I've been unemployed for 3 years. Anyone beat that?

Page 7 of 10 [ 142 posts ]  Go to page Previous  1 ... 4, 5, 6, 7, 8, 9, 10  Next

ColdEyesWarmHeart
Velociraptor
Velociraptor

User avatar

Joined: 28 Oct 2012
Age: 39
Gender: Female
Posts: 477
Location: 51° North

04 Nov 2012, 3:56 am

Bloodheart wrote:
Employment Support Allowance is notoriously hard to get onto so I'm experiencing stress as a result of trying to get onto this benefit, but my only other option is Job Seekers Allowance where there is no support and no allowances made for disability, I was on Job Seekers Allowance for a good few years but I found it made my autism and health suffer due to stress and being forced to do unsuitable activities. Honestly being on Job Seekers Allowance has done me so much harm I can't even express how much it's changed me.


Aww, here's a hug. Being on JSA is just hideous, isn't it? :cry:



WantToHaveALife
Veteran
Veteran

User avatar

Joined: 16 Sep 2012
Age: 32
Gender: Male
Posts: 1,617
Location: California, United States

05 Nov 2012, 3:30 pm

AngelRho wrote:
WantToHaveALife wrote:
ColdEyesWarmHeart wrote:
I haven't had a permanent job since early 2008. I've been an agency temp since then. I manage to get work on average about 3 days a week, which isn't great to live on but a heck of a lot better than being on benefits. (And the whole procedure of going and signing-on (that's the process of going to the Jobcentre once a fortnight to sign for your benefit money) is hellish in itself.) Or it was, the temp wages were pretty good when I first started doing it but now it isn't much above minimum wage.

A few times I've had temp-to-perm roles but never been kept on permanently, I've never fitted in and often get bullied out of jobs (one memorable example, the clique I worked with were sabotaging my work) even though the bosses are happy with my work, my face doesn't fit there.

On the other hand, I always get asked back by every company I've temped for and my temp agency staff know they can call me last-minute to work that day, and I'll show up on time and ready to do a day's work. It's a shame this can't translate into success in a permanent job.

Another problem is that I have a great reputation for being able to work alone on boring stuff with no supervision, so I always get sent for those kind of jobs and I like them, but it means I don't have the team-player experience on my CV that every company seems to be looking for now.


seriously, what caused this recession to happen? could it have been prevented?

Banks were handing out mortgages without actually checking to make sure borrowers could actually make their payments. To bring in extra money, they were selling securities on those mortgages. That created a glut of MBA's fresh out of college who were trained to think they'd be millionaires by the time they were 30, and their egos didn't allow them to understand they were just living in Idiotville. So along with their $200,000 McMansions, $50,000 student loans, their $30,000 car notes, and over $10,000 on credit cards, they found that their $30,000/yr jobs didn't even pay 1/4 of a month's bills.

The first thing that happens is the credit card companies turn the accounts over to collections. What they don't realize is credit cards are unsecured, so collectors can't do a damned thing about the debts. So they try to fudge on house payments or student loans because they let themselves be intimidated by collections. They can't give up the car because that's how they get to their jobs. They HAVE to have that shiny brand-new car when the sensible thing to do is just get a $3000 beater they can pay cash for. Different things can happen, but they all follow the same pattern.

The next thing that happens is the car gets repo'd, which means Mr. Green MBA can't get to work, which means he gets fired. No job=no house payment, which in turn = mortgage default, followed by foreclosure.

And that's where the trouble begins for EVERYONE. When a bank forecloses, they sell the house at auction. There's no way in hell that they'll get what's owed. So what do they do? They sue the former homeowner for the difference. Well, you can't squeeze blood from a turnip. So how do banks recoup on their losses? They DON'T.

So what happens next? Interest rates for new loans go up, interest rates on long-term investments go down. AND there's a glut of homes on the market. No demand + high supply = devalued homes. So the people who realize they're upside down on house and car notes before it's too late can't even GIVE their homes and cars away to get out from under their debts. The bubble has burst. Banks can't get their money, so the money just bleeds out. Businesses hedging themselves through bank stocks lose their investment income. All those investors who were depending on mortgage securities for income find themselves going bankrupt. Which means businesses either close or lay off employees just to stay afloat.

So you have HUGE banks in control with most everyone's debts going nearly bankrupt and pulling all their investors down with them. They are "too big to fail," so you have government bailouts. People can't afford to borrow money with interest rate hikes, so they stop buying cars. Which means the Big 3 auto companies aren't selling cars. Which means they have to lay off employees. And there are a LOT of employees, and the unions aren't having that. So the government has to bail them out, too. The Fed increases how much deposit insurance banks can claim, and they start printing more money, which decreases the value of the US dollar. Prices of groceries and gasoline skyrocket. Which threatens the profitability of farmers. And more people apply for food stamps. And with increased unemployment, more people are filing unemployment insurance claims, which eventually means selling more bonds to China or raising taxes, most likely on the middle class. Either way, there are MASSIVE national debt increases that someone is ultimately going to have to pay for.

Technically, that's how we got here with banks having absolutely no accountability for the money they loaned people.

The real problem is overall people not knowing how handle their money.

First of all, "follow your dreams" is just bad advice for parents to give their kids and for teachers to give their students. Developing a strong work ethic is the first step in training kids for "real life." And it helps to lead by example in showing young people what being a good money manager looks like. Before you follow your dreams, first get yourself on solid financial footing with a "real job" before trying to do something big. My dream? I write music. Is that something that brings in a lot of money? Only for certain people, of which I am not. So what do I do? I have a church gig that pays competitively, teach piano lessons at a college extension, play in a band, and I take every gig I get offered. Sure, I'm still under the poverty line, but my income alone pays almost all of our household bills. Meanwhile I write and perform my own music, get some of my work on Youtube and Soundcloud occasionally, and network every chance I get. I don't how long it's going to take to get some kind of payoff, though I did make a little money on a work-for-hire project for a non-profit I've been courting for the last few years. I'm also saving every penny I can for some equipment purchases for something that could potentially be a huge money-maker that I could also use to promote my own music. It's a dream worth working for, but the point is you can't follow your dreams if you don't have a plan.

Second, it is generally a bad idea to incur massive student loans for a college education. Something is terribly wrong when someone can have $140,000 student loans for a degree in journalism and end up being a hair stylist. There's nothing wrong with being a hair stylist, but it's not something you need a $140,000 degree for in an unrelated field!

Third, unsecured debts are just a bad idea. If you want something, earn the money and save up for what you want. Don't use credit cards. EVER. FOR ANYTHING.

Fourth, as I've already said, you don't need to pay $20,000+ for a new car. $3,000 is plenty enough for something that will get you to and from your job. If you do really well in your career and you have profits pouring in, sure, go for it. But you don't need anything you can't pay cash for.

Fifth, don't try to buy the nice 5-bedroom McMansion in your first 5 years on the job. Just rent. When things start working out for you, buy a 3-bedroom trailer on the edge of town for between $35,000 and $50,000 (to include the lot). And make sure you get a 15 year, fixed rate on it AND you can afford those payments. If you can't afford it, DON'T sign the mortgage!

More than anything, always pay IN CASH. Sure, that means you'll have zero credit--but if you're paying in cash for everything what do you need credit for? House mortgage? All you need is a manual underwriter and the bank will hand you all the money you need on zero credit. All you have to do is show that you have good income and no bad debt--and I mean not so much as an unpaid library fine. Just don't do anything stupid and you'll save yourself the pain that a lot of poor MBA graduates are suffering through while they live in their parents' basements. If you want to be rich, do what rich people do. If you want to be poor, do what poor people do. It's that simple. And if more people understood that, we wouldn't have idiotic situations like housing market bubbles that end up screwing over the vast majority of us.


and why, how come the Banks did not keep a sharper eye out? did it ever occur to them that this would become a problem?



Nick9075
Snowy Owl
Snowy Owl

User avatar

Joined: 19 Sep 2011
Gender: Male
Posts: 134
Location: USA

06 Nov 2012, 7:23 am

managertina wrote:
Til last year I was on multiple contracts. It is hard to find longterm work. Many of my friends have partners unemployed for long periods. We are not alone.


Actually, I don't anyone else who is unemployed and where I am in the USA (Boston MA) the economy & job market is booming. I haven't had a perm job since 2008 and have gotten fired from many 'temp to perm ' positions for vague reasons. recently I was let go from a one month assignment because according to the recruiter the comp;any decided they needed someone with more experience for the role I had (project analyst).



steviewonderau
Snowy Owl
Snowy Owl

User avatar

Joined: 20 Jul 2012
Age: 37
Gender: Male
Posts: 161

06 Nov 2012, 7:40 am

I am unemployable. Applying for lots of jobs online by spamming emails and not getting any responses is soul destroying. I rarely apply to places in person because I have extreme social anxiety. I been to recruitment agencies to sign up on their databases have made me waste time for nothing. There is little or no hope at all if you are long term unemployed.



Nick9075
Snowy Owl
Snowy Owl

User avatar

Joined: 19 Sep 2011
Gender: Male
Posts: 134
Location: USA

06 Nov 2012, 7:42 am

steviewonderau wrote:
I am unemployable. Applying for lots of jobs online by spamming emails and not getting any responses is soul destroying. I rarely apply to places in person because I have extreme social anxiety. I been to recruitment agencies to sign up on their databases have made me waste time for nothing. There is little or no hope at all if you are long term unemployed.


The problem is that if a job doesn't work out thru these recruitment agencies, they blacklist you forever



steviewonderau
Snowy Owl
Snowy Owl

User avatar

Joined: 20 Jul 2012
Age: 37
Gender: Male
Posts: 161

06 Nov 2012, 7:45 am

Unempolyment may lead to long-term unemployment leading to becoming unemployable and welfare dependent/poverty for the rest of your life.



DarthMetaKnight
Veteran
Veteran

User avatar

Joined: 16 Feb 2010
Gender: Male
Posts: 6,124
Location: The Infodome

06 Nov 2012, 4:50 pm

My parents won't let me beat that. They're libertarians so they allow me to believe whatever I want but they won't let me not work.


_________________
Synthetic carbo-polymers got em through man. They got em through mouse. They got through, and we're gonna get out.
-Roostre

READ THIS -> https://represent.us/


puddingmouse
Veteran
Veteran

User avatar

Joined: 24 Apr 2010
Age: 33
Gender: Female
Posts: 9,246
Location: Cottonopolis

06 Nov 2012, 7:43 pm

DarthMetaKnight wrote:
My parents won't let me beat that. They're libertarians so they allow me to believe whatever I want but they won't let me not work.


Then what would they do if you literally could not get a job? If they own their own business, they could employ you, but not everybody's parents do.



hanyo
Veteran
Veteran

User avatar

Joined: 30 Sep 2011
Age: 45
Gender: Female
Posts: 4,427

07 Nov 2012, 3:41 am

DarthMetaKnight wrote:
My parents won't let me beat that. They're libertarians so they allow me to believe whatever I want but they won't let me not work.


I never understood that either. If my mother insisted on "making" me work it's not like she could just force a job to hire me. I guess you are good at getting jobs and not unemployable? If my mother told me get a job or gtfo I'd be homeless. I don't even know where to apply for any jobs in my area except for fast food places and I wouldn't even be able to do those jobs if they would even hire me. My only job interview ever was at a fast food place and they didn't hire me.



Last edited by hanyo on 07 Nov 2012, 6:55 am, edited 1 time in total.

steviewonderau
Snowy Owl
Snowy Owl

User avatar

Joined: 20 Jul 2012
Age: 37
Gender: Male
Posts: 161

07 Nov 2012, 6:46 am

Nick9075 wrote:
steviewonderau wrote:
I am unemployable. Applying for lots of jobs online by spamming emails and not getting any responses is soul destroying. I rarely apply to places in person because I have extreme social anxiety. I been to recruitment agencies to sign up on their databases have made me waste time for nothing. There is little or no hope at all if you are long term unemployed.


The problem is that if a job doesn't work out thru these recruitment agencies, they blacklist you forever


that sounds right the system does not really want to employ the unemployed/unemployable. we are seen as high risk and employers/recruiters do not want to hire the unemployable. people with jobs can easily find another job. if you end up long term unemployed it is unlikely to change.



WantToHaveALife
Veteran
Veteran

User avatar

Joined: 16 Sep 2012
Age: 32
Gender: Male
Posts: 1,617
Location: California, United States

07 Nov 2012, 4:24 pm

i hate how george bush was elected twice



BlueMax
Veteran
Veteran

User avatar

Joined: 27 Aug 2007
Age: 45
Gender: Male
Posts: 5,285

07 Nov 2012, 11:05 pm

...aaaaaand fired today. Damn. While it's a relief to leave a toxic environment, it's also yet another failure in the eyes of those who make the critical decisions. *sigh*



AngelRho
Veteran
Veteran

User avatar

Joined: 4 Jan 2008
Age: 41
Gender: Male
Posts: 7,910
Location: The Landmass between N.O. and Mobile

08 Nov 2012, 10:50 am

WantToHaveALife wrote:
and why, how come the Banks did not keep a sharper eye out? did it ever occur to them that this would become a problem?

Well, there are a couple of reasons. For one, there was no regulation. They could do whatever they wanted. This is one of those "blame Bush" kinds of things because many Republicans believe the government should stay out of regulating businesses; rather, let them regulate themselves and leave it up to the market who survives and who fails. It's a much more sensible way of looking at it, IMO, but that's debatable.

Also, it SEEMED like everything was going really well. Mortgages are not unsecured loans, which means if someone fails to make their payments, the banks can just take the property, sell it at auction, and sue the former occupant for the difference.

My wife and I got caught up in this whole thing, btw, but we were trying to do the right thing. We had some $90k that we put down on a $140k home, so we then had a fixed rate on a $50k mortgage for 15 years. Again, it was the sensible thing to do. The originator of the loan promised us that with the deal we cut our payments wouldn't increase. Then we got sold to Chase, which is a HUGE bank, and then we had hidden fees attached to our mortgage payments. We went from paying an affordable $750 to paying well over $1000. We had a baby but no money to pay for the hospital. We're doing pretty good, so what do we do? The hospital pressures us into paying for it with a credit card, so being young and stupid we fall for it. Interest rates on credit cards will eat you alive, so it soon became obvious we couldn't afford those payments. So, no big deal, we take out a 2nd mortgage for $20k to cover it and make lower-interest payments. We're stretched pretty thin, but we both have decent jobs for the moment. So I lose my job and decide to start teaching piano lessons just to bring in SOME income--which ends up not doing so well for the first few months, but my wife is bringing in just enough to keep us afloat. Then we have another baby, and within 2 weeks my wife gets her (literal) pink slip on a post-it note. Classy right? She got fired for getting pregnant and having a baby. About 3 months prior to this, we're seeing the writing on the wall, so we contact a realtor and get a "for sale" sign up in our yard. We start making our mortgage payments, etc. from our emergency fund. Six months out of work, the house FINALLY short sells, we pay the difference from equity, and with no more options left to us we move into a motel. Our credit is RUINED at this point, so we can't rent, we take all the money we have left out of the bank, and we start paying for everything in cash. We are officially homeless people at this point, and we remain homeless for about 2 1/2 months. Now it's summer, I've been teaching in the evenings at a college extension in addition to my day students for about a year and a half by now, and I take some extra students during the day while school is out. The wife got a job offer the day the house sold, ironically enough, and we get a lead on a trailer and an acre of land going for $35k. I convince my wife on giving me a cut for equipment purchases so I can do other things to bring in some more money, and we buy a portable building for the extra space in addition to the metal shed already on the property. All our equity is GONE, but at least we're in full ownership of real property without having to make mortgage payments. And that's more than our former wealthy neighbors can say when we were struggling to make payments on our 2-story, 5-bedroom place on a city lot.

The point of me telling that whole story--and that's really barely half of it--is that we were young and stupid and made a lot of poor choices. Real estate is a good family investment. But kids like us have to learn to look at the big picture with more maturity than we had at the time and understand when a financial status quo is certain and when it is not certain. We thought we had that certainty, but our jobs weren't as secure as we thought they were. We figured that out two years too late, but at least we came enough to our senses just enough to figure out our situation was bad and trying to hang on to our house was not a feasible plan. What happened with the rest of the country was not unlike what happened to us. The difference is that people couldn't admit to how bad things were and found themselves in worse situations they couldn't get out of. Their houses and their BMW's were status symbols they couldn't let go until the banks finally ripped them away.

Now back to your question...

Up to that point, the housing market had being doing extremely well. There was a high demand for housing, more people were graduating with college degrees, and you had more professionals in higher paying jobs right out of college. So investing in mortgage securities had become an enormously lucrative and low-risk investment for banks. If you've ever had a mortgage, you know how it works. You start out with a local loan originator, which may be a big bank if you have a local branch, or it might be a small local/regional bank that nobody outside your area has ever heard of. These smaller banks don't have that kind of money to loan you. So to make up for the money going out, they will typically sell the originating loan to a bigger bank that does have the money. Because the little bank originated the loan, they make a profit when they sell the mortgage to a larger bank. The big bank you get sold to is the one that will collect the interest on your loan, so they aren't concerned about losing a few hundred or a few thousand dollars to the local bank. This is a good arrangement for everyone.

The originator doesn't have to worry about whether you pay the loan or not. It's no longer their problem after they sell you to someone else. The big national or multi-national banks DO have to worry about it, but they're big enough if they lose a few hundred loans to default, it's not a big deal. This leads to local originators generating mortgages like crazy to boost commissions for bank platform associates (like loan officers, etc., as opposed to tellers) and bring in profits for that bank when they sell their debtors to the big providers.

AS LONG AS the housing values increase AND people have high-paying jobs, a few risky loans are OK. But what happened was you had thousands of platform employees originating thousands or millions of risky loans. Remember, they don't give a rat's rear end if the debtor can actually make the payments. They're just trying to get as many customers as they can so they can get their commissions and bonus checks and go home. If the bank they sell to fails, it's not their problem. And to make sure the profits keep coming in, bank executives where the loans originate encourage this kind of behavior.

Now, you might wonder how it is people who can't afford loans can even get them. Most of the bad loans were not fixed-rate loans. Fixed-rate loans will often be short-term loans with a lower interest rate that take lower-risk borrowers. What banks did for higher-risk customers was offer low- or no-money-down loans at interest rates that adjusted over time. What would happen is that the borrower would start out at a low interest rate, low payment schedule. It's assumed that a young, green professional fresh out of college will work hard, earn promotions, etc. and be able to match a ballooning payment schedule over the course of 30 YEARS. Just as my wife and I learned the hard way, there is no guarantee that this will happen, but you can't tell an over-ambitious MBA that on his first year on the job. After all, MBA programs do a fabulous job of teaching graduate students who to SPEND money, but they teach nothing about saving money and personal finance. Getting an ARM is great for a short-term investment purchase AS LONG AS YOU KNOW you'll have a buyer. People were using this to buy their first homes as a residence, and they just didn't make the kind of money they expected to.

An acquaintance of mine lives by two rules: 1) Everything in life boils down to two things: "honey" and money. 2) Never, EVER reward bad behavior. Well, money is the game at banks. And guess what? They were using it to reward bad behavior.

So you now have a high demand for housing, which leads to increased building, and all this is fed by easy credit. Eventually, as always happens, the supply:demand breaks even, which leads to stagnant home values. When people get in trouble, lose jobs, and so forth, they can't even GIVE their homes away. Home values plummet. People go into foreclosure (remember, you can't sell if nobody is buying, so foreclosure is just a matter of time).

Now, this isn't a big deal when it happens to a few thousand homeowners in default, because banks can recoup at foreclosure auction. Either that, or they write off their losses, impose restrictions on credit, go through the usual pains of devalued stock, pray for the next quarter to be a better one, and move on with life. It's when there are thousands or millions defaulting on loans and there is NO money to be had (because people quit buying houses) to make up for it.

The real tragedy is that instead of the government sticking it to these guys and forcing them to take responsibility, the government propped up the banks that held the most securities, i.e. rewarding bad behavior. To insure that this cannot ever happen again, the government should have just let them burn, let the good guys buy out the bad guys, and return the business of credit to the local guys who both need the money the most AND actually have the means to pay the money back. The only reasoning I see behind "too big to fail" is that too many foreign investors might have come in, and it would have been more in the government's interest to make sure that Americans are actually in control of the American economy and not foreign corporations. But the government could have done otherwise by directly overseeing how failed banks get carved up, and I think more execs should have gotten lengthy prison terms for the roles they played in the whole fiasco.

Now, if you think about all this, you'll realize that it's all about to happen again in a different market: Education. Ordinarily, if a local bank president hears about a loan officer at a branch making an unsecured loan to an 18-year-old with no job for $20,000 or more, that loan officer will be out of a job by the end of the next day. But that's precisely what happens with student loans. The difference is that student loans are government-insured. The government has to pay the bank when graduates default on their loans. So, let's say you have a chiropractor who gets loans in excess of $200,000 just for school. Somehow or another, he's got to get some overhead for setting up his office, marketing, and other startup costs just to get patients in the front door. He HAS to charge an exorbitant amount of money just to break even in his first year, and being an expensive doctor won't really help get patients who might be able to find cheaper alternatives elsewhere. As business improves, he has to increase his fees to remain reasonably profitable. Anyone with a strong work ethic can justify doing that. But if he doesn't do the work, he doesn't get the money. Even going crazy paying off student loans, the earliest he can pay them off is in 5 years, and that's assuming he doesn't keep any money for himself.

What's happening is increasingly people are getting college degrees that are useless in real-world scenarios, and they aren't willing to work hard at whatever work they CAN get to take care of those loans. So increasingly you're going to see more professionals defaulting on student loans. Which means the government, NOT the banks, are going to step in and ruin their lives. You can escape the bank. You can NOT escape the government. What will happen is the government will pay out the loans to the bank and be unable to attach out-of-work graduates. They'll end up homeless since they can't pay liens on their homes, etc. And since the government won't be able to function without making up for the difference, taxes will increase and subsidized student loan programs will shut down. No education=no job, or at least that's the current illusion the banks and universities are selling. So you'll eventually end up with a ruined economy with a redonkulously massive unemployment rate--at least until people figure out you don't have to have a college education to do whatever you want.

And then the inevitable happens... Universities can't pay their professors, budgets get cut, jobs are lost, schools get consolidated or closed down, and academia returns to the privileged few who actually CAN afford it. Which means it will turn increasingly conservative. I don't know your political views, but depending on perspective that might be a good thing or it might be a bad thing. With dramatically increased competition for university positions, the academy will turn into just another "old boys" club. But one thing is for sure: the QUALITY of graduates coming from those institutions will be vastly superior to what it is now since the degrees earned will be worth a lot more than the paper they're printed on.

With the housing market, there is increased demand for rentals since people can't get money to buy McMansions. Property values are already back on the way up, banks face restrictions on who they can actually lend to, and buyers are the kind of people with the financial independence to make good on home loans. There has been a gradual return to normalcy, and the same thing will happen with higher education. However, people NEED housing. The worst thing that could happen for higher education is people figure out they don't need it.

OK, yes, you need advanced degrees for teachers, doctors, lawyers, and certain other types of professionals, and, of course, if you want to make a life of academia you must have a Ph.D. I'm not talking about that. I'm talking about people like me who owe more than $50k to study composition and end up teaching piano lessons. I don't regret the experience I got as a composition student. I also love my students. And I'd do it all over again with maybe the exception of making different choices once I got out of college. I knew the risks of trying to be an independent, freelance composer, and I accepted that. The trouble is you have people who honestly believe that getting a piece of paper is going to solve all their problems and set them up for a glorious career in their field of study. It's a lie or an illusion, and these kids get in all kinds of trouble when they get out and find that the "real world" is HARD and doesn't hand you your dreams on a silver platter. It's taken me nearly 5 years doing what I do to start making mature business decisions. Heck, my supervisor resisted allowing me to increase my fees until I started bringing my children to work, and I hit her with a triple-dose of reality--I can't work just to pay for daycare. Within a month, I was making TRIPLE what I had been on average--heck, triple what I had made in my best month in 4 years of teaching. I didn't need a master's degree to pull this off, either. But that's not why I got my degree. Most kids get the degree betting on using it and end up being unable to. Most kids coming out of college tend to think that way, which is why we'll be facing another economic crisis over silly student loans.

Well, not so much economic as it is employment, but that will be a problem our government will have to face, and they'll pass their pain and misery right back to us one way or another. PLEASE prove me wrong here!



WantToHaveALife
Veteran
Veteran

User avatar

Joined: 16 Sep 2012
Age: 32
Gender: Male
Posts: 1,617
Location: California, United States

08 Nov 2012, 9:06 pm

AngelRho wrote:
WantToHaveALife wrote:
and why, how come the Banks did not keep a sharper eye out? did it ever occur to them that this would become a problem?

Well, there are a couple of reasons. For one, there was no regulation. They could do whatever they wanted. This is one of those "blame Bush" kinds of things because many Republicans believe the government should stay out of regulating businesses; rather, let them regulate themselves and leave it up to the market who survives and who fails. It's a much more sensible way of looking at it, IMO, but that's debatable.

Also, it SEEMED like everything was going really well. Mortgages are not unsecured loans, which means if someone fails to make their payments, the banks can just take the property, sell it at auction, and sue the former occupant for the difference.

My wife and I got caught up in this whole thing, btw, but we were trying to do the right thing. We had some $90k that we put down on a $140k home, so we then had a fixed rate on a $50k mortgage for 15 years. Again, it was the sensible thing to do. The originator of the loan promised us that with the deal we cut our payments wouldn't increase. Then we got sold to Chase, which is a HUGE bank, and then we had hidden fees attached to our mortgage payments. We went from paying an affordable $750 to paying well over $1000. We had a baby but no money to pay for the hospital. We're doing pretty good, so what do we do? The hospital pressures us into paying for it with a credit card, so being young and stupid we fall for it. Interest rates on credit cards will eat you alive, so it soon became obvious we couldn't afford those payments. So, no big deal, we take out a 2nd mortgage for $20k to cover it and make lower-interest payments. We're stretched pretty thin, but we both have decent jobs for the moment. So I lose my job and decide to start teaching piano lessons just to bring in SOME income--which ends up not doing so well for the first few months, but my wife is bringing in just enough to keep us afloat. Then we have another baby, and within 2 weeks my wife gets her (literal) pink slip on a post-it note. Classy right? She got fired for getting pregnant and having a baby. About 3 months prior to this, we're seeing the writing on the wall, so we contact a realtor and get a "for sale" sign up in our yard. We start making our mortgage payments, etc. from our emergency fund. Six months out of work, the house FINALLY short sells, we pay the difference from equity, and with no more options left to us we move into a motel. Our credit is RUINED at this point, so we can't rent, we take all the money we have left out of the bank, and we start paying for everything in cash. We are officially homeless people at this point, and we remain homeless for about 2 1/2 months. Now it's summer, I've been teaching in the evenings at a college extension in addition to my day students for about a year and a half by now, and I take some extra students during the day while school is out. The wife got a job offer the day the house sold, ironically enough, and we get a lead on a trailer and an acre of land going for $35k. I convince my wife on giving me a cut for equipment purchases so I can do other things to bring in some more money, and we buy a portable building for the extra space in addition to the metal shed already on the property. All our equity is GONE, but at least we're in full ownership of real property without having to make mortgage payments. And that's more than our former wealthy neighbors can say when we were struggling to make payments on our 2-story, 5-bedroom place on a city lot.

The point of me telling that whole story--and that's really barely half of it--is that we were young and stupid and made a lot of poor choices. Real estate is a good family investment. But kids like us have to learn to look at the big picture with more maturity than we had at the time and understand when a financial status quo is certain and when it is not certain. We thought we had that certainty, but our jobs weren't as secure as we thought they were. We figured that out two years too late, but at least we came enough to our senses just enough to figure out our situation was bad and trying to hang on to our house was not a feasible plan. What happened with the rest of the country was not unlike what happened to us. The difference is that people couldn't admit to how bad things were and found themselves in worse situations they couldn't get out of. Their houses and their BMW's were status symbols they couldn't let go until the banks finally ripped them away.

Now back to your question...

Up to that point, the housing market had being doing extremely well. There was a high demand for housing, more people were graduating with college degrees, and you had more professionals in higher paying jobs right out of college. So investing in mortgage securities had become an enormously lucrative and low-risk investment for banks. If you've ever had a mortgage, you know how it works. You start out with a local loan originator, which may be a big bank if you have a local branch, or it might be a small local/regional bank that nobody outside your area has ever heard of. These smaller banks don't have that kind of money to loan you. So to make up for the money going out, they will typically sell the originating loan to a bigger bank that does have the money. Because the little bank originated the loan, they make a profit when they sell the mortgage to a larger bank. The big bank you get sold to is the one that will collect the interest on your loan, so they aren't concerned about losing a few hundred or a few thousand dollars to the local bank. This is a good arrangement for everyone.

The originator doesn't have to worry about whether you pay the loan or not. It's no longer their problem after they sell you to someone else. The big national or multi-national banks DO have to worry about it, but they're big enough if they lose a few hundred loans to default, it's not a big deal. This leads to local originators generating mortgages like crazy to boost commissions for bank platform associates (like loan officers, etc., as opposed to tellers) and bring in profits for that bank when they sell their debtors to the big providers.

AS LONG AS the housing values increase AND people have high-paying jobs, a few risky loans are OK. But what happened was you had thousands of platform employees originating thousands or millions of risky loans. Remember, they don't give a rat's rear end if the debtor can actually make the payments. They're just trying to get as many customers as they can so they can get their commissions and bonus checks and go home. If the bank they sell to fails, it's not their problem. And to make sure the profits keep coming in, bank executives where the loans originate encourage this kind of behavior.

Now, you might wonder how it is people who can't afford loans can even get them. Most of the bad loans were not fixed-rate loans. Fixed-rate loans will often be short-term loans with a lower interest rate that take lower-risk borrowers. What banks did for higher-risk customers was offer low- or no-money-down loans at interest rates that adjusted over time. What would happen is that the borrower would start out at a low interest rate, low payment schedule. It's assumed that a young, green professional fresh out of college will work hard, earn promotions, etc. and be able to match a ballooning payment schedule over the course of 30 YEARS. Just as my wife and I learned the hard way, there is no guarantee that this will happen, but you can't tell an over-ambitious MBA that on his first year on the job. After all, MBA programs do a fabulous job of teaching graduate students who to SPEND money, but they teach nothing about saving money and personal finance. Getting an ARM is great for a short-term investment purchase AS LONG AS YOU KNOW you'll have a buyer. People were using this to buy their first homes as a residence, and they just didn't make the kind of money they expected to.

An acquaintance of mine lives by two rules: 1) Everything in life boils down to two things: "honey" and money. 2) Never, EVER reward bad behavior. Well, money is the game at banks. And guess what? They were using it to reward bad behavior.

So you now have a high demand for housing, which leads to increased building, and all this is fed by easy credit. Eventually, as always happens, the supply:demand breaks even, which leads to stagnant home values. When people get in trouble, lose jobs, and so forth, they can't even GIVE their homes away. Home values plummet. People go into foreclosure (remember, you can't sell if nobody is buying, so foreclosure is just a matter of time).

Now, this isn't a big deal when it happens to a few thousand homeowners in default, because banks can recoup at foreclosure auction. Either that, or they write off their losses, impose restrictions on credit, go through the usual pains of devalued stock, pray for the next quarter to be a better one, and move on with life. It's when there are thousands or millions defaulting on loans and there is NO money to be had (because people quit buying houses) to make up for it.

The real tragedy is that instead of the government sticking it to these guys and forcing them to take responsibility, the government propped up the banks that held the most securities, i.e. rewarding bad behavior. To insure that this cannot ever happen again, the government should have just let them burn, let the good guys buy out the bad guys, and return the business of credit to the local guys who both need the money the most AND actually have the means to pay the money back. The only reasoning I see behind "too big to fail" is that too many foreign investors might have come in, and it would have been more in the government's interest to make sure that Americans are actually in control of the American economy and not foreign corporations. But the government could have done otherwise by directly overseeing how failed banks get carved up, and I think more execs should have gotten lengthy prison terms for the roles they played in the whole fiasco.

Now, if you think about all this, you'll realize that it's all about to happen again in a different market: Education. Ordinarily, if a local bank president hears about a loan officer at a branch making an unsecured loan to an 18-year-old with no job for $20,000 or more, that loan officer will be out of a job by the end of the next day. But that's precisely what happens with student loans. The difference is that student loans are government-insured. The government has to pay the bank when graduates default on their loans. So, let's say you have a chiropractor who gets loans in excess of $200,000 just for school. Somehow or another, he's got to get some overhead for setting up his office, marketing, and other startup costs just to get patients in the front door. He HAS to charge an exorbitant amount of money just to break even in his first year, and being an expensive doctor won't really help get patients who might be able to find cheaper alternatives elsewhere. As business improves, he has to increase his fees to remain reasonably profitable. Anyone with a strong work ethic can justify doing that. But if he doesn't do the work, he doesn't get the money. Even going crazy paying off student loans, the earliest he can pay them off is in 5 years, and that's assuming he doesn't keep any money for himself.

What's happening is increasingly people are getting college degrees that are useless in real-world scenarios, and they aren't willing to work hard at whatever work they CAN get to take care of those loans. So increasingly you're going to see more professionals defaulting on student loans. Which means the government, NOT the banks, are going to step in and ruin their lives. You can escape the bank. You can NOT escape the government. What will happen is the government will pay out the loans to the bank and be unable to attach out-of-work graduates. They'll end up homeless since they can't pay liens on their homes, etc. And since the government won't be able to function without making up for the difference, taxes will increase and subsidized student loan programs will shut down. No education=no job, or at least that's the current illusion the banks and universities are selling. So you'll eventually end up with a ruined economy with a redonkulously massive unemployment rate--at least until people figure out you don't have to have a college education to do whatever you want.

And then the inevitable happens... Universities can't pay their professors, budgets get cut, jobs are lost, schools get consolidated or closed down, and academia returns to the privileged few who actually CAN afford it. Which means it will turn increasingly conservative. I don't know your political views, but depending on perspective that might be a good thing or it might be a bad thing. With dramatically increased competition for university positions, the academy will turn into just another "old boys" club. But one thing is for sure: the QUALITY of graduates coming from those institutions will be vastly superior to what it is now since the degrees earned will be worth a lot more than the paper they're printed on.

With the housing market, there is increased demand for rentals since people can't get money to buy McMansions. Property values are already back on the way up, banks face restrictions on who they can actually lend to, and buyers are the kind of people with the financial independence to make good on home loans. There has been a gradual return to normalcy, and the same thing will happen with higher education. However, people NEED housing. The worst thing that could happen for higher education is people figure out they don't need it.

OK, yes, you need advanced degrees for teachers, doctors, lawyers, and certain other types of professionals, and, of course, if you want to make a life of academia you must have a Ph.D. I'm not talking about that. I'm talking about people like me who owe more than $50k to study composition and end up teaching piano lessons. I don't regret the experience I got as a composition student. I also love my students. And I'd do it all over again with maybe the exception of making different choices once I got out of college. I knew the risks of trying to be an independent, freelance composer, and I accepted that. The trouble is you have people who honestly believe that getting a piece of paper is going to solve all their problems and set them up for a glorious career in their field of study. It's a lie or an illusion, and these kids get in all kinds of trouble when they get out and find that the "real world" is HARD and doesn't hand you your dreams on a silver platter. It's taken me nearly 5 years doing what I do to start making mature business decisions. Heck, my supervisor resisted allowing me to increase my fees until I started bringing my children to work, and I hit her with a triple-dose of reality--I can't work just to pay for daycare. Within a month, I was making TRIPLE what I had been on average--heck, triple what I had made in my best month in 4 years of teaching. I didn't need a master's degree to pull this off, either. But that's not why I got my degree. Most kids get the degree betting on using it and end up being unable to. Most kids coming out of college tend to think that way, which is why we'll be facing another economic crisis over silly student loans.

Well, not so much economic as it is employment, but that will be a problem our government will have to face, and they'll pass their pain and misery right back to us one way or another. PLEASE prove me wrong here!


Republicans, Conservatives are sort of like Anarchists in my opinion, because they hate Big Government



Adam82
Veteran
Veteran

User avatar

Joined: 29 Jun 2010
Age: 37
Gender: Male
Posts: 615

10 Nov 2012, 12:58 am

Like some others in this thread, I too feel my autism has regressed while I've been unemployed. Not having the regular social contact that work provides has made me withdrawn, antisocial, have trouble looking people in the eye, lethargic and tired and depressed all the time, etc.

I thought I'd improved in these areas, but being unemployed and directionless again has put me back to square one.

I have not had a job in four months.