Save Your Money: Don't Buy This Book
Vying for the title of least sympathetic financial hardship case ever is New York Times (economics!) reporter Edmund L. Andrews, whose article "My Personal Credit Crisis" ran in the May 17 Times magazine. The piece is an excerpt from his new book Busted: Life Inside the Great Mortgage Meltdown.
In between covering global financial meltdowns, Andrews created his own personal financial meltdown. "It was August 2004, just as the mortgage party was getting really good," he relates. "I was 48 years old and eager to start a new chapter in my life with Patricia Barreiro, who was then my fiancée."
High school friends years before, both were on the rebound from failed marriages. Barreiro, with custody of two young children, hadn't worked for 20 years. Andrews was pulling down $120,000 from the Times but paying $4,000 a month in alimony and child support. What to do? Cement the relationship by borrowing $460,000 to buy a house in Silver Spring, Md. This at a time when Andrews's pay, minus the aforementioned obligations to his first family, came to $2,777 per month. In an earlier era, as he admits, he could have afforded only to rent a one-bedroom apartment. But in 2004, mortgage lenders were willing to extend him as much as half a million dollars. He went for it.
Having taken such a gamble on rising home prices and Barreiro's unproven earning power, the couple might have settled down to a life of macaroni and cheese, thrift-store clothes, bag lunches, and Scrabble games for cheap family entertainment. But who'd want to buy a book about that kind of life? Okay, you know from the title where this story is going, so here's the good part:
Patty spent little on herself, but she refused to scrimp on top-quality produce, Starbucks coffee, bottled juices, fresh cheeses and clothing for the children and for me. She regularly bought me new shirts and ties to replace the frayed and drab ones in my closet. She thought it wasn't worth agonizing over nickels and dimes.
Besides being in hock for a house they couldn't afford, they ran up $50,000 in credit card debt:
In the previous December alone, we charged $2,845 on the Chase card for Christmas gifts, food, gasoline, clothing and other expenses. The charges included almost $350 for groceries, $700 in clothes from J. Crew, $179 at GapKids and $700 for airplane tickets for two of Patty's children to visit their father in Los Angeles. Our balance climbed from $14,118 to $17,135, and in January 2006 we maxed out at our $19,000 credit limit. And there were other expenses on other cards: $1,200 in dental work for Patty's son Ben; $1,600 to rent a beach house the previous year for us and all the children. Granted, the beach house was an embarrassing mistake. . . .
THE SCRAPBOOK knows exactly what you are thinking: Thank God "Patty spent little on herself." Imagine if she were the self-indulgent type!
And in case you were wondering, they haven't lost the house yet. Andrews ends the excerpt on this poignant note: "I was actually beginning to feel sorry for Chase. It seemed to be so flooded with defaulting borrowers that it didn't have time to foreclose on my house. Eight months after my last payment to the bank, I am still waiting for the ax to fall."
You're probably also thinking that the New York Times should be a little embarrassed that they made this man their chief economics reporter. But that's not all they should be embarrassed about: Despite writing a seemingly revelatory book about his personal finances, he covered up critical details.
For what Paul Harvey would have called "the rest of the story," we must turn to the terrific blog of the Atlantic's Megan McArdle (meganmcardle.theatlantic.com):
It turns out the story has been tidied up a little. Patty Barreiro, Andrews' wife, has declared bankruptcy twice. The second time was while they were married, a detail that didn't make it into either the book or the excerpt. . . . Andrews' desire to shield his wife is understandable-hell, laudable. No decent person wants to parade their spouse's financial trouble in front of the world. But this is material information that changes the tenor of his story. . . . In September 1998, California bankruptcy court records indicate that Patty and her first husband declared bankruptcy. The financial statement they filed with the court indicated family income of $174,000 in 1996, $87,000 in 1997, and $126,000 in the first nine months of 1998. The income fluctuations are not surprising, given that her husband was in the film production industry. By the time of the filing, the couple owed about $30,000 on 8 credit cards, over $200,000 in back taxes, and almost $15,000 in private school tuition, as well as substantial car and mortgage payments. [The bankruptcy code requires filers to wait 8 years after a previous Chapter 7 discharge.] In 2007, nearly as soon as she was eligible, Patty Barreiro filed again in Montgomery County. . . . Serial bankruptcies can, of course, happen to anyone with enough bad luck. But . . . bad luck isn't really the picture painted by either filing. Rather, Ms. Barreiro seems to have spent most of the last two decades living right up to the edge of her income, and beyond, and then massively defaulting. . . . Andrews has been admirably open about many of the poor decisions and the wishful thinking that led him deep into debt. Nonetheless, he has laid much of the blame onto irresponsible bankers and mortgage brokers. . . . It's hard to argue that Ms. Barreiro was forced into bankruptcy by crazed subprime mortgage lenders in 1998. Greedy bankers certainly didn't keep her and her first husband from paying their taxes. . . . Those kinds of problems can't be fixed with tighter mortgage lending standards or a 500 basis point uptick in the Fed Funds rate. And they aren't the main problems facing most Americans today.
State Department ♥<β> Obama
Our friend Yuval Levin notes on National Review Online: "The State Department's Bureau of International Information Programs, in an effort, one presumes, to shape America's image abroad, has put out a book of President Obama's speeches, to be read the world over. Of course, President Obama has only been president a few months, and putting out such a book takes a few months, so there is actually only one speech in the book that he delivered after becoming president: It is his inaugural address, which the State Department entitles: 'The Remaking of America.'
"Other speeches in the book are mostly from the presidential campaign: from his announcement speech (entitled 'Our Past, Future & Vision for America' in the book) to his election night speech (entitled 'Change Has Come to America'). There are also excerpts from his 2004 Democratic convention speech and, most amazing of all, from his 2002 speech against the Iraq war.
"In its excerpts from that 2002 speech, the State Department has chosen one quotation in particular to feature. . . . It reads, in huge letters: 'What I am opposed to is a dumb war. A rash war. A war based not on reason but on passion, not on principle but on politics.'
"This is the image of America that our new president and his Department of State apparently want to project around the world: a nation in need of remaking; a nation begging for change; a nation that engages in dumb, rash wars; but a nation led by Barack Obama, who recognizes all this, and therefore maybe not that bad a nation after all.
"They're bound to love us now."
Sentences We Didn't Finish
"He's the first president in modern history who's a serious student of constitutional law,' said political analyst Charlie Cook, editor of the nonpartisan Cook Political Report in Washington. 'This is something the guy's got a passion for. Nobody has to explain to him the significance of a Supreme Court appointment.' . . . " [ What? They had to explain that to Reagan, the Bushes, and Clinton? Who knew?] ("Obama Court Decision Shaped by Years, Wife's Advice," Bloomberg, May 7.)