September 26, 2008

Money, Money, Money

Many people have written into the Tasty Bits (TM) Mail Sack asking, "Tom, why haven't you posted on the financial crisis?"

Well, the answer is that I know so little about this sort of thing that nothing I can say would contribute one tiny bit to the discussion.

However, I do know now that the Missus and I have been absolute mugs for locking into a 30-year fixed at six and whatever it is on our mortgage, and even more so for keeping up with the payments, especially as the Missus had to go back to work when I switched jobs four years ago and took a sizeable punch in the salary for it.

So I've been on the phone all morning and have got in on what we think is a more sensible deal: We're re-fiing on a 90 day ARM. For the first 90 days, not only do we get a million dollar credit line, the lender actually pays us interest. Of course, after 90 days, the rate we pay them is 500% compounded weekly plus our eldest daughter, but we figure we'll just go ahead and blow through the credit, default in three months and let Uncle pick up the tab for us.

How suh-weet is that?

All fooling aside, on a general level my impression is that this entire morass is just another outburst of Baby-Boomer greed and hubris. I suppose they reckoned they would pillage the financial sector before getting on with destroying the retirement system, just to be thorough about it.

If you used to think "the Me Generation" was a coo-el idea, I sincerely hope you've disabused yourself of that notion by now.

Posted by Robert at September 26, 2008 10:15 AM | TrackBack

Back in the 90's, I was analyzing loans backed by the FHA that allowed financing at 105% of the value. That meant that the borrower needed no money down and could even finance the closing costs. Of course, this "borrower" had to fall into strict ethnic and financial parameters... I knew it was a recipe for disaster then and have only had that confirmed now. The banks were under tremendous pressure to prove a negative; that is that their lending was not ethnically biased... They would have loaned to a pink elephant if they thought it would improve their score.
And yeah, what chumps the rest of us are. I have owned homes for 20 years. We have a spotless payment history. Will the feds write my mortgage down? I would love a 4.6% interest rate...
I also have no clue what this bail out is about. Seems to me the big boys will survive at the expense of the taxpayer. I have watched several hours of analysis on C-Span and other channels and I still don't understand it.

Posted by: Babs at September 27, 2008 09:52 AM

In the late 90's my husband and I bought our first house on a whopping 0.23 acre lot. Each real estate agent and banker we met would chat us up to assess our income/education level then tell us that they and they alone could figure out ways to make it possible for us to buy more/borrow more- offering mortgages like ARMS, interest free loans, or balloon payments. I would fold my arms and say no. The shocked "expert" would ask why and I would remind them about when we were in high school and all those people with balloon payments were selling their fancy houses. The "expert" would then explain to us naive twenty-somethings that that would not happen again. When I asked why not, they would start appealing to my supposedly more rational, sophisticated husband. Thankfully he shared this bizarre irrationaliy.

Posted by: AKL at September 28, 2008 09:35 PM