A recent article in The New Yorker, "The Death of Kings" by Nick Paumgarten, May 18, 2009, provides an tour through the stations of the current financial hell, from the earliest signs (between four and one hundred and two years, depending) to full-blown imminent-disaster predictions.
Even though you may have read extensively on the topic, this story is exceptional, a gripping overview of the mess illuminated with anecdotes. A private-equity executive Paumgarten interviewed said that he sensed the jig was up when his cleaning woman in NYC took out a subprime loan to buy a house in Virginia.
And you get a peek how people used to life in the tippy top income bracket are coping. A Wall Streeter advises his buddies who have lost at least half their net worth to have what he terms "The Conversation" with their partners, an event that he warns may result in termination of the relationship.
The Conversation lays out "our budget from now on". The man advises dividing expenses into three categories:
1. Essential: Your mortgage or rent, food, gas and other requisites.
Pay your expenses, maintain your credit rating.
2. Discretionary: Private school tuition, clothing, entertainment, massages and personal trainers, etc.
Cut by 50%.
3. Frivolous: Jewelry, art, travel, toys like boats and fancy cars
Cut by 85%.
I liked this short, sharp three-bin plan.
Some people will say, "Ha! I never had money for category #3, or even much of #2", but remember, these high-flyers did. As someone observed in the article, dropping from 15 to 1.5 million in assets is a terrifying plunge, if that's what you were used to.
You can read an abstract at The New Yorker site; the compete article is available only to magazine subscribers. Or read it for free at the library.
During the same week, Le Duc and I went to see Ricky Jay perform his new show, "A Rogue's Gallery" and guess who was up on stage with Ricky?
You should have seen Le Duc shuffling! Ricky dealt into his hand, and Le Duc confidently counted the cards he held: six. Then, after a few quick words, how many cards now? "Seven", said a dazzled Duc.
One card of six held by an equally baffled woman, standing at the other side of Jay, had somehow left her hands and appeared in Le Duc's.
Isn't that's what the whole easy credit scam did? People thought they held an extra card for no effort. But it's a mug's game: in the end, all the cards are the lender's, and many borrowers have nothing left, not even the homes they mortgaged.
Jay, in a CBC radio interview with Jian Ghiomeshi the day before his Toronto opening, said that greed was the quality necessary to pull off a con, and that many people had succumbed to this vice in recent times. "It starts small", he said, "with something like downloading music you don't pay for. It's easy to fish them in from there."
Asked if he ever used his powers to fleece someone, Jay cited his grandfather, a magician and beloved mentor. " 'Don't ever play cards'", Jay said he told him. " 'If you win, they'll think you're cheating, and if you lose, they'll think you're a lousy magician.' "
My souvenir of "Rogue's Gallery" was one of Jay's cards, appropriately, the King of Diamonds.