Credit Crisis Confessional

One of the most talked about articles of the week is from the NYT Magazine. In "My Personal Credit Crisis" economics writer Edmund L. Andrews unravels his tale of financial woe. It's a poignant and well-written piece that mirrors the trap so many Americans fell into during the housing bubble.

There are a number of odd things about the story, as some have already noted. One is that the writer claims to have a yearly income of $120K, plus NYT stock to cash out for a down payment, yet for some reason was bringing in less than $3K/month. This just doesn't add up.

True, he was on the hook for $4K a month in alimony and child support payments. However, it's still amazing that he was only left with $2777/month, as he claims in the story. Alimony expenses come out pre-tax, and so he should've been left with $6K/month. With so many dependents and two mortgages he ought to have qualified for plenty of tax breaks. So let's say worst case he is out 30% in taxes. That should've left him with at least 4,200/month, and probably more. Maybe not enough to afford a half million dollar house, but his second wife also had full-time work most of the time--some of it quite well paid.

Then there were the fights and recriminations with his wife over her spending. Yet, when he enumerated the types of expenses they had, they hardly seemed excessive. Contrary to his own self-flagelating description of it, the beach house expense wasn't all that over the top--it was $1,600 total for him and the kids. Other than that, they bought some clothes and food. They didn't refurnish their house--in fact, they brought in all their old stuff. And from the way he describes it, they didn't do much to renovate the place, either--just the opposite. They let it go to seed.

So, what was really going on with Mr. Andrews? Part of it, I'm going to guess, is that there were other expenses involved that he is not copping to in this article. Perhaps they will be more fully explained in the book. Or maybe he'll continue to gloss over them, in which case my trust in this narrative will slip even lower.

Of course, what makes the story juicy and ironic is that we're not just talking about a common shlub. This is an economics reporter for the venerable New York Times. In other words, if anyone should've known better, it was this guy.

But wait ... wasn't everyone reporting that housing prices were likely to keep on rising? Aside from a few notable naysayers, this sunny outlook was the norm. If anything, an economics reporter would be even more prone to subscribing to this point of view. Not that it should be this way, but human nature being what it is, this is hardly a shocker. Not only that, but he probably got used to thinking in very big numbers--billions and trillions. In my own small way, I experienced this as well. Reporting on Silicon Valley for Red Herring, I began to talk about "millions" as if they had very little value.

"Oh, they were only funded at $5 million," I would say, not really hearing myself.

Another angle on the story is that much as it is written in a highly confessional style, the author has done a good job avoiding some of the obvious questions about what kind of person he was, and is. What was his attitude towards money over the course of his life? What drew him to dedicate his life to writing and thinking about money? Perhaps he had oh, I don't know, a few small hangups about it? Just a thought...

When he described his cold sweat panic attack over money, I couldn't help thinking that maybe what he needed to do first was to take a step back and examine his responses. Panic attacks are their own type of affliction--and they often hit us in situations that others might not consider worthy of panic. His wife's reaction seems to support this. Of course, we can now step back and judge her to be the one who was in denial, but was it really that healthy for him to torment her about every little expense? Was it spending that took them down, or an overall unhealthy relationship to money on both their parts--his especially?

Anxiety tends to pursue us through our lives. If we dispense with one trigger, we find (or create) a new one. In short, this was a very psychological journey that he was experiencing--maybe even a spiritual one.

Again, perhaps more will be revealed in the book length version of the story. Considering the strong response this feature got, I'm sure it will sell well. I'll probably pick up a copy--though to save money I'll just check it out of the library.