Recession and Regret

Today we said goodbye to neighbors across the street from us who lost their home to foreclosure.  They moved in not long after we did back in 2004 when the economy was growing rapidly and the housing boom red-hot (on what bases, too few seemed to know or appreciate.)  The couple were working for a major homebuilder and were able to take their old cabin, said to have been built in 1915, and its 1950s addition and expand and vastly improve it, while discovering that the mid-century add-on was poorly built and needed to be stripped down to the studs.  Consequently, they put in a huge amount of sweat equity, as well as money, in renovating their home to something that came out beautfiully and of which they could be proud.

Then came the recession.  The couple lost their jobs and, while he was able to cobble together some fairly consistent work with friends, not nearly enough money was coming in to pay their mortgage.  Even when they were fortunate enough to arrange a loan modification, their income was too low to meet the payments.  After two years of living on the bubble, the inevitable end came this weekend.  One can only imagine, not being familiar, what the feelings would be like, not knowing when that finality would actually arrive and the stress and pain and anxiety that has to be lived with, daily.

The financial details aren't known to this observer.  They certainly took on a loan too large to pay, possibly with not enough money down, perhaps on terms (adjustable rate, sub prime, etc.) that were ominous from the start or not very long afterward.  Perhaps they compounded the problem by taking out a home equity loan or line of credit.  Likely they ran up credit card debt.  Obviously, too many buyers made the mistake of signing on to unsustainable loans and should have known better.  At the same time, buying a home is an emotional process we're likely to do only a few times in our lives and we can be blinded to reality (and fine print) by desire and hope.  Home ownership has been a fundamental tenet of the American Dream and the reality that too many of us can't afford them are among the essential grounds for our current national nightmare.  Yet, buyers can only get a loan that a professional broker will offer them and a lender fund.

Meanwhile, these professionals, the mortgage brokers, realtors, banks, and others (all with industry standards and codes of ethics) were all-too-happy to ride the wave.  Those ethics (enshrined in framed prints on office walls or emblazoned on company Web sites) and legalities (all well understood by at least company lawyers, if not everyone else) were trifles, because there were a lot of hungry buyers out there ready to make ill-informed decisions, conscious or not, that lent themselves to what has become an ingrained term in our lexicon: predatory lending.  Remember those commercials?  No money down, no income documentation, no problem.  Lenders issued ARMs and sub-prime loans, which were sold within a day or two to speculators and then again several times over in a matter or weeks or months.  Better yet, they were bundled into complex securities and peddled in a dizzying array of exotic instruments for investment--joining the likes of derivatives and credit default swaps--to the point where banks and investment firms began to bet on the failure of their own industries and the stock market so that massive amounts of money could be made now.

Finally, over the last few decades, whatever regulatory protections had existed (and whatever should have) were watered down or eliminated by a government that all-too-often accepted the interesting philosophical (but staggeringly unrealistic) premise that an economy unhindered by regulation would grow and prosper because institutions could be trusted to manage themselves out of enlightened self-interest and that the market could regulate and control itself.  Without government employing reasonable regulatory procedures, without professional lenders and funders employing some modicum of ethical (much less legal) best practice, and without buyers apply some measure of discipline and knowledge about an admittedly complicated process--speculation gone unhinged could only lead to disaster, as has happened so often before.

Despite the fact that America's glory days were long past, having peaked in the 1950s and 1960s after the post-World War II economic dominance reached its limits; in spite of the reality that middle and working class Americans' wages have been, adjusted for inflation, almost entirely static since the early 1970s, while the wealthy have seen their fortunes skyrocket and inequity accelerates; no matter that the economic booms of the 1980s, 1990s and 2000s were mainly built on the sands of speculation rather than the bedrock of actual productivity and funded by massive borrowing and the explosion of the national debt--we've been living on the assumption that housing as an investment was eternal and unchanging with values ever rising.  We fooled ourselves into accepting this myth just as we've refused to acknowledge our gradual, but persistent, national decline.

The signs were actually everywhere if we chose to look--decaying inner cities, grossly excessive gated subdivisions bursting with McMansions, conspicuous consumption gone viral, infrastructure gradually eroding, top entertainers and CEOs earning tens of millions annually as if any one human being could possibly be worth that amount of money, credit card debt ever-expanding, personal storage units stacked one on top of another filled with stuff desired and then decomissioned . . . the list could go on, but most people don't want to give it a mere glance or a first thought, much less a second. 

It is useless to heap all the blame on bleeding-heart liberals or heartless conservatives, socialists masquerading as Democrats or fascists in Republican clothing, as if the world were that black or white or so easy to categorize in neatly defined terms.  There's enough blame to go around to virtually anyone and most people seem content with offering heaping helpings to others while studiously avoiding the mirror.

So, this is as equally as useless a rant.   But, all these things above (and a whole lot more, mercifully going unsaid here) throbbed in the head while walking back down from the painful, but necessary, act of saying goodbye, after the wives cried and the husbands gave slightly-tentative, if still authentic hugs, and left an empty house that represented hopes, dreams, ambitions, memories, and real work.  Another empty house among several in this neighborhood and thousands more across the country--all more or less symbolic of the same things.

Before, after every bust, there always was another boom out there lingering.  Then, you could mostly forget the horrors of the one in the hullabaloo of the other.  At the moment, it seems that the horizon is just too distant and the next great comeback a little too far away.  But, there's always hope.  What else is there to do?