An Odd Example in Today's WSJ

Posted by: Michael Mandel on August 14

An article in today’s WSJ made me laugh. They were trying to show that “Home Buyers With Good Credit Confront Increased Scrutiny And Fewer Choices.”

Their main example was a 70-year old woman in Marietta Ga who could not refinance the million dollar mortgage on her home, so she
“is working 80 hours a week as a technical writer to make ends meet.”

Sob sob.

But we don’t find out until much later in the story that:

Ms. Van Cleave concedes she took a risk, borrowing close to the appraised value of her home two years ago — at the market’s peak — to help fund a start-up company that sells a patented fishing-rod holder. She opted for a two-year ARM, with a piggyback mortgage at nearly 12%, and planned to refinance.
But the start-up hasn’t taken off….

Oh, I see. At the age of 68 she borrowed to the max on her home to fund a startup. Fishing rods. And we are supposed to feel sympathy. The mind reels.


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Reader Comments

Brandon W

August 14, 2007 11:09 AM

Wait... she took out almost all her assets, $1 million, to fund a startup making fishing rod holders? Whose scam was THAT? If you can't bootstrap a company making fishing rod holders for under $10,000 you don't know what you're doing. I may not feel too sorry for her for borrowing so much against the value of her home, but I do feel sorry for her because she got scammed.

Kevin

August 14, 2007 04:17 PM

I'm with you, Michael. Actually I don't believe for one instant that a 70 year old woman is working 80 hour weeks anyway -- but why should a journalist bother to be skeptical? And if she has a great track record of "running a number of businesses" then how come she's got no savings?

In any case she must LOVE that house cause it would be pretty easy to just walk away, get foreclosed on, and rent a nice apartment with her untouchable social security check while cutting back to, say, a mere 65 hours a week of work.

No, the one I feel sorry for is the other lady mentioned in the article, who could cut her mortgage from 8.75% to 7.25% -- except that she didn't want to bother with providing income documentation. I'm going to cry all night over that one.

What a crap story.


Mike Mandel

August 15, 2007 05:42 AM

Yes, the woman who didn't want to provide tax documents was a bit odd also

Martin

August 15, 2007 04:21 PM

Crazy story! But to the author of this blog, can you email me? Id like to speak with you. Im a CPA in the Northeast and have been a BusinessWeek reader since college (Im 43 now). This mortgage mess is only part of the story yet to be told. I have posted about this anywhere I can find to post but BusinessWeek needs to do an article about what is really going on out there. Much of it has nothing to do with debt or sub-prime its just a symptom of a much bigger problem.

1- Govt inflation figures which are grossly distorted.

2- Jobs growth and job quality misinformation along with issues with benefits.

For over 2 years I have seen this mess coming and isnt pretty. Even people with no mortgages are not able to afford their places with insane price increases in everything that costs people money.

There are also interesting issues with cost of living increases during the last inflationary period vs this inflationary period. Id like to at least give all these thoughts and info to someone with a brain to get it out there.

BW did a great job with the outsourcing article a month or two ago (cover story) and I think they can nail this stuff on the head as well.

Its about time people woke up.

Americans have been milked by the oil companies and corporations, and when combined with an unprecedented concentration of wealth that outsourced their jobs and gave them poisoned pet food, antifreeze in their toothpaste and leaded childrens toys in return. This is indeed the biggest story I can remember.

When the savings rate his the lowest rate since the Great Depression that was telling you something, it told me something.

Martin
CT USA

Brandon W

August 16, 2007 07:33 AM

Martin, I agree with you. I've been posting arguments about this here and elsewhere for a couple of years, to no avail. I gave up. If you can't beat them, join them. Free Market(tm) Capitalism is great if you're a capitalist; but most people aren't really capitalists. You have to control real assets (and I don't mean the so-called equity in an overpriced house) to be a capitalist; otherwise you're just one of their laborers. People are brainwashed into believing they are capitalists and that they should be cheerleaders of Free Market(tm) Capitalism. So they continue cheer-leading their own demise. Good. I need lots of desperate laborers (especially the white-collar sort). It keeps my costs down. Thank God for the Internet and globalism because it means I can get top-notch talent from around the globe in countries with even more-desperate laborers. Chalk up a bigger bottom line for me. If you can't beat 'em, join 'em. There is a huge class divide brewing and I suggest to people that they don't want to be on the wrong side of it. Fortunately, most people won't listen to me... Those who do need desperate, brainwashed workers.

Thank you for your interest. This blog is no longer active.

 

About

Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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