(Photo credit: the Ricky Gervais Show)
You read a lot about how stupid and greedy those people were who in the early aughts bought homes they couldn't afford with money they didn't have, resulting in bundles of "toxic" mortgages that, when they ballooned in cost, began the collapse of the house of cards it turns out the U.S.'s and in fact, the world's financial system was built upon.
Many people look askance at those who bought homes virtually without money, who perhaps bought a second home they intended to "flip" at a profit. And yes, some of these people were "greedy" and "ignorant" and blind. Perhaps many of them.
But just for one moment can we consider the path that was laid out for them by the people who permitted them to make those purchases? The banks and mortgage brokers who looked at these people's assets and paltry income and nodded sagely and then offered these hopeful buyers a new-fangled instrument called a "no-income verification" loan, which in fact was created for just these very people?
These folks (the borrowers) weren't ever in a position before to get a loan; perhaps their credit was bad, perhaps they had an erratic employment history, perhaps they simply didn't have any money beyond a modest down payment, which in some cases was dropped from the traditional 20% to 10 or even 5%, just to make it easier for people "just like them". But now, bankers, professional "money people" are telling them that yes, they can afford it! Their assets have been examined by professionals who examine assets for a living, and even though these potential buyers had little money and low-paying jobs, it turns out, there is a way they can do it! Or so they are assured.
These buyers didn't set out to buy above their means. But the truth is, in many, many cases, they didn't understand what they were getting into. Like all of us do in some aspect of our lives, they trusted the experts.
They sat down with professionals, white collar guys and gals who explained it all to them, who told them that their house would be increasing in value, that in fact, they could borrow against the increasing value of their home, that they could sell at a profit in 5 years (before the mortgage reset at a much higher rate), thereby improving their credit, giving their child a place with a yard to grow up in, finding a modicum of independence from a landlord, and finally realizing the "American Dream". And when it sounded too good to be true, and when these first time buyers doubted it themselves, these mortgage brokers patted their hands and assured them: "Look, I've been in this business for 15 years. There's never been an opportunity like this. This may be your only chance, ever, to own your own home, now's the time to get in, mortgage rates are at their historical low and real estate prices will continue to climb! In fact, you'd be a fool not to."
Who didn't buy this on some level?
In fact, in this era of specialization, who doesn't trust the professionals to lay out a path for us in some field that we don't understand, nor are expected to know all about?
Who among us hasn’t boarded a plane with the implicit belief that the pilot has flown this particular type of plane thousands of times before, and knows what to do if the plane stalls? That the wings have been de-iced by the professionals who do this every day? That the pilot’s mental health has been vetted before he was given control of a passenger plane? We all assume we're getting a pilot like the hero Sully, but the fact is, we're not, and there's not a damn thing we can do about it, because in this specialized world, you have to operate on faith. Not faith in God (although for some there's an element of that too), but faith that the people you're putting your trust in, know what they're doing.
You have to hope that the babysitter you hired is not hitting your kid when you're at work, that the bus driver who's operating your tour bus winding along those cliffs in Mexico hasn't been drinking, and that Con Edison is truly charging you for the electricity you're using. But do you really know?
How could you?
You assume the FDA will keep you from eating tainted peanut butter or spinach, but as it turns out, it doesn't. In 2008, six people lost their lives (and over 500 became ill) eating not just peanut butter from a jar, but a product that they might not even have known included peanut butter, trusting as they did that the "professionals who make these products wouldn't knowingly poison them? Trusting the professionals.
And it's not just the middle class or a group of uneducated consumers who have recently been victimized. How about the wealthiest 1% in the world who were ripped off by Bernie Madoff, trusting him, or his agents, with their life savings?
The SEC whose very existence is predicated on preventing just such crimes, and catching just such thieves, blatantly ignored 5 years worth of warnings from whistleblowers who wrote to them multiple times that Madoff's investments were a scam, that his greatest work was a giant Ponzi scheme.
And yet thousands of highly educated and sophisticated investors assumed incorrectly, naively, perhaps stupidly, based on assurances from their financial advisors that their investments were going into high yielding stock funds, even though it seemed impossible that the returns they were getting could be as high and as consistent as they were.
And it turns out, Madoff was only one of what will surely turn out to be dozens of investment crooks who have been stealing money from rich, sophisticated investors, pension funds, museums, philanthropic institutes, and Ivy League universities, all of whom had highly paid professionals on their staffs steering the money toward the "best" investments, those funds with the best returns.
Immediately after Madoff, three more massive investment thieves were uncovered: Paul Greenwood and Stephen Walsh (of the WG Trading Company) managed to steal (what seems paltry in comparison to Madoff), $667 million from mostly New York investors, (unlike Madoff who actually went global), and Mark Bloom (who ran the North Hills Fund) and who apparently learned at the knees of those two masters and in 2001, started his own theft ring.
Greenwood and Walsh ripped off Carnegie Mellon and the University of Pittsburgh among other clueless, naïve, some might call "greedy, ignorant, and blind" investors. Probably unfair to well-meaning and educated board members who were making decisions based on the expertise of highly trained financial advisors.
But there is a truth in the world now that is unavoidable and that truth is that: no one can be an "expert" on everything. No one person can know everything, and so we rely on "experts" who, for whatever reason, we choose to advise us in matters we don't completely, or deeply understand. Not just financial matters, but everything. The world as it exists now means that we go to professionals for almost every repair, for every product we need, for any health care question.
When my mom was diagnosed with esophageal cancer, the oncologist and her internist sat us down and gave us the options, such as they had determined. She could get radiation only, or combine it with chemo. She could do them simultaneously or one after another. If the tumor in her throat shrank enough, they suggested she could get an operation that would cut out that part of her esophagus that was affected and yank up her stomach to attach to the part that was left. Sounded horrific.
After they laid out all the options they asked her what she'd like to do. She looked at me; I looked at her. What would she LIKE to do? She'd LIKE to go home and watch TV, and probably, knowing her, smoke. But no, the professionals had told us what options she had and she was now being asked to make a choice.
It was like Sophie's choice. How much pain do you want to endure? None of it will probably work, and you will suffer horribly with every option, but if you're very, very lucky, and beat all the odds stacked against you, it just might work. The professionals gave us the facts and we made the decision. And this is how the world works. You consult with the professionals, you make an "educated" choice, and you are the one who suffers.
Because I was the only family member with her, she looked to me to help her make the decision. I told her to take both chemo and radiation; get it over with was my thought, and see what happened. And so she did, and what happened was the combined treatment was too much for her weakened system, and within 6 weeks she suffered total organ failure and died of what seemed to have been a heart attack. I had the hospital do an autopsy because I couldn't understand what caused the heart attack, and the ultimate irony was that the tumor had actually shrunk. And so, it was the treatment that killed her. The treatment I suggested; the treatment that was one of our options and that we chose based on "professional" expertise.
So when I hear people complain about the stupidity of people, the unfathomable greed of "poor" people buying homes they can't afford, I can only dredge up that old expression: "Let he who is without sin (or in this case, guilt), cast the first stone". Or more specifically: “Let he who has not relied on the wisdom of those who ‘know better’, criticize those who did.”
Perhaps you didn't buy a home you couldn't afford, but perhaps on the advice of professionals, you invested your IRA in stock mutual funds, or perhaps you trusted your money to a brilliant investment fund that had nothing but positive returns for the last 20 years, and now your savings are decimated.
(And, oh, by the way, those "lucky" ones who pulled their money out before the scandals broke are not so lucky after all. Unfortunately for them, they were required to return the money they so cleverly pulled out of their accounts, since, as it turns out, it's not "theirs" but belongs to the Justice Department since it was not earned but simply transferred from one victim's account to another's. Soon they will be sued by the Justice Department for that money, and if they don’t have it, perhaps they’ll have to stop paying their mortgages; perhaps they’ll even have to sell their houses to earn it back.)
So those geniuses who thought they "got out just in time" or who thought they beat Madoff at his own game, and who crow at those who left their money in these non-existent funds, are just as screwed as those whose money simply vanished. Not so clever, and not so lucky after all.
So none of us are as smart as we think, and one doesn't truly know whom one can trust; with your money or your life. The only thing we can do is our best, and hope we don't stumble into the way of a thief, or simply, a wrong decision.
And finally, perhaps, we should all have a little compassion for others before we leap to judge them.
No comments:
Post a Comment