Fiscal Realities

I assume we've all seen this article? ? I do feel badly for them, as I feel badly for most people that end up in this situation, in particular when children are involved. However, ultimately, we have to take responsibility for our fiscal well-being.

Let me preface this next segment by saying I have no idea what sorts of mortgages the Giudice's had on their homes (and I will not bother to speculate). The next paragraphs serve as an introduction to my opinions of the pressures of American consumerism, coupled by fiscal irresponsibility and deregulation. Also, what follows is simplified and not a multi-faceted look the recession, with a look at the human factor.

I'm a proponent of regulation. (I think) A lot of America's economic problems are due to deregulation of the market place. Including a failure to check mortgages and bank (and in worst cases, predatory) lending (compounded by real estate speculation. Call it Tulip Mania 2008!). Simply speaking subprime lending allows people to finance a purchase using borrowed money. This person is one with poor credit and they do not qualify for a normal (prime) loan because the risk of default is too high. Instead, at the price of higher fees, higher interest rates and the likelihood that their loan is not fixed (an adjustable rate mortgage), it pretty much is the last ditch effort of loans. Of course, the whole notion that a person that cannot afford to keep up with their credit payments that AREN'T subprime can keep up with payments that ARE subprime is sheer delusion in most cases (but not necessarily all) if you ask me. I think a lot of borrowing, borrowing with over the top ridiculous fees, exists on our notion of achieve the American Dream, of having it all, and living a certain way and that this also played a role in our movement towards recession.

Unfortunately not everyone can afford to live the (nearly non-viable) American Dream: the house, the picket fence, etc. There are a number of various factors that influence our socio-economic status ranging from race, gender, education, etc etc etc and I do not have the time nor energy to go into the various problems that exist in America in the context of class-sex-race-gender. If we look at the credit crisis, an item emerges: Americans are consumers, and the mantra may as well be consume first, think about paying later (or never). As total Neuroscience cutey Jonah Lehrer puts it in his book "How We Decide," we're incredibly short-sighted when is comes to credit. (This is the main reason I plan to get an American Express- it's a charge card).

I've lived in Northeastern New Jersey all my life. It's not a cheap place to live. In fact, it's regularly declared to be one of the priciest places in the United States. Costs are over-inflated in New Jersey, and it can really affect the way you view money growing up here. Also skewed by the cost of living is personal income. Teresa and Joe claim a salary of USD79k (I imagine this is taxable income) plus another USD120k in "family assistance" (this, I imagine, is not taxed). That's a net income of USD199k. Undeniably that's a hefty chunk of change when compared to the national average, however, put into the context of Northern New Jersey costs compared to the presentation of their lifestyle on television, Joe and Teresa were living well beyond their means. Qualifying for mortgages became easier (deregulation people!) over the course of the 21st century as standards declined, and I am curious if the Giudice's even bothered to place a down payment on the mortgage on their "French Chateau." Even at the height of my father's Wall Street career (several years ago; my father is now deceased) when he was making more than the above mentioned income+family assistance, I don't think my family would have EVER moved into a house that would require that large of a mortgage. My mom is, in her own words, a "thrifty New Englander" and loves saving money.

Three homes and eight mortgages? USD104k in credit card debt? And for what? They were attempting to project an image. And when you're around people that are upper middle to upper class the desire to keep up with the proverbial Joneses is perhaps intensified.

Like the underlying assets of a busted speculative bubble, is the American Dream worth anything today? Teresa and Joe are victims of the very dark side American Dream. As were Tamra and Simon Barney, and Lynne and Frank Curtin. However, perhaps the importance of the American Dream has even greater weight for Joe and Teresa because of their upbringing as the children of immigrants. If only they had known that in the modern era the American Dream is a total fallacy.

If something seems too good to be true it probably is.