Thursday, May 14, 2009

"My Personal Credit Crisis"

Kudos to Edmund Andrews, who writes a tremendously honest account titled "My Personal Credit Crisis" in the NYT Magazine this week. It's a must read. I had some comments on my last post, in which I criticized Obama for making the GM debt negotiations a main street vs Wall Street class war, that accused me of being, essentially, a Wall Street Sympathizer. It should come as no surprise that I'm a believer in free markets capitalism, personal responsibility, and that I hate the "it's Wall Street's fault" arguments.

Fortunately, Andrews makes no such arguments in his recounting of how he ended up in debt up to his eyeballs, waiting for Chase to foreclose on his home. Andrews explains the conversations with Bob, his mortgage broker (emphasis mine):

"If I wanted to buy a house, Bob figured, it was my job to decide whether I could afford it. His job was to make it happen.“I am here to enable dreams,” he explained to me long afterward. Bob’s view was that if I’d been unemployed for seven years and didn’t have a dime to my name but I wanted a house, he wouldn’t question my prudence. “Who am I to tell you that you shouldn’t do what you want to do? I am here to sell money and to help you do what you want to do. At the end of the day, it’s your signature on the mortgage — not mine. You had to admire this muscular logic. My lenders weren’t assuming that I was an angel. They were betting that a default would be more painful to me than to them. If I wanted to take a risk, for whatever reason, they were not going to second-guess me.”

Later in the article, Andrews asks himself some simple questions that he wished he had addressed earlier:

"Why had I been trying to live a lifestyle that I couldn’t afford? Why had I tried to keep up the image of a conventional suburban family man, when nothing about my situation was conventional? How could I have glossed over the fact that we had been spending about $3,000 more than we were earning, month after month after month? How could a person who wrote about economics for a living fall into the kind of credit-card trap that consumer groups had warned about for years?"

Andrews concludes the article with some pseudo-sympathy for his current lender, Chase:

"I was actually beginning to feel sorry for Chase. It seemed to be so flooded with defaulting borrowers that it didn’t have time to foreclose on my house. Eight months after my last payment to the bank, I am still waiting for the ax to fall."

Edmund Andrews doesn't make the mistake of blaming people for giving him money - he takes responsibility for his errors in judgement, and doesn't fall into the easy trap of shifting responsibility to the people who were generous/ignorant/naive enough to give him the money in the first place. (note - the proper adjective is probably "naive" - in that they completely ignored the risks, although I guess that could be classified as "ignorant" as well).

It would be nice if other in Andrews' boat demonstrated similar culpability.


EDIT: p.s. - I want to thank my friend Eric, who responded "This guy is an idiot - not sure why this is a must read." I realized that this was, indirectly, exactly my point - there is no one to blame when you borrow and spend more than you can afford - you're an idiot (sorry Edmund Andrews).

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