And the ultimate point:
But all of this misses the point: However terrible the sins of the financial markets, they’re merely a reflection of a cultural predisposition. To blame the people who lent the money for the real estate boom is like blaming the crack dealers
yes, crack dealers
for creating addicts.Americans feel a deep urge to live in houses that are bigger than they can afford. This desire cuts so cleanly through the population that it touches just about everyone. It’s the acceptable lust.
Then, in case this explanation of the problem didn’t quite sink in, Lewis goes on to tell us about a May 30 New York Times story on how California residents Lilia and Jesus Garcia bought a house beyond their means, and to explain:
But the real moral is that when a middle-class couple buys a house they can’t afford, defaults on their mortgage, and then sits down to explain it to a reporter from the New York Times, they can be confident that he will overlook the reason for their financial distress: the peculiar willingness of Americans to risk it all for a house above their station.
Look, here is the fundamental problem with blaming the root of the financial crisis on ingrained attitudes: If Americans have always wanted expensive houses, why did the crisis occur now? Of course, the only way to answer that question is to look at the structural causes. At that whole list of people and institutions Lewis rattled off before proclaiming they were pretty much beside the point.
We know Portfolio has fallen on hard times recently . We are sorry. But too many stories like this, with the lack of vision they imply, are a key part of the problem.
Let's see, there's the December issue, with a fantastic Michael Lewis cover story... no, not that... there's the November issue, maybe you haven't got around to reading that one yet... no, not that either... I know, why don't you critique the OCTOBER issue? Yes, great idea! Maybe you're going backwards, will you talk about the September issue next? At this rate you'll hit the debut issue some time around 2012, I think.
Posted by Felix Salmon on Tue 25 Nov 2008 at 04:15 PM
I think the SEC has some old reading it needs to catch upon. At least the analysts who follow and rate Toll Brothers stock.
Posted by dlamour on Wed 26 Nov 2008 at 02:52 AM
Just reading the sections she gives above and having read the various articles in the New York Times over the past 8-10 months about who was doing what to whom in both the Financial Sector with securitized CDO's etc and realtors talking low middle class adults into a mortgage that "We'll do it this way now and change it later" shows that very few people use common sense to make their decisions and the realtors had no ethics. Too many AMERICANS have been living too high on the hog and now don't know how to scrimp and save. I raised my son and covered my husbsand's bills 90% of the time through the 80's and 90's on teacher's substitute pay--about equal to 1.5 times minimum wage then. There were many times my son had to go without or had to get cheaper items rather than the most expensive as his classmates did. My husband seldom had new clothes unless the ones he wore were torn by overuse. He and I had learned a lot of ways to do without. He grew up in Harlem in the 30's and 40's with nothing and I followed my mother's methods of saving by scrimping and doing without. She got all four of use thriugh college and bought a new hiuse after we left. Now my son is able to get by and save since he learned before, though his college classmates bought $400K homes and are moaning now. I still have to scrimp since my pension is $100 more per month over the poverty level for family of 4. I wonder how many of those mentioned or those "financiers" on Wall Street would like to live on my pay???? I have no sympathy for any one who over built, over sold, etc. Those that bought the "bill of goods" beyond their income will be paying for it all of their lives and very few will forget what they should have known and done when they bought that #700K house. Many of them will rent but the others will be ones we all will be paying for through taxes and charities. everyone had to stop blaming others, clean up their own "houses" and work to get the town, state anbd country back into the "BLACK." Lower incomes, more work and community organizations are a start.
Posted by Patricia Wilson,San Jose Ca,USA on Wed 26 Nov 2008 at 02:59 PM
Hi Felix,
We respect your stuff, but I notice your comment addresses everything but the substance of the critique.
If it matters, we praised Lewis's other piece already. But I wonder if this is really the time for business press parlor games.
--Dean
Posted by Dean Starkman on Wed 26 Nov 2008 at 03:58 PM
*Everything* but the substance of the critique, Dean? I thought I addressed virtually nothing -- but thanks for the compliment, I guess!
As for business press parlor games, that's my job! And yours! If we lose our business press parlor games, the terrorists will have won!
Posted by Felix Salmon on Wed 26 Nov 2008 at 04:18 PM
What can I say? When you're right you're right. Happy Thanksgiving.
Posted by Dean Starkman on Wed 26 Nov 2008 at 05:09 PM
I thought that this piece was a good one, but I see Felix's point. This is an old issue, and to conclude that Portfolio "is not getting it," without even referencing later issues (with an excellent cover story by one of the same writers you criticize) strikes me as a bit odd, not to mention unfair.
Posted by George Tumassy on Thu 27 Nov 2008 at 10:42 AM
Who's to say Portfolio doesn't get it? Buy low-sell high, that's every businessman's creed. Buy high- sell low, that's every American citizens creed. Elinor, that should be the point of your criticism-not that Portfolio doesn't get it, but that the American buyer doesn't get it.
Posted by Jim on Sat 29 Nov 2008 at 09:56 AM
This all seems like small beer compared to what seems a far more important question: Was the biz press too caught up in housing-market boosterism to notice or care that the foundations of our entire economy were beginning to quake and crumble? I'm still not convinced that the press did anywhere near the job they should have exposing this thing. Sure it's easy to dig into Lexis-Nexis and pull out a few apocryphal clips showing this or that reporter was onto a piece of the mess. But no one took out a whole section to explain and point up the importance of credit swaps & CDO's, did they? If you knew a major hurricane was coming, wouldn't you do that? But this was far worse and far more important than a mere hurricane. Still, the first I'd heard that there were $62 trillion in credit default swaps outstanding (multiples of the entire equity market) was just a couple months ago. I will still think that this whole episode demonstrates the peril when the press gets too cozy with the powerful they purport to speak truth to and about. Where was the muckraking? Did I miss some fantastic, agenda-setting jourmalism? I don't think so! I'm open to being convinced otherwise. Until then, count me among those who sees a failure of imagination and a lack good old-fashioned skepticism (and not just the blustery fake kind many journalists wear as a kind of uniform) at the core of today's crisis in journalism.
Posted by Andrew H on Sun 30 Nov 2008 at 02:17 AM
you've got to be joking.
the business press is a total cosmic joke. every business magazine and every business cable outlet does the same thing: report around the edges and NEVER look at anything structural. EVER. after-the-fact navel-gazing is just pathetic if it doesn't get to the heart of why all of these supposed expert reporters and editors and publishers couldn't ever ask tough questions when things were "good" (an appellation that i think we can all agree did not in fact fit the circumstances of either the 90s or the aughts). the business press sucks the dick of business when it isn't kissing its ass. that's all it's good for.
basically, the only honest reporting in 90s business was on the fuckedcompany.com comment pages and in the last ten years on various websites. the rest of you were useless and should all retire to a monastery and ask yourselves why you wasted your life and fell down on your job: afflicting the comfortable and comforting the afflicted. somewhere doug henwood is laughing at idiots like felix salmon and his ilk--the left business observer may literally have been a rag, but doug was always right adn the rest of you were ALWAYS WRONG. now the rest of us are eating the crap that you couldn't smell under your noses. thanks.
Posted by robert green on Mon 1 Dec 2008 at 12:07 AM
As a person who subscribed to Portfolio thanks in part to the great work Mr. Salmon and company do online, I've got to tell you the magazine is a huge disappointment. Other than the Lewis piece, I can't recall any articles I've really wanted to read. Oddly enough I heard about the Lewis piece from friends and later blog links to the website...I received my print issue about two weeks after the story was already in wide distribution. Finally the graphic density (it looks like a big blob of gray type) makes the entire mag hard to read. The website is terrific. The magazine? I'm looking forward to returning to Fortune!
Posted by Stav on Mon 1 Dec 2008 at 02:29 PM