Sunday’s issue of The New York Times Magazine was all about “the dilemmas of debt”, and featured stories like:

The piece that caught my attention, however, was a story from Edmund L. Andrews called “My personal credit crisis”. Andrews is a smart man, and a long-time economics reporter for The New York Times. You might think this would keep him from making financial mistakes. But you’d be wrong. He writes:

If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.

But in 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others — borrowers, lenders and the Wall Street dealmakers behind them — I just thought I could beat the odds.

Andrews’ story reads like a textbook example of how the housing market went awry. He and his wife had excellent credit, and so decided to stretch to afford the house they wanted. They gambled. They embraced the “get rich quick” mindset, which is never a good idea. You cannot cut corners and succeed.

Despite nagging doubts, Andrews and his wife continued to make choices that moved them from a position of relative comfort to deep debt — and crumbling credit. Along the way, they had plenty of help:

“Don’t worry,” Bob [a loan officer] reassured me, saying what almost everybody else in real estate was saying at that moment. “The value of your house will be higher in five years. You’ll be able to refinance.”

As I walked out of the settlement office with my loan papers, I couldn’t shake the sense of having just done something bad…but also kind of cool. I had just come up with almost a half-million dollars, and I had barely lifted a finger. It had been so easy and fast. Almost fun. I couldn’t help feeling like a high roller, a sophisticated player who could lay his hands on big money at a moment’s notice.

I’ve read a lot about the sub-prime mortgage crisis. I’ve even written a little about it, documenting my brother’s own battle with foreclosure. But most of the information I’ve come across has been second-hand. This story is told by the man who lived through it, and it provides an interesting glimpse into his motivation and rationalization.

[The New York Times: "My personal credit crisis"]

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