Sub-Prime Intelligence and the American Dream

“Earth provides enough to satisfy every man's need, but not every man's greed." - Mahatma Ghandi

Among the biggest news stories of recent months has been the financial market sturm und drang caused by the 'sub-prime' crisis. How big the problem will ultimately become no one is certain, but big it is, and we can all rest assured that eventually the American middle class taxpayer will pick up the tab for endless questionable programs to relieve the pain.

The general coverage of the story is a two sided affair it seems. The first addresses the financial aspects: current and potential effects on the stock market and other areas of the economy and the effects on the world economic markets. The second is the human interest side - Dick and Jane Doe weeping as they contemplate their Simon Legree banker foreclosing on their dream home. Networks seem to love this shattered American Dream stuff.

I just 30 minutes ago saw a feature on a television financial show about a young woman in Queens, New York. This woman is losing her home. She earns $38,000. per annum. Her home cost $700,000. No, that is not a typo. Let me repeat: She earns 38K a year and bought a 700K house. She signed a variable rate mortgage and now, with its upward adjustments, her monthly payments are $7000.

We are supposed to feel sorry for this woman. She is a victim of unscrupulous bankers, brokers, and agents who, with only their own commissions in view, failed to fully inform her of the possible implications of the documents she was signing. Phooey! These people were venal. So what? What else is new? They are in business to make money, not protect the witless. Slimy they may well be, but in my view it is irrelevant. Let's keep it simple, because it is simple: The woman bought something she could not afford to pay for and now she must give it back. She is a victim, of course. She is a victim of her own avarice, willful blindness and stupidity.

To this jaundiced eye, the entire sub-prime story can be reduced to one simple fact: People live beyond their means. This woman's story is extreme but it perfectly illustrates the fundamental problem. People know if they cannot afford something. It does not take an economics degree to grasp that if your net income is, say, $2000. a month and your mortgage will be $1000 with the possibility of its rising, you cannot afford that house and best find something more modest. Likewise with Ferrari-coveting middle managers and $300 a week office clerk fashionistas who will just die without the latest Jimmy Choos.

The American Dream used to mean working hard, succeeding, and enjoying the fruits of one's labor in an environment of opportunity that few places on earth offered. Now, apparently, it is to live like Brad Pitt or Donald Trump on 50 thou a year - and seek sympathy and help as a victim when you can't pull it off.

My sub-prime policy? Foreclose. Let the chips, homeowners and bankers fall where they may.