It’s Good to be the Prodigal Son

Not so good to be the responsible older brother though. Figuratively or literally.

Although it’s long past time to tackle this particularly big root of the current financial implosion which threatens us all, it still leaves me shaking my head and not just a little bit annoyed.

Team Obama announced yet another bailout, this to the tune of $75 billion for homeowners. Considering that this is where the problem started – a long time ago – it seems a bit like trying to stuff horses back through the keyhole of the lock on the barn door but better late than never, right?

According to Sheila Bair, who is chairman of the FDIC, it’s about time. Previous bailouts, I assume she means the ones to banks and investment houses, have failed because “We’ve not attacked the problem at the core.”

The core, of course, are all the Joe Six-Packs/or Prodigal sons who caused this mess by not being able to pay on mortgages and other lines of credit. Money is debt after all. Banks essentially lend money based more on what is owed them than the stuff that is actually on deposit with them. It’s an elaborate scam that goes unnoticed because it sits out in plain sight, pretending to be a sane idea.

Team Obama was quick to utter the right reassurances. No one will get bail out money for their mortgage if they were house flipping or bought more house than they could afford or are one of those horrid dishonest lenders who tricked people into buying more house than they could afford. 

Money will go to families who played by the rules. Oh! So the older brothers will get their reward then? Not so fast .

Thing is the “rules” during the great American housing dream of the early part of this decade clearly stated that one could buy more house than one could normally afford because houses where going to do nothing but appreciate in value. And with things like ARM’s or interest only loans – and a good job whose salary will only go up year after year -a play-by-the-rules family could buy more than they could really afford and refinance before the ARM came due using the appreciation of their home to finance it. 

Older brothers didn’t fall for that, so Prodigal sons win again. Because if you scrimped and did without – lived within your means in other words – then you are not one of those who are losing their houses right now. (Although you might be soon if you are among those downsized as a result of the reckless grasshopper like behavior of your credit-is-just-like-money thinking neighbor. Where you stand in the great Main Street giveaway is like the player yet to be named.)

I got the spiel on ARM’s when I bought my last house. I turned it down flat and still almost lost my house anyway when my late husband was fired from his job because of his illness and our income was nearly halved.

Which is my point. What about people like me? Who lost their homes through circumstances they really couldn’t control. People who really played by the rules as opposed to crying foul later when their gambles didn’t pay off as they hoped. Or the people who didn’t raid their equity piggybanks to pay off the credit cards they would just run up again or to take the family on a Disney Cruise.

What about us?

The Prodigal son’s older brother complained to their father that, essentially, being good didn’t pay off like being a screw-up who is sorry after the fact. He was sent off to a corner to contemplate his inability to be charitable.

Should people who over-extended themselves, much like the Wall Streeters and the banks, be bailed out?  Are we, the responsible taxpayers, mortgage payers and just bill paying in general half of the population just supposed to be glad the spendthrifts have seen the errors of their ways. They are victims only of their greed. They gambled on home prices rising forever and borrowed against equity that doesn’t really exist until a home is sold. They used credit cards to buy things now instead of saving up for the vacations and toys and treats. They might have been playing by the “rules” but the rules were fucked up. And deep down, didn’t we all know that?

No one teaches us in school about using credit cards, financing cars or homes. Heck, they don’t even teach us about paying taxes which is very odd for an education system that leaves little to chance by way of indoctrination into the American Way.

I know what you are thinking. The rich have been bailed out, and they knew what they were doing was wrong, so why not help out the little guy? And you are right. Why not?

Why not continue down the path of no accountability?

It’s clear that we are not worthy of our immigrant ancestors anyway. People who scrimped and saved and worked hard to get ahead. People who rode out the bad time and down turns without expecting someone to save them for themselves.

There are precious few innocent victims in the housing mess, but I will agree that there are a lot of stupid ones. People who didn’t quite understand the ramifications of the fancy financial terms, but simply trusted the realtors and the lenders when they were told,

“You can always refinance.” and that “Home prices will just keep going up.” or that “It’s never been easier to buy into that better neighborhood than now.”

Because believing that let them “get ahead” and live in that fancier suburb or take that vacation now instead of saving for it and buying it with real money and having it mean something more when they were finally able to do it without fudging around the edges.

Nothing will really be fixed by all this money that the government is tripping over itself to throw at consumers and lenders alike. The root of our problems lies within our twisted value systems and our inability to endure hard times because they are “too” hard and we are too soft.

6 responses to “It’s Good to be the Prodigal Son

  1. I’m glad to know there are some other frugal families; I thought we might be the last one. Your post is spot-on. Those of use who lived within our means are now assuming the debt of those who over-extended themselves. They already enjoyed all the goodies; we will pay for years to come.

  2. I’ve wondered for the past few years how anyone who is only paying interest on a mortgage is a “homeowner,” but I guess for bailout purposes, they are. I’ve been a renter for most of this decade since I couldn’t buy a house the traditional way – with a down payment – and I wasn’t interested in a “creative” loan, yet there are “homeowners” with just as much equity in their homes as I have – which would be zero.

    This is a great post, and a far more honest assessment of the issue than many I’ve read lately.

  3. i’m vexed by this as well… the bailout should go to those who are affected by layoffs. period. fundamental challenge (at least in the US) is computational illiteracy… makes me want to scream that we’ve gotten so bad at math that the average citizen doesn’t understand interest rates, let alone fundamentals of personal finance (like equity). Ugh.

    nice piece…

  4. This is great – the type of op-ed piece I’d expect to see in a national newspaper. We need a national discussion about these issues; we need to look at our values and priorities.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s