If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.
But in 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others ”” borrowers, lenders and the Wall Street dealmakers behind them ”” I just thought I could beat the odds. We all had our reasons. The brokers and dealmakers were scoring huge commissions. Ordinary homebuyers were stretching to get into first houses, or bigger houses, or better neighborhoods. Some were greedy, some were desperate and some were deceived.
[i]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?[/i]
Sobering because, as the author admits, if anyone should have been aware of the pitfalls it was he. I never cease to be grateful that in the boom years we were in a graduate school situation that precluded the search for a home, but even so I couldn’t imagine ever taking on an adjustable rate mortgage.
I’m reminded of the hubris evident in a novel like Bonfire of the Vanities (though Mr. Andrews and his family have happily survived intact).
[url=http://catholicandreformed.blogspot.com]Catholic and Reformed[/url]
All through the low-interest, easy-money mortgage days I listened to radio commercials touting the super-low ARMs and I thought, “You’d have to be a fool not to take out a fixed-rate mortgage these days.” Well, it seems I was right and so many of these ARMs, Alt-A and subprimes are going belly-up. This guy really should have known better.
[url=http://meganmcardle.theatlantic.com/archives/2009/05/busted.php]Megan McArdle[/url] has a couple of columns about the article (sympathetic) and the book (far less so), for the interested.
When I bought my house, there was some weird fluctuation of rates such that the ARM they offered me had the same introductory rate as the rate of the thirty-year fixed I made them show me.
I was never going to take the ARM, of course, but that made me think — although I was too chicken to say it out loud — “OK, I know what you’re trying to do to me with the ARM; but here you’re not even buying me dinner first.”