Am I the only one who was floored by reading “My Personal Credit Crisis” by Edmund L. Andrews – and not in a good way?

A senior economics reporter for The New York Times, Andrews doggedly covered the Fed for six years, wrote several articles against go-go mortgages, covered the Russian and Asian bubbles…the list of credentials goes on. Yet in 2004, he bought a home for $460,000 that he was in no position to afford and began a slow-but-sure slide into sub-prime mortgageland. It’s not a spoiler to tell you the finale: he’s now eight months behind on his mortgage payments, waiting for default so he can finagle a loan modification. Oh, and his article is actually an excerpt from his forthcoming book, Busted: Life Inside the Great Mortgage Meltdown. I wonder how many zero’s that book deal scored him?

It gets richer: Megan McArdle of The Atlantic revealed that Andrews failed to disclose the fact that his second wife has declared bankruptcy, not once but twice – once in the midst of the timeframe Busted covers. In other words, the couple was even more personally reckless with their money than the book disclosed, exposing not so much a lax, easy-money mortgage system as that system plus the accumulated sins of two spendthrifts. You can check out that scuttlebutt here, or read how Berkeley economist Brad DeLong estimates how buying this house gave Andrews $100k in free extra money to spend.

I don’t wish Andrews any more ill than he’s already experienced, but the article made me angry for one reason: if informed investors don’t take responsibility for their own decisions, how will we ever get out of this mess? Yes, we need firmer regulations and tighter credit requirements, but all the regulation in the world can’t make up for the impact of investor choices, too. This guy couldn’t have been more knowledgeable about the foolishness of the personal-finance choices he made – yet he went ahead and made them. It never occurred to him to sell this home he could barely afford in the first place and just live more modestly somewhere else. Now his reward for that behavior is a cushy book deal and eight months’ worth of a free-ride on his mortgage payments.

True, his credit report is probably in ruins, he was an emotional wreck through much of this ordeal, and I’m sure it adds no shine to an economics reporter’s reputation to be the guy who’s muddled his own finances so egregiously. But what is the lesson to be taken away from all of this?

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I guess putting aside any eregious abuses, is it fair to ask someone to essentially not do there job, because of there own personal finances? I'm not taking sides, just asking the question. Lots of people have financial difficulty at one point in their lives or another and still go on eveyday doing their job.


Now having said that, if his intention was to default in order to provide 'research' for his book, one has to wonder what legal precedent that would set?

I have had my share of arguments in favor of the stimulus aid for homeowners that were unknowingly  ambushed by the sub-prime rush, but I also know of individuals that got ridiculously carried away with the abuse of credit and assumptions that housing would continue upward eternally.

95% of economics talking heads are dolts who can't see the forest for the trees. They get so caught up in their models, adding so many layers of complexity that they can find ways to justify virtually any stupidity even when it flys in the face of both economic fundamentals and common sense. 

Interesting points, everyone. Corbinb2, I'm pretty sure from the article that this guy got into his sub-prime mess on a personal basis, not intentionally to research a book. (Unless, of course, he's lying, but it's pretty far-fetched to imagine someone ruining their credit score for research.)

You raise a good question as to whether he should lose his job. I wouldn't go that far necessarily, but I will say that FINRA-regulated financial firms like ours watch out for employees with personal-finance troubles for good reason; the fear is that they could behave questionably with other people's money if they're in dire straits themselves. Obviously Andrews doesn't have access to client capital directly, nor is the NYT a FINRA firm, but there is a clear precedent in the financial industry for losing your job due to personal financial choices.

Incubus is right, too. We can only hope that the loan modification plan and other supports for underwater homeowners will wisely differentiate between shysters and opportunists and those who both need and deserve help. (I gotta imagine this guy hurt his chances for mercy with any loan officer as soon as he published his story in the New York Times.)

Stoicathos, you're probably right on, too. Clearly Andrews persuaded himself to take what he rationally knew was a raw deal financially. I still can't understand why it never occurred to him to sell and move to a more affordable home? Practically all this trouble could've been avoided that way.

One moral this story does make clear, though, is that knowing your personal finance rules is only half the battle. Having the discipline to live according to them is another story.

The word could, always bothers me. I personally tend to take the innocent until proven guilty approach here. That is not to say though you don't watch what an employee is doing a lot closer and if it comes down to an offense or their job performance is suffering than a company would be within it's rights to let them go.

He certainly did not do himself any favors by publishing the article, but unless it can be proven he did it intentionally, it should be irrelevant when it comes to loan modification. If he's left out pertinent information than that would be relevant, though anything that increases the true state of his 'hardship' would most likely have limited effect.

Having been in dire straits in my younger years, what does irk me is when you are trying to actually pay and the company will not work with you. I see this all the time with friends of mine too. They give you an option of settling the account if you can give them some huge lump sum right now, which if you had just lying around. would mean you probably would have paid them anyway. This one thing I've heard has actually gotten worse during the economic down turn.

This is the essence of what the loan modification should have been, but has turned out sadly not to be the case for most.

I think he should lose the house.

Ownership -- once it meant... you owned it.

Once people began to play with language, and the reality, the bank owned it ... headlines like, "People losing their home..."  when it is they are unable to pay the bank... we have to ask the question, why?

Renting from the bank, or a landlord -- for 30 years ... is there a huge difference... ah, taxes, and the hope of profit.

And, lately, the ability to get more money from the bank.

Who is bailed out by you and me... what good is that for those who truly own their own homes?  Or are trying to -- unfair and greedy, and the bank profits.

The banks as well ... sorry, should have been allowed to fail, the assets going to people who will manage them in (perhaps) better ways... and suddenly houses wouldn't shoot up in value 50% a year, but perhaps even... gasp! decline in value. 

No, the tax code is set to help those who leap frog to more and more wealth -- and Congressmen.   The elderly, losing their houses to emmin. domain, and taxes -- they really are "losing" their houses.

The rest of us are tenants, or we are fooling ourselves.

True, Corbinb2, maybe I'm being too hard on this guy. It just seemed like such a preventable tragedy from the outset.

I hear you, too, on the value of mixing mercy with justice when people are ready to deal and pay their bills, however they can. The scenario you described, negotiating with creditors, had to be frustrating.

FreeMusic's comments point to the fact that a lot of this systemic mess might boil down to how individual mortgages get sorted out. I don't know much about the loan-mod process, but the outcome for Andrews might depend on whether the policy is biased towards keeping him in his house, or evaluating his income versus the property price now to see if he can really afford to stay. 

The problem that nobody wants to talk about when it comes to the right solution is that once a house is purchased it becomes a 'home', assuming it is their primary residence of course. Whether or not they should have gotten the loan or not almost becomes irrelevant once it becomes a 'home' and not just an asset.

ALL efforts should be made to make the paying of the mortgage possible, with appropriate penalties, but people should be allowed to stay in their 'homes'. If more politicians would understand the difference between and a house and a home they would probably do better at election time I'm guessing too.

There are always exceptions and examples of flagrant abuse that need to be dealt with, but in the end maintaining a family in a home should be top priority if at all possible. Yes this is somewhat of an emotional aspect, but people vote with their hearts in many cases, if not most cases and should be 'legislated' the same way when warranted.