In one of my favorite movies, "The Usual Suspects," a crime has been committed. The police have caught a key eyewitness who claims that the culprit was a notoriously evil criminal named Kaiser Soze. In the end, after being released, we discover that this "eyewitness" was actually the Kaiser Soze.
Flash forward several years, and I'm now reading Michael Lewis' latest mind bending expose, "The Big Short." Here, he goes into specific detail about subprime mortgages, credit default swaps, interest only loans, and how these financial instruments led to the downfall of Wall Street's most prominent investment banks. Not to mention all the foreclosures that spread into certain markets like water from a leaky roof.
As Lewis accurately lays blame on several different parties, I realize that one particular group was left devoid of any responsibility. An insidious group that has made a reputation for repeated profitability in any economic climate.
Real Estate Agents.
To some, they fall somewhere between car salesmen and Al Qaeda when it comes to job approval. They're the starting gates of every real estate transaction and they represent the first check point on consumer credit, down payments, and complete assessment of customer credibility. Like a game of poker where certain card combinations rank higher than others, they also have a specific hierarchy with potential customers.
Cash customers beat those who need a mortgage. A buyer without the contingency of selling another home first ranks higher than those buyers that do. Likewise, a higher household income is better than one that isn't. But like great con men, they couldn't resist rigging the game in their favor.
When hesitant buyers questioned their affordability in paying for a house that seemed beyond their reach, they were told, "don't worry, I have a guy who can help." They have a guy? Was he in Good Fellas? No, this "guy" was either an internal finance expert or a friend the broker had at a local bank. It's here where the prospective buyers first discovered products like interest only loans, adjustable rate mortgages, and even options to pay any amount they wanted each month.
Don't tell me that these modern day robber barrons couldn't do the math. You don't need an A+ in calculus to realize that a family making 100K per year, putting no money down, couldn't possibly afford a multi-million dollar home. They knew it, but they didn't care. If the buyer was forced to sell in less than five years, it's perfect? They'll just resell the house and make more commission. Real Estate and Wall Street have one thing in common. Volatility is good.
Yes, you could point to the fact that the buyers should have known better. But real estate agents are supposed to be experts in their field, so as "consultants" many trusted their financial acumen.
So what can be done about it now? It's not too late. These so-called brokers have had fixed commission rates for years regardless of the neighborhood they sell the house in, the home's price, and the total number of days on the market. The government should impose a fine dating back to the beginning of this mess which is probably sometime from 2005-2008. Each brokerage agency should be required to return 2% of all commissions earned during this period. Individual brokers will be charged back for all commission checks and the proceeds will go into a fund for educational programs on how mortgages really work. This way, no one will be fooled again.
Kaiser Soze is amongst us once again. This time, let's not let him get away.
Thursday, April 15, 2010
Monday, April 5, 2010
The Case of the Missing Bookcase
I've always loved mysteries. My first exposure to the genre was reading Hardy Boys novels which were equivalent to Harry Potter of the era. I carefully dissected each caper in the hopes of solving the crime before they did. I didn't always succeed. But when I finished each one, there was a sense of accomplishment. So I proudly displayed the completed novel in my bookcase alongside several others so I could easily reference how many books I'd actually read. The goal was to fill up the bookcase and start a new one.
I don't know when the first bookcase came into vogue, but I'm sure if Moses could have made a paperback version of the Ten Commandments it would have started around then. Let's just say it took awhile longer before Ikea made it both commonplace and affordable. But did you ever stop and think why we even needed bookshelves in the first place? If we desired a place to store our best sellers, paperbacks, and text books, why not just shove them into boxes and store them in an attic or basement? If we wanted to get rid of them altogether, Ebay offers cash and a local library offers a tax write-off. But that doesn't work for most people. Because without a bookcase, we can't really prove to anyone that we definitively finished any books beyond Curious George and Dr. Seuss. This, of course assumes that you actually have moved beyond Green Eggs and Ham.
The real truth is that a bookcase holds more than just books. It also holds the key to a few critical psychological components. First, the bookshelf tells the complete story of our lives. It displays the books we were forced to read in high school (with or without accompanying Cliffs Notes). Some feature the college textbooks that we refer back to every now and then. They contain NY Times bestsellers that were made into classic films, books on self-help, leadership, naming a baby, biographies of great historical figures, and saving for retirment. The bookcase lazily leans against the wall, but in the foreground displays our intellectual pursuits over various stages of our adulthood. But like any well developed novel, this only tells half the story.
The second facet of a bookcase is not meant for us at all. It's for the benefit of everyone else. Doctors use them to prove that they actually know something about medicine, or worst comes to worst if dumbfounded, they actually have a refernce tool. And how could lawyers not prove they know something about the law, when the law itself it plastered all over the office in various bookcases? The same rules apply to any home office, den, study, or any other room where books are displayed. If you listen carefully, you could hear every bookcase shout, "Hey you, look what I've read!"
This all brings us to the latest chapter in book display - - the age of digital technology. It began with Amazon's Kindle, was reinforced by Barnes and Nobles' Nook, and seemed to zenith with Apple's new iPad. It's hard to imagine, but could all these high tech gadgets soon make the next generation's bookcase extinct? It's happened before.
The music industry was first to take a hit. Back in the days of the British Invasion, summer beach music, and Classic Rock, artistic album covers were on display in every household. Many of them were worthy of framing. Soon, these collections gave way to much smaller CDs which were stored in less visible racks as the CDs were turned on their sides. And with digital music distribution, any semblance of an album cover has disappeard and replaced by a still image you can't even touch. How could books not be next?
What we're reading has become far less important that how we're reading it. The plot of the latest Grisham novel is not nearly as fun as reading it on the beach in a digital format without any worry of sand getting caught between the pages.
So will our children be the first generation to not use a bookcase? Probably not fully. But with a new group of readers enamored with portability, don't expect to see their bookcases completely filled. It will however, provide a perfect space for a charger that will connect to a wall outlet and insure that our eReaders will always be brightly lit.
As for what we're reading, well, that will remain a mystery.
I don't know when the first bookcase came into vogue, but I'm sure if Moses could have made a paperback version of the Ten Commandments it would have started around then. Let's just say it took awhile longer before Ikea made it both commonplace and affordable. But did you ever stop and think why we even needed bookshelves in the first place? If we desired a place to store our best sellers, paperbacks, and text books, why not just shove them into boxes and store them in an attic or basement? If we wanted to get rid of them altogether, Ebay offers cash and a local library offers a tax write-off. But that doesn't work for most people. Because without a bookcase, we can't really prove to anyone that we definitively finished any books beyond Curious George and Dr. Seuss. This, of course assumes that you actually have moved beyond Green Eggs and Ham.
The real truth is that a bookcase holds more than just books. It also holds the key to a few critical psychological components. First, the bookshelf tells the complete story of our lives. It displays the books we were forced to read in high school (with or without accompanying Cliffs Notes). Some feature the college textbooks that we refer back to every now and then. They contain NY Times bestsellers that were made into classic films, books on self-help, leadership, naming a baby, biographies of great historical figures, and saving for retirment. The bookcase lazily leans against the wall, but in the foreground displays our intellectual pursuits over various stages of our adulthood. But like any well developed novel, this only tells half the story.
The second facet of a bookcase is not meant for us at all. It's for the benefit of everyone else. Doctors use them to prove that they actually know something about medicine, or worst comes to worst if dumbfounded, they actually have a refernce tool. And how could lawyers not prove they know something about the law, when the law itself it plastered all over the office in various bookcases? The same rules apply to any home office, den, study, or any other room where books are displayed. If you listen carefully, you could hear every bookcase shout, "Hey you, look what I've read!"
This all brings us to the latest chapter in book display - - the age of digital technology. It began with Amazon's Kindle, was reinforced by Barnes and Nobles' Nook, and seemed to zenith with Apple's new iPad. It's hard to imagine, but could all these high tech gadgets soon make the next generation's bookcase extinct? It's happened before.
The music industry was first to take a hit. Back in the days of the British Invasion, summer beach music, and Classic Rock, artistic album covers were on display in every household. Many of them were worthy of framing. Soon, these collections gave way to much smaller CDs which were stored in less visible racks as the CDs were turned on their sides. And with digital music distribution, any semblance of an album cover has disappeard and replaced by a still image you can't even touch. How could books not be next?
What we're reading has become far less important that how we're reading it. The plot of the latest Grisham novel is not nearly as fun as reading it on the beach in a digital format without any worry of sand getting caught between the pages.
So will our children be the first generation to not use a bookcase? Probably not fully. But with a new group of readers enamored with portability, don't expect to see their bookcases completely filled. It will however, provide a perfect space for a charger that will connect to a wall outlet and insure that our eReaders will always be brightly lit.
As for what we're reading, well, that will remain a mystery.
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