Across from her was a middle-aged black man, staring at the TV with a bemused expression. On the other window wall sat a pink-faced elderly woman, busily knitting a multicolored scarf. All three of them settled into a reverie. Then a fourth person strode in, a woman who looked like she might be a Talking Head on TV herself, with clothes Louella estimated as being worthy of Sarah Palin on the campaign trail. The woman took a seat, crossed her very good legs, and folded her arms impatiently as she watched the TV anchorwoman in silence. She gave an Al Gore-style sigh that made the others turn toward her.
"Do you all know the real story about why the economy got so bad so fast?" she demanded. The others shrugged, afraid to attempt an answer. "You want me to tell you?" They nodded in unison. Might be more interesting than the TV, Louella thought. On the other hand, this woman might be a nut.
"Do you all have mortgages?" she asked. They all nodded. "And do you remember how much interest you paid when you first started the payments?"
"Oh, yeah," drawled the man. "I sure do remember that! Couldn't believe it. It was about every penny for interest."
"Right!" said their instructor. "It's like a hundred percent interest you're paying for the first three years or so. You can see why they like to make mortgage loans, can't you?"
Nods all around. This woman has to be a teacher, thought Louella. Or else she sells something really smarmy.
"Okay—just bear with me now. Think back to 9/11, when the economy tanked. I want you to imagine you're in a board room at some big bank. You've got these executives all worried about the economy, looking for a sure thing that'll make a lot of money, but with little or no risk. I'm thinking their coversation went like this: 'You know, those first few years on a mortgage make nearly a hundred percent interest, and there's hardly any risk to making the loans because you've got the mortgaged property as collateral. Plus if you're mortgaging houses, the value goes up. So even if somebody defaults in a few years and you have to take it back, you're way ahead because you got all that money, and now you have the asset back and you can sell it for more than it sold for when you made the loan to start with.'"
The woman looked at each of them in turn. "Sound good to you?" Louella, intimidated, blurted, "Sounds too good to be true, if you ask me." The other woman kept her head down, knitting furiously. The man looked eager to know more. "Okay," said the woman. "Now you've got somebody in that board room who says, 'But hold on! Just about everybody who qualifies for a mortgage has already got one, and they've refinanced to boot.' And another guy chimes in and says, 'Well, how about this? We qualify the next tier down—the people who normally wouldn't qualify. We give them whatever interest terms it takes to move them in, so we can get those 100% percent interest payments flowing in. When the mortgage gets recalibrated in a couple of years, they might not be able to keep up with the payments, but that wouldn't matter to us because we'd get the properties back and could re-sell them for more than the first time. It's win-win!'"
"Damn!" said the man. "I believe that's likely just how they went and did this thing!" The knitting woman looked up, transfixed. "I do believe you could be right," she said breathily.
Louella said, "Hold on! You're not saying these finance people would do something like that, knowing they might be putting people out of their houses and ruining their credit, are you?"
The woman rolled her eyes. "Of course they would! What planet are you living on?" Louella began to feel hostile.
The woman was on a roll now, and didn't pick up on Louella's body language. "So then some other guy speaks up and says 'Hold on, now! This sounds real good, but we'd be underwriting risky loans here. It's not responsible. Subprimes have a bad track record. To do this, we'll have to share the risk.' And everybody around the table nods. The first guy says, 'We could mix a whole lot of the loans together, so the better risks would make up for the bad ones, and then we could slice it up into shares and sell the shares.' And another person says, 'And you know what? We can get insurance to make the deals extra safe. I bet AIG will do it, especially because we'd be lowering the risk by packaging the loans. It would be a lot like how they mix together hamburger meat for the fast food joints. It could be from anywhere, but in the end it all looks alike.' And so they decide to make these deals, and the rest is history."
The woman smoothed her snug skirt over her knees and gave her audience a brilliant whitened-teeth smile. "What do you think?" she asked.
"Sounds right to me," said the man. "I think I understand this stuff for the first time.I'm going to have to remember all this to tell my co-workers at the post office."
"I think it's awful," said the older woman. "Any fool could've told them that house prices don't always go up. I remember back when you didn't expect house prices to increase—houses depreciated like cars. Those investment people should go to prison. I'm really mad about those golden parachute things."
Louella started to say something that she hoped would sound smart, but just then the service manager came in the waiting room. "Miss Pryzbylewski?" She nodded. "Your Miata is ready. No repairs needed." Louella nodded at the others, collected her things, tossed her cold coffee, and followed the manager to his office. Thank God! I didn't want to give that woman the satisfaction of knowing I agreed with her, she groused. Then, as she paid her bill and unlocked her car to drive away, she wondered, That really was a cool explanation. Who do I know who'd be interested in it? She drove off. Can't think of anybody who'd care. Besides, it's too late. Suddenly Louella felt very sad.
TO BE CONTINUED.
