Old math

As someone who grew up relatively poor – we always had enough to eat but I got told no more frequently than yes when I asked “can you buy me…?”, often wore hand-me-down clothes from families who were friends with my grandmother, and sometimes my mother “made ends meet” by accidentally putting the gas company check in the electric company envelope and vice-versa – I was taught the value of money early on.

• Save your money for a rainy day; you never know when the car might breakdown.
• Be sure if you’re buying yourself a treat that you’ve got enough saved to cover that rainy day, and make sure you really want what you’re buying; it’s going to take you a while to save up enough to buy something else.
• Money is more fun to spend it big chunks; save to buy something you really want instead of wasting your cash on small, impulse purchases.

There’s a common thread here: Don’t spend more than you earn. Pay for necessities first, save something, no matter how little, in case something you hadn’t planned on comes up. Purchase consciously and in cash so that by the time you do get around to plunking down your money you’re absolutely sure that what you’re buying is something you really want. Pretty simple, right?

So why is it so many Americans can’t seem to grasp these basic concepts?

It seems a bit self-righteous to be writing this as someone who paid off her house and who is about to pay off her 60-month car loan in 30 months, but I’ve been watching the news coverage of the sub-prime meltdown and trying to learn more about the banking system and something in all the coverage smells funny to me. That something is typified by this headline from Alternet’s daily headlines mailing:

Debt Victims Resorting to Suicide

Debt victims? So even though I’m on track to work upwards of 60 hours this week I bit and followed the link to the article which begins:

Suicide Spreads as One Solution to the Debt Crisis

In a culture where credit rating is the key measure of self-worth, the increasing response to huge debts is “Just shoot me!”

A few days before Congress passed its Housing Bill, Carlene Balderrama of Taunton MA found her own solution to the housing crisis. Just a little over two hours in advance of the time her mortgage company, PHH Mortgage Corporation — may its name live in infamy — was to auction off her home, Balderrama killed herself with her husband’s rifle.

This is not the kind of response to hard times that James Grant had in mind when he wrote his July 19 Wall Street Journal essay entitled “Why No Outrage?” “One might infer from the lack of popular anger,” the famed Wall Street contrarian wrote, “that the credit crisis was God’s fault rather than the doing of the bankers and the rating agencies and the government’s snoozing watchdogs.” For contrast, he cites the spirited response to the depression of the 1890s, when lawyer/agitator Mary Lease stirred crowds with the message that “We want the accursed foreclosure system wiped out …. We will stand by our homes and stay by our firesides by force if necessary”

Now, I get that a lot of things have changed since the ’70s when I was a kid. Gas is a whole lot more expensive for one thing. Thirty years ago my Mom could coast into a gas station in her eight-cylinder station wagon, ask the attendant for $2 worth of gas, and roll out with nearly half a tank. Food was a lot less expensive, I surmise, though truthfully I didn’t pay much attention to prices. I was just happy with my weekly treat of a can of SpaghettiOs.

Even though I am pretty solidly middle class, I can truly sympathize with folks who have difficulty making the rent, finding money to pay off health care bills, and end up having to put the credit card down for things like groceries. You do what you have to in order to survive. Sometimes the choices you make aren’t the smartest ones in the long term but are the ones that will ease the acute pain of the now the fastest. But there has to be some personal responsibility.

Barbara Ehrenreich’s article on Alternet, the article she quotes from The Wall Street Journal, and to a lesser extent James Scurlock’s excellent book Maxed Out: Hard Times in the Age of Easy Credit rightly blame the financial institutions that are the heartbeat of the American economy. Were it not for the greed of corporate entities, their desire for easy credit for themselves and high return on investment on the money they lent consumers, and the lack of oversight, indeed the coddling of these same businesses, by the government to the detriment of the electorate we would not be in the financial mess that we are in today. After all, if you don’t offer the products to someone they can not buy them. Yet, someone had to buy them.

Someone had to accept credit cards that offered limits that were way beyond their income capacity to pay off; someone had to sit down and sign mortgage papers that offered them introductory payments that anyone with third grade level math skills could see were way more than they could afford each month even before the intensely confusing adjustable rate and equity structure that was going to kick in after the first 6 months.

What surprises me about the mainstream media coverage of the financial meltdown we’re going through is not that the media are placing blame on the financial giants and the government but more that there is zero blame being placed on the debtor. When did we go from being a Puritanical country that prized image above all else – after all, even if your place in heaven or hell is already predestined you must act righteous so that everyone thinks you’re going to heaven – to one in which even though we manifestly contributed to our own misery we are in no way responsible for the state in which we find ourselves?

The credit card companies charge usurious interest rates, they raise those rates with no rhyme or reason and virtually no notice. Banks charge outrageous rates to allow you access to your own money (the average ATM transaction costs the bank between $0.04 and $0.06 cents yet they charge you a $3 fee; thank Ronald Reagan and his deregulation for that one). Mortgage brokers failed to explain balloon payments and interest-only loans and adjustable rates and sometimes even intimidated people into signing documents that they knew would be defaulted on. There is little incentive for someone who isn’t already rich to save or invest since, like buying, saving and investing are most rewarding in big chunks and lately interest rates only become attractive starting at the $10,000 mark. All of these things are true.

But victim implies that you are suffering the consequences of the actions of another that you had no hand in. Doesn’t acting on the desire to have more than you can pay for make you complicit in your own financial misery? And shouldn’t there be consequences for actions?

It feels shitty to ask questions like that when people are killing themselves to get their families out of debt but the reality is that because those questions aren’t getting asked, because no attention is being paid to the other parts of the solution – frugality, education, and temperance – to our financial problems even if some genius superstar economist finds a way to reform the banking system, make the credit card companies rein in their greed, and rectify how investment banks rate securities so that those ratings are based on their actual value not their potential value we will be right back where we started very soon, wondering where we’re going to sleep as the U.S. marshals watch the repo company cart our big screen TV out the door of the house we’ve just been evicted from because we couldn’t make the payments.