Thanks God, because my part-time job won’t pay the mortgage bill.
Yesterday, we got a series of calls and e-mails from friends and family who were wondering if we were out on the street yet and if we were going to show up at their house with a mattress strapped to the roof of our car.
My husband works for one of the two remaining solvent investment banks in NYC. He’s okay. He’s been busy helping to clean up the mess, and his blackberry was about to explode on Sunday evening, but otherwise things are normal.
I’m not going to econo-blog. There are too many people in the blogosphere who really understand what derivatives and repo documents mean for me to get involved with all that. But I do have some quick thoughts.
McCain said that the economy is still basically fine. He should keep saying that. And President Obama will take him out for a beer next January.
Bad things that happen on Wall Street don’t just stay on Wall Street. Jobs are being lost. Money for investment is lost and won’t show up in the tax treasury next April. Business won’t be able to expand.
Obama said that the economy is in trouble and it’s the fault of Bush policies over the past eight years. That might be a bit of a stretch. Wall Street made a whole lot of dumb deals in the past eight years. People bought homes that they couldn’t afford with flexible rate mortgages. Maybe Bush could have done a better job of keeping the irrational exuberance under control, but I’m not sure how.
Apt. 11d 
“Thanks God, because my part-time job won’t pay the mortgage bill. ”
But, hopefully, your savings will? I think this is the lesson we have to learn from what’s happening. You really must have a cushion.
I also think you’re perfectly right that there will be ripple effects of wall street crashes. I noticed this during the dot com crash, when I realized that private foundation grants were “reorganizing” (one that I had delayed payments). People won’t have money to buy things, and that will affect both the people who sell them and make them.
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Good luck, Laura!
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Laura: my thoughts and best wishes for you and your husband. Even though he’s employed I’m sure its very scary and unpleasant right now.
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I think it is hard to blame it on any one person or event. Are we really going to blame Bill Clinton for making mortgages too easy to get? Let’s face it – people bought what they couldn’t afford and others used their houses like cash machines (including some of my relatives). I used to wonder how we made so much more money but they were living a far grander lifestyle than us. Let them laugh at our old sedan (which happily fits a family of 5) as their shiny Suburbans (my father worked for GM and they were all entinced by the discount) gather dust in the garage.
I am pretty excited about all of this. For years, we have waited for the NYC housing market to come down – our few forays into the suburbs came to naught. We gave up Manhattan and have been hibernating in Riverdale – biding our time.
Life has been better since the whole thing started to fall down. No more mad rush to make the billable bonus – it ain’t going to happen (and lawyers bonuses are not anywhere comparable to their wall Street counterparts). We had our first summer vacation in years that didn’t involve a boat load of documents. Half of his division showed up on Saturday to paint a mural in a public school – in the past they would have just written the check because no one had any time. My husband comes home before 10 and he has lost 10 lbs. – not from stress, he is pretty safe but because he can sit down and eat a real meal and not some buffet laid out for those who can’t go home.
Perhaps board games will make a comeback. And the whole I have to get my kid into Harvard or some other totally overpriced private college (now that the banks are getting out of the student loan business) craze will end. Binghamton was fine for us – grad school is what really mattered. Two months ago we cancelled the cable (kids were too addicted to the Disney Channel) and surprise, surprise – they started reading more. An $80/mth bill disappeared before our very eyes. We cancelled the Poland Spring and started to use NYC tap water – another $40 bill went the wayside. Now if I can only give up taking cabs and car service……
Good luck, hopefully we all won’t be meeting on some internet bread line in the future….
SueNYC
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Yes, best wished to you and yours (and thus, indirectly, to my own retirement accounts). Unfortunately, my employer won’t match my contributions if I bury them in the yard.
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We just finished 18 months of unemployment and Bert went back to work last week. Thank God. The job pays half of what the old one did, but still has all the great benefits, and a more reasonable and pleasant work environment. We feel lucky.
Getting through unemployment? BJ is right, savings, savings, savings. We had a healthy savings account that we began to pour more money into 3 months before he lost the job- we could see the writing on the wall. That savings, unemployment, severance and one small bump from in-laws kept our heads above water. We cut back in all the logical places, the kids didn’t feel too much impact so they weren’t stressed. Bert and I were, but ultimately we knew we had a lot of safety nets. We aren’t too proud to move, or taking lower paying jobs or whatever. We knew we could keep the family together and be fine whatever we had to do to make it happen.
Thinking of you, and hoping you stay just where you are right now.
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I follow the housing stuff very closely, but the Wall Street side of it is really hard to follow for a layman. Plus, everybody’s got their favorite villain. My understanding is that much of the damage was done early in the Bush presidency when interest rates were cut super low to encourage spending and keep the economy going after the end of the Clinton-era tech bubble and 9/11. There’s a lot more to it than that, but the thing is fiendishly complicated, particularly since the housing bubble was an international phenomenon and Japan, Spain, the UK, and Canada have all been involved at different times. Eastern Europe is also supposed to be in a bubble, too.
It’s hard to draw a straight line from high finance to consumer behavior and popular culture, but some really weird alterations in outlook and behavior happened over the past decade or so. 20% appreciation in certain areas became a given, even though wages were not rising at 20% a year. When we lived in DC, I used to follow the 20850 zip code closely. At the peak, you could barely find a single family home under $400k, and a lot of very basic 1950s houses in iffy neighborhoods with so-so schools were much closer to $500k. Nowadays, I am pleased to say, 20850 has houses in the $200s. That’s a huge step forward for sanity and affordability.
Another goofy thing that happened in recent memory was that a lot of people stopped aspiring to pay off their houses. People started thinking of their homes as their principle retirement savings, even if (thanks to pumping the equity out via HELOC) they didn’t have any money left in the houses. In fact, through some bizarre inversion, some people started thinking of their refinance or HELOC money as actual income, and they’d milk their house as regularly as if it were a cow. One of my favorite relatives did that with several rental houses, but fortunately left her paid-off home alone. I think she’ll be OK. I’m more concerned about another set of relatives who are nearing retirement and have crushing loans on about three properties and now owe more on their property than it’s worth. They won’t get out–they’re planning on riding it out. I asked the wife how they were going to retire and she said they weren’t going to.
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I recommend listening to The Global (or is it Giant?) Pool of Money, which is an episode of NPR’s This American Life. I can’t remember which blog recommended it (not this one, though) but it is riveting. According to the program, the ultimate cause of the credit crisis is the doubling over the last 8 years of the amount of money worldwide that needed to be invested, aka the global pool of money. After listening to it, I feel nothing but compassion for those caught in this mess, including those who are over-mortgaged.
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I was wondering about that.. happy to hear you’re still OK.
It’s not housing so much as the refusal to recognize the housing bubble, (cf Alan Greenspan encouraging us all to take out ARMs), and the unregulated, massively leveraged investments that were made in derivatives of the underlying rotten mortgages. For that we can thank Phil Gramm, McCain’s financial adviser – the defenses that FDR had set up after 1929 were repealed in 1999 based on legislation that Sen. Gramm wrote (and let us be fair, President Clinton signed). In the 2000s, he successfully lobbied Congress to lift state restrictions on predatory lending tactics by mortgage brokers. See
http://www.slate.com/id/2182709/
As Andrew Leonard observed in Salon,
“Millions of Americans bought houses they could not afford. But they do not deserve all of the blame. They were aided and abetted and encouraged and seduced by mortgage lenders and investment bankers. They were told the exotic mortgage products were a good idea by their own central banker, Alan Greenspan. They were served badly by regulators and politicians — the kind of people who, even today, are saying “the fundamentals of our economy are strong” when, in fact, nothing could be farther from the truth.”
It’s worth noting that “the fundamentals of the economy are strong” is much the same as Herbert Hoover’s “the economy is fundamentally sound”.
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I’m starting to feel depression-type nervousy. Not sure why, ’cause I don’t think I have sufficient economic memory for that to be a rational concern. It’s possible that it’s the first time there’s been a market correction that actually impacts my net worth (older, hence more investments), and thus not meaningful. But, I’m feeling truly nervous, like the “fundamentals” are really off.
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Thanks all. We’ll be fine. Maybe.
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Thanks, Laura. We’ll all be fine. Maybe.
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What Doug K said about the origins of this mess, and what you say about McCain (because deregulation was just one of many realms where Clinton threw in the progressive towel, and Obama shouldn’t ride that hobby horse anymore).
I’m glad you’re weathering the storm.
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