OK, so we were out of the country and out of touch for most of the recent financial "That Was the Week That Was," when the pundits were actually comparing the present economic situation to the events of October 1929, the sell-off that began the Great Depression. When we got back we had a half dozen calls on our answering machine. One was from an area code I recognized as Ft. Lauderdale (954). It was a guy from a mortgage company asking for someone named Diane. It clearly appeared to be a case of the wrong number. But something happened that reminded me of the Glenn Close character in the 1987 movie Fatal Attraction. (She appears to be killed, but comes back to attack again and again.) So this morning the phone rings again, and, yes, it's the mortgage guy from Ft. Lauderdale, still looking for someone named Diane. I explained politely that he must have the wrong number; there's no Diane here. "Oh, that's too bad," says the voice. "She must've made a mistake on the application form she filled out on the internet." OK, I'm thinking. That sounds plausible, but after last week's events, it seems sort of odd that they are still handing out mortgage money via the internet. "So, how IS the mortgage business these days?" I ask. "Hey, it's just great!" comes back the voice. "Now, do you rent or own?" His segue came so quickly, I was taken aback a little. Now I'm starting to think that maybe there was no "Diane." "Uh, actually we're renting right now." I said. "And if we do buy any property, we're thinking about buying something cheap enough that we won't need a mortgage." (That's providing, I think to myself, that the banks don't collapse between now and then, and we can get our money out.) "Oh, that's great," he says. "Most people aren't in that fortunate a position." I'm thinking I have already said too much. "But you ought to consider getting a mortgage anyway," he goes on. "The mortgage situation has actually never been better! We're offering a fixed rate at 5%." I'm remembering that at one time Ft. Lauderdale was the "funny money" capital of the world, even before the "Miami Vice" years of the Eighties. "And what's better, the mortgages are now backed by the full Faith and Credit of the United States Government." "Yeah," I replied, "you mean the taxpayer." And every other schnook who depends on the relative stability and worth of the dollar, which has lost almost a quarter of its value since 2000, even before the crazy events of last week.
So I ask, what's with this? They're still hawking mortgages like they're used cars--everyone can afford one? And now I find that the whole fiasco is so complicated and complex that it's unlikely either presidential candidate can explain it. I find that if you don't know how a tranche works (or what one is), you don't have a hope of understanding what's going on.
So what's Joe Sixpack to do? Sign up for more debt? And is there anyone at the top who dares explain all this? Or is the house of cards so fragile that an accurate explanation would be enough to bring the whole thing down? Stay tuned...and plant a garden.