About a House

In 1927 a very successful businessman bought a house in New Rochelle, NY. It was a few blocks from New Rochelle Harbor and right on top of the railroad into Manhattan.

The buyer, the son of German immigrants, earned the equivalent of $112,000 in 1927. Well-known in his field, a real up and comer, he was clearly destined to earn more. A great deal more.

He grew up in poverty, his father was an alcoholic and frequently unemployed, his mother worked as a maid. From a young age he helped his mother with her work. She was the breadwinner, the disciplinarian, and he devoted himself to her.

He worked his way to Columbia University, left early to pursue his career, had success from the beginning, always took care of his mother. He bought the house in New Rochelle as a Christmas gift for her.

It was a three bedroom, rather plain house with possibilities. He took over the $10,000 mortgage already on the house and put the title in his mother’s name. Payments were $255 every six months.

He moved in with his parents and began an extensive renovation project. The house was shortly transformed into a showplace.

Our man’s career blossomed, the house was steadily improved, things were idyllic. Then our guy got married in 1933 at age 33. Perhaps unsurprisingly, his new wife and his mother did not get along. At all. The couple moved out of the New Rochelle home in 1934, though he continued to pay the mortgage.

In 1937, in the depth of the Depression, he earned the equivalent of $436,000.  Yet, he did not pay the $3,583 (in today’s dollars) due for the mortgage. It should be noted that our man was very, very careful with money. He had the mortgage payment.

The house was foreclosed on, the parents were forced to move out. Their son received another pay raise, was earning the equivalent of $620,000/year in 1939 when he was diagnosed with a rare, terminal disease. He died in 1941.

Yes, our man was New York Yankee Hall of Famer Lou Gehrig. His life, obviously, has been well documented, he is the subject of a some very well done biographies and one iconic movie, Pride of the Yankees. And yet, no one can figure out why he let the house go to foreclosure.

He wasn’t showing the effects of his illness in 1937, he had the money, but, as is noted by every biographer, his wife and his mother basically hated one another. It’s possible that as the house was in his mother’s name, Gehrig never knew about the foreclosure action. It’s possible that Gehrig’s wife Eleanor simply told Lou to stop paying. It’s also possible that the family decided to walk away from the house.

It’s a mystery, but we can attest to the fact that not all foreclosures make any sense.

The house that Gehrig re-built is still there. It’s had a long, strange history. It’s exterior was used in Pride of the Yankees, though the residents at the time had to sue the the Samuel Goldwyn production company to receive compensation for allowing them the run of the house for a few days. They settled for complimentary tickets to the movie after it opened in New York.

Over the years the house has been in foreclosure several more times. The last time was in 2016. It needs work. It’s fallen behind many of the homes, all built around the same time in 1905, in the neighborhood. It seems that it’s primary value is that it was once the home of Lou Gehrig and he probably did some the renovations in the late 1920s and early 1930s himself. That seems a little tenuous and potential buyers seem to feel the same way.

The house did sell a few months ago,. The yard is overgrown, the back of the house is a mess, the interior needs work and updating, the new owner is hoping to sell it to the New York Yankees to establish a Lou Gehrig Museum on site. The Yankees don’t seem to be that interested – New Rochelle is not all that close to Yankee Stadium.

If you look at some of the other houses in the surrounding area, you can’t miss the fact that many of them are beautiful – grounds, exterior, interior – Colonials kept up over the last century.

Lou Gehrig’s house is a pretty solid example of the lingering effects of a foreclosure in the neighborhood.

Debt Games

wargamesI asked a friend to dive into the wild and wacky world of all things financial on the web.

He’s in his 50s, has three kids, a decent credit score, couple of credit cards, student loan, leased car. Pretty run-of-the-mill-doing-okay-not-drowning-in-debt (today) Mid-America – though he calls it ‘depressingly normal.’

First thing he did was, of course, to try to make a few bucks. Football season started a few weeks ago so Draftkings and FanDuel are all in with ad saturations and sponsoring shows on ESPN and the like. (What happened to last year’s uproar over them?)

He knows sports, follow the NFL, even reads a few things from writers who aren’t in the bag for the Patriots. So, he replied to the latest of the hundred or so Draftkings messages he gets a week.

This one was a free entry to a $10,000 payout. But it wasn’t. He clicked on it, filled out a imagelineup, submitted it, was informed that he had to deposit $10 for the future games he would undoubtedly want to play after the fun of the free game. The free game a few hundred thousand people were also playing, some with advanced math degrees and a full grasp of algorithms. So much for using sports knowledge is a path to riches.

lendingSo he turned to consolidating his debt. And maybe getting an extra few bucks to plop into his business. He clicked on one of the few hundred emails from Lending Tree sitting in his spam folder. He filled out a quick form – very easy – waited less than a minute and – *WOW* – he had offers. Lots of offers.

He could consolidate his credit card debt and – assuming he only paid monthly minimums – he would *SAVE* 60% per month. If he acted now. Plus, you get a next or $1000. He could click *DO IT!* now or he could read the fine print. Because he was doing this for me, he read the fine prin:. 36 months, $350 processing fee taken off the top of the loan, an effective rate of 30% – because it all went through Utah, a state with apparently generous usury laws – if they have them at all.

He could also shave off a hundred dollars per month for his auto lease by doubling the lease term from 36 months to 72. Lending Tree assured him that this was a great deal, so great he only had 48 hours to accept it. Having passed seventh grade math, he passed.

Because he signed up with Lending Tree he now gets two to three prescreened credit card offers a week. At a minimum. Most have fees, the lowest interest rate so far is 22%.

There’s more, but it’s all the same. He drew the line, though, at opening an account with Wells Fargo.

It’s pretty clear what the lesson is here, it’s a lesson from the 1980’s and a Matthew Broderick. Wargames. Which ended with this warning:

“The only way to win is to not play the game.”

So, Trolls …

 Nothing against trolls – the fairy tale, Tolkien type trolls, that is. You know the type, big, strong, intellectually challenged, easily influenced. Big, shambling brutes that you sorta feel sorry for.

Then, though, there are internet trolls. These you sorta feel sorry for the way you felt for the Nazis in Inglorious Basterds. I had one a few weeks ago, he commented (don’t look for it, it’s long gone) on a picture of me testifying before the Connecticut Legislature about  the mediation program.

He – I should point out he is not a follower of the blog or page, he just came out of the ether – made a comment I’ve heard a thousand times in a hundred different forms. This: “Why don’t your clients just pay their bills.”

So, I did a quick click over to the guy’s page, he’s a member of a quasi-official offshoot of the Republican party and an ardent follower of the guy who would make us all great again. The irony, of course, is drippingly clear, his icon of fiscal responsibility became rich by using the bankruptcy laws.

Be that as it may, I started thinking about a response to this type of self-righteous remark. I’m certain pointing out that my clients would pay if they could because no one likes being sued or foreclosed on would fall on closed ears. I also suspect that my previous posts about the reasons people miss payments, how everyday things like divorce, job loss, or illness effect the best intentioned ‘consumer,’ would be scoffed at even while I pointed out the inevitability of one of those things happening over the course of an average mortgage.

Nah, this guy has neither empathy nor a sense of history.

So, I’d tell him this – we should all care, deeply, because foreclosed on homes are blights 4677237in the neighborhood and anchors pulling down everyone’s home values. That’s it. Simple. Unless you are the only person in the country who believes that banks do a sparkling job of managing the homes they foreclose on, you want the people who love their homes to stay there.

That’s it. Foreclosures hurt the community in a host of ways. If you’re into draconian actions to punish delinquent homeowners because of … well, whatever your personal hobgoblins are … you would do well to remember that somewhere along the line, you’re harmed by every foreclosure that goes through in your community.

 

Debt, Dickens, and the Ghost of Christmas Yet to Come

So now, as an infallible way of making little ease great ease, I began to contract a quantity of debt.

~ Charles Dickens, Great Expectations

imageWhere would Charles Dickens have been without debt? Where would English Lit, Hollywood, and Christmas be without Dickens?

The running themes through Dickens’ long – and lucrative – career were crushing debt, workhouses, courts snarled in technicalities, poverty, sour credit, low wages, foreclosures, banks, scams, mass incarceration, sweatshops, social injustice … All very much applicable today.

If Dickens came back tomorrow, he’d be astonished by the speed of today’s communications; overwhelmed by the modern technologies used in finance; awed but probably pleased with the serialized novel on TV and Netflix, et al – I imagine him binge watching Breaking Bad and The Wire.

He’d find some things appallingly the same, others miraculous. He’d immediately recognize Pharma Bro, everyone running for President, the characters in The Big Short. Give him a week and he’d be working on a new novel.

Dickens had an unfailing eye for all this because he lived it. He grew up in a imagemiddle class family, comfortable, good at school, apparently fairly happy. All that was destroyed when he was twelve and his father was tossed into debtor’s prison (right). Charles’ mother and younger siblings went with him – as was the custom. Charles,was forced to pawn his school books, was sent off to a workshop to help pay off his father’s debts.

An inheritance saved the family though Dickens’ mother was adamantly opposed to his leaving work and forced him to stay there for long, unhappy months before he left to resume his studies. He rewarded her for that particularly slight through dozens of novels and plays. (From Dickens to Bob Dylan and Alanis Morissette, it’s never a good idea to upset an artist with wide reach).

In his early writing career – he was pretty much a prodigy from the start – he covered the courts and, briefly, Parliament.

He saw the system from every angle and he set out to attack it in the only way he could, through his writing, within the flexibility and thin protection of the novel. He opened Victorian eyes to the seamy underbelly of British wealth, society, and empire.

imageIn 1843 he turned his wrath to Christmas. At the time, many – including his good friend Washington Irving – felt that Christmas season was ebbing away from the poor and increasingly put upon middle-class.

He didn’t like what he was seeing, feeling, and he sat down to write a scathing pamphlet about the issue. It soon occurred to him that a novel would work much better, reach more people. In six weeks he crafted his ‘ghost story’, A Christmas Carol.

He published it himself in an effort to not be ripped off by his usual publisher.A Christmas Carol in prose. - caption: 'Marley's Ghost. Ebenezer Scrooge visited by a ghost.' In today’s parlance, it went viral. Immensely popular, even his [many] critics extolled it. Thousands and thousands of copies were sold, many more – particularly in the United States were ‘bootlegged’ – and it was immediately adapted for the stage. Dickens himself did stage readings of the entire manuscript. It was everywhere.

Humanitarianism, redemption, a dead-on accurate portrayal of early-Victorian England, it hit a nerve in Great Britain and the United States. It hit, hard, the people bearing the burden of the Industrial Revolution, changed the way everyone thought of the Christmas season.

imageHow a man who, when first confronted with poverty and homelessness, says, “Are there no prisons? Are there no workhouses?” Finds empathy is inspiring regardless of religious belief. A Christmas Carol was a great story, a strong, bitter indictment of the times, and it worked. It changed things. It has never been out of print.

Again, no debt, no Dickens, no Dickens, no holiday season? The latter may be a stretch, but it’s not unthinkable.

So, sometime in the next few days I plan on catching the 1950 Alastair Sim, A Christmas Carol – a great adaptation (out of dozens, beginning with Thomas Edison’s version in the early 1900s!).

And to all my readers, I hope it’s obvious, “God Bless Us, Everyone.”

 

Why I’ll Be Cringing During the Republican Debates (… it’s not what you think)

Cassidy-GOP-Debate-group-shot-1200There are three Republican Presidential debates over the next six weeks and they are sure to have a chilling effect on my clients. I’m not referring to the politics, or the issues, I’m talking about Donald Trump’s business background and what are sure to be continuing attacks by one or more of the other candidates.  Specifically, I’m talking about his bankruptcies. To be fair and accurate, his corporate bankruptcies.

In the September 16th debate, Carly Fiorino made this an issue. It was a fair point, of course, but the manner in which she asked Trump about his casinos’ financial problems rubbed me the wrong way.  She was accusatory and made the implication that Trump had used – the verb employed in its most pejorative manner – ‘government programs’ and had played the system. Equally implicit was ‘How could you have done such a lousy, irresponsible job?’

That may be good politics and was probably a fair question. The thing is, I work with people buried under credit card debt or who are facing foreclosure and attacking someone for using the bankruptcy system, and creating spin around it, does not help. These attacks simply serve to add to the stigma and shame that hangs over having debt issues.

It’s well known to lawyers, court officers, judges and anyone who is sees credit card collection matters and foreclosure cases on a regular basis, that the homeowners and consumers involved are slow to respond to court, if they respond at all.  Many people I work with are fighting the shame and embarrassment of having papers served on them at their homes and fear their neighbors, family members, friends and co-workers will find out about their money problems.  Because there’s still a strong Puritan work ethic in the U.S. inertia usually goes hand-in-hand with the perceived stigma of having unpaid debt.

People who start participating in the process late into the game are lined up outside my office door.  Most come heads hung low, sleep-deprived, embarrassed, ashamed, believing they deserve the abuse they sometimes get from collectors or their mortgage servicer.  I spend a lot of time and expend a lot of energy explaining- counseling, really – that, in most cases, they had little to no choice but to fall behind on their bills. You just can’t control certain life events- health, career, market forces, recessions, corporate mergers/bankruptcies/relocations/relevance; divorce; death; children; aging/ailing parents; severe weather; and a hundred other things.

Anything can happen, any time. Mortgages are thirty years long. Something bad will happen to most of us over thirty years that will prevent us from being able to pay our bills on time.  How many things actually last thirty years? The Thirty Years War didn’t last thirty years.  Most marriages certainly do not last thirty years.  Trump’s four bankruptcies occurred over a 25 year period, a time of total upheaval in the casino industry and the real estate market.

The shaming of those who seek out bankruptcy protection or mount a defense in court is unfortunately being reinforced heavily this presidential political cycle.  Bemoaning ‘free stuff’ and drawing dire inferences from another’s business decisions serve only to reinforce the feelings of shame and avoidance that my clients struggle with.

I’m hoping the candidates don’t continue down that road in the upcoming weeks, but I know they will.

Trying to shame a politician is one thing – though I have to believe Mr. Trump is pretty much shame proof.  Shaming someone for participating in a court process that has been a part of our judicial system going back to Colonial America is to shame the millions of Americans who have used the bankruptcy process, or foreclosure mediation, or credit card debt defense, to get a fresh start and subsequently recover financially and start giving back to the economy, is wrong.  It’s anti-Americans, if you will.    (The S on the end of Americans is intended.)

This is important to all of us, no one wants to own a home on a block where your neighbors’ houses are darkened by foreclosure.  That helps no one.

The DaVinci Code, Debt, and A Book Announcement

I’m working on a book – Got Debt? Essays from the Front Lines of America’s Debt Epidemic. I’ll be writing (and talking) a lot more about it over the coming weeks but I’m excited and hope you will be too.

For now, here’s a little bit from the introduction:

films.01If you read Dan Brown’s The DaVinci Code – or survived through the movie – you may remember the hero, Robert Langdon, talking about the mysterious Knights Templar, driven underground by King Philip IV of France in the early 1300s.

They knew great secrets’ and were persecuted, hunted down, thought wiped out but live on, unnoticed, influencing great events … you know the spiel.

Under Brown’s layers of conspiracy theories is a historical truth that should speak loudly to millions of us today. In reality, the Templars did indeed very much exist. They were fabulously wealthy, the result of certain extracurricular activities during the Crusades.

They were entrenched in France when Philip philippe_le_bel-1bcd9b4ascended the throne. It being France and the Middle Ages, Philip spent the majority of his time fighting the English. When peace broke out with them, he turned his attention to the Flemings.

Wars are, and have always been, expensive. Philip borrowed heavily from the Templars, probably far more than he or the kingdom could ever hope to repay.

He certainly could not maintain his wars or refill his empty coffers while repaying the Templars. For our purposes, think of being short of cash in the middle of February and needing to choose between paying the oil bill or CapitalOne.

Philip faced that same quandary, solved his fiscal quandary on Friday, October 13, 1307 by having the entire order of the Templars simultaneously arrested.End of the Templars, Philip burned his notes to them and…. well, the Templars as well. Then he confiscated all their holdings.
In one fell swoop Philip wiped out his debt and filed his coffers.

Philip burning his I.O.U.s
Philip burning his I.O.U.s

It’s good to be king.

While most of us can only dream of taking care of our debt with such . . . finality . . . it’s important to take a few lessons from this.First, debt, credit, debtors, creditors, collections, and defaults have been around for a very long time. Second, everyone – you, me, kings, queens, dictators, presidents, Founding Fathers – have debt. Lastly, we have options in how we handle that debt – not Philip’s options – but options still, and more than most people are aware they have.

Credit Theories . . .

I have a few theories – actually more than a few – but here’s a couple about credit for now.

First, I believe there’s a connection between credit cards and wages.

Back in the early 1990s, the credit card interest rate rules started to change and lots more banks were offering lots more credit cards to lots more people. So much so that today the average person has something like 8 credit cards.

image
As De Niro says in Casino – ‘just keep them playing.’

Over the years, this changed our thinking to something I call “credit card mentality.” Here’s an example: I spoke with a man who was in a rage because his credit card company had lowered his available credit limit.

“They took my credit,” was how he started the conversation. When I asked him to explain, he said he had a $10,000 limit, and a $4,000 outstanding balance he paid on every month. But then all of a sudden, the company lowered his credit limit to $4,000- so he had no more available credit. And he felt robbed.

This is a widespread problem – Americans consider their available credit as a savings account. We typically don’t have much (or any) cash in savings accounts, but we can always charge it. To the point where it has became a point of pride to have a high credit line(s).

What’s this have to do with wages? Well, another of my theories is that when people stopped worrying about having money in savings because they had plenty of available credit they stopped worrying about how much they were earning – they just charged when and where needed.

What happens then? No one demands higher wages, or if they do it’s muted by the ready access to credit . . . it takes the bite out of the bark. Thus the availability of credit has contributed to the stagnation of wages in the last generation (“the credit card generation”).

Is this sounding familiar at all? If you don’t have 3-6 months of earnings saved in a savings account, then maybe this is why. If your earnings haven’t kept up with your household expenses, maybe this is why. If you have credit card balances you can’t seem to pay down, maybe this is why.

Think about it, and stay tuned for tips from me on how you can move away from depending on credit and start saving. One way to improve your financial savviness is to register for my Your Money CONNection series- a free series of interviews about all things financial for Connecticut residents. Go here: www.moneyconnectionct.com.

U.S. Grant and Crushing Debt

A story from a friend of mine from his law school days – just another reminder that your financial condition today neither defines you or your future.

December 1991, I came out of New York Law School at 11:30 pm after a five hour Constitutional Law final. Cold, windy, raw, the World Trade Tower looming a few blocks away- I thought it ugly then, miss it now – the Commerce Clause ricocheting around my head like shrapnel in a tank (to the same effect), I did not have it in me to hike over to City Hall and the Lexington Avenue Express to Grand Central. Alone on the corner of Church and Worth, I flagged down a cab, jumped in, skipped eye contact with the driver, an average looking black guy who gave me a surprising, pleasant ‘Hello, where to?’

I responded with a mumbled, “Grand Central, don’t take Park”, nestled into the corner, eschewed the seatbelt, pulled my bag tight to my side, closed one eye, kept the other half opened to insure he did indeed stay away from Park. Took a bump on Sixth that forced me to open both eyes, I scanned the glass divider, taped to it behind the driver was this picture of Grant.

grantI looked at it, stared at it, held my curiosity for half a block before asking, “Why do you have a picture of Ulysses S. Grant on the glass.”

“Ah, you know him,” he sounded surprised – which, if you dwell on it, is perhaps a bit disturbing.

“Of course,” I answered, but not in that tone reserved for cab drivers who insist on engaging in conversation at exactly the moment you are in no mood to talk to anyone, never mind the stranger driving you the long way to your destination, “so why his picture?”

“I just turned forty,” he announced, and I knew at once where this was going, sat up, “and I’m driving a cab, trying to finish school, kinda’ the loser’s track, you know? So, I put that photo there to remind me that when Grant was forty he was bankrupt, lived with his wife and kids in his father-in-law’s house, worked as a clerk in a feed store . . . . talk about losers. . . eight years later he was President of the United States . . . . that’s it, man, nothing’s ever over.”

Just saying …