Sunday, May 17, 2009

Unbelievable. (Updated)


UPDATE: Thanks to Raina and Decorno for the update to this post. Apparently, Patty Barreiro, the author's wife (pictured above) has a history of multiple bankruptcies which was intentionally, some might say egregiously, left out of the article. Can you imagine?

Megan McArdle from The Atlantic monthly uncovered the dirt. Here's an excerpt:

"In September 1998, California bankruptcy court records indicate that Patty and her first husband declared bankruptcy. The financial statement they filed with the court indicated family income of $174,000 in 1996, $87,000 in 1997, and $126,000 in the first nine months of 1998. The income fluctuations are not surprising, given that her husband was in the film production industry. By the time of the filing, the couple owed about $30,000 on 8 credit cards, over $200,000 in back taxes, and almost $15,000 in private school tuition, as well as substantial car and mortgage payments.

[Then] In 2007, nearly as soon as she was eligible, Patty Barreiro filed again in Montgomery Country. ...The bankruptcy code requires filers to wait 8 years after a previous Chapter 7 discharge. Barely four months after she became eligible, Patty Barreiro filed again."

Here's a link to The Atlantic Monthly article.

Here's the original article from the New York Times Magazine:

My Personal Credit Crisis by Edmund L. Andrews

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 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.

For the entire article, click here.

If you are not personally going through it, this article will illustrate how the mortgage crisis happened: one stupid decision mortgage at a time.

I saw this coming. I did. My husband is a real estate lawyer and he would come home with tales of refinances that made my head spin. I remember asking him in the late spring of 2007, "What if it all came crashing down at once? Could we have another depression?" He said, "It couldn't happen. There are too many safeguards in the system to allow a total financial collapse."

Right.

On a related note, I'll bet this guy sure feels stupid (his book was published in Feb. 2006):

Doh!

18 comments:

The Townhouselady said...

Thank you for this must needed post. It's very scary to see someone with all the knowledge and tools at their disposal fall into the cavern.

Strange Days.

jen said...

Ahh! The David Lereah book is one that my bosses (I worked in real estate office) made me order countless times to give out as referral gifts and part of closing presents. I thought it was ridiculous then and it makes me snicker to think about that book now given our financial situation.
I personally feel this meltdown is the best thing that could have happened to the US. Many people are now more about conserving, consuming less, enjoying things in moderation. I hope it lasts once the economy stabilizes.

Pigtown-Design said...

i heard him on marketplace the other night and just wanted to smack him. "i did it all for love..."

when i read the whole article this morning, i still wanted to smack him.

Raina said...

That book should be re-printed with a new cover. The house has fallen from the sky and squished the family.

Anonymous said...

I heard Mr. Andrews on PBS yesterday. It's a sad story, but it reminds me of the song "I'm Busted" by C&W singer Aunt Effy.

http://www.youtube.com/watch?v=2HSu00C2CO8

Paul Anater said...

Great piece, thanks for alerting me to it. I would have let it linger in the "I will read this eventually" pile had you not brought it to my attention.

hello gorgeous said...

I don't feel sorry for them what. so. ever.

His wife won't give up Starbucks, for example.

Why not?

People who want everything and can't afford it and get it anyway piss me off.

In fact, I'm going to remove the reference to his book because as I see it, we are all already paying for his free mortgage (8 months without a payment). And if they lose the house? Well, maybe next time they'll buy something they can afford.

erin@designcrisis said...

We saw it coming, too. Living in the fabulously expensive bay area, we had plenty of friends our age (early 30s, late 20s) buying up 700k homes on the same salary we brought home because they got "great deals on interest only loans!"

And that's when we moved to Austin.

Cote de Texas said...

oh my - thanks for this - can't wait to go read the whole article. unbelievable!

Anonymous said...

And I still have checks so I must not be out of money, right?
Strange days indeed.

jess said...

The author of the book has to feel like an ass. And I think the author of the article should feel like an ass. I agree that people shouldn't feel like they deserve to be so privileged. If you can't afford it, don't buy it.

Lolo said...

We pulled way back on our stocks about two years ago due to my fiance seeing this coming. He owned a mortgage company and real estate brokerage and saw some really sketchy shit being pushed through by many folks who let their greed bitchslap their common sense. I heard some reporter recently say how spending is what got us into this mess. No. Borrowing on terms we couldn't realistically repay is one of the straws that brought down the house of cards.

It's infuriating and maddening to me that so many of us who followed those silly old rules are paying the price, for years to come, for this mess. When I hear of how folks with jumbos are wailing for bailouts? Want to slap them silly.

Decorno said...

I read every word of that article. What a fucking moron. Seriously. He should be embarrassed. And shame on him. He doesn't make much money at all, how would he think he could afford that? Idiot.

Raina said...

Uh oh, some damaging info has come out about this guy's wife:

http://tinyurl.com/o2nez7

Decorno said...

You're gonna like this dirt:

http://gawker.com/5265546/times-scribe-omits-vital-details-from-bookarticle

Decorno said...

Ooops, looks like Raina beat me to it. :)

hello gorgeous said...

Thanks to Decorno and Raina for the update!!

Decs said...

Oh, and there is more!

You will like this:
http://www.businessinsider.com/henry-blodget-subprime-delong-mortgage-system-gave-busted-nyt-reporter-an-extra-100000-to-spend-2009-5



So Ed Andrews's adventures in real estate have lost him $46K in NYT stock that he sold to make his down payment--stock that would now be worth $14K...

He has now lived rent-free for the ten months since be stopped paying his mortgage--call that +$32K...

He paid essentially a market rent for the house via his mortgage payment but he got a tax shield worth $500 a month for 42 months--+$21K...

And he pumped $58K out in his home equity loan...

So by my count his adventure in real estate has enabled him and his wife to spend $97K more over the past five years and still arrive at the same asset position as if they had rented...

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