Last night, I was watching HGTV’s House Hunters and the show followed a real estate agent who was moving to Atlanta post-Hurricane Katrina. She was looking for a home in the Atlanta suburb of Decatur, setting her budget at $180,000. She looked at three homes, the cheapest of the three priced at $225,000, more than $40,000 over her budget. However, when it came time to choose her home, she decided to purchase the most expensive of the three – a $280,000 5 bedroom home, $100,000 over her budget. In justifying the purchase, she noted that as a real estate agent, she knew that she had mortgage options that she could afford – like an “interest-only” home loan.
Fast-forward to a few years later, with the Atlanta real-estate market slumping like the rest of America. I wonder if House Hunters went back to visit this woman, if she would still be in her home, or realizing that she had no equity in the house she “purchased” had decided that it was better for her to just go into foreclosure. One wonders.
I write that because I couldn’t help but think about the current AIG situation while watching the show last night. AIG is presently the most hated company in America, with some Americans spewing death threats at executives of AIG because the company paid retention bonuses to many employees. Although the people now employed at AIG are not the employees responsible for investing in risky mortgage-backed securities (caused by people like the woman in the House Hunters show) that were part of the problem (those employees have long since left), those who stuck around to clean up the problem are now being accused of being the cause and culprit for the “greed” that tore the American economy apart. Yes, well-educated, successful individuals living in the tony Connecticut suburbs of NYC are much easier to blame than your cousin or neighbor who bought too much house that they could not afford.
But even more so, even on a day when Senator Chris Dodd fesses up and admits that at the Obama administration’s encouragement, he crafted a provision in the “Recovery” legslation that excluded Contractual Executive Bonuses from consideration in the Executive Pay limitations, you still have Congress feigning outrage at the target of the new AIG CEO. The new CEO, of course, having taken over the embattled company after the company first received bailout funds and who took over the company to try to restructure it. You have Congressmen, like Barney Frank, who voted for the offending legislation that REFUSED to regulate the bonuses showing indifference to death threats to AIG’s employees. And that frankly, is the most disgusting part of it.