Thoughts On The Bailout...

Thoughts On The Bailout...
Michael D. Wright
9.30.08

Let me get this straight, we're going to foot the bill for overzealous (greedy/parasitic) lenders who bit off more than they could chew? We are going to pay TWICE for their mistakes? Those of us who have debt, we're already paying them, and now we're paying them AGAIN if/whenever they pass this economic bailout bill into law? I don't see the sense in that, as if it truly is the thing that buoys the U.S. economy.

When I was little, in the 1980s, I remember getting lines of credit or a regular credit card being something that only White people and others who had substantial income (and in essence, did not really NEED credit) could attain.

Slowly, but surely, once Bill Clinton took office as President, and thereafter, much more quickly and willingly, creditors gave out credit cards, lines of credit, and mortgage financing (sometimes up to three times the amount of the value of the house the people were buying) until your neighbor's DOG could have $100,000 of credit with little or no concern for how much income you had or your level of risk, when it came time to repay the loaned funds.

That is not to say that consumers are by no means responsible for the way they have and currently do use credit, it just reflects how greedy the lenders were.

I said to myself in February 2006, when the new credit guidelines took effect (depending on the balance owed on your accounts, you would have to pay 3% or another prescribed amount per month in the form of a minimum payment; not considering interest) that a LOT of people who were living on the edge -- living paycheck to paycheck... maxing out credit cards just to get by... people you see eating out every night and going on exquisite trips and going to ball games, all of which more than exceeded their liquid assets -- all of which made me wonder -- WHEN IS THIS ALL GOING TO COME HOME TO ROOST?

Well, it took two years. I am only surprised it didn't occur sooner. These people you see taking trips, going to professional sports games -- games that cost the amount of most people's mortgage payments -- PER PERSON!!! are living off CREDIT!

On a personal note, I was debt-free. COMPLETELY debt-free in May of 2003. That same month, I went in for emergency surgery for a wisdom tooth and another extraction. Because I had spent the prior fifteen months getting out of debt, my on-hand funds were depleted. I had to resort to a loan in order to pay the orthodontist fees, which were nearly $1,000. I was still in good shape, though. I decided to add another arm to my business ventures and began doing consulting; which necessitated I had a laptop computer, as I was traveling even more than ever. OK, still no problem. Then, my Mazda 626 did what 90% of all 626s had done -- the transmission went bad for the second time. Instead of expending so much time and money to get it repaired, I went to the Nissan people, where I had a connection and got a pretty good deal on a brand new Nissan 350Z ('04 model, freshly shipped in from 150 miles away with my own requested package). This was September 2003. That New York mindset (especially Harlem) was still there, unfortunately. Always flashy over frugality. I thought I had shaken off the desire to be fly when I left New York in 1998. Not so. The minute I was tempted and had the ability to go back to it, I did.

My credit score was right around 800, which guaranteed that I could sign and drive that $34,000 car off the lot that night. I did so, non-chalantly, but in the back of my mind and at the bottom of my heart, I know I was making a bad decision that would affect my financial situation negatively in the long-term. I was making very good money at the time, and as long as I continued in that sector, I would be fine financially. However, long-term I knew I would either be like the people I mentioned earlier, or worse yet, LOSE IT ALL.

So instead of being debt free as I was just four months earlier in May, I now had nearly $40,000 in debt. My credit cards were barely being used until the general problem that occurred with that model of the 350Z (tires wearing in prematurely... Z-rated tires at that -- some of the most expensive tires out there, FYI) began to manifest. I went through five sets of tires within eighteen months. It was ridiculous. Add to that, the flashy attire crept back into the picture, as I had gone "all in" again with my spending habits.

Yet still, I was not in a bad situation. By the summer of 2004, I was disenchanted with my job. I was 25 and was NOT trying to be a lifer at Aetna, like many of my colleagues had become (many of whom had Masters, Doctorates and a few Ph.Ds were mixed in as well). I began praying for the Lord to bring to my remembrance the things that I was most passionate about and what steps I needed to take in order to take advantage of those gifts in a professional nature. I started my first business at age 18 in December 1997, but I got away from it once I began working at Aetna and making a comfortable salary.

I had a long and contentious relationship with my first college, Long Island University (Brooklyn Campus), and because I left the school in somewhat of a rush (a separate blog entry altogether), some paperwork was improperly processed at LIU, leaving me to repay nearly $10,000 in fees to the school before I could return to college ANYWHERE.

One reality that makes this reflection extra painful is the fact that St. John's University out in Queens was actively recruiting me to return to New York City and I would have had a full ride. FREE. This was 2003, while I was in the midst of car-buying. It was a tough decision to make. I was involved in real estate and looking to buy my first house for myself. The ONLY reason I did not go to St. John's was the fact that they did not offer campus housing; and everyone from New York knows that rent is ridiculous. As a full-time student, that was out of the question. However, looking back, and given that I am basically in that same position again next summer when I return to New York for graduate school, I wonder why I allowed such a thing to prevent me from moving forward. These past five years would not have been such a colossal and depressing tragedy had I gone back.

I had applied to Seton Hall University, which was five minutes from my then-home, Newark, New Jersey. I got in, but would have had to incur even more debt to pay for it. So I passed on that. Besides, as a New York resident, I could only get a reduction in tuition at a New York school. Given that I already knew that the City University system was a sick joke, I did not even apply there.

So later, I came back to North Carolina and applied to UNC-Chapel Hill (denied), UNC Charlotte (accepted, pending the transcripts that were being withheld until I repaid the aforementioned $10,000 to LIU -- so I could not go), NC A&T (accepted, no questions asked -- but I only applied to see if I COULD get in, never once in my life had I any desire to attend that school. No offense to A&T students and alumni). I applied to UNC Greensboro, which accepted me pending the transcripts. I swallowed the pill and paid the thousands of dollars to get my transcripts. That put me in even MORE debt. Then, because my financial aid was not processed in time, I could not attend in the Fall of 2004, as I desired. Because I was now an adult/independent student, even though I had a 3.5 GPA, I received nothing but loans from school. MORE DEBT.

I had plenty of haters who dinged up, keyed up, egged up my car the four years I had it. (Some of my friends remember how homicidal I was the night the kids from the neighborhood repeatedly egged my car. I had the gun in the glove compartment and sat in the car in the dark waiting for them to do it again -- thank God, for their sakes, they did not). That only made the situation worse. Then, as I began my first semeseter at UNCG, I ran into conflict with my supervisor at work, who already had it in for me and was just looking for a reason to fire me. She had nothing on me, but she COULD make it impossible for me to go to school and continue working there -- which she, of course, did with such glee. I was one of the best claims analysts in our division, they did not want me to leave, but at the same time, my boss did. Instead of waiting for her to set another trap, I threw myself into yet another business endeavor and gave the boss the universal "screw you" sign with my arms and left abruptly.

OK, now I have no income, several maxed out credit cards (due to the tires on the car, which were $1,500 every time I had to buy them), no job, and a car which used 93 octane gas, high insurance, because it was a sports car and no means to really do much financially, since everything was predicated upon my income. I had several thousand dollars saved up, well over $10,000, actually. But bills, business-starting costs and school-related expenses ate that up within a year and a half. Now I'm having to put the new business on the back burner and find work. Later, I had to sell the car. The whole situation would have been avoided, except...

THE NEW LAW THAT WAS PASSED, ALLOWING CREDIT CARD COMPANIES TO CHARGE THE GREATER OF 3% AND THE ASCRIBED MINIMUM PAYMENT. In short, if your minimum balance was $200/mo. in December 2005, it TRIPLED after that law took effect. It is easy to see why I, and many people who I know, ended up in financial ruin.

Keep this in mind as this $777B bill is being haggled over. If/when they pass it, there are going to be EVEN MORE people who went through what I've been through in the past five years. All the foreclosures, downsizing, having to sell cars, homes, businesses to stay afloat -- we have not seen ANYTHING YET. Do not get into credit card debt. PERIOD.