My Mortgage Can Beat Up Your Mortgage

There are those who live in bizarre squalor, and those who bid for the privilege of settling in festering hovels for a king’s ransom and the delight of a non-conforming 30-year mortgage. It is, as realtors will remind the disconsolate first-time homebuyer of the greater New York City suburbs, a game of visualization. Do you have the foresight to envision this bedroom without the corroded toilet bolted illegally against the far wall? Do you have the ability to ignore the smell of animal urine (not to mention the cacophony of a kid practicing piano in an adjacent unit) pervading the bedrooms of this otherwise spacious townhouse with garishly mirrored walls? Do you posses the mental calm to pretend that you did not walk into the third bedroom of a labyrinthine former doctor’s office and observe a moustached imbecile (whether the owner’s socially inept thirty-something son or a dangerous vagrant) masturbating in his closet, before cautioning you, your fiancée, and your female realtor that he “needs a few minutes” to presumably locate pants or deflate his apparatus?

Unless one claims independent wealth from grandpa’s lockbox, young buyers in these bustling outskirts of Metropolis must eschew the “ideal” and focus on “potential.” In other words, the faster one realizes that “walk to commuter rail” is a fair swap for “1960’s-era kitchen slapped together by part-time handyman to minimize functionality,” the quicker all involved parties can assume seats at the bargaining table. Boasts implying that a marvelous time was spent trolling the overpriced tumble-downs festooned in crackhouse chic should always be met with suspicion, and generally dismissed as senseless drivel from the insane, or from those medicated to the point of waking coma. As you might guess, shoppers with greater imagination tend to delude themselves into making wiser choices. Because ultimately, wiser choices spawn wiser investments when eventually cutting loose of that former crackden-cum-colonial. After endless weekends spent eradicating the geriatric vibes (which taunt openly, mind you, lingering in floral wallpaper, shag carpeting, and abandoned Lawrence Welk VHS collections), one has finally earned the privilege of stratospherically boosting the asking price and trouncing a new generation of idealistic, soon to be dejected, newlyweds. And yes, it does feel good, in the same way that hazing your frat brothers by dropping them off in the center of town, pants-less without wallets, might have stroked the ego ten years prior.

A brazenly self-confident bunch, New Yorkers are not idiots. We realize we could sell our modestly-sized (but much better constructed) tax-saddled homes and trade-up handsomely for the fifteen garage, faux-sided, character-devoid, McMansion monolith with a space shuttle launching pad in the backyard, located in some bumfuck flyover zone near a culturally bankrupt city, to live comfortably amongst affluent rednecks and the town doctor. But unless we’re playing beer pong, most of us prefer our brew from the bottle; not to mention our teeth firmly in our gums, roadkill estranged from the skillet, the Yankees, unrivaled pizza, and the ability to ride elevators without some damn fool asking us about our day. We also believe in evolution, which prohibits our settling in certain states.

Imagine knowing that the condominium on which you are prepared to make an (astronomically high) offer – while part of a beautifully manicured Tudor-style complex in a quaint village with excellent schools – was actually a steaming hellhole masquerading as … a steaming hellhole. My wife and I could momentarily condone the stained carpet, Nixon-era appliances, and smoke-dulled walls by maintaining the foresight of “potential”; that survival mechanism tucked away in the mind’s recesses for instances demanding reinterpretive reality. Not only was the prior owner a crazy old crow who refused to descend ten stairs to her mailbox (although her gait was unencumbered) – opting for tête-à-têtes with the postman after said box had sufficiently exploded with catalogs – but she’d smashed to shit all four burners of the electric stove, for reasons known only to almighty God and possibly her ex-husband. On the flip side, she was kind enough to bestow two gifts upon a weary couple firmly in the throes of disillusionment and surrender: a wrapped box, with instructions to open on December 23rd, and a carton of eggs squirreled away in the oven; unexpired, for those taking notes. Beseeching my wife to keep the present untouched for nine months, I was hoping that our friend was loony enough to have bequeathed a surprise of gold bullion, or at very least some safe deposit box key holding a Caribbean timeshare. Of course, I was equally preparing to extract the head of Jimmy Hoffa, complete with “Merry Christmas New Owners!” stapled to the ear. Unfortunately, a set of “Twelve Glorious Angels” tree ornaments, while thoughtful, was not going to alleviate our debt service. At least we weren’t Jewish.

Five years were enjoyed in that condominium, transforming it into a charming, and in turn very marketable, home. Hardwood floors, stainless steel appliances, crown molding, fresh coats of paint, and smaller detailed renovations fully erased the spectre of decrepitude. So when the time arrived to draw market bids, I could only righteously smirk. After all, this was a perfect “walk to commuter train” gem; and if I was getting properly spanked by the eighty year old former owner of our current house, then my biggest paddle was making an appearance during condo negotiations, forearms tightened in anticipation of levying ‘Animal House’-type swings at lawyers, buyers, and notaries alike. If it goes around, it sure as hell comes around, stronger and longer, like an awful case of bird flu.

In this neck of the woods, when someone leaves you a dozen eggs, whether inside the oven, under the bedsheets, or cracked within the fuse box, you make omelets and smile.

Let's Bomb China!

What are you doing next Saturday? No plans? Great. Let’s bomb China! Right off the map. None of this tactical nonsense. I’ll call my contacts in the shadow government and get the ball rolling immediately. Can I pencil you in from 10am to, say, noon-ish, after which we can grab some lo mein or pork-fried rice? No really, it’s my treat.

Nuclear non-proliferation be damned, I’ve had my swallow of black gold at $145 per barrel, and frankly – as a driver of two automobiles which require premium gasoline, not to mention a home in the northeast which is lovingly encumbered by the necessity of oil heat – those bothersome 2008 fuel costs may become a price floor once everyone’s been foreclosed upon and fired; thus signaling a nadir from which to retool, reinvest, and rewitness skyward-stretching commodity values.

From a geopolitical standpoint, soaring energy costs (observed before the housing and lending markets pulled an inverted headlock lungblower on capitalism) can be attributed to the emergence of once destitute third world nations. China in particular. As these countries began feeding the two-pronged beast of America’s import obsession and credit reliance, their GDP’s ballooned exponentially, translating into an increased need for energy to keep their river dumping, black lung inducing, ozone ripping, sasquatch-sized carbon footprint stomping, Industrial Revolution-era factories in full production swing. In other words, when we were buying, they were selling, and our greenbacks were sparking a Far East economic prominence to be celebrated like a year-round Chinese New Year bash, with enough fireworks to warm the heart of every noodle slurping Communist.

China’s been meddling in economic impropriety for the better part of a decade. When they weren’t nudging the balance of payments fulcrum – whistling nonchalantly as they forcibly kept their currency weak and their exports inexpensive – tilting our country’s (somewhat improved yet still disastrous) trade deficit, they were ignoring their infrastructure to the detriment of a massively impoverished populace. In this sense, consider the hypothetical carpet bombing a lesson learned, a proverbial slap on the wrist from a hard-boiled enforcer who is none-too-pleased with frothy commodity bubbles. And I’ll consider it a savings in my own wallet when the demand for oil from an extinguished superpower ratchets down to nil, just like the good old days of Mao coats and bicycles, when your old man could fill up his Cadillac V8, pump his wife full of six kids, and send them all to college, financially assured. If we need to start importing our tainted pet food, lead-based toys, and counterfeit drugs from another budding IMF hellhole of unhygienic proportions, I’m sure India or Russia would rise staunchly to the challenge.

You’re looking a bit pale, so perhaps I should elaborate on my background. After all, I’m certainly not one of those conservative right-wing nutjobs with a bible belt securing my jeans and a gun rack above my fireplace, quoting scripture in your public schools and asking for God’s mercy when I hear about free condom distribution, stem cell research, or illegal immigration. I’m just an ideas guy with no political axe to grind. And please, don’t bore me with this drivel about “consequences.” What if they retaliate before we completely destroy their armaments? What if we kill thousands of innocent civilians? What if it upsets the international community, and we have to wear a dunce cap at future G10 meetings? What if the (remaining) Chinese stop financing our low lending rates by ceasing their mammoth US Treasury purchases? Honestly, do your homework before regurgitating inane criticisms like that. When has this country, ever, in its storied red white and blue history, really thought through the long-term consequences of international policing and initiatives of global force?

Well, good, so you’re on board. See you Saturday. This fortune cookie is predicting a monetary windfall within the next year.

Apocalypse Now (With Love And Squalor)

Ain’t the recession grand?

A perpetual sucker for nostalgia, The Bastard recalls an equally frenetic time during 1981-82; one soiled by double-digit inflation, soaring unemployment, and record shattering bank failures. Although I was newly out of diapers and mastering sentence construction, our nation’s elder statesmen (most likely back in diapers at the time of this writing) had just maneuvered through an oil shock several years prior before wading through the dung of the most serious contraction since the Great Depression itself. But just as the summer of 1981 spawned adversity for key American industries, it also ushered in the golden era for Menudo and the mainstream explosion of synth-pop and resulting Flock of Seagulls haircuts. Said differently, there’s a pearl in every oyster. And that, my friends, is why I sit here like a grinning simpleton day after day, holed up indoors like some reclusive hobbit with minimal income, yet still whistling myself to sleep each night. Recessions have their bright spots.

Now, I could bore you to tears with arguments concerning global balance of payments, speculative bubbles, and savings rate disparity, but let’s just agree that the current market correction is a nice way to flush some fat down the bowl. And let’s also agree that financial hardship makes it easier to order a round of Milwaukee’s Best for destitute friends without eliciting the sideways glances usually reserved for wearers of foam trucker hats. Not only is retirement plan implosion a conversational ice breaker, but it’s a sympathy play and a hilarious excuse to bump chests. Moreover, job loss stories make for interesting coffee house fodder. In fact, there’s a quirky political drama behind mine which is certainly worth a latté or two. But above all else, this nasty contraction is forcing people to do their homework. Suddenly, headlines regarding AIG or Citigroup can be discussed, in relative degrees of sophistication, with barbers, policemen, gigolos, and just about anyone with a dime in the local bank and a desire to hang up the hat by 65. We’re poorer, but we’re also smarter.

Yes, I’m newly minted collateral damage in this equation. It was barely four months ago that I last hunkered down in the trenches of financial warfare amidst squabbling pundits; where every slip in the Dow hastened lively debate concerning the endgame for my weakened (yet still existent) firm. We were a sinking battleship, holes plugged with cork and bubble-gum, deck awash with raging sea water as crew mates pondered the drowning value of vested equity. Then I got fired. And the investment community took a collective breath. And the firm’s stock value slowly rose from its November bottom.

It wasn’t the most dignified of moments, speaking to my bible studying, power grabbing, allegedly alcoholic, pseudo-manager in what will go on record as our longest conversation ever. Certainly, my clumsy victory lap around the perimeter of the trading floor was an awkward means to close an interesting career step, but frankly, I couldn’t find the damn conference room in which he was roosting. Metaphorically speaking, I was shooting baskets at the wrong net, scoring touchdowns in the opposite end zone, completely disoriented with the building floor plan and forced to ask my executioner for directions to his own guillotine. Explicit directions, mind you, which made that second phone call all the more unsettling. Seriously, who does that? “I’m sorry, where did you say you wanted to shove that five iron up my ass, because I’ve already pulled down my pants but the numbering sequence for these rooms is rather confusing. Also, I think the sight of my bum is upsetting some females.” At that point, an HR lackey should have just lobbed a grenade at my workstation and blown me up in an extraordinary blaze of mediocrity. If anything, the blast could’ve made for an exciting “Power Lunch” segment on CNBC, targeting its economically fatigued viewership.

The rest of that day is inconsequential, although I remember taking shelter from the bitter cold in a subway station, making frantic calls on my dated Motorola RAZR V3, shaking my colleague’s hand in a Starbucks, and bemoaning the surrender of a Blackberry and its engaging diversions (BrickBreaker, anyone?). Removing that device from my pocket was like unhooking a brain, forcing its hollowed victim to amble zombie-like against the rushing flow of commuters who relentlessly bumped at my sides; a surging army of black overcoats en route to purpose and income.

As for my future, maybe I’ll join one of Barry O’s work project crews, assuming that his New Deal II ever shifts out of ideological gear. Hell, if I can calculate bond interest, I can learn to operate a jackhammer or swing a wrecking ball, all while smacking the cheeks of passing cougars. After all, someone needs to rebuild our country’s infrastructure and satisfy its aging female populace. I’m in decent physical shape and probably look alright in a reflector vest. If I could just wrench this five iron out of my ass, I’d be your model citizen for a new tomorrow.

Biff Destroys The Economy (But He's Hardly To Blame)

Your blogmaster penned the following article for The Daily Del Franco. It can be found there, and for the dunderheaded few who peruse this site, below:

If I tried to sell you a steaming pile of shit, would you pay me? A filthy, hulking, noxious lump of dung; in a paper bag for ease of transport. You’d appreciate that I bagged it, wouldn’t you? I mean, I could’ve just left it on your stoop, per our hypothetical agreement, letting you rummage through twenty years of garage surplus to pull out that rusty wheelbarrow, or hand truck, or pitchfork, all while fighting the swarm of flies now festering on my extraordinary gift. I’ll bet with a firm handshake and solid eye contact, you’d take this off my ass, excuse the pun. Look at me, for goodness sake; I’m not wearing a red and green checkered suit like that shifty maniac at the used car lot, or the vagrant that’s been making eyes at your wife from behind the gas pump. And you know what, because I like you, I’ll wrap this log in cellophane and place it in a gift basket with a few colorful party favors and a sack of tasty nuts. My nuts score the highest marks in the ratings, you know. Consistently. Hell, everyone loves my nuts. Your wife loves my nuts. OK, now you’re sold.

Sound crazy? It’s a near mirror analogy to this Wall Street housing debacle cum economic implosion. When your buddy took out his 5-year option ARM interest-only embarrassment of a home loan, or when you locked in that 30-year fixed rate mortgage at 5.75%, there’s a very good change the lending institution sold the loan to be packaged into a pool of mortgages with similar terms. In the glory days of housing flips, these loan packages were peddled on Wall Street as investment securities. Much like stocks and bonds change hands over the course of daily trading, pools of mortgage-backed securities (MBS) were bought and sold like any other financial instrument. The interest payments distributed to investors were collateralized by the underlying mortgages. So long as homeowners continued making regular monthly payments to their banks, the securities could make regular interest payments to their holders. This worked great, until eventually, it didn’t.

Throughout the past decade, Uncle Sam relaxed mortgage lending rules tremendously. For a while this was constructive, as it dropped the American Dream into the laps of countless, hardworking individuals. When combined with low interest rates (housing bubble, anyone?), your boy Biff at the car wash could qualify for home loans at an obscene multiple of his yearly after-tax income. To the disbelief of more educated brethren, income documentation was nary a requirement, or so it went in the more duplicitous corners of the mortgage brokering world. Of course, the terms of Biff’s mortgage weren’t quite so stellar once you read the fine print. But Biff doesn’t read because he was too busy crushing skulls before he dropped out of high school and failed his GED. To add insult to injury, Biff’s loan was packaged into a mortgage pool as well. True, it was a lower quality product, as anyone with half a brain could see, but perhaps there was a way to jam these low-rent loans under the same umbrella as the nobler ones. Surely some MBA pencil-neck could structure that complex monstrosity to afford it the highest score from the bond rating companies, namely “AAA.” Especially if those fellas from Moodys and S&P (the aforementioned raters) were treated to a nice steak dinner on the house's dime, followed by a wink and nod. For years, these polished triple-A securities were held by the billions, on the balance sheets of staid (and no longer so staid) institutions from Goldman Sachs to (*cough*) Lehman Brothers.

Well, eventually Biff realized that his insanely low teaser rate was going to balloon like an unloved housewife. Refinancing would be difficult because his credit score was an abomination. Likewise, income requirements were more stringent now, as the recession bit hard and transparency was all the rage. So Biff defaulted, and the bank foreclosed on his expansive home in South Beach, or Scottsdale, or Riverside, or some other overbuilt sunbelt tract lacking character. In fact, a tidal wave of foreclosures swept across the country, decimating neighborhoods while bankrupting some of the largest holders of MBS. And suddenly that triple-A security has plummeted in price. Because it’s toxic, and because no one will touch it. The next morning, the AAA is a B, steak dinner be damned. How long can a bank weather these losses before having to commit enormous write-downs on its books? How long can a firm survive when its peers on the Street have pulled their credit lines and shuttered their reciprocal trading activities, for fear that said firm is burning through cash faster than Charlie Sheen in a whorehouse. Ask Dick Fuld of Lehman, or Jimmy Cayne of Bear Stearns (assuming he wasn’t toking up with his geriatric Bridge club when you caught his ear). They know the answer. And so do the hundreds of thousands of Americans losing their jobs in the midst of this fallout. Economists call this a negative feedback loop: Crippled banks institute layoffs. Layoffs curb spending and propagate defaults. Lower spending kills retailers. Retailers close stores. Defaults weaken banks. The stock market tumbles. Banks lose more money and institute further lay-offs. Suddenly your next Christmas is straight out of a Dickens novel, the bad chapters. And so on and so on.

What? You think this doesn’t affect you because you work at your old man’s tire shop in downtown fucking Des Moines? Vote against the bailout plan, right? Those money hungry crooks on Wall Street don’t deserve billions after they defrauded and defrocked the masses, then escaped with the spoils of guerilla ambush! And you got nothing! Well, relax for a second, cowboy. Do you have a retirement plan? A 401(k)? Have you checked your statement recently? Have you checked the Dow Jones average? Think you’ll make back that 30% shortfall if, say, Morgan Stanley blows up tomorrow? So the next time I come knocking on your door with my blistering bundle of crap, maybe you shouldn’t be so eager to open that wallet, even if I’ve got a few Tupperware containers to mask the smell and nuts to sweeten the deal.

Either that or take a ride to Sleepy’s, buy a big mattress, and start saving for the future. You’re still young. Right?