Monday, February 15, 2010

Who's At Fault?

The Economic Elite Have Engineered an Extraordinary Coup, Threatening the Very Existence of the Middle Class

The economic elite have robbed us all. The amount of suffering in the United States of America is literally a crime against humanity. 

So begins a very compelling article by David DeGraw. This is part one, which is available on

The case can easily be made that the economic elite has been slowly eroding quality of life for the average citizen. The campaign to downgrade the average American's quality of life is as obvious as it is ubiquitous. Anyone who was alive in the mid-70s can chronicle the demise of the middle class, which picked up steam with the election of Ronald Reagan and has continued unabated through present day.

In the mid-1970s, many Americans could still maintain a household on a single salary. Most real estate was a great investment. In the mid-1970s, most Americans still had reasonable access to health care, affordable insurance, affordable food (which contained more nutrients). Most Americans could take some sort of vacation each year. Those days are long gone.

 So who's to blame?

If you listen to the right-wing noise machine, anyone who was stupid enough to sign onto a sub-prime loan deserved what they got. Tough luck, suckers. They should have been able to read the reams of fine print and understood what they were getting into.They should have been able to see through the 2002 disinformation campaign delivered by George W. Bush himself. "A Home of Your Own"was designed encourage low-income families to enter into the mortgage game and lead them to believe they could afford a home - though in reality, many couldn't.

 I think there's a good case to be made that the financial deck has been stacked against the American people. And I think that we need to work diligently to reverse this horrible trend.

However, I also believe what many business and life coaches assert: that we are each completely responsible for our own lives, and when we fail to assume that responsibility, we relegate ourselves to the role of victim and surrender our power.

My fiancee and grow a lot of the food we eat - the rest we buy as locally as possible. We try to reduce our carbon footprint a little more each year. Still, there are some concessions that seem nearly impossible to make. We limit the amount of driving we do, but lacking decent mass transportation, giving up our cars completely would severely compromise our lives and take a huge divot out of our current income. We want to live more independently, but it doesn't seem possible.

So how can we balance personal responsibility with forces well outside our control, like the lack of mass transportation or the financial meltdown we're currently experiencing? How can we completely avoid the corporations who produce the very products we need to survive?

What if someone we knew had died from eating lettuce tainted with e-coli bacteria, and his spouse said, "Well, it was our fault for being hungry all the time"? We'd send her to an assertiveness training seminar and a good lawyer - and maybe even a psychiatrist.

I decided to call up a Coach and Trainer I have worked with for years, Behnam Bakhshandeh of Primeco Education. I asked him what we should do when assuming total personal responsibility is still not enough to protect us from problems caused by corrupt corporations and governments.

Behnam asked, "If you lose your home, can you put all the blame on the mortgage company? What if your ego convinced you that you needed the prestige of a 6-bedroom house when you could live just as comfortably (and probably more happily), in a 2-bedroom apartment?" Our ego's needs are largely emotional, not practical.

That got me thinking: I had a large office for most of my career. I thought a spacious, trendy office was necessary to project success because that was the way to attract success. If I worked at home, potential clients wouldn't take me seriously, and I couldn't charge as much money. However, by the mid-1990s, I did most of my business over the internet, and very few people actually visited me at my office. My impressive office no longer had anyone to impress! At that point, I must admit, my office served to boost my ego more than it served to attract customers. I paid a lot of money to satisfy my emotional needs more than my practical needs. As a result, I didn't have enough of a nest egg to weather the financial storm.

Behnam pondered for a second. "We also make a lot of purchases based on our need to fit in." We want to be accepted by those around us, so we work long hours to pay for deluxe homes, offices, cars and toys - not necessarily because we need or want these things, but because we think we'll win approval by having them. In this case, we're buying stuff to satisfy someone else - someone else who is so involved dealing with their own life, they probably won't even notice!

So what about my house? I made the decision to buy out my ex-wife when we split, because we had bought the house together only 18 months before. It seemed to me that one of us should keep the place for at least a few more years to preserve the initial investment - a totally practical decision, right?

The mortgage was daunting, but I could swing it if my earning power, which had remained consistent for over 2 decades, didn't drop more than 25% - a safe bet at the time. Real estate had been appreciating by 15+% a year. I had done my homework and knew the economy was due to slow somewhat. I estimated that even if the market slowed and the value of the home only rose by 5% a year, I would still do well if I kept the house for 3-4 years and then sold it.

My projections seemed conservative and reasonable at the time. But it wasn't 9 months before the financial bubble burst, the home's value plummeted, and my workload dropped by more than half.

I started reading news stories about how the big banks had intentionally sold bad mortgages as investments to Wall Street, which artificially inflated the market, creating a precarious bubble. The bubble burst and the collapse bled into the overall economy, leaving me unable to pay the mortgage which was now more than the house was worth.

I had been responsible: I had done my homework, I had crunched the numbers. I had made a sound, calculated financial decision. I had done everything right, and the bank screwed me.


Then, I thought about how Behnam cautioned against making purchases based on our emotional needs. Had I examined all the reasons I bought that house?

Well, it's certainly true that the banks made my situation more challenging. But I have to face the truth: when I bought that house, I neglected to ask myself a few very important questions:

First, why was a bank suddenly willing to loan me $260K when just 4 years previously, I barely qualified for a $100K mortgage? My income had not increased during those 4 years. Something was rotten, and I didn't bother to sniff. Instead, I thought to myself, "the banks wouldn't lend me the money if I they didn't think I could pay them back, would they?"

Second, with my wife out of the picture, was a 3-bedroom, 2 bath house the right fit for me? As it turned out, it was much more house than I needed.  But I didn't want to downgrade my living situation after the divorce - I would have felt like my ex got the best of me. I wanted people to see me as having survived the split-up unscathed. I was also exhausted from the aftermath of an emotionally-taxing marriage, and simply didn't have the energy to uproot my life again, especially after having just done so 18 months prior.

Being the insightful coach that he is, Behnam helped me see that my decision to keep the home was largely based on emotion, which blinded me to the other factors I should not have ignored.

Trusting the banks was another huge error. I hadn't done my homework from their side of the equation. With the current lack of financial regulation, mortgage banks only need to have as little as 4¢ in holdings for every dollar they loan. Where does the other 96¢ come from? They create it out of thin air every time they write a mortgage! When my mortgage was written, I put up a 20% down payment and the bank only put up 4%. The banks further increased their profits by misleadingly repackaging their mortgages as low-risk investments and sold them on Wall Street. The banks deliberately sold home loans to people they knew wouldn't be able to pay them back. I may have been one of them. It didn't matter to them. Even if the loans resulted in massive default, the banks would still make plenty of money.

Are the "banksters" scoundrels who deserve to spend time in prison? Yes. Have their greed and corruption contributed to a great deal of our nation's financial misery? Yes. Am I going to blame them for all my financial problems? No. I think the best way to put it is: 1) Yes, the banks screwed me, but 2) it was my fault for trusting them in the first place. Caveat emptor, baby.

If I play the victim card, then I am basically saying that I am helpless and the big bad banks have total control over my life. I don't want to go there.

I am responsible for my decisions - financial and otherwise. Taking responsibility also means taking back my power. And I'm working diligently to change my behavior, because I don't want to go through this again if I can help it.

That's the key phrase here: "If I can help it." I can dramatically curtail my spending and live as simply as is practical, but I'll still be dependent on employment, healthy food, decent shelter, clothing and heat. So I can't completely control everything that happens to me, can I? I've been studying some Buddhist philosophy lately, and I'm realizing that the best way to proceed is: "work toward change, but let go of the outcome".

Can I reform the banks and the insurance industry? No. At least not single-handedly. And not right away. Can I change this situation by voting? No. Sadly, that no longer seems to change anything.

Can I control the cost of water? of food? of electricity? No. It's been proven that Wall Street speculators manipulate those numbers every day - prices are no longer related to supply and demand.

So taking total responsibility for my life means:
• Picking myself up when I fail and continuing on
• Educating myself
• Challenging the forces that are working against my (our) welfare
• Working to change this destructive dynamic
• Working to help others do the same
• And lastly, letting go of any expectations regarding the result.
That's what I must do so I can face myself in the mirror each day and respect myself.

It helps to remember that I am not alone in this. I am a member of society, and as such, I am also responsible for helping those around me. If we all assume responsibility, we can collectively repeal the injustices that we cannot change as individuals. I'll save that can of worms for another blog post.

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