Coming Apart at the Seams - It's the Economy, Stupid and I Am Feeling the Sting

I'm a responsible citizen. I work hard, give to charity, raise my family responsibly, save money and invest wisely. Three years ago I had completely rebuilt my financial life after a long bout with cancer and had more than $65,000 in the bank and was investing $14,000 of my earnings in a 401k annually on top of that. When home prices began to dip I tested the waters and after they continued to decline bought a house with nearly 15% down payment in hand. I ended up with a higher interest rate than was promised, and only upon signing final documents was it disclosed that it wasn't the 30 year fixed that had been promised but was instead going to adjust up after 5 years. But I knew the home was a solid investment and I realized I could refinance before the five years' time even if the current economic downturn (this was mid to late 2006) continued. Almost concurrent with my first mortgage payment coming due, my loan was sold to a new lender. That was my first indication that I had a sub-prime loan. It was also my first indication that maybe banks were leary of lending in general and that was why everyone was getting subprimes loans. My interest rate of 7.5% was a little high but not that high and as a divorced person buying a home on my own I didn't bristle at paying a full percentage point higher than I felt I should have qualified for given the reality I had absoutely no debt and high earnings and any questionable credit on my history would have dated back ten years, to my divorce, so it should have been off the credit reports and I'd worked to make sure it was off and my score went up. I resolved to improve on my loan as soon as possible, as the mortgage broker affiliated with the well known local realty company that had sold the house assured me things were picking up and I was an attractive borrower to any lender. By the end of 2007 my home's value was holding at about only $5,000- $10,000 less than I had paid for it, retaining a value well above $500k. I still had some equity and began to look at refinancing to see if I could get a better rate. I was extremely dismayed to learn from my lender, or the acquirer of my loan anyway, that I had a two year prepayment penalty.
My lender refused to either lock my rate for 30 years or to waive the prepayment as I had been offered a better rate on a fixed loan by another lender.

Because I was reading about foreclosures right and left I decided maybe my lender was just skittish, so I held tough. I could wait out the cycle and I could certainly continue to pay my current mortgage rate. I was stunned three months ago to get a letter from the lender saying my rate was going to adjust up, and precipitously, and was even more stunned to get virtually no reply to call after call and letter after letter about how I did not have a two year ARM. Only after roping in the Attorney General, Department of Consumer Affairs and carefully documenting bad practices by the new lender did I get the tantalizing offer to provide mounds of new paperwork to lock in the current rate that should have been locked in all along. I provided the mounds of paperwork and I am hopeful I will not be bothered further by my lender and will continue to enjoy the privilege of paying more for my home than I should be paying for an additional three years, but at least the same amount I have been paying since the outset.

Which is not to say my financial situation has been completely stable. My earnings grow just slightly every year thanks to very hard work, and I am a high wage earner, but my standard of living is going down just like everyone else's and some major government policy failures have been weighing in to why my standard of living is going down. The first example is the reality my lender won't budge on the current terms of a loan purchased from another bank, even though I have a solid payment history and even though I have equity in a home which I have made minor improvements to and which is retaining its value after the initial dip.

Thanks to our teetering health care system, I paid more than $44,000 out of pocket in healthcare costs under my PPO (private companies are hardly offering HMOs any more) last year and am out more than $27,000 so far this year. My employer dropped its HMO in 2006. Like many employers it was persuaded to move employees to PPOS and health savings accounts to allow 'us' to take more responsibility for our health care costs. I am a 45 year old mother of three children, one of whom fell seriously ill in early 2007. I have struggled to meet exhorbitant payment requests from for profit providers, and, frankly, my daughter has received the best care when in hospital or under the care of her own physician, a nutritionist affiliated with the teaching hospital in our area, and with another provider also affiliated with that program and ot from the pricey providers. My out of pocket costs are going down, but for the foreseeable future I will spend more than $800 per month on premiums and another $300-400 per month for treatment - for one member of our four member family. I don't see any window opening where my employer will suddenly revert to offering an HMO now that we've all been shifted toward making the employee pay so much of the growing cost of medical care in largely privatized settings. I don't see cost containment on the provider side either as long as consumers and employers are paying ever larger shares of the costs of healthcare. Consumers have little leverage in the market and healthcare, like everything else in America today, is about the market and what the market will bear.

But, because I am a prudent person I have continued to sink $14,000 annually into my 401k, and even though I had to dip into that fund to help cover some of the health care costs in the past year, that plus my now modest personal savings have been my security.

So, imagine how I feel today, after Fannie and Freddie got bailed out, after IndyMac failed, after more record high foreclosures came in during the last quarter and more are expected in the coming quarters. I can't count on my home value to hold. And with the 500 point hit Wall Street took today, after months of intermittent poundings, I wonder what my 401k portfolio and other modest holdings are going to be worth down the road. Lehman and Merill Lynch tanking! This is no midcourse correction. This is not a market anomaly. Our financial industry in this country is feeling the impacts of years of regulatory neglect, years of unchecked questionable practices to remain 'competitive'. We are down to a few solid banks. And what holds those banks together? Well, let's see, some new housing starts might help. Some relief in home values could be good. A slowing of the foreclosure stampede would also keep enough cash flowing in to attract necessary investment.

But, we don't have any of that. We are a nation spread worse than thin. It makes no logical economic sense to continue to foreclose on homes and watch their values plummet and take other homes with them. People who lose their homes, lose the value of the investments and can't meet rising energy, health care and other costs, are not going to stimulate the economy. And a country with a record deficit can't generate more revenue without raising taxes at a time when it is mired in two separate wars and when its financial markets are in turmoil.

Unless our government begins to make some tough, responsible choices about regulation of everything from banks to energy companies to communications companies, we will taking the quickest nose dive into not just long term recession but outright depression in history. Our economy is not sound and it has not been sound for years. It has been propped up artificially by speculation that should not have been allowed in the first place. It's not that we need to modernize our means of regulation and oversight - although of course we need to catch up how we monitor AND enforce action, it's that we actually need to govern and regulate again. All those cronies who got put into the Justice Department haven't been doing their jobs following up on consumer complaints against banks and mortgage companies. The EPA and other agencies should have been coming down hard on our oil companies about prices and false shortages and should also have been fiercely regulating our auto and other industries to reduce consumption of fossil fuels. If we'd pursued aggressive renewable energy strategies and fuel efficiency standards in 2000-2004, let alone in the past four years - we'd have millions of more fuel efficient cars on the road that were manufactured in this country and we'd have more development of renewable energy generation. Rather than handing out incentives and tax breaks, energy companies would be competing iwth each to develop the best technologies because the market was right out there waiting to purchase the products and because the government was insisting on better standards. We'd have better transit planning, we'd have high speed rail if not up and running on both coasts, about ready to roll.

If we'd watched the speculation in the housing market early, understanding the fragile nature of falsely inflated home and property values, millions of American families would still be in their homes, making mortgage payments. Banks would not be on the brink of failure. More than that millions of existing homeowners would not be making the high payments they are making today on homes with plummeting values - reducing their overall standard of living and taking away whatever disposable income they might otherwise have been investing in this economy. Small businesses would not be failing at record pace, unemplyment would not be about to hit 8% and major employers would not be laying off huge proportions of their workforces.

The tax burden on this country from unemployment and the housing foreclosure situations alone is staggering. The amount of federal spending daily to patch these holes, let alone to bail out major financial institutions, is massive. That will translate into higher federal income taxes on average Americans, people wo are already bearing huge increases in their cost of living. People for whom a $3,000 per month house payment was affordable in 2006 at their incomes at that time, may be struggling to meet that amount as their transportation costs have doubled, their health care costs have doubled, and they've seen precipitous increases in their costs of food, clothing and other basics. What happens to that household when one of or the only wage earner gets laid off by HP or Intel or GM or some other company that is downsizing after a merger or in the wake of record financial losses?

In six weeks' time we will elect a new president and that president will inherit an international, economic and domestic situation worse than what Franklin Roosevelt inherited from Herbert Hoover, worse than what Hoover inherited from Calvn Coolidge and worse than what Calvin Coolidge inherited from Warren G. Harding, historically viewed as having overseen the least successful administraton in US history.

The full effect of what is going on both domestically and internationally due to policy failure on the part of the current administration, and the unprecedented strains these combined circumstances are having on our economy, rival any economic upheaval in modern times. It is a crisis borne of neglect, of dereliction of duty, of failure to act responsibly and in the interests of the American people and of our economy. It is a crisis of a lack of preparedness, a lack of foresight, a lack of execution of policies and procedures that could have forestalled or closed off further failures in many areas. Unless a major course correction is made, unless government becomes focused on recovery, step by step and with full oversight of industry (which means we have to discard our coveted notion of small government until recovery happens) and accountability for government action - America will devolve into a hopelessly tiered society with no middle class.

Peronally, I am fed up. I have done all of the right things to ensure security for myself and my family and to be a contributing member of society. I have not been a borrower so much as a saver. I work, I conserve, I pay taxes. I have watched my standard of living dwindle and I see where it is headed without a change in economic direction for this country. I want a president who will lead by putting the good of the people first and who will pull this country back up. I don't care if his political party isn't my political party or if some of his views are different from mine. I simply cannot countenance the deception and incompetence any longer. John McCain and Barack Obama had better start telling me exactly how they are going to dig this country out of the Bush mess. I don't want to hear rumors or innuendo about the other candidate. I don't want to hear idle promises. I want to hear the truth and I am ready to embrace it and dig in and help make this country great again. I know that any more of the same wlll be disasterous. I know I cannot sustain many more hits to my home value, more blows to the value of my savings, more increases to my daily cost of living. I want my children to have the quality of life they deserve, the quality of life I have worked hard every day of my adult life to provide for them. And I know that quality of life can only be sustained, improved, with very great effort. Who is going to make that effort? Who is going to lead and not simply be satisfied just to get elected or just to keep a party in power?