The big “middle class” rip-off: How a short sale taught me rich people’s ethics
So many of us are clueless about business and finance. Here's why that's just the way the investment class likes it
EDWIN LYNGAR
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| (Credit: Andy Dean Photography via Shutterstock) |
The closest I ever came to acting like a rich person was two years ago when I short-sold my primary residence. I might have been able to keep it but strategic default made life easier. I owed about $400,000 on a house that short-sold for $150K. The bank lost more than a quarter of a million dollars, and I lost at least $80K in down payment and property improvements. In a short sale the bank agrees to settle debt for the lesser amount and the seller gets nothing but is “punished” by not being able to finance another house for at least two years (rules vary). My moment of acting rich was when I bought a second house before short-selling the first to skirt around the repercussions of my own bad luck.
When the housing market tanked a few years ago, the government rescued every bank and business (even a damned insurance company), while ignoring everyone else. I realized that the game was fatally lopsided, so I didn’t just walk away in middle-class shame, but rather I employed all my (extremely limited) cunning and deviousness to get a similar home before ditching the old one. I was able to cash in on low housing prices from a couple of years ago, coupled with low interest rates, to come out on top. The biggest barrier to getting a great deal was an almost overpowering need to behave like a middle-class sucker.
I was taught growing up to “keep my word” and that your handshake “meant something.” Yet businessmen and individual wealthy people make decisions that are far less moral than a short sale. People “incorporate” so they can avoid legal responsibility for individual actions. It works great. You can stiff creditors, declare bankruptcy, pollute daily and raid pensions to enrich individual executives. If it all goes wrong, like it has so often for Donald Trump, you can keep your mansions and individual fortunes. It is no accident that the best-paid CEO in America has never made a dime for the company. If regular Americans acted like corporations and the moneyed class, our country would collapse in a week from systemic theft, corruption and greed.
I always knew business was getting over on me, but I had no idea the extent until I started looking to short-sell. I first learned all I could about private home financing. I called up some shady investment groups around town and questioned them at length. I didn’t end up using them, but they were frank, informative and unashamed.
“Who would pay 11 percent on a home loan?” I asked.
“Rich people,” said “Bill” from the legal loan-sharking company. “The rich have terrible credit.”
Rich people = bad credit: Just let that sink in.
Bill told me in roundabout ways that rich people never pay a bill if there is any way around it. If something goes wrong in an investment or a business, they always preserve their own assets first. We’ve all heard the generalization that they’re lousy tippers.
Most Americans are clueless about business and finance. Instead, we are a caste of customers. We consume short-term predatory lending, school loans that can never be discharged, inflated mortgages, high-interest credit cards, fast food and overpriced automobiles. We “invest” in basic IRAs, doomsday prepping or Ponzi schemes. The worst part is that no matter how much money we gain or lose, the investor class always gets paid.
During the same five- or six-year period my house value tanked, I also lost tens of thousands of dollars in retirement accounts. At the same time, my “money manager” collected a fee day after day, month after month. Since he is the dealer of America’s crack-based stock market, he got paid regardless of performance.
Middle-class Americans just aren’t the same species of human as the wealthy, but we refuse to even discuss the class issue in America. “Class” is for the British, even though the U.K. now has more upward mobility. There have been many great essays and movies about the parallel but unequal capitalist systems in America. There exists a baffling, byzantine maze of corporate and personal benefits enjoyed by the super-rich and investment class both indecipherable and unavailable to regular people.
We pay banks for the privilege of fleecing us, a fact made obvious by the growing slice of corporate profits generated by the financial sector. Employment in the financial sector hovers around 5 percent of the American workforce, while they skim a third of all corporate profits off the top. They create nothing and add nothing, so in essence, a massive chunk of American profit is made up of handling fees.
Lest I be accused of “sour grapes,” because I’m not rich, let me be clear. I live what used to be a middle-class life. We vacation every year without fail, own a home and live in a nice neighborhood. My hands stay clean at work. Of course, it could all crumble tomorrow, but for the moment, I’m a “winner” of some kind. Because I’ve reached some small level of financial stability, I’ve had the time to look around and see how utterly broken the system has become for most people.
Living a middle-class life is an impediment to meaningful change. We are taught that we have everything we should dare to expect and capitalism has “worked” for us. Middle-class people are also urged to hate poor people, and those who cannot or will not work. They are the “other,” the moocher class. Poor people are the reason you haven’t gotten a raise in five years or that your house is worthless or that your company only gives you one week off a year. Those who have something detest those with nothing. We’re letting rich people get away with fleecing America, while turning our rage on poor people.
When you examine it, you cannot blame the rich for the oligarchy we’ve become or for what looks more and more like the return of Dark Age feudalism. Rather, the blame lies with my fellow work-a-day slobs who vote for politicians and policies that favor investment and wealth over the work of regular people. Middle-class Americans are self-flagellating and dispirited over their own lack of wealth, as if it were a character flaw. At the same time, they fall for the deception that everyone can be rich when, of course, most people lack the connections, education and plain old luck to even get close.
I can uncover an individual’s actual potential for wealth with one easy test: If you equate business opportunity with a multilevel marketing scheme, like Amway, you will never be rich. If that doesn’t work, just ask yourself if you think you’ve got a shot at winning the lottery. If the answer is “yes,” you will most assuredly die poorer than you are now.
For my entire life (and I don’t think this will ever change) I’ve watched friends and family engage in one Fred Flintstone-esque, get-rich-quick scheme after another. I’ve also been caught up in more of these than I’m comfortable admitting, and they always fail, without exception. At the same time (at least in my own circles) this starry-eyed group of middle- and lower-class strivers vote overwhelming for the Republican Party. I find a direct correlation with an unlikelihood to ever become wealthy corresponding with a stronger commitment to vote Republican. They further solidify institutional advantages of the business elite to which they will never, ever belong.
As a public service to every member of the get-rich-quick community I offer this: You will never (ever) become millionaires. Not with a “paying gold claim” or a giant Amway distributorship. Not with a system for winning at blackjack or a rich uncle about to croak. I beg you, for your own sanity and well-being, stop voting for more benefits for the monocle-wearing, martini-sipping, trust fund class. They care nothing about you, your feelings, your family, or life or death. They already have plenty, so stop enriching them at your own expense.
I do have the start of a solution, and it starts with America taking a hard look at itself. As a people, we suck at self-examination, but if we can manage it let’s ask: Why does society exist? Does every human live with the sole purpose of enriching the smallest sliver of the species? Do we consider rich people better than the rest of us? Or, should we instead attempt to bring the greatest good to the greatest number of people, while still promoting innovation and competition?
I entered the shark-infested waters of high finance with a short sale. It was the worst ethical decision, but finest, most profitable business moment, of my adult life. It was an informative, even transformative, experience. People are too hesitant to talk about such dealings, especially because most people make shitty financial decisions (like me), but this sheepishness perpetuates systemic financial illiteracy.
As a species, the American-brand human is reluctant to talk about fiscal failure and our own constant victimization at the hands of faceless corporations. Furthermore, our misplaced “ethics” in dealing with big business, a group devoid of anything resembling morality, hurts regular people and society as a whole. If I could legally find a way to screw over a bank, I’d do it without hesitation. The financial industry would screw me six ways from Sunday to save a nickel. The least I can do is return the favor. I only wish I had more homes to short-sell.
You can follow Edwin Lyngar on twitter @Edwin_Lyngar
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And now an uplifting message from George Carlin
It appears there is a reason for things to be as they are, here George Orwell (1984) gives us an explanation: " "From the moment when the machine first made its appearance it was clear to all thinking people that the need for human drudgery, and therefore to a great extent for human inequality, had disappeared. If the machine were used deliberately for that end, hunger, overwork, dirt, illiteracy, and disease could be eliminated within a few generations But it was also clear that an all-around increase in wealth threatened the destruction... of a hierarchical society. In a world in which everyone worked short hours, had enough to eat, lived in a house with a bathroom and a refrigerator, and possessed a motorcar or even an air-plane, the most obvious and perhaps the most important form of inequality would already have disappeared. If it once became general, wealth would confer no distinction. Such a society could not long remain stable. For if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; and when once they had done this, they would sooner or later realize that the privileged minority had no function, and they would sweep it away. In the long run, a hierarchical society was only possible on a basis of poverty and ignorance... It is deliberate policy to keep even the favoured groups somewhere near the brink of hardship because a general state of scarcity increases the importance of small privileges and thus magnifies the distinction between one group and another... The social atmosphere is that of a besieged city, where the possession of a lump of horseflesh makes the difference between wealth and poverty. "
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