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NYT Economics Reporter Covers His Own Financial Meltdown

There’s a lot of buzz already about New York Times economic reporter Edmund L. Andrews’ account of his personal financial crisis in “Busted: Life Inside the Great Mortgage Meltdown.” Mainly it’s because more than a few financial blogs regularly linked to Andrews’ coverage of the financial crisis. The same veteran reporter who covered the Federal Reserve was on the verge of losing his own $460,000 Silver Spring house to foreclosure.

As Economic Principals notes, Andrews even revealed his predicament while interviewing former Federal Reserve Chairman Alan Greenspan about the crisis.

“Why did you do it?”That’s Alan Greenspan, interrupting, on the first page of Busted:Life Inside the Great Mortgage Meltdown – shocked, appalled, perplexed and finally curt – as Times reporter Edmund L. Andrews mentions, in the course of interviewing the Fed chairman in December 2007, that he thinks he’s about to lose his own family’s home to foreclosure. “I felt like a teenager who had just told his father that he had crashed the family car.”

In an excerpt to appear Sunday in The New York Times Magazine, Andrews traces the path that led to his downfall, describing but not necessarily condemning the mortgage brokers who enabled him along the way. He offers a glimpse into how the era of easy money worked, while suggesting that if this happened to him, it could have happened to anyone.

who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.

But in 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others — borrowers, lenders and the Wall Street dealmakers behind them — I just thought I could beat the odds. We all had our reasons. The brokers and dealmakers were scoring huge commissions. Ordinary homebuyers were stretching to get into first houses, or bigger houses, or better neighborhoods. Some were greedy, some were desperate and some were deceived.

As for me, I had two utterly compelling reasons for taking the plunge: the money was there, and I was in love.

Andrews bought a house that was too expensive, given that he had hefty child support payments for his children from a previous marriage. The high mortgage, combined with his new wife’s job loss, mounting credit card bills, and an expensive refinance, caused Andrews to fall behind. JPMorgan Chase was too swamped to help with a loan modification. At the end of the excerpt Andrews hadn’t paid the mortgage in eight months and he’s waiting to be foreclosed on.

I was pretty close to buying the whole notion that this is the sort of thing that could have just happened to any of us during the boom years, until I looked a little closer at his description of living expenses at a time when he couldn’t keep up with his mortgage:

Between humongous loan balances and high rates, we had hung ourselves with the rope they gave us. In the previous December alone, we charged $2,845 on the Chase card for Christmas gifts, food, gasoline, clothing and other expenses. The charges included almost $350 for groceries, $700 in clothes from J. Crew, $179 at GapKids and $700 for airplane tickets for two of Patty’s children to visit their father in Los Angeles. Our balance climbed from $14,118 to $17,135, and in January 2006 we maxed out at our $19,000 credit limit. And there were other expenses on other cards: $1,200 in dental work for Patty’s son Ben; $1,600 to rent a beach house the previous year for us and all the children.

Ok. If you can hardly make your mortgage payment, how do you justify spending $700 at J. Crew? Isn’t the J.C. Penney outlet more appropriate when money is tight? How about consignment stores? Or if the money was for Christmas expenses, how about homemade gifts? Or just switching names? (Andrews acknowledges the beach house was an indulgence, but said his wife had just taken a job and they thought at the time they could swing it. She later lost that job.)

One assumption here is that we’re all still entitled to spend, even when the money is gone. And that the consequences we’ll face for our actions will be … what, exactly? No doubt Andrews will make some money from this compelling and very personal account of his finances, family, and marriage. He lived essentially rent-free in his comfortable suburban home for at least eight months, waiting for the foreclosure notice. Maybe profits from this book will enable him to buy a foreclosed house at a fire sale price. Maybe he’ll end up just walking away. It will all be fodder for another book.

The best you can hope for, after a crisis, is that you gain some knowledge that keeps you from making the same mistakes again. In the wake of the mortgage crisis, we’re still waiting. Banks still carry powerful lobbying clout on Capitol Hill. Financial regulatory reform isn’t a slam dunk. Soon-to-be ex-homeowners continue to sort through just how they got in the messes they’re in. We’ll have to wait for the sequel to see how all this turns out.

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