Today, I would like to juxtapose two stories.
The first, from the Wall Street Journal, presents one instance of the housing bubble. The essay presents (with pictures) the tale of a house, 500-plus square feet, unfit for habitation, being appraised at over $100,000. The owner received a mortgage for the full "value."
The occupant, a 61 year old woman, with a history of alcoholism, used the money to pay off debt. She eventually moved out, leaving the home to be occupied by her son, who could not afford the mortgage.
The part of the article that aroused much outrage was the mention that the owner has not worked for many years, but lives on $3,000/month from various sorts of assistance. Also arousing outrage was the army of “professionals,” including the appraiser, who participated in (and profited from) the mortgage industry.
Story #2 is from the CNN site. It presents quite sympathetically the tales of two young men, who lost their $100,000-plus/year jobs. Both had to take jobs paying substantially less.
Here are two vignettes.
Vignette 1: “Shaun Chedister, 30 . . . was laid off from his job at Washington Mutual at the end of last year. After eight months of actively looking for work to help support his wife and four children, he accepted an offer from Ernst & Young even though the new position as an executive administrator paid less than half of what he was making before. . . . . But the adjustment to making $66,000 a year from $125,000 has been hard. 'For the last four to five years I'd been making six figures,' Chedister said. ‘My lifestyle had been at a certain level.’”
Number 2: “After Jarrod Posner, 34, was laid off from his $110,000-a-year job as a mortgage lender for D.R. Horton, he had to change careers to find employment. After months of looking he took a job as an enrollment counselor at the University of Phoenix - a position that paid $33,000…’I was actually thankful because I was getting a job, but at the same time my wife and I realized we had to make a lot of lifestyle changes,’ Posner said. “
OK. Maybe I am embittered. But does anyone else see the connection between the stories? Those salaries of the CNN story are awfully high for people in their early 30s, especially since the jobs don’t require much specialized training or education. One worked in the mortgage industry and the other worked for WaMu, the bank that represents, if I’m not mistaken. the largest bank failure in US history (a function of those irresponsible loans).
Weren’t those big salaries dependent on lending a la the WSJ story? Did the housing bubble prop up the whole economy? Someone: please explain!