Ok, I’m actually just re-posting an opinion piece from NY Times. However, he stated eloquently what I’ve been thinking as well. I’ve been struggling for some time. Part of the reason is I made mistakes with credit early. I had that moment of clarity as I went “This is a trap, and if I don’t get out now, its only going to get worse”. I’m right, and millions of Americans just don’t see it. The only thing we’ve bought on credit in the past five years is our car and our house. Both times they were willing to give us more than we asked for but we looked at the numbers and said “If something happens, we can’t afford this” so we went with what we could afford. We try to live slightly below our means. What I would be putting toward savings is instead going toward paying off credit card debt. It amounts to the same thing in the long run.
The Borrowers
On Monday, in a vote that will go down in history, the House of Representatives said no to a $700 billion plan to bail out the teetering financial system. Members of Congress chalked the rejection up to populist rage over the idea of rescuing Wall Street while helpless homeowners flail, and some representatives who voted no say they’ll vote no again when the version of the bailout passed by the Senate on Wednesday comes up in the House.
I’ll say this upfront: I hope the titans of finance who expect us little people to save them are ashamed of themselves. But at the same time, in painting Main Street solely as a victim of a rapacious Wall Street, we are being hypocritical.
We are all to blame.
Step back. The securities that are poisoning the financial system are made up of mortgages and home equity lines that are going sour. They may soon consist of sick credit card and automobile debt as well. “Innovation” on Wall Street meant that the institution that made the loans could sell them off, and bankers could carve up those loans into new instruments, which they in turn sold to investors around the globe, with the result being that no one felt responsible for ensuring that the person who got the mortgage or the credit card or the home equity loan could actually pay for it.
But who made the decision to take on that mortgage she couldn’t really afford? Who lied about her income or assets in order to qualify for a mortgage? Who used the proceeds of a home equity line to pay for an elaborate vacation? Who used credit cards to live a lifestyle that was well beyond her means? Well, you and I did. (Or at least, our neighbors did.)
In other words, without the complicity of Main Street, Wall Street’s scheme never would have flowered. Some would argue that the modern sales machinery — remember those ads telling you to let your home take you on vacation? — is to blame. And it is.
But we’re supposed to be adults, not children who can’t keep our hands out of the cookie jar. (Those who were lied to by brokers about the reset rates on adjustable-rate mortgages and other elements of their loans are in a different category.)
Just as many of us deserve a share of the blame, many of us also got a share of the profits. No, not the kind of profits that Wall Streeters got, at least individually. But if you sold your house over, say, the last five years, you got an inflated price because of the proliferation of credit made possible by the Street’s practices.
If you bought a house, then you got a lower mortgage rate than you would have if it weren’t for Wall Street.
If you made money on the shares of Merrill Lynch or Lehman Brothers or another participant in this mess, then you shared in the profits. One could even argue that the overall stock market wouldn’t have achieved the heights it did were it not for our housing and debt-fueled economy. So if you cashed out at all, then you got some of the profits.
This isn’t an argument in favor of the bailout plan. There are big questions that need to be answered. When Treasury Secretary Henry Paulson argues that the plan can’t impose onerous requirements on financial institutions because otherwise they won’t participate, I think, “Well, if they are in good enough shape that they actually have a choice, then why are we offering them a costly lifeline?”
This also isn’t an argument that a bailout would be fair to ordinary Americans. We are to blame, but we don’t deserve all the blame. We profited, but we didn’t get anywhere near the lion’s share of the profits — and from the sound of things, a bailout would stick us with a disproportionate amount of the bill.
But it’s also true that if the experts are right, a failure to act will stick us with most of the pain as the economy seizes up. The Wall Streeters who pocketed million-dollar bonuses can handle a layoff. Most Americans can’t.
Didn’t your parents teach you that life isn’t fair?
Bethany McLean, a contributing editor for Vanity Fair, is the co-author of “The Smartest Guys in the Room: The Amazing Rise and the Scandalous Fall of Enron.”