You Did This

This article illustrates nicely the visible effects of the current economic slowdown. It's one of a spate of recent articles which paint a shocking picture of how bad things have gotten. Whereas the last depression was characterized by bread lines and multitudes of jobless men lining the streets, this one will see Senior Structured Credit Directors serving lattes.

Secondly, this maudlin and inaccurate article by Bob Greene is the type of thing I fear we're going to see more often. The rise of "reverse mortgages" bears witness to the fact that the elderly, like people of every other age, were using their homes as ATMs. Like many others, older people withdrew home equity to finance consumption. In addition, any competent financial advisor knows that it's inappropriate for someone nearing or in retirement to have a substantial portion of their net worth in the equity market. Those who did were greedy, foolish, or both. Thus, we're asked to shed tears for a bunch of people who lived through a depression but did not learn any lessons about the fragility of financial institutions or the impermanence of paper gains. More generally, though, it continues a worrisome trend: carving out groups of people who aren't responsible for the current problems.

Guess what? We're all responsible. Old, young, rich, poor, hedge fund manager, retail investor. The greed of the subprime borrower who wanted a house she couldn't afford is the same as the greed of the institutional investor who chased yield by buying that mortgage (and thousands of others) securitized by a greedy investment bank and stamped "Triple A" by a ratings agency greedy for fees. Grandma, while certainly less culpable than Bernie Madoff, got a little bit greedy and now has to eat cat food until she dies.

I'm not showing callous disregard for the plight of anyone in the current downturn. It sucks, big time, but that's what happens when we have to collectively pay the piper after more than a decade of debt-financed asset bubbles. Maybe we'll learn our lesson next time... though if the fate of the people who survived the last financial catastrophe of this magnitude is any indication, I doubt we will.