(In the style of the late, great Robert Benchley.)
A young man who wanted to buy his own house asked my advice. This is what I told him.
The uninvited economic recession necessitates that modern man understand the dynamics of what was once considered “falling off a log.” I refer, of course, to the acquisition of a home mortgage, a leg up on the Ladder of Building Assets or, should you tire of metaphorical puns, placing your own roof over your head instead of someone else’s roof.
Once upon a time (if you check your calendar you will discover this was quite recently) in the Land of the American Dream, obtaining a mortgage loan was child’s play. One provided no documentation nor did one have to attend a face-to-face meeting with the mortgage lender. In fact, it would have been technically impossible to meet with one’s mortgage lender because while there was one institution that provided the funds initially, it remained at risk on that paper for two nanoseconds during which time the institution added your mortgage to a 12-foot-high stack of other-people-whom-it-hasn’t-met mortgages, tied a ribbon around the stack, added on a percent or so for its trouble and sold the entire package to an unknown (and they’d like to keep it that way) group of newly created job opportunists known as financial instrument packagers.
Your government was aware of all this fast card shuffling. It was the government that supported the entire smoke-and-mirrors game by providing mortgage protection in the form of two institutions called Ginne Mae and Fannie Mae, names that remind me of the spinster sisters in “Arsenic and Old Lace.” The connection in my mind is that these mortgage guarantor institutions and Cary Grant’s batty aunts share the same moral standards.
We all know that the world of High Finance is one of High Risk — and the reason I capitalize the first letter of each word. The danger when such men get together and create new financial “instruments” is that they will be considered a cabal, which is a polite way of saying they are Practitioners of the Financial Black Arts.
Given the above, it should not surprise you to learn that after you left them, your mortgage documents — under pseudonyms naturally — traveled to meet up with other mortgage documents via private train and all congregated in a nondescript building in a nondescript Midwestern city where they were packaged and privatized and then tranched and, well, no need to offend your sensibilities so close to dinner time with a detailed description of this financial abattoir.
My point being, that in the time it took you to collect your new abode’s deed at the mortgage broker’s office, stop by the water fountain and exit via the front door, your financial soul had been sliced and diced, filleted, splayed, skewered and pedigreed into 12 different financial personae and I’ll bet you didn’t feel a thing. You are now owned in unequal parts, each providing a different rate of return, by a minimum of 12 mortgage funds, each of which consists of many thousands of shareholders.
When your father obtained a mortgage he no doubt wore a suit to meet his banker. It would not have been just any suit, but quality tailored apparel that, while not his “Sunday best,” had been obviously worn frequently signaling both good taste and a strong work ethic. It was easy to achieve this hardworking, trustworthy image. One bought a Brooks Brothers suit and ran it through the wash cycle 43 times.
Today you may purchase this same look readymade. Visit the Harvard Business School Baker Library environs between 3 and 5am and look for an older graduate, approximately your size, who once chose banking as a career. Then make him an offer for what he’s wearing.
The truth is that when you walk down the street in most any affluent neighborhood, half of the people you pass own a piece of you. A small piece to be sure and without voting rights, yet still the entire confabulation feels unnerving and antithetical to the American Dream — to have fought wars for freedom and still find yourself indentured.
This Week's Ponder: How would you prove that money can't make you happy?