After watching Frontline's take on the first symptoms of the financial meltdown (that anyone noticed), I came to a stunning and frankly chilling revelation.
It's all my fault. I did it. I'm sorry, Wall Street. I'm sorry, Main Street. I personally (but entirely without malice) broke the economy.
Details apre le fold.
In the late spring of 2007, my wife and I decided to buy a house. This decision was based on several factors, including providing a yard for our child, a garden space, and the ability to live without having irresponsible and loud people sharing walls with us.
It was not motivated by a desire to make money. At no time did I see my house as a way to bolster my bank account, other than in the long-term and general way of having something concrete to pass on to my child after my death, rather than simply paying rent for the rest of my life. I had a decent job that looked like it was going to continue and possibly improve. Purchasing a home was finally getting my share of the much-vaunted American Dream. Not taking someone else's dream away, not getting a gift, but taking my earned place in the Society Of Grown-ups at long last. If I had but known the consequences of this decision...
After finding a nice house (90-year old style Sears-kit bungalow, remuddled in the 1970's, one block off the bus line, one mile from downtown, a piece of the Core Neighborhood that city was encouraging renovation of) and a friendly Buyer's Agent, we arranged financing.
And this, my friends, is when I fired a shot though the temple of American Finance.
She had a good credit score but not a lot of income, I had decent income but no credit in my name. Taking the agent's advice, we picked up another credit card (to show "depth of credit") and I arranged to lay my hands onto a few thousand dollars to have sitting in the bank (in-family loan, no interest, payback at my convenience). After a couple of months, credit was available, and we were ready and able to purchase a house with no money down.
We saved a little on the interest rate by giving proof of income, although we were offered the option to write it as a self-certified loan. We were then offered another choice. 30-year fixed, with mortgage insurance (due to the nothing down), or an exotic. Of course, it wasn't put to us as an exotic.
It was described as a 30-year adjustable rate mortgage with a 11% cap, with the first 5 years interest-only, for 80% of the value, and a home equity line of credit for the other 20% with an adjustable rate and a balloon payment of the balance in 5 years, with this standing in as the down payment.
"What you are doing, by structuring your loan this way, is asking yourself the question 'Will I be doing well 5 years from now?'", said the agent. "If the answer is yes, bet on yourself." So I did. And I have not defaulted, but that doesn't matter.
My loan, with Countrywide and a local bank (who we are quite happy with) was one of, if not the last of these tricky loans before lenders started getting nervous about handing out wads of greenbacks to anyone with a pulse (or, in Chicago, a valid voter registration card).
My mortgage was then immediately parceled, tranched, packaged, sliced, diced, pureed, extruded, dehydrated, rehydrated, fortified with MSG, fondled, finagled, folded, spindled, mutilated, masticated, minced, and mulched. It was insured, swapped, revalued, bet on, bet with, bet over, bent over, collateralized, cauterized, crammed, glommed, and served with a side of bacon grease-soaked unregulated uninspected ground peanut product.
It's my fault, America. I bought a house, and in the words of Lou Reed, the Earth squealed and shuddered to a halt.
I didn't buy a car, though. That collapse is on someone else's head.