple, effective, fair, and just.
Tanta, I'm sorry, but overspending is not a character defect. Overspending may be a bad habit, or a psychological crutch, or a symptom of depression, but it's not a character defect. Meanspiritedness is a character defect. Lack of empathy is a character defect. Pettiness is a character defect. But not overspending. I've never found that decency to one's fellows could be determined by looking at someone's credit card payment history.
I'll go with "stupid." Which of course suggests that the lenders should have to live with the results of their stupidity just as Diane has to live with the results of her own mistakes.
And what is pissing everyone off is that it appears that while Diane will take the consequences, the lenders won't. It gets all caught up with assumptions about the extent to which Diane's personal failure doesn't "hurt" anyone else but the failure of large corporations "hurts" the economy, and so on.
What is troubling me lately is the sense I get that a lot of people think the answer is lender paternalism, rather than convincing lenders that they are not insulated from stupidity.
I doubt any sensible person would disagree that lenders should suffer from the consequences of their stupidity. But the real responsibility lies with the lender side of the equation and not the borrower. Borrowers would and will probably take whatever they can get; to expect them to decline the caviar they are offered is too much to expect. It is the lender side of the matter that needs to be corrected. When that is done, the problem will large disappear. Perhaps you might make some suggestions about how to stick lenders with the responsibility for their own stupidity. That would be useful.
Mr. Mortgage has one of his best videos up on the Pay Option Arm scandal. If you put it all together, you can see why problems happened and how it's going to get much worse.
The Mortgage Lender Implode-O-Meter News Pick-ups: Mr Mortgage on the Pay Option ARM Implosion
Key points:
Banks loved pay option arms become the negative amortization let them book huge amounts of phantom income.
80% of people with these mortgages have chosen the lowest possible monthly payment, with highest neg amort.
A lot of these mortgages were 90%+ LTV at the start. Now, with neg amort. and falling prices, he says some of them are 200% underwater (value is one half loan principal).
When the limits are hit (such as 115% of original mortgage principal) some of these people will be facing a doubling of their monthly payments.
Come on. You really expect people to pay twice as much per month for a house that's 200% underwater? People made the smart choice to take these loans at the top of the market. Now, they'll make the smart choice to bail. Stop feeling so sorry for smart people doing the right thing for themselves.
It's not even immoral anymore to bail on a way underwater mortgage.
Dear Tanta,
Thank you very much for the clearly thought out writing. I don't see much of that these days.
Or, to put it another way, you totally rock!
Best wishes to you.
From the article:
Such fees and interest rates are a growing burden on Americans, especially those who rely on credit cards to make ends meet.
How do you rely on credit cards to "make ends meet"? Isn't that function usually filled by somethng called "income"?
This after listing the absurd interest rates this woman is paying on her credit cards. Good lord woman, read your statements - the interest is broken out in separate line items at the bottom of each statement.
(Even so, once upon a time we had usury laws.) The movie "Maxed Out" is instructive on the games played by credit card companies, but it takes some stupidity on the part of the customers to get this royally screwed.
rich
thanks for that data. Scary stuff. One question:
Isn't it true that when the limits are hit they will be facing a doubling of their monthly payment IF they had been paying the full amount instead of choosing to pay the least possible? So in reality they would be facing a higher multiple on the payment?
The way I see it, if 80% are choosing to pay the min, 79.5% of those will default.
I believe that is why the nice mr paulson wasn't so upbeat this morning on the TeeVee.
I must say that if there are only 13 visitors here on a Sunday night with the week we have ahead of us that people must think the worst is over.
Maybe everyone is watching The Dark Knight.
This looks like the most self-correcting "problem" in the history of the universe. Two parties enter a contract neither should ever have entered; both suffer in accordance with that contract and existing law; what's the problem?
Nemo:
I would agree with you FULLY, except:
-when the banks take their deserved losses then they may go under, and then the FDIC must bail them out. This is not a problem SO LONG AS the FDIC has adequate funding. Which by the way many people are worried about. If the FDIC doesn't have enough funds then the next stop is the TREASURY. so the taxpayer may be taking the loss as well
-The banks made these loans and sent them to fannie and freddie. if you haven't noticed, we may be on the hook for up to $5 BILLION. so again, I would state that we as a country DO have a need to "monitor" these private contracts
-the banks made these loans and then packaged them and there may be a lot of fraud there. and a lot of Pension funds bought these through securitization. Thus, our Pensions are at risk
-the banks made these loans and sold them through Fannie/Freddie to overseas central banks. Now that the gig is up we may have increased borrowing costs because of these.
-the banks did all sorts of shenanigans using these loans including Off balance sheet SIVs and what not. now that they're blowing up, they are asking for federal backstop (Bear Stearns)
so in the end: the problem is that the lenders have made this OUR problem
and since it is our problem, I feel we have a right to give input on HOW they can lend.
The visitor count must be malfunctioning. It goes down every time I refresh.
IMO my statement above is more interesting than this sob story - can we get back to discussing inflation vs. deflation? Which way will it go, Tanta? Do we hyperinflate or deflate? Are we more like Zimbabwe or Japan?
"What surprises me is that no one is willing to take the side of the argument that says the Dianes of the world are the backbone of our consumer-based economy"
LOL. All the bears believe the debt-fueled consumer based economy is the source of all that ails us. I have no problem with people spending their incomes minus something they set aside to pay for my medical care. I don't think Diane is prepared to help fund socialized helth care, or even contribute to her own, unless she can get $100000 a piece for slightly used snow globes on eBay.
Sorry, Yearning, but mostly you lost me there.
It has seemed to me for a very long time that damned near every conversation we try to have on this blog about newspaper accounts that involve specific examples (namely, an individual's story) get immediately bogged down into whether the individual in question is "sympathetic" or not. "To blame" or not.
Honestly? I find that symptomatic of intellectual childishness. Examples are useful because they allow you to analyze one thing in depth, and then test the results of that to see if it fits in with whatever larger, impersonal data or trends or abstractions we are confronted with. I certainly would never deny the potential analytical power of looking at an example.
But I have no desire to confuse my emotional responses to "true life stories" with analytical purchase. I specifically mentioned the fact that the woman struck me as likeable because I think we should always be aware of our own emotional responses to people, and how they may or may not color our analysis of the "big picture" view the journalist is trying to get us to take. But beyond that, it's perfectly immaterial whether I like Diane or not. This isn't a soap opera. I hope Diane doesn't care whether I--some stranger on the internet--likes her or not, because she shouldn't.
I remain convinced that your response to the video, while perfectly legitimate, is not what its creators and editors had in mind. This only proves the fallacy part of the "intentional fallacy." But I suspect the typical reader of the NYT business pages is a whole different socio-economic demographic than Diane. Actually, either this blog's readership also is, or way too many of you lied out your ass on the last advertiser survey we did. According to that, the vast majority of you are a damned sight richer, better educated, and upper middle class than I am.
Nothing you've said really changes my view that "personalizing" economic discourse is at least as dangerous as it can be illuminating, because it so often degenerates into arguments that claim to be about economics but that are really about taste.
"I feel we have a right to give input on HOW they can lend."
Yearning, you have a right to say anything you want, so long as you do what you're told.
That's the way this country works. If Senator Grassley and the credit card companies had their say, Diane would be availing herself of D9 and the Japanese organ broker to pay her bills.
You can argue about who screwed the pooch but, at the end of the day, it's going to be the little people who pay the bills.
Haven't read the thread, but all too many of my clients are like Diane.
Getting a lot of money is a good job can be a bad thing for some people, it just sets them up to borrow more and more, and when something bad happens they are buried under a mountain of debt.
People really really think that money will make them happy and more and more money will make them happier and happier. Doesn't matter where or if they go to church, what they really worship is money. This really isn't so and someone should say so. Enough money makes you happy. Not too much and not too little.
There is a book called Class, which may not still be in print. It is worth a read. Just to make the blindingly obvious once you see it, obvious.
Well, also, the paper can't criticize the spending of the uber-rich or their advertisers wouldn't like it, so we get to focus in on Diane.
I wonder if Diane realizes how contemptuously she has been treated.
PeonInChief wrote: "overspending is not a character defect"
Correct. But it's a hallmark of irresponsibility - which is a character defect.
alifornia, Florida and Texas, the U.S. states with the most Starbucks Corp (SBUX.O: Quote, Profile, Research) stores, will see the most shuttered as the coffee chain axes more than 600 underperforming outlets in the coming year.
Starbucks is closing 88 locations in California, a loss of 5 percent based on store counts as of the end of March.
According to a list of store closures released on Thursday, Florida will lose 59 stores, or nearly 14 percent of overall outlets, while the coffee seller's move to shutter 57 Texas locations will lower store counts there by 11 percent.
"I've never found that decency to one's fellows could be determined by looking at someone's credit card payment history"
I donate modestly to the American Cancer Society every couple of months online using my credit card. I am getting ready to stop though, since they are on some kind of rampage to punish me with weekly phone calls for more money. I told them if they don't quit calling, I will quit contributing. We'll see if they can act sensibly as an organization...
mp writes:
Conjure is aware of a solution to Diane's problems: it's call "D-IX," or "D9."
Invented by German Army doctors during World War II to enable soldiers to perform superhuman feats of endurance, D9 is a tablet containing amphetamine, cocaine and a morphine derivative.
Conjure says that D9 was "vastly superior to plain vanilla Pervitin," the Wehrmacht's favorite amphetamine.
With federally-subsidized D9, Diane could work three jobs and have that debt paid off in no time at all!
Assuming she has two of them, Diane could also sell one of her kidneys to a Japanese organ broker!
Remember, all of you optimists out there, the glass is never half empty, it's always half full!
mp | 07.20.08 - 6:04 pm | #
Plus she'd lose weight - double bonus.
Re: The visitor count must be malfunctioning. It goes down every time I refresh.
No it's just time for fresh air and coffee!
the vast majority of you are a damned sight richer, better educated, and upper middle class than I am.
Count me in as your inferior: $11/hour full-time, apartment renter, no car or driving for 3.5 years, very poor sensory motor skills, mental illness, non-smoker, anorexic, near-sighted, perpetually 1 credit from college BA, no future. Now please! Will it be inflation or deflation?
Rob and Tanta-
As an aside, obesity is a risk factor for hysterectomy. (this probably isn't spurious. Increased levels of fat causes increased production of estrogen, which can cause increased risk for uterine cancer among others)
Cooper R, Hardy R, Kuh D. Is adiposity across life associated with subsequent hysterectomy risk? Findings from the 1946 British birth cohort study. BJOG 2008; 115:184-192.
That said, I think middle and high socioeconomic status is even more strongly correlated with a belief that "fat and poor" means
A- "hey brought any misfortune upon themselves because they are idiots"
and/or
B- "they don't know better".
I know I find myself slipping into this fallacy more than I should. Sometimes I even catch myself thinking both A&B at the same time, (in which case I know I'm the idiot)
Thanks for the post. I thoroughly enjoyed it, and the comments. Most of the people I know are either on their way to becoming Mrs. McLeod or coming out of the other end of it, debt free. They didn't spend it on the same types of things necessarily. Some did Mercedes, and Tank watches and Couture. Some did vacations and second (and third and fourth) homes. some did Vegas.
I tasted this very slightly back in the 80s and got burned and have been debt free since. Nothing to this extent.
what irks me to no end is the way the system (retail) PENALIZES people who pay with cash (or debit). I cannot stand it when I am offered an additional 10% off (because I almost always buy stuff off the Sale rack in the back) if I apply for the in-store credit card, which will automatically be approved (they know nothing of my credit or employment history).
Of course, I could take the deal, then pay the card off the first month and cut it up and get the extra 10%. I know that, But the Mrs McLeod's wouldn't, you see. And a part of my wonders if I wouldn't hold it in the card folder of my wallet "just in case".
I do buy impulsively. It is not something I am proud of. But I rarely get as far as the parking lot before I come to my senses and return it to the store. I literally get about 100 yards out into the mall before I realize that making that purchase just jeopardized my paying rent, or the phone bill, or something. That is an interesting phenomenon. And it lurks at the corners of this story.
I suppose it is a character flaw of mine that I cannot resist making the initial purchase. Some lack of knowing the value of money or something. But I do know the value of living within my means. I cherish it.
Like Kurtyboy I am only better off in the sense that I can sleep at night. I still remember the gnawing anxiety of being so far behind in debt, and the shame of not knowing how to get out of it.
I sink Starbucks is trying that flavor next month, along with das:
hocolates dosed with methamphetamine were known as Fliegerschokolade ("flyer's chocolate")
Yah,
My tank crew could use a cup!
chocolates dosed with methamphetamine were known as Fliegerschokolade ("flyer's chocolate")
Ja! Doch richtig! Und vergessen Sie nicht "Panzerschokoloden," or "armor chocolates."
Now, you know what made "Blitzkrieg" possible. The solution to Diane's debt problems are as close as her pharmacy.
Think of it: Lightning Payoff.
Actually, either this blog's readership also is, or way too many of you lied out your ass on the last advertiser survey we did. According to that, the vast majority of you are a damned sight richer, better educated, and upper middle class than I am.
Based on how many times I've read the phrase, "I think i'm going to nibble some SKF" on this blog, I'm thinking your ad survey probably was pretty accurate. I don't hang out with the rich, well educated upper middle class in meatspace and I can assure you I have never heard that phrase uttered in person.
I would've found this article to be much more useful if they had found someone who was making $250K a year who was in well over their head due to excessive consumption and bad decisions. However, that might've made a bit too many of the Sunday Times readers spit out some coffee and start listing their flat screens on Ebay, so they profiled someone unlikely to get the sunday times on a subscription basis.
OT Sunday Times note: I don't get the Times any more since I have a reaction to Judith Miller like the one Tanta has to GM. But I do get to see it delivered on my street in the early AM. The current delivery guy drives a brand new Suburban. I still haven't wrapped my head around that one. More pain on the way if people are taking paper routes to pay for the suburbans.
Tired of the same ol crapenzeduetch?
Here: Starbucks Closure List Revealed: Is Your Shop Toast?
Starbucks Closure List: All 600 Stores, Searchable
Re: he solution to Diane's debt problems are as close as her pharmacy.
Yah, work harder, longer and take no breaks, this is war!
FWIW - my world is full of the likes of Diane. After watching the video I think I'd rather spend a weekend at outlet malls with her than at an economic seminar with Gretchen. But maybe that's just me.
Wonderfully written article and very interesting debate. Thank you.
Re next week, after Op Ex and the short squeeze, I expect business as usual- down.
Did they every put this stuff in schnitzel or strudel?
Diane has the bankruptcy card to play. One reason why America is a great country.
Then she can either do Dave Ramsey or Suze or whatever. Or else just borrow/spend her way back into debt.
She was going to spend as much as anyone would let her. The fact that she was able to borrow as much as she did is sort of immaterial. It would have been too much. BK clears the decks (mostly), so once again, hard to feel like it matters.
I doubt that she could actually get any of those credit card offers -- lenders may be dumb, but there are limits.
Maybe Gretchen has a younger sister?
Is it too late to be off-the-wall? Am I early, where are my peeps?
I have a question about the article that accompanies the video. Why does the graph compare debt to monthly savings? Shouldn't debt be compared to assets?
PeonInChief
Overspending chronically is not a character defect. Expecting others to pay for it may be.
Lack of empathy is indeed a character defect: sales tactics are not exactly based on empathy. Seems that Diane was a good target: for both the CC lenders and the shops.
But Diane's case is only about a little bit of money and she had a choice. Plenty of people in the world are in situations where they may have no future to hope for, by no fault of their own. I'll save most of my empathy for them.
"I cannot stand it when I am offered an additional 10% off (because I almost always buy stuff off the Sale rack in the back) if I apply for the in-store credit card..."
Hey, baby, first one's free.
With federally-subsidized D9, Diane could work three jobs and have that debt paid off in no time at all!
We've already got the Prozac to make people better more compliant workers. My mother just retired from being a first grade teacher. She told me how surprised she was when she went out to lunch with a group of her fellow teachers and they all took some Prozac like substance at lunch. All paid for under the insurance plan. Easier to teach today's ADD crowd if you are on the drugs. Very lucrative for Big Pharma. Everyone is happy. And the kids are all on Ritalin.
Perhaps some sort of Prozac D9 is the secret.
Brave New Worlds require Brave New Products.
Nemo wrote:
"I mean, what is the point of spilling all this ink on stories like this, both for you but especially for Gretchen? Is the idea to tell lenders "see had you not been so careless you would still be in business"? Or to fire people up to seek a bunch of legislation to prevent activities which are already never going to happen again?"
Heh. When I see the words "never going to happen again" in relation to a disaster of this magnitude, I am reminded of the "farces" of human history and the phrase, "Mr. President, we must not allow a mine-shaft gap!"
YouTube -
we'll meet again, don't know where, don't know when ...
but i know we'll meet again, some sunny day ...
Tanta,
You remain a treasure.
"Brave New Worlds require Brave New Products."
And modern pharma is delivering them. Check the numbers. America is cranked.
I think theories that the NYT wouldn't profile rich readers with too much debt because it would hit too close to home (and therefore lose readers) is way off base.
Look at Law and Order - the average viewer is far wealthier than the average American.
And nearly every episode involves a: stockbroker/doctor/lawyer
bludgeoning/stabbing/overdosing
a model/stockbroker/conceptual artist/rich homemaker.
Everybody likes to hear about people like them - most especially when it involves misfortune.
I was in a store the other day, the kind full of knick-knacks for the home. A SUV load of ladies drove up and got out and each got a cart and started just piling useless little items in their cart. One of the girls was fidgety and kept talking about how she was going to quit smoking soon but she wanted to go outside and light up. One of the other ladies was fidgety as well, she kept grabbing things and would start putting them in her cart and then would stop and say "No, I am watching my dollars" and put the item back.
As I was leaving later these 2 ladies were outside waiting for their friends to finish shopping. One looking soothed at having a cigarette and the other looking longingly at the store wanting to shop but trying to kick that habit.
Everybody likes to hear about people like them - most especially when it involves misfortune.
Look at Law and Order - the average viewer is far wealthier than the average American.
And nearly every episode involves a: stockbroker/doctor/lawyer
bludgeoning/stabbing/overdosing
Do you have some stats on this? I'm willing to bet it is more like the average viewer likes seeing stockbrokers and lawyers beat to death via blunt trauma. "Hey look, that lawyer's blood splatters just like us regular folk"
I really think the "class cues" in the video are just too heavy-handed to miss.
There you go again, Tanta. I didn't see any such class-cues in the video. I saw a middle class person, a smoker, yes, but with a nice tidy suburban home. She could be everywoman.
Perhaps you being a woman makes you read so many cues into that video that average geek men like me just don't see.
"And modern pharma is delivering them. Check the numbers. America is cranked."
Trust me, I know. And yet we can't legalize marijuana because it is "dangerous".
We are becoming a science free nation.
Here is what she needs:
The Phoenicians Centre for Well-Being
The Phoenician’s Centre for Well-Being
As an aside, obesity is a risk factor for hysterectomy.
As an even further aside, Diane is not "obese." She is certainly not "morbidly obese."
She's chubby. Our inability to distinguish between mildly overweight and morbidly obese is part of the very dynamic you name.
based on comment frequency there are obviously more than 17 people here. I'm wondering if Paulson has used the Patriot Act to take over the CR traffic meter? "nothing to fear here, only 17 people at Calculated Risk"
dryfly writes:
FWIW - my world is full of the likes of Diane. After watching the video I think I'd rather spend a weekend at outlet malls with her than at an economic seminar with Gretchen. But maybe that's just me.
I hope it's just you. Frankly, I would rather have a trip to the dentist than spend 5 minutes with that self indulgent moron.
You see, I can have sympathy for the woman, and yet still acknowledge that she is, indeed, a self indulgent moron. Pretending she is likable, or interesting, is just asinine.
Note to Self: At Calculated Risk Convention, hang out with Dryfly, avoid Bob in MA
Nothing you've said really changes my view that "personalizing" economic discourse is at least as dangerous as it can be illuminating, because it so often degenerates into arguments that claim to be about economics but that are really about taste.
Second that.
I think theories that the NYT wouldn't profile rich readers with too much debt because it would hit too close to home (and therefore lose readers) is way off base.
I agree entirely.
I just think that if the NYT had profiled a richer, more "tasteful," more upper middle class borrower who spent too much and then crashed and burned when the cushy Wall Street job with the bonuses went away, GM's overlaid commentary would have made more sense. You know--"they earned a lot and spent a lot, but then they lost their jobs and the $2MM house in the Hamptons had to go to FC."
The video fails for me because the reporter finds someone who doesn't fit that "demographic," goes out of her way to make a video that clues us in that she doesn't fit that demographic, but then trots out the same analysis that works best for a different kind of borrower.
I didn't watch the video, that stuff bores me death. But the commentary here is a very interesting discussion.
When people talk about class they aren't really talking about money, they are talking about behavior - which comes down to knowing how to act. Society has unspoken rules about "how to act" that provide very clear distinctions. The terms you see are "poor breeding" and "hopelessly middle class." Social class is defined by behavior. Everyone knows somebody wealthy, but of low class. Most of us also know somebody who is on the low financial scale but has impeccable manners.
Class is about behavior, not money.
The smoking is not so much an indicator of lack of class, but an indicator of lack of impulse control. Diane's problem in life is that she lacks impulse control -- probably because she wasn't taught it as a child. Retailers love people with no impulse control (who they can't stand is those of us who spend 4 hours online researching and price comparing and know exactly what we want and how much we will pay for it.) Some people will never learn impulse control and we have to lock a lot of those people up, but someone like Diane could turn her life around tomorrow.
12th percentile-
Sorry, no stats. FWIW, a friend is a writer on the show, and that's what she told me.
As an even further aside, Diane is not "obese."
Bullshit. She would definitely fit the obese criteria. When someone is morbidly obese, they can't do things like wipe themselves.
I would never criticize someone like that to her face, and I don't make a practice of judging people who leave me alone, but this nonsense of trying to make a virtue from her situation is way beyond silly.
Tried to think of a cogent post, just couldn't do it. How about we just let everybody do whatever they want until the meteor hits?
Good video. Puts a very human face on it. She sounds like she's from Long Island, though.
The following info is from the following link: Fewer Scottsdale Million Dollar Homes As Sellers Drop Asking Prices - Housing Doom
Fewer Scottsdale Million Dollar Homes As Sellers Drop Asking Prices
" Check out the number of rentals:
All MLS 8,261
Scottsdale 2,323
Tempe 201
Mesa 472
Chandler 373
Gilbert 294
Phoenix 1,783
I think the Population of Phoenix is about 1.4M, Scottsdale just over 200K, Mesa over 400K."
One last comment and then I will self censor.
I believe, based on my knowledge of songs available for quarters in my favorite establishments, one of the most common being "Dueling Banjos", there is only one "L" in Dueling.
Was that a 40oz. bottle of beer next to her at the end of the video?
I know that this may sound insensitive, but I really could give a rat's as_ about a woman named Diane McCleod. We all have our own problems even though even though many of us have lived within our means.
As for her financial woes, better her than me.
I remain convinced that your response to the video, while perfectly legitimate, is not what its creators and editors had in mind
Possibly, but that still remains conjecture. You know more about the NYT and GM than I do. I rarely if ever read either her or the paper. However, you must then admit that your reaction to the snippet was NOT necessarily based on the video itself, but instead on what you believe was the intentions of the makers of that video.
You then pulled out parts of the video that YOU found offensive based on what you felt the NYT/GM was doing
I am not so sure. I feel that if the NYT really wanted to make a caricature of the borrower they have 100's of thousands of other borrowers they could have used that would have looked more "tacky".
I am ONLY rating the video that I saw. I am not rating the motivations of the movie-makers because I know nothing about them. and your argument does make sense to me: that there is this horrible elitist NYT and GM who are trying to fit poor Ms. McLeod into their story. but it isn't 100% proven.
so I just wanted to put up a counterargument to your claims. it is very rare that I disagree with you. I have no intention of changing your mind... I am not sure I could ever change your mind about anything... instead I am giving my thoughts on this, so that others have another lens through which to interpret the video.
and I feel that I am not alone in my assesment of the video. so although this may harm Ms. McLeod in the upper crust snotty Manhattan jet-setter set, it will also endear her to many people like me.
and I am exactly the kind of demographic the NYT salivates over. Extremely high income, high intelligence, liberal, blah blah blah. so not all of "us" are the same. in the same way that all "middle class" people are not the same. and all "working class" people aren't like Ms. McLeod.
.
12th,
Catch the cigar bar gang for Macanudos, libation of choice (single malt in double digits personally)...and, er 'chocolates'
Sorry, no stats. FWIW, a friend is a writer on the show, and that's what she told me.
I'm sure there is a fascination with the "person like me gone bad" when it comes to fiction. Very different from the "Person like me gone broke" reality show called the US of A.
as to whether or not we "should" have such a video is an entirely different debate. I agree with you that they can do more harm than good. but they also can increase awareness. And similar tacts have been used with success. for instance: the Matthew Shepherd story. few people cared about gay bashings but seeing that story changed a lot of people's minds. same with human rights issues.
(now I am not linking poor lending with gay bashing in terms of severity to our existence... only to say that using a person can be an effective method for social change.)
this can of course be abused or used for "evil" too (which is what you believe the NYT is doing if I understand you corretly)... such as the press showing the pictures of black convicts, but not white convicts... which leads to the erroneous assumption that all convicts are black
anyway: I gotta go and drink wine with some friends. I hate to leave now. I hope you don't get mad at me, because I'm really not trying to be a snot.
I'm just showing a different POSSIBILITY, that's all.
and like I said: I know nothing of GM or NYT, so you may have her pegged exactly right.
in which case: despite her elitism her article will still inspire others to do "good" because there are people like me who don't understand the elitism and take the story at face value.
The two big issues that are completely missed in both the Times and here is the fact that Diane is fuct, thanks to the legislation sponsored by the credit card industry regarding bankruptcy and who gets paid, and by the fact that a person has to work so many jobs just to get by instead of earning a living wage at one or perhaps two jobs.
The bankruptcy law is going to prevent a satisfactory outcome for Diane or the big bad lenders, because ultimately you cannot squeeze blood from a turnip, let alone a turnip being crushed from 5 directions at once. She will soon be in a homeless shelter or apartment struggling to get by and even more depressed knowing that she is making the American class transition in reverse, the hard way, and in the paper where snooty Manhattanites will mock her knick knacks and judge her smoking and other habits.
Secondly, the wages of American workiers have declined drastically since the 1970s and the prices of commodities have gone up severely of late. Tax burdens have been shifted from the wealthy to the poor and middle class and the shrinking middle class is desperate not to lose ground. At the same time, the middle and lower classes are the engine of consumerism in this country-rich people don't buy much stuff at Best Buy or Shopko. And recent reports show that while retail is suffering a 17 percent increase in bankruptcies this year, you have to wait years for a gulfstream personal jet or a custom yacht, which tells me this country is upside down and sinking. Luckily, Paris Hilton hasn't read HG Wells or she might not be so prominent in public-the Morlocks are always hungry, and we could return to that 1920s-1930s lifestyle damn quick, where kidnapping rich people is a career track. We are two nations right now, and the class war has wound up with the wealthy winning.
After watching the video I think I'd rather spend a weekend at outlet malls with her than at an economic seminar with Gretchen. But maybe that's just me.
No, it isn't just you.
I'm happy to confess that if someone made me live in Diane's house, my head would explode. I'm just like that. I respond badly to too much visual busyness. The fridge magnets would ruin every one of my mornings.
But would I rather hang out with someone who is capable of satirizing her own habits of denial by acting out that little scene where she shuts the phone into the dishwasher, than with GM? Absolutely.
I'm sorry, but my response to GM's persona on that vid is that she's the sort who would answer a call during an appointment I had with her, spend twenty mintues of my time dealing with her personal business down to the last jot and tittle, and then expect me to admire her because she never procrastinates or puts unpleasant things off.
Re: "my head would explode"
ROTFLMAO - good one dude
The issue of "who is at fault" seems so beside the point.
However, reading through the thread (which is my own damn fault), it seems to be the central issue of interest. Either is a fairly abstract way (the original post), but tending to immediately get to the more visceral judgments.
I suppose my personal prejudice is to start at the top (those who bought crappy asset backed securities) and work down the chain with the borrower at the bottom (the demand for credit for those that can't repay is infinite).
However, it has been pretty well aired out by now, so what more is there to say about this?
We were at dinner at the FIL and my BIL and SIL (Both attorneys) were holding forth on one of their secretarys misfortunes. The women in the video is remarkably like the person they were discussing. Of course it was her fault and the BIL went on about how if she let him we could manage her life and money soooo much better. My wife got up and walked out.
Self-righteous and elitist yes. Ironic also in that they bought a 1.5 million house at the top of the market. Both work in a field that requires lots of credit to create the deals that fund their bonuses.
I know from personal experience that women like these, and men, will give willingly to those they see as less fortunate.
"Holiday In Cambodia"
So you been to school
For a year or two
And you know you've seen it all
In daddy's car
Thinkin' you'll go far
Back east your type don't crawl
Play ethnicky jazz
To parade your snazz
On your five grand stereo
Braggin' that you know
How the niggers feel cold
And the slums got so much soul
It's time to taste what you most fear
Right Guard will not help you here
Brace yourself, my dear:
It's a holiday in Cambodia
It's tough, kid, but it's life
It's a holiday in Cambodia
Don't forget to pack a wife
You're a star-belly sneech
You suck like a leach
You want everyone to act like you
Kiss ass while you bitch
So you can get rich
But your boss gets richer off you
Well you'll work harder
With a gun in your back
For a bowl of rice a day
Slave for soldiers
Till you starve
Then your head is skewered on a stake
Now you can go where people are one
Now you can go where they get things done
What you need, my son:.
Is a holiday in Cambodia
Where people dress in black
A holiday in Cambodia
Where you'll kiss ass or crack
Pol Pot, Pol Pot, Pol Pot, Pol Pot, [etc]
And it's a holiday in Cambodia
Where you'll do what you're told
A holiday in Cambodia
Where the slums got so much soul
"The video fails for me because the reporter finds someone who doesn't fit that "demographic"..."
Well, that's root of all GM's problem. She is congenitally incapable of writing anything other than a morality tale - facts be damned.
While this trait is maddening, it also sometimes a strength. Since she is always looking for corruption, she sometimes finds it. And the histrionics ensure that the topic gets attention. (NB- I'm hardly excusing her, but I think this trait explains why she has a good nose for news. It also goes some way to explaining why she wins prizes (along with the fact the members of the Pulitzer committee largely have no clue about financial issues - financial reporting is about as glam in the profession as, well, Ms McClead)
GM found a perfect one-dimentional character for her one-dimentionally themed articles.
Good for her.
What's all the hub-bub? The lady has a somewhat tragic story but takes the responsibility. Most of these stories stem from a lack of understanding of basic finance.
Some of us older boomers got lessons from mom and pop on how to shop and why you don't buy what you don't need. Extended families back in the 40's and 50's exposed you to alcoholic uncle Fred, great aunt Em on the poor farm and why debt if not paid was a disgrace that could lead to suicide. Real life lessons.
Seems like the cycle will continue with stories about how mom and pop lost the house in 08 and had to move in with relatives in their doublewide. Lessons learned to be repeated every few generations.
The wife has run a Montissori pre school and head of a non profit grade school for the last 30 years. It was withgreat anguish that I finally persuaded them to teach common, everday economic survival skills to the little rug rats. We'll see if it helps.
I'm not holding my breath. Herding animals including us two legged varities seem to want to graze the same pasture. Everything is OK til you let Tooncies drive your car.
Great post Tanta.
Subscribe to the NY Times
Choose a payment option:
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Hehe
PS: Gretchen mentions falling RE values as a contributor to people's problems. Wasn't it the debt related to higher RE values the problem?
PS2: One thing I can sympathize with is the spending spree. 14 years ago my Mom insisted on my staying over her house after I had shoulder surgery. I woke up the first night in a medicated state and bought "Mega Memory" from an infomercial. Given my usual spending habits, this was a huge abberation. Alas, $150 lost (at least I think that's what it cost..can't remember).
Tanta/CR,
I think that you have the wrong reponse here.. IMHO, Gretchen is on to something..
My friend earns a pretty decent salary as a programmer but has never been able to shake off his credit card debts .. If you were to see his profile, you would have a hard time imagining him as a good candidate for the cc companies but he probably singlehandedly has been responsible for keeping atleast a couple of employees of the cc companies employeed.
Tanta,
That is simply one of the best posts I've ever read on any blog, anywhere, on any topic.
Even the Russian judge would have to give you ten out of ten for that.
Seems like the cycle will continue with stories about how mom and pop lost the house in 08 and had to move in with relatives in their doublewide. Lessons learned to be repeated every few generations...
Ross
Yes, definitely. I was born in 1958 and people still acted like the 1930s just happened. I remember when I was like 5 or 6 and the old TV we had been broken for several months and my Mother went out bought a the smallest b/w set you could find. When my father came home he was livid. It is one of maybe a half dozen times he was angry. He felt they hadn't saved enough. "What if x happens? What if Y happens?" And he had a degree and a secure job for 15 years by then.
Apparently, people like Diane forgot that X and Y can happen.
Isn't the solution to make bankruptcy much easier?
How about a little mud wrestling or something, us lower class roughs are getting a little bored over here. Bet you one thing we tend to have a lot more fun.
Wonderful article. There are those of us here who really appreciate insightful writing. Your analysis is spot on, in my opinion. The "judgers" and the micromanagers will be with us always. I try to avoid them myself. I've also had to work very actively to purge these traits from my own personality.
Under normal conditions this borrower would have told this to a reporter 4-5 years ago. What is different this time is that she was able to get even more credit than anytime in history and so the hole dug is even larger.
It is a person who was always going bankrupt the credit bubble just delayed the reckoning is all.
She needs to follow the money>>> She needs to ask, where is that stuff going, why is it going there, and hoe the hell can I be there before it drops from the sky???
Fractional Property, Vacation Ownership & Luxury Travel & Lifestyle Magazine
"Apparantly, people like Diane forgot that X and Y can happen."
And why should people like Diane not forget? Because after she successfully BK's out, the cycle starts all over again. If the game does not have pawns it cannot have a knight.
In the U.S., you get very little bonus points for playing by the rules.
Ok, I'll give her a hint: fractional ownership ...
anonymouse, you sound hotttt. Call me!
There was a famous impulse control study of some years ago. Little kids were left with a sweet and told not to eat it until the tester got back and then they would get 2 sweets. Years later the kids who could control their desires were found to have done much better in life (I forget how) than the ones who didn't. Maybe you can teach this and maybe you can't. I really don't know.
I have problems with depression myself. Due to side effects of drugs prescribed, I finally consulted my natural medicine book, which recommended, among other things, omega 3s. Really works for me. In fact, if I forget to take my fish oil tablets, I can feel this weird feeling creeping up on me. So now I am addicted to fish oil tablets. (Yeah, yeah, pharmaceutical grade.) Maybe my distant ancestors ate fish all the time and not eating it has caused a maladaptation. We Americans are the people who couldn't get on in the the places that we came from. We came here, and think that because we were financially successful (previously), that all problems were solved. Well, they weren't. Is it so suprising that having abandoned our cultures and our former eating habits, and the social controls that evolved where we came from that we have problems?
The Times piece is a thin shadow of the 'Maxed Out' film, which lays out in painful detail why the QVCs, the real estate industry, credit card companies burned up Dianes like jet fuel. And yeah, the Dianes allowed themselves be burned but that's another fascinating, complex and utterly overlooked part of the Times piece.
I was one of the last college-going generations to be refused credit cards till I could get a full-time job and prove myself worthy of credit.
All that changed when CC companies were invited to campuses to push credit cards-- even to pre-college kids. This is a generation that grew up thinking lots of debt is normal and credit is an entitlement.
It's like that meth addiction expose that showed addiction and use spiked when the purity of the drug went up. Sure, the addict is to blame, but the drug plays a very powerful role.
Tanta,
Smoking and obesity (yes, she is obese) are causes of health problems later in life. There is no distinction between mildly overweight and morbidly obese. Unless you're in shape, you're fat. This is a binary definition, there is no grey area.
Tanta, it's not "fashionable these days" to sound the clarion against obesity and smoking. Doctors have been saying the same things for over 3 decades, but nobody pays attention to doctors until it's too late. Then, they demand an instant fix from a doc.. and are shocked to find this condition can't be altered.
There is no pill, no operation, no treatment, no prayer regimen that fixes 50 years of poor treatment of the body's internal systems, and there never will be.
If you're fat, you're putting hundreds of extra PSI on your joints every minute you're walking. If you smoke, you're pushing shards of glass through your windpipe every second. OF COURSE this causes problems - not immediately, but after some number of years!
Look, the human body is essentially similar to a very complex car. The body of a person who smokes or is fat is equivalent to a car coming off the Yugo production line. A marathon runner, on the other hand, is a Honda.
Yes, I'm sure we're all familiar with one guy who drank Thunderbird and ate Popeye's Fried Chicken every day until the age of 110.. however, on the average (which is the only way medical statements are remotely relevant..) people who are fat or smoke will cost more per medical intervention - and even after the costly treatment, they'll still die sooner than healthy people.
Rant off.
Now if only we can go back to educating Gretchen - and the rest of the financial newsmedia around the nation.
Really the lenders are the stupid ones, would you lend her ten of thousands of dollars sight unseen.
Thats why there is a financial crisis.
The major bank's management allowed this to happen, profited immensely from it and knew it was unsustainable. But $10-15
Million a year in bonuses kept the party going along enough to cash out big.
And yeah, I was born in '46 and really heard about the depression a lot. My grandma was incredibly cheap. As I posted elsewhere, they lost some money, but really didn't have it bad at all.
People think I'm cheap. You never met my grandmother I say. We got a big new tv after hurricane Andrew. A copy of years ago, it broke. It was so heavy and we had a couple of other tvs so just left it to sit in its cabinet with the doors closed. We could have charged a new one on the ole credit cards, but just didn't. Now a new tv became necessary so we finally bought a replacement. Having grown up in the 50s, I'm here to tell you that it was ok for middle class white folk.
Unless you were black, or were gay, or otherwise just didn't conform. Also, there were still real neighborhoods, with neighbors who didn't hesitate to yell at you if you did something bad, with stuff you could walk to and a functioning mass transit system (in Balto) and a fair number of well paying, if polluting jobs in the manufacturing plants. Both the good stuff and the bad stuff are gone now.
My children didn't get spoiled particularly, but they also didn't get first hand stories of GD I. They don't quite believe how bad it can get.
I believe.
Hey Liz,
Where in baltimore did you live.
"Based on how many times I've read the phrase, "I think i'm going to nibble some SKF" on this blog, I'm thinking your ad survey probably was pretty accurate. I don't hang out with the rich, well educated upper middle class in meatspace and I can assure you I have never heard that phrase uttered in person."
I put my whole 401k into skf @ $110. Sold at $190. Its looking pretty good again.
All these sob stories about homeowners losing their homes and then how the govt. will or should step in to "save" them. Oh, how pitiful. I'd love to see some sob stories about renters. Don't they count? Don't they play a role in supporting the economy? Don't they also deserve a bailout?
Any thoughts on the subject Tanta?
p.s. I love your blog - I read it religiously
I read a lot, but I look forward
most of all to tanta's work at Calculated Risk. The style, the unashamed dive into the arcane, the
cultural knowingness: all are superb.
KEEP IT UP!
I agree with Tanta that the NYTimes piece is condescending and that Diane McLeod was chosen because she is happily far removed from the parameters of the Style section. She is chubby, she smokes, she has a house full of stuff, she may even enjoy a beer while dealing with the fallout from her debt.
Had the piece featured One of Our Betters, it would be a woman who is thin, who realized with her therapist's help that she has a chronic problem, who embraces a new zen aesthetic and has emptied her home of all the high end decorating follies, and has found joy and self-awareness in her newfound simplicity. She would also have networked with her pals to establish a non-profit to enlighten other souls so burdened while providing for herself a new income stream as director.
The NYTimes is usually servile in profiling Out Betters, even when they have suffered Hard Times.
Wow- Fannie and Freddie, leverage looks about 60-65x, makes Bear Stearns look conservative.
"we're all familiar with one guy who drank Thunderbird and ate Popeye's Fried Chicken every day"
For me, that brings back some vivid memories of South Central LA and is a great example of our U.S. tax dollars hard at work.
By the way, I don't think people here are too familiar with the person that you are trying to describe.
"...she may even enjoy a beer while dealing with the fallout from her debt."
Alcohol. The Peoples' Drug.
Well the Dead Kennedy's were quoted upthread so I don't know if anything more can be said but...
I don't care that she is obese or smokes or wastes her money on YooHoo and cigarettes. That's her business. The problem is and we all know it "IT ISN'T HER MONEY." Her private behavior has crossed over into public impacts. That gives everyone sympathetic, apathetic or opposing standing to comment on how they are affected.
Diane is nowt a good consumer because she isn't paying her debts. She isn't a bad person for smoking or being obese. She is a bad person for not being able to afford her habits.
You know there's no telling if her health insurance considered her high risk and extracted more in premiums than they ever paid out for her medical costs. That's not important. What is important is the here and now. No doctor is going to tell a post-op obese woman it is okay to smoke and drink YooHoo. She admits to impulse control issues. It all boils down to yet aanother case of attempting to privatize sucess and socialize failure.
Indolence is heavens ally here,
And energy the child of hell:
The Good Man pouring from his pitcher clear
But brims the poisoned well.
- Herman Melville
Tanta:
Thank you for this social commentary.
I agree that the NYT is long-gone as the grey lady and has to compete with cable news by offering purple prose.
Another variation of Gresham's law.
I would guess that Ms. McCloud hass an addiction:
"QUESTION: Can shopping be an addiction?
ANSWER: While it's long been known that shopping tends to make people feel good, new research indicates that it has a direct effect on the brain's pleasure centers. It seems that a trip to Bloomingdale's can flood the brain with dopamine in a manner not dissimilar to that experienced by a drug addict getting a fix, or someone jumping from a plane for the first time, or someone tackling a new golf course.
That's because dopamine tends to get involved when someone is faced with something new, thrilling or challenging. A rack of designer dresses, apparently, holds the promise of the new and unfamiliar. And so a "shopping high" is the result. Which would also explain the somewhat empty feeling one has a few hours after making the purchase: The dopamine has, in effect, receded.
Psychology Today Magazine, Mar/Apr 2006"
Unfortunately this is not only a socially acceptable addiction but a mainstay of the mainstream culture (as smoking and drinking were in our youth)
But the question of attempting to set up any set of controls is increasingly difficult in our society.So in a true sense we are an out-of-control system. All such systems eventually crash. As ours is even now doing.
The truth for Diane is that there is no free lunch.
"You got your troubles and I got mine.All I want to talk about is LOVING you blind."
"In one narrative, debt-funded consumer spending is "sustainable" until you lose your job or get sick or get divorced. In the other narrative, unsustainable debt-funded consumer spending is the response to losing your job or getting sick or getting divorced."
While it may appear to be a contradiction, it really isn't. As philosopher (borrowing heavily from the psychoanalyst J. Lacan) makes clear, today's super-ego injunction is no longer that of discipline and guilt, but that of enjoyment. The super-ego injunction to enjoy serves to keep one in line, while also serving to maintain the status quo.
But what happens when this is no longer the case, when shopping no longer can serve the needs of enjoyment? Well, it is important that the enjoyment of shopping is not only buying things, it is the experience itself. Nothing like going to the mall for social (really privatized) interaction. So . . . as time goes on, more and more as people go shopping, they just won't buy anything. Eventually, the enjoyment of the shopping experience wanes, and then the mall closes.
The psychic adjustment will be very significant for the average shopper, that is the average US citizen, and it won't come without pain. Perhaps, over time, we'll be forced to really interact socially, and out of this new forms of social solidarity will materialize, and perhaps out of this class consciousness too will materialize. It will be then that things get truly interesting.
I put my whole 401k into skf @ $110. Sold at $190. Its looking pretty good again
kudos to anyone who put their whole 401K into SKF at any level. And anyone who didn't get out at $170. You have gambling tendencies that I happily will not emulate.
I bet you aren't in the same demo as the lady in the vid. Or I would, if i was a gambler.
It all boils down to yet aanother case of attempting to privatize sucess and socialize failure
Perhaps this is escaping you, Rob, but Diane didn't loan herself the money.
Counseling sessions can help homeowners restructure loans
Counseling sessions can help homeowners restructure loans» Ventura County Star
More than 300 NACA counselors, certified by the Department of Housing and Urban Development, will be at the Capital Hilton Hotel to provide same-day affordable mortgage restructurings that may include reduced interest rates and/or loan balances.
Take the example of Melody Weathersby of Jackson, Miss., who was able to restructure her 14.625 percent loan with GMAC Homecomings to a 6.75 percent fixed rate. Additionally, she was able to cut her mortgage debt by $20,000.
nce all their information is verified, NACA will present restructuring packages, which may include drastically reduced fixed-rate mortgages, to loan servicers. And in some cases, it could result in a reduced loan amount. All the rates under their program are fixed for 30 years, Marks said.
Here are two examples of mortgage restructures that were approved by servicers working with NACA's Home Save program:
Mistakenly, I failed just above to mention the philosopher. He is Slavoj Zizek. Read 'The Metastases of Enjoyment'.
The "Free Marketeers" decided to create a tragedy of the commons problem for everyone by replacing income with borrowing.
This was all very predictable.
Why did YOU let it happen, Rob? Why are you any less culpable than Diane?
We are all performing Marxian analysis now.
Sue--lower Park Heights. Went to high school at Seton. Hub went to Hopkins U. I actually walked around the part of Druid Hill Park nearest to my house, (as did my mother before me) and emerged unscathed.
The hub went to city and lived near York Rd.
Lenders would literally enslave us if they could.
I gots me a question for anybody out there.
As the subprime meltdown continues and IMHO, more mortgages become fixed 30 year loans, how does this "fixe" condition impact the liquidity of say Fannie Mae .... LOL!
Tanta, I'm a big, big fan of this blog. That said, I honestly do not understand the attention you give with Gretchen Morgenson. I mean of all the important targets to pick on -- mismanagement at Citi, Bear and Merrilll, just to name a few -- you spend time picking on a reporter? One who has a history of some really impressive investigative calls, such as busting collusive trading on the Nasdaq market back in 1993 (a Forbes story, Aug. 16th that year, she wrote that nailed the problem and preceded by years a major restructuring of that market). That story alone should make people think twice before thinking she is some sort of lightweight -- absolutely laughable. I mean even if I grant you for the sake of argument that this story was a little more emotional or illustrative than some of her other work...so what? (And she did win a Pulitzer for some of her prior work.) The blogosphere vs. mainstream media sniping seems to miss a much more important story, which, in my view, is more worthy of your considerable talents.
Lawyerliz, that is the Stanford Marshmallow Study you are referring to.
Deferred gratification - Wikipedia, the free encyclopedia
I was actually talking about that in the latter part of my post. I do believe in free will and I believe Diane could solve her problems if she really wanted to.
The people who have a genetic impulse control issue end up in jail.
Diane is human garbage.
EOT.
yours in Christ,
Isamu
Freddie Mac 30-year fixed mortgage rates dropped 9 bps to 6.26% (down 47bps y-o-y). Fifteen-year fixed rates fell 13 bps to 5.78% (down 60bps y-o-y), and one-year adjustable rates declined 7 bps to 5.10% (down 62bps y-o-y).
Bankers' hours:
[Bank of America Corporation Earnings Conference Call (Q2 2008)
Scheduled to start Mon, Jul 21, 2008, 9:30 am Eastern]
Broward Horne writes:
Perhaps this is escaping you, Rob, but Diane didn't loan herself the money.
and:
The "Free Marketeers" decided to create a tragedy of the commons problem for everyone by replacing income with borrowing.
This was all very predictable.
Why did YOU let it happen, Rob? Why are you any less culpable than Diane?
I'm ready to take my share of the blame. Heck, I've been lucky and productive, I am ready to take more than my share. I am objecting to the butcher with his thumb on the scale telling me what my share is.
IF the lender had not been willing to extend credit to a person who had no business accepting it or was obviously incapable of paying it back there would never have been a problem.
I don't buy this. It seems to me this is a woman who for psychological reasons could never save, and by her own testimony, a woman who keeps spending even if credit is shut off. If she can get a job to fund it, she will, but if she can't, she stops paying bills to allow herself to buy stuff.
The one truly bad decision here is the first refi, and there her "friend" clearly worked her over. But at that point it was still recoverable if she had changed her habits. The initial $500 monthly surplus should have allowed her to knock out the IRS bill in no time, build a savings account to handle expenses, and refinance out of that loan into a prime loan before the payments rose sharply (if she had stopped spending and done that, she would have had equity, good credit and reserves to do it within two years). Clearly she continued spending. Believe it or not, there are people who do learn their listen and change their ways at this point, but no one's ever going to write a newspaper article about them.
There are people who will only pay their credit card bill because it allows them to keep spending. If you cut them off they stop paying. Diane appears to be one of those people.
I really liked her, but I was shocked at the fact that now her son is going to be forced to probably declare bankruptcy to avoid a deficiency judgment. It appears that she threw him over to continue her spending. He won't be able to buy a house because she was addicted to buying stuff.
My personal belief is that for some people credit cards are crack, and Diane appears to be one of those people. It's possible that selling her stuff on eBay may be teaching her a new way of getting her fix. I hope so.
I would like to point out that requiring a borrower to save for a downpayment (even if 5%) in order to buy a home sorts out people like Diane. I don't know if there is any meaningful regulation for credit card lending that can be put in place to prevent people like her from going into debt. If they don't have credit cards, they will use store credit. If they don't have any credit, they will simply buy stuff at yard sales and won't pay their bills. This is the story of a women with a psychological problem more than anything else.
Diane's story reminded me of Prof. Warren's lecture postered here last month. She pointed that even upper middle class people can fall through the rapidly disappearing social safety net that existed from the 1960's until the '80's. Divorce, job loss, medical problems, and skyrocketing education costs can result in financial ruin. Diane had two of the four problems. I thought GM did a good job pointing out how the credit industry helped Diane spiral downward into economic problems and personal misery.
Bogus mathematical models of risk allowed this to happen in many ways. The aggregated models used to price risk doesn't correctly capture the Diane's of the world. It is kind of like making assumptions and predictions about human behavior using a Newtonian model rather than a Shakespearian one. There's a huge philosophical fallacy at the root of this somehow...
MOM, yes that's certainly part of it, but then again, when we have a whole nation that went from positive to negative savings rate, and amassed the level of personal debt that they have (is it 9g a person now?) one has to wonder what other forces are at play. We're all subprime, but I don't think we're all Diane.
♥✿ ☼♥ : You're so cute!
Well, i read the first hundred or so comments then realized no one was talking about how, as with the mortgage lending, banks would have self regulated if they had all the risk and/or were limited to some reasonable interest rate.
The question I'd like to see answered is how much of the credit card debt is/was securitized, and who owns it?
We are only concerned at this point (most of us anyway) about the Diane's because either we are diane, or we are suffering from her interaction with the lenders. I'm thinking that if the lenders had to bear all the risk with their credit card lending Diane would not have been given enough rope to hang herself.
As for our lack of grit and new propensity for debt, I saw the change most clearly when a friend of mine -- the most conservative and disciplined guy I've ever known, quit his job as a department head at a world class research hospital so he could go make far more money doing megabuck surgeries for wealthy foreigners.
This is a person that used to rise every day at 4:00 in the morning, work out, get to the hospital by 6:30, operate all day, come home, eat dinner, work until nearly midnight and then do it again the next day -- year after year for more than 20 years. He was number one in his field. His explanation for why he changed his life? He couldn't stand to see all the other docs leave and start making huge fortunes and buying huge houses while he had his nose to the grindstone.
And I could tell he was lookin' for trouble
The eyes of the little man narrowed
The smile disappeared from his face
Gone was the friendliness that I had seen
And a wild look of hate took its' place.
But the big one continued to mock him
And he told me that I'd better go
Find him a couple of glasses of milk
Then maybe Shorty would grow.
When the little man spoke, there was stillness
He made sure that everyone heard
Slowly he stepped away from the bar
And I still remember these words.
Oh! it's plain that you're lookin' for trouble
Trouble's what I try to shun
If that's what you want, then that's what you'll get
'Cause cowboy, we're both packin' guns.
MaxedOutMama,
There is an explanation for Diane's action: guilt, derived from the superego injunction to enjoy. The more one slips into debt by overspending, the more one is left feeling guilty, and as a result, the more one attempts to mask over that guilt by then buying more; a spiral downward.
Superego is like the extortioner slowly bleeding us to death - the more he gets, the stronger his hold on us.
Tanta: I am so tired of all these perfect people whose first instinct in any situation is to micromanage other people's lives.
Rob Dawg: The problem is and we all know it "IT ISN'T HER MONEY."
You're both right, but Tanta I believe you're taking Rob's comment wrong.
IMHO people can do what they want with their lives & money... as long as it's their money. The minute they can no longer support themselves, well, whomever is supporting them -- parents, friends, charities, government -- should definitely have a say in the nature of that support.
I'm on it UB, looks like Indymac & GM
Naiiice... Haya Fayvve...
The Century of Self. One take on how we became creatures of consumption.
YouTube -
Tanta writes, "The fridge magnets would ruin every one of my mornings."
That's why Diane needs to buy stainless steel appliances. Magnets don't stick to them.
predictions for tomorrow?
Liz,
Neat I used to live near York Rd myself, I lived in Baltimore for ten years, now woodstock MD.
Jon Shayne - Tanta "picks on" GM because she is writing a series of articles about the current situation that fail to ask the important questions and instead promulgate a false narrative.
If you were in the lending industry, you'd understand.
Here we are talking about major spending of public money, and we haven't even stopped to consider how we got here. Tanta is angry at GM because she isn't talking about the real issues, but instead is writing for her next Pulitzer with a predetermined slant which obfuscates the real public policy issues.
The bottom line for most individuals is that to build wealth one must live within one's means, build a savings account to handle unexpected means, and keep one's debt obligations to reasonable limits in comparison to income.
Read Tanta's articles on DAP (downpayment assistance programs), and see the kind of info that GM could be giving us.
Had the piece featured One of Our Betters, it would be a woman who is thin, who realized with her therapist's help that she has a chronic problem
Therapist by him/her self can drill a pretty big hole in the bank account.
Therapist by him/her self can drill a pretty big hole in the bank account.
I just charge 'em.
Alo We're all subprime, but I don't think we're all Diane.
We're not all subprime. About 30% of homeowners have no mortgages. Credit card debt is concentrated in about 30% of the CC-bearing population.
Many financial conservatives are doing extremely well.
The real problem is that many people with high FICO scores are essentially financially unstable because of high debt ratios. The overwhelming fact is that both companies and individuals have been encouraged and enabled to increase their debt to levels that generate a high systemic risk.
IMHO it is like this. If the national leaders allow or encourage great indebtedness rather than say savings and job protection, what does that say about what is patriotism and not.
By law and example, debt could have been more regulated, but that was not national policy.
Soooo the proper way to serve your country is high debt and default. The consumption is benefits your neighbor and the foreigner will take the fall.
Look -- Here she is again, our deadbeat house rep Laura Richardson. If you want to look deep into the human psyche to see how all this has happened, make this a featured stop on the tour.
She defaulted on 3 homes. One was foreclosed on, but she had Wamu magically rescind the foreclosure. The fellow who bought the foreclosure is suing to have the recission reversed. She was last seen riding around in the most expensive vehicle in D.C., subsidized by.... us. We are paying (hopefully were paying) $1,300 a month for her to lease a lincoln towncar. Yes. You read that correctly.
Now she's seen in New Orleans, commenting on what a shame it is to see people living in trailers. This is a person who almost certainly committed mortgage fraud to get her purchases and refi's approved, and most certainly received an illegal favor in having her foreclosure rescinded. No one in the house has the balls to even bring this to the ethics committee. No one has filed charges against her yet. Systemic.
Que se vayan todos! Vote Clemente!
http://www.nola.com/newsflash/index.ssf?/base/news-40/1216599842145750.xml&storylist=louisiana
MaxedOutMama
May I suggest that the actions of the 30% may endanger us all.
It reminds me of a story about pre WWI Germany, there was a man with 2 sons one prudent and one a drunk. When the father died, he left his wine cellar to the drunk and his fortune in German Bonds to the prudent.
After awhile the drunk drank the wine cellar, sobered up and sold the empty wine bottles for a fortune. The prudent son was broke when inflation wiped out his bonds.
example:
Citigroup Inc · 10-Q · For 3/31/08
http://www.secinfo.com/dVut2.t5K7.htm
Other Guarantees and Indemnifications
Citigroup's primary credit card business is the issuance of credit cards to individuals. In addition, the Company provides transaction processing services to various merchants with respect to bankcard and private label cards. In the event of a billing dispute with respect to a bankcard transaction between a merchant and a cardholder that is ultimately resolved in the cardholder's favor, the third party holds the primary contingent liability to credit or refund the amount to the cardholder and charge back the transaction to the merchant. If the third party is unable to collect this amount from the merchant, it bears the loss for the amount of the credit or refund paid to the cardholder.
The Company's maximum potential contingent liability related to both bankcard and private label merchant processing services is estimated to be the total volume of credit card transactions that meet the requirements to be valid chargeback transactions at any given time. At March 31, 2008 and December 31, 2007, this maximum potential exposure was estimated to be $60 billion and $64 billion, respectively.
However, the Company believes that the maximum exposure is not representative of the actual potential loss exposure based on the Company's historical experience and its position as a secondary guarantor (in the case of bankcards).
At March 31, 2008 and December 31, 2007, the estimated losses incurred and the carrying amounts of the Company's contingent obligations related to merchant processing activities were immaterial.
There are no amounts reflected on the Consolidated Balance Sheet as of March 31, 2008 and December 31, 2007, related to these indemnifications and they are not included in the table.
In addition, the Company is a member of or shareholder in hundreds of value transfer networks (VTNs) (payment clearing and settlement systems as well as securities exchanges) around the world. As a condition of membership, many of these VTNs require that members stand ready to backstop the net effect on the VTNs of a member's default on its obligations. The Company's potential obligations as a shareholder or member of VTN associations are excluded from the scope of FIN 45, since the shareholders and members represent subordinated classes of investors in the VTNs. Accordingly, the Company's participation in VTNs is not reported in the table and there are no amounts reflected on the Consolidated Balance Sheet as of March 31, 2008 or December 31, 2007 for potential obligations that could arise from the Company's involvement with VTN associations.
At March 31, 2008 and December 31, 2007, the carrying amounts of the liabilities related to the guarantees and indemnifications included in the table amounted to approximately $31 billion and $24 billion, respectively. The carrying value of derivative instruments is included in either Trading liabilities or Other liabilities, depending upon whether the derivative was entered into for trading or non-trading purposes. The carrying value of financial and performance guarantees is included in Other liabilities. For loans sold with recourse, the carrying value of the liability is included in Other liabilities. In addition, at March 31, 2008 and December 31, 2007, Other liabilities on the Consolidated Balance Sheet include an allowance for credit losses of $1.25 billion relating to letters of credit and unfunded lending commitments.
In addition to the collateral available in respect of the credit card merchant processing contingent liability discussed above, the Company has collateral available to reimburse potential losses on its other guarantees. Cash collateral available to the Company to reimburse losses realized under these guarantees and indemnifications amounted to $104 billion and $112 billion at March 31, 2008 and December 31, 2007, respectively. Securities and other marketable assets held as collateral amounted to $72 billion and $54 billion and letters of credit in favor of the Company held as collateral amounted to $498 million and $192 million at March 31, 2008 and December 31, 2007, respectively. Other property may also be available to the Company to cover losses under certain guarantees and indemnifications; however, the value of such property has not been determined.
Re "the value of such property has not been determined."
LOL!
OT-
This might restart oil bull market this week..or stop the bear in its track..
http://www.ssd.noaa.gov/goes/flt/t2/avn.jpg
IT WILL BE SITUATED BENEATH A LARGE UPPER-LEVEL ANTICYCLONE AND OVER SEA-SURFACE TEMPERATURES OF AT LEAST 28
CELSIUS. GIVEN THESE CONDITIONS...AND ASSUMING THE CYCLONE REMAINS
INTACT AND VERTICALLY ALIGNED AFTER ITS PASSAGE OVER YUCATAN...
STRENGTHENING OVER THE GULF APPEARS TO BE THE MOST LIKELY SCENARIO.
ALL OF THE PRIMARY OBJECTIVE INTENSITY MODELS FORECAST THAT TO
HAPPEN...AND ALL FORECAST DOLLY TO ATTAIN HURRICANE STATUS OVER THE
WESTERN GULF. THE NEW OFFICIAL INTENSITY FORECAST FOLLOWS THAT
GUIDANCE...BUT IT IS IMPORTANT TO REMEMBER THAT LONG-RANGE
INTENSITY FORECASTS HAVE A SIGNIFICANT AMOUNT OF UNCERTAINTY.
IT IS FAR TOO EARLY TO DETERMINE EXACTLY WHERE DOLLY WILL MAKE FINAL
LANDFALL.
For those interested/concerned, the Nikkie is closed for Ocean Day. Damn, the Japanese have all sorts of <a href="http://www.nni.nikkei.co.jp/FR/MKJ/marketholidays/>cool holidays.
Oh shit:
Weather and Energy derivatives
The fair value of weather and energy derivatives is determined through the use of quoted market prices where available. Where quoted market prices are unavailable, the fair value is estimated using available market data and internal pricing models using consistent statistical methodologies. Estimating fair value of instruments which do not have quoted market prices requires managements judgment in determining amounts which could reasonably be expected to be received from, or paid to, a third party in settlement of the contracts. The amounts could be materially different from the amounts that might be realized in an actual sale transaction. Fair values are subject to change in the near-term and reflect managements best estimate based on various factors including, but not limited to, actual and forecasted weather conditions, changes in commodity prices, changes in interest rates and other market factors..
XL CAPITAL LTD
More oil
China doesn't like exxon making deals in Vietnam...hmmmm, after the Olympics the main show begins...
China warns ExxonMobil: Drop deal with Vietnam - MarketWatch
Re: Nikkie is closed for Ocean Day.
Cheer up!
Bad Request 7D
The Nikkei finished the session 0.2% lower at 13,237.89, while the broader Topix index ended little changed at 1,297.88. The Nikkei lost nearly 8.5% during the past 12 sessions. Its longest losing string was 15 consecutive sessions in 1954, followed by 13 straight losses in 1949 and 12 in 1953.
Department store chain Mervyn's LLC is fighting for survival after a lender pulled financing and some vendors stopped shipments, the Wall Street Journal reported on its website on Sunday
U.S. retailer Mervyn's fights for survival: WSJ
| Reuters
We all fall down and go boom.
Your brain at this moment is composed of brigades of tiny Bolivian soldiers. They are tired and muddy from their long march through the night. There are holes in their boots and they are hungry. They need to be fed. They need a new post by CR.
The story of how a woman spend herself into bankruptcy and knew what she was doing nearly the whole long way.
A complete and accurate metaphor for the current state of not just homeowners' finances, but a lot of businesses and units of government as well.
Rather than being unusual, it is actually quite common.
I hate the predatory lending angle which is getting more and more ink, as that's what the lefty's and the do-gooders latch onto. With that viewpoint no one wants to hear about what is an individual's personal responsibility in managing their finances, instead its "the lenders' fault" because they "gave" me so much money "I can't now pay it back."
Sorry, I've been down that road, irresponsible borrowing helped to crash my by-then teetering marriage. Since then I've always bought exactly what I could pay for and saving the rest.
From Roubini's blog, on the games the banks are playing with their earnings statements:
Most financial institutions are low putting increasing numbers of assets in the illiquid buckets of Level 2 and Level 3 assets. While FASB 157 should prevent manipulation of the valuation of such illiquid assets forbearance by the SEC, the Fed and other regulators allows a massive amount of fudging. An insider told me that in a major financial institution the approach is as follows now: top management decided in advance what the announced writedowns should be and folks dealing with the toxic/illiquid assets come up with their totally ad hoc assumptions to make sure that such illiquid assets are valued consistent with the decided-in-advance amount of writedowns and losses.This is not earnings smoothing; this is active manipulation and falsification of financial results aimed at creating even more obfuscation of the true state of financial institutions. This obfuscation is actively abetted by the SEC, the Fed and all other regulators who are now in forbearance crisis management stage where the objective is to avoid at any cost anything that may trigger a financial meltdown. Thus, most of these earnings reports are not worth the paper they are written off.
RGE - The Coming Systemic Bust of the U.S. Banking System: “Dead Stocks Rallying”
Oh for the love of ..., Comments (260) Can we pleaze have a new BedTime story?? I tried to be off topic as much as possible and this is the thread that will not die.... WTF!
That friggn does it, here:
YouTube - Sons of the Pioneers "Tumbling Tumble Weeds"
I wonder if that "major financial institution" was Citi!
That just makes me wanna watch The Big Lebowski again
One has to wonder how many big big US banks are essentially broke. If you can't trust the values they give out, you need to REALLY be worried. And Roubini has a terrible record for being ACCCURATE.
The message is loud and clear:
Lenders have to be held responsible for the cost of defaults and run the risk of cram down or forgiveness in bankruptcy proceedings. Period.
Re: The story of how a woman spend herself into bankruptcy...
Ok, we call it self control... some people eat themselves, I mean they eat enough crap to become massive -- then, some people drink themselves to death, others like Belushi, or millions of others, go on binges and they can't stop. So, who does say stop -- in this case with credit, why not a bank. Actually I never saw that video, just this one:
YouTube - The Cattle Call
Remember when women used to be hot? YouTube - Patsy Cline "How Can I Face Tomorrow"
Now they suck" YouTube -
I have a couple of thoughts that have been touched on but not really discussed much.
(1) I don't know how many people feel "sorry for" the credit industry, but they recently did a good enough job of convincing people that they were victims to get the bankruptcy law changed so that a lot of people won't be able to get rid of their debt through bankruptcy. This went through without any corresponding additional responsibilities by the banks, like capping interest rates or not doing double cycle billing.
(2) I saw a video about debt in America (I think linked from here) that said that creditors make most of their money from marginal people like Diane. Even if they eventually default, they have paid so much interest and so many penalties in the meantime that the creditor comes out ahead. And then they get to market credit cards to the people who have gone through bankruptcy, because now they can't go BK again for seven years.
Hot damn! I can't wait to ride TS Dolly's waves!!
https://www.fnmoc.navy.mil/ww3_cgi/cgi-bin/ww3_all.cgi?color=b&type=prod&area=cent_am&prod=sig_wav_ht
I'm sure I just jinxed myself. If we get hit this year by a hurricane I'll be to blamed.
I read the article.
I came away sympathetic toward the borrower that got in over her head. And I'm way more cynical than all of you.
She suffered the major life catastrophes that are most related to bankruptcy: Job loss, divorce and medical problems.
She blames herself, because she bought a couple of handbags and some jewelry she wanted. Honestly? Big deal.
Her real crime was trying to live a pre-Reagan middle class lifestyle in the George Bush era.
And that takes debt for the average person:
A lot of it.
Thirty years ago, this person would have gotten along just fine, warts and all. This should not have been a story about personal failing, but of the failure of the American system.
Just finished watching "Dr. Strangelove"...oh boy does that seem to rhyme!
Slartibartfast,
Don't let anyone take that name away from you.
WAKE UP CR!! WE NEED YOU
Catching falling knives is dangerous to your health. Do not attempt this at home.
Fortress Looks for the Bottom, Again
Fortress Looks for the Bottom, Again - WSJ.com
The questions I have are
It will always be the same for this woman and many others just like her. There is always an excuse.....no on willing to make any sacrifices. Just hand me the American Dream, I am entitled to it!
"predictions for tomorrow?"
Sen. Schumer(D) starts another bank run ?
No ..
from the article
Ms. McLeod used debt to keep going until she was fired from her job in March for writing inappropriate e-mail messages. Since then, she has been selling her coveted handbags and other items on eBay to raise money while waiting to be evicted from her home.
Anyone keeping track of national suicide statistics? And Crime?
Corn Has Biggest Weekly Drop in 12 Years on Argentine Tax Vote
Corn Has Biggest Weekly Drop in 12 Years on Argentine Tax Vote - Bloomberg.com
She needs Cornholio.
Well I guess this could be our baseline:
FASTSTATS - Suicide and Self-Inflicted Injury
Last national stats are from 2005?
Then there is this WSJ article about behaving like Countrwide.
FDIC Faces Mortgage Mess
After Running Failed Bank
FDIC Faces Mortgage Mess After Running Failed Bank - WSJ.com
Rather than immediately shuttering or selling Superior, as it normally does with failed banks, the Federal Deposit Insurance Corp. continued to run the bank's subprime-mortgage business for months as it looked for a buyer.
The Superior situation could be costly for the FDIC. Texas-based Beal Bank SSB, which bought a portfolio of Superior loans, about half of them originated under the FDIC, is suing the agency in U.S. District Court in Washington.
In a recent court filing, the FDIC estimated that about 1,500 of the 5,315 loans it sold to Beal either have defaulted or are nonperforming. The FDIC already has bought back another 247 of the mortgages, most of them for violations of federal anti-predatory-lending laws intended to protect borrowers from unreasonably high fees or deceptive practices. Beal Bank has said in court filings that 73 of the repurchased loans were originated while the FDIC was running Superior.
Tanta: I am so tired of all these perfect people whose first instinct in any situation is to micromanage other people's lives.
That's an ironic thing to say, Tanta, since you are so desperately trying to micromanage our reaction to GM's piece.
I'm with Yearning To Learn on this one. I think your Gretchen Morgenstern hatred has driven you to distraction. You're way smarter than I am, Tanta, but my gut tells me you're wrong on this one.
You obsess about the shots of the cigarettes and the chain link fence (and yeah -- I thought the cigarette shot was cheesy). I know your heart is in the right place -- you're rightfully fighting on behalf of the little guy -- but in my opinion you're coming off as very defensive and you exhibit little faith in the average person to exhibit empathy or understand nuance.
Maybe I'm just a SNAG (sensitive new age guy) but what I saw in that video was a woman who was quite self-aware about her own failings and problems. She wasn't lashing out at the credit card companies -- she wasn't demanding a bailout or for her debt to be forgiven. She was taking responsibility for her actions even if she didn't know yet how to change. I also saw a woman who still had a sense of humor after everything she'd been through.
And in my opinion, on the basis of those two things alone she's is admirable and worthy of respect.
[But smoking is a filthy f&*&% habit.]
GM and the Times chose to show these things -- Diane's self-awareness and her sense of humor -- just as surely as they showed the tchotchkes and the cigarettes. Do they get any credit for that or was that just incidental?
What made Diane's story tragic to me wasn't that she was "low class" -- it was that she didn't have a support system. Her parents are dead. She's divorced. She has a son who's pissed off at her for screwing up his credit. When she's kicked out of her house, where's she going to go? Who's she going to live with?
Her debt and problem spending is a symptom of her crushing loneliness. She had no trusted friend to give her good advice on money.
If you think that most readers of the Times will look at Diane's story without empathy, that they will universally observe a tale of a lonely and isolated woman and think 'that's not me,' then I think you need to take a look at your own biases and resentment about the "upper class."
I'll admit, for my own part, that when this video offered the first glimpse I've had of Gretchen Morganstern herself, my first thought was, "Oh... she's a rich blonde chick." I'll cop to that. And I can't help but wonder if you had the same reaction. Is she one of the "perfect people" that you are so tired of? The only "perfect" people are people we don't actually know.
I choose to believe that a large number of New York Times readers saw something of themselves in Diane MacLeod. And if this article hastened their own self-awareness, and their own days of personal and financial reckoning, that on balance its publication was a good thing.
Heads up kids, say "Hello, Dolly!"...looking a bit more coherent and likley to hit the slot to head into the GoM rather than the Yucatan.
What penalty is appropriate for sending "inappropriate e-mail messages?" Losing one's job? The death sentence? Jesus Christ.
As far as "entitlements" go ...
Look.
The very richest among us push very heavily using every instrument at their disposal to fulfill their feelings of entitlement. Why shouldn't everyone else?
The vanishingly small payout that this woman might ever receive from government is nothing compared to what the average millionaire expects and gets from the social welfare state.
Yesterday, we were all outraged because two gals in Chicago were bilking the Illinois state welfare system out of $800 a month that they used for food and shelter.
Really, what the freak ...
We're paying 100x that, or more, to fill the trough of Halliburton/KBR executives by the week.
As I said above, this gal's mistake was in her aspirations, which are out of touch with the times. The average person can't live the American dream without debt, a lot of it.
I get the Maria Bart... part, but what's the slarti and the fast?
I have a feeling that the phrase "triple-breasted whore from Eroticon 5" would not resonate much here either.
Er, 6 ... damn typo. Anyway, what I was saying.
I was a little too tall
Couldve used a few pounds
Tight pants points hardly reknown
She was a black-haired beauty with big dark eyes
And points all her own sitting way up high
Way up firm and high
Out past the cornfields where the woods got heavy
Out in the back seat of my 60 chevy
Workin on mysteries without any clues
Workin on our night moves
Unless someone gets this under control, we're headed towards a financial 9/11.
Similar to the terrorist attacks, there are plenty of warning signs, though no one is doing anything about it.
There are a few Douglas Adams fans around, you just missed them atm... you will some of EVERYTHING here over time...
Well if it's a mystery, I'll venture that it's a Kurt Vonnegut character before I actually summon the energy to leave this page and look.
friardaddy: not doing anything about it? We're talking the HELL out of it!
Que se vayan todos. Vote Clemente.
A lot of you guys saying this article isn't class-baiting reporting should read some Barbara Ehrenreich. Have you read the bullshit lifestyle articles that have mushroomed in the NYT over the past few years? Make no mistake, the snotty yuppies who make up a big chunk of the NYT readership would think Diane was trailer park material and judge her actions with that in mind.
Man-Moth: I saw it more like the Curbed episode where Larry feels obligated to gesture to the african american fellow he passes in the hallway.
(Keep in mind that we are all african-american).
Bowel Moves
YouTube -
UBLNK: talk is cheap - revolving credit is not.
Yes technically, but the NY Times comparison tells you more. It's a barometer of Americans' ability to cope with adversity, such as a large medical bill, temporary loss of a job, or sudden spikes in gasoline and utility costs.
Personal savings is personal income minus personal consumption. It's the amount of progress the average household is making (in prime earning years) putting money away for "bad times." Lately, personal savings has been very, very low.
Steady increases in personal debt (in excess of national wage growth) tend to erode personal savings over time, due to debt service cost. Also, it increases vulnerability in times of difficulty or crisis, because debt payments can only be postponed so long before a household starts to face deprivation.
The ratio of personal debt to annual savings (the personal savings rate) is a barometer of how well prepared American households are to cope with a period of adversity. The higher the ratio, the more vulnerable households are. The graph shows that American households are a point of maximum historic vulnerability to any adversity.
They have very little backstop. The defenses are thin.
It's the best graphic depiction of this I've seen in print yet.
"herself the bachelor's in finance that seems required these days to deal with all this."
No, it requires 3rd grade math, a little discipline and a little good fortune.
3rd grade math and discipline isn't going to help you much when a little bad fortune rolls around. I doubt an MBA in finance would do you much good then either.
Nor will an MBA in finance and good fortune save you if you lack discipline. Look at Orange County, the refi-foreclosures are blasting through million dollar homes.