Another Voice in the Greed Wilderness

August 16, 2007

I had a number of friends lately criticize me because I have commented on how greed got the country into its current predicament with housing. We made loans to people who were assuming the market would keep up its steep ascent into worth and give them a chance to buy not only the house they wanted, but the loqued-out car, the pimped up boat and the trip to Tahiti they always wanted also…and all of this before they turned 35.

But here is another voice – Mike Baker, a freelance writer and former CIA operative. Here is what he has to say about the current housing “crisis”:

Up until now we’ve heard plenty of people saying that the brokers and lenders are at fault… they were acting dishonestly or, at best, not being completely transparent in explaining the terms of the various mortgages. They took advantage of uneducated consumers who were unable to understand the process and were just trying to get a foot on the ladder of prosperity. Greed drove the lending side into screwing over the country, or so goes the blame-the-industry theory.

I’ve spent several years now in the private sector, working in the fields of business intelligence, due diligence and risk management. Do I think that there were brokers and lenders who operated with less than ideal ethics? You bet I do. You don’t need to be Moose and Squirrel to figure that out…

Here’s what I think about the consumer and the process of buying a home. Buy what you can afford. Notice that the last sentence doesn’t say, “Buy what you can currently afford.”

And it doesn’t say, “Buy above your head because surely the house will appreciate in value and you’ll be able to sell it for a profit before the rates rise and you get hosed.”

Buy what you can freakin’ well afford. Otherwise, rent. And save. And quit blaming others because you wanted more than you could ever logically afford and because you refused to wait until you could afford it. There. That should generate a few thousand nasty emails.

You can read the rest of his article here.

I was raised with the notion that you had to have 20% as a down payment on a house. We never thought it would be possible when we were 25. We were making the poverty level in wages, we had two small children and we lived in a town where every house looked like a ghetto house. Within five years, we had taken a beaten-up, run-down house that was in a bad neighborhood and fixed it up enough so that after living in it for five years, we could sell it during one of the upswings in the housing market for a $12,000 profit. That was enough money when we moved from that town to put the money down on a lower middle-class home which we fixed up (even though I had to rely on books to figure out how to do most of the things I did…and advice and help from people in the church). Our income rose substantially because we had some experience now, and the neighborhood we lived in got better. And, (and this is the main point), we never took a cent of equity out of our house. We made double-payments and were within 18 months of paying off that house by the time we moved to California.

Now we live in an upper-middle class neighborhood, we owe half of what we paid for the house and we still haven’t taken money out of our house for “playing around with”. And we have neighbors who are 28 who complain that they can’t afford their payments and will have to move soon into a neighborhood not quite as good, after knowing the “good life” just a year after marriage that took us 25 years to accomplish.

I see the misconception at work. Do you?


  1. First of all, kudos to the Rocky and Bullwinkle reference. We need more of those. I’ve recently begun working in the financial industry, for one of the credit monitoring bureaus (to be semi-specific yet still shrouded in mystery). I’ve also the benefit of personal experience in making not so bright financial decisions (early in our marriage my wife and I had a radio station “Young and Stupid”) Lest I digress, in the few short months I’ve been working here I have seen instance heaped upon instance where individuals have borrowed themselves into a corner.

    The blame game definitely extends to the Credit Bureaus. It was the fault of this bureau or that bureau that screwed them in the first place. (I’m not claiming infallibility here so please no jumping into a tirade about your report being all screwed up =O)

    The best thing I can advise is the universal principle that applies across all consumer lines, Be an educated consumer! To repair my early mistakes I’ve have to make some very hard decisions that have far reaching impacts.

    I still rent and probably will for the next couple of years (minus divine intervention which, I’m totally open to). I’m still repairing damage done to my credit from 7 years ago. I’ve had to be honest with my mistakes and I cannot sit and wait for them to repair themselves. I’ve had to redefine Want and Need. And most importantly, I’ve learned (and am continuing to learn) to bring God into our finances and trust him. And most of all, nothing will get better until we decide to take responsibility for the decisions we make.

  2. Aaron, that is an awesome set of truths to catch hold of. Bless you as you rebuild more than just your credit, but also your trust in God.

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