How Does The Bailout Effect Me?

Call me crazy, but maybe "credit" is the problem, not the solution. As I read day after day about the increasing dollar amounts and number of banks and investment firms that are flocking to suck on the nipple of Treasury, I have to ask myself: Why do I actually care about this?

I have almost no investments, and the ones I have are considered "very stable." I don't own a home. I don't have any financial dealings that require me to file more than a 1040EZ every year (even my moving expenses were deductible without being itemized because they were so small.) And, overall, I have paid zero income tax my entire life. A few times I have owed tax dollars to the state I have lived in, but I have gotten a Federal return every year of my working life. Again, why do I care?

First, it occurs to me that I have worked about half of my working life. I've got about 30 years left until I am retirement age, and I have been working (on paper) about 25 years, so roughly, I'm halfway through. When I get to retirement age, what do I want my life to look like? Well, I'd like to own my home so I don't end up working third shift at a convenience store just to pay the rent when I'm 80 (or 60, or even 40 for that matter.) I'd like to have a "nest egg" to finance things like vacations, death arrangements, improvements and maintenance to my home (that I have yet to procure,) and maybe some money left over to leave to my family or the charity of my choice. I'd like to have some life insurance that is matured enough that I can start drawing on it. I'd like to be sure that I will be safe, secure and happy in my "golden years." Isn't that what we all work our whole lives for?

So, let's talk about that house. That one that I don't own because any lender in their right mind would never give me a mortgage. I'd estimate that over the course of my adult life, I have paid somewhere around $100,000 in rent, which is only different from a mortgage because all it earns me is another month of having a roof over my head. The consequences of not paying my rent are the same as not paying my mortgage: I lose my place to live, and it becomes harder to get another one. The benefits of paying my rent, however, are not the same as the benefits of paying my mortgage. Sure, I get to stay another month, and it is assumed I get to stay as long as I want, but I'll never own my apartment, my landlord will continue to get that particular benefit. Also, my rent doesn't go down over time, and there is no end to the payments. My landlord, after living in an apartment for 30 years, is not going to say, "Okay, you've paid enough. You can live here for free now. Just pay the taxes on the place and we're all good." So, that $100,000 I've spent already in my life, while it has provided me with shelter and only minor maintenance costs, and which represents about 50% of the average home price in the US, has really earned me absolutely nothing.

Why can't I get a mortgage? I'll tell you. Student loan debt, which due to various circumstances, I have defaulted on here and there over time. I've always handled them, got them out of default, and got back on track, but you don't get any kudos for that. You only get punished. A couple credit cards that I was foolish enough to accept in college that I was unable to pay off and they went to creditors. Those ones, I take complete responsibility for. I was stupid, I ignored my debt obligations, and I paid for it, literally. The irony is that those are the least of my problems. It's been more than 7 years -- they are gone from my credit report. And, get this one; this is what really sticks in my craw: late and short payments on heating and electricity bills. Because I had a hard time paying my $1000 a month heating bills in the winter, in Maine, while I was in college and a few years after, my credit rating is trashed. Are you kidding me?? And, get this one: while I was receiving Federal Student Aid I was automatically disqualified from both welfare programs and Unemployment benefits. So, even though I was living (at the time) somewhere around 30% below the national poverty level I couldn't get any assistance with my heating bills, or even get some food stamps so I could eat while I went to college. This forced me to make choices like, food vs. electricity or rent vs. heat. When survival issues are competing with each other for dominance in your financial capabilities, your "credit rating" doesn't seem all that important.

So, what do I do? In my case, morbid as it may sound, I wait. When my father dies, I'll end up owning a house (even though I have no idea at this point how I would afford the taxes, considering where he lives.) When my partner's parents die, we'll end up owning another one. Between the two of us, we're going to end up inheriting a very decent chuck of change, and two houses. Finally, the benefits of being an only child (we both are) become apparent. But, it could be another 20 years before any of this comes about, at least we hope. More likely it will be less, particularly for me. But, moreover, what if this wasn't true? What if it becomes untrue? I'm certainly not banking on it.

Credit favors the rich and holds no provisions for cost of living or "unforseen circumstances." We say that the "middle class" propels most of the American economy, yet I am dead center in the middle of that definition, and I have absolutely no consumer power above the "large electronics" category. We had to get a co-signer to get a car loan. A car loan. Are you kidding me?? The car we bought represents about 20% of our combined annual income, which over the 5 years we financed it makes it about 4% of our income that goes to the payments. 4%. But we needed a co-signer with a credit rating referred to in the auto industry as a "stud" to get this car? Note also that it's a Toyota, not a Hummer or a Lexus. The amount of rent we pay overall is about 8% of our income -- double what we pay for a car -- but we didn't need a co-signer on our lease. And yet, even with a co-signer, I very much doubt we could get a mortgage. Yes, there are alternative programs out there, but those very programs are the popularly-blamed cause of the current housing and financial crisis in America.

With an estimated 16% of American home mortgages currently in default, and another 5% currently bank-owned, and another 10% currently vacant, it seems to me loosening the credit requirement for getting into a home makes a whole lot more sense than tightening them. What do lenders have to lose? That 31% of homes are already in the financial dust bin. And, no matter what happens to the financial markets in America, the simple fact remains: people need places to live, and if more people are transitioning into rental situations rather than the other way around, it is not helping anyone except a handful of homeowners (known as "landlords") who are not going to return much or any of the benefits to anyone but themselves. I am just as capable of writing a check to the bank every month as I am writing it to my landlord. My lifetime earnings so far are approaching a million dollars. The amount of money I've spent on rent in my life would be halfway to owning my own home. The amount of social security taxes I've paid so far in my life should be more than enough to take care of me, not to mention the unemployment and medicare taxes I've paid my whole life that the government denied me access to for the simple reason that I was attending college, trying to better myself. If I sat at home guzzling beer and cranking out a baby a year, I'd be in better circumstances than I am today. Instead, I've struggled my whole life to keep a roof over my head, food on the table, and the proverbial hearth burning, while my tax dollars support other people, and my credit rating places me in a category considered "unworthy."

I still don't know how the current government bailout of American credit effects me directly, but I'm sure it isn't going to benefit me any more than it did before it was needed. If I have to pay more taxes because of it, you can be sure I'll vote with my wallet.