Last Sunday, The New York Times Magazine published a lengthy adaptation from a new book by one of their business reporters: “My Personal Credit Crisis” by Edmund Andrews. The article generated a lot of attention and commentary but some emerging evidence suggests that the story Andrews tells isn’t the whole one:
At the end of his book’s harrowing account of mortgage mistakes and credit card crises, Edmund Andrews writes: “While our misadventure had certainly been more extreme than those of many other Americans, our situation was not all that unusual.” And indeed the book reads like the story of an American Everyman, easily sucked in to the alluring world of easy credit as he struggled to blend a new family. The terrifying implication is that it could happen to you–to anyone who leads with their heart and not their head.
But en route to that moral, it turns out the story has been tidied up a little. Patty Barreiro, Andrews’ wife, has declared bankruptcy twice. The second time was while they were married, a detail that didn’t make it into either the book or the excerpt that ran in last Sunday’s New York Times Magazine.
– Megan McArdle, “The Road To Bankruptcy”, Asymmetrical Information, May 21
In reading Andrews’s article I couldn’t help but wondering why he bought the house and took out the disastrous mortgage in the first place. As an economics writer who had written articles on this very subject (take a look at “The Ever More Graspable, And Risky, American Dream”, The New York Times, C1, June 24, 2004, for example), he really should have known better. In the article, he explains it this way:
As for me, I had two utterly compelling reasons for taking the plunge: the money was there, and I was in love. It was August 2004, just as the mortgage party was getting really good. I was 48 years old and eager to start a new chapter in my life with Patricia Barreiro, who was then my fiancée.
Patty was brainy, regal, sexy, fiery and eclectic. She was one of my closest friends when we were both students at an American high school in Argentina. Back then, we would talk together about politics and books at a coffee shop every day after school. We were not romantic in those days and went our separate ways after high school. But each of us would go through bruising two-decade-long marriages, and we felt that sweet spark of remembrance and renewal upon meeting again in middle age.
After a one-year bicoastal courtship, Patty was about to move from her home in Los Angeles to Washington. We would need a home with enough space for her two youngest children, as well as for my own teenage boys on the weekends. I had assumed we would start by renting a house or an apartment, but it quickly became clear that it was almost easier to borrow a half-million dollars and buy something.
Patty discovered a small but stately brick home in a leafy, kid-filled neighborhood in Silver Spring, Md. We sent in an offer of $460,000 and one day later got our answer: the sellers accepted. I felt both amazed and exhilarated, convinced that the stars had aligned for us.
At the time, Andrews was required to pay $4,000 a month in alimony and child support payments, leaving him with only $2,777 a month in take home pay. He wouldn’t qualify for the mortgage if he disclosed that information so instead he opted for a “stated income loan” in which he didn’t have to document his income. He just stated it as $120,000 – failing to mention the $4,000 a month that went to his ex-wife.
Within 5 months, January 2005, he was broke, with only $196 in his checking account. His next paycheck was entirely reserved for February’s mortgage payment.
In the article Andrews chronicles their struggles to make ends meet. In November 2008, four years after buying the house, they finally fell 30 days behind on their mortgage. He he hasn’t made a payment since and is currently “waiting for the ax to fall”.
As McArdle eloquently writes, he casts himself as victim of the same larger forces that have caused so many Americans to lose their homes. But the fact about his wife’s two bankruptcies, including one while they were married and during the period which the book covers, and that he doesn’t even mention them in the book suggests something else might have been going on here.
In her first bankruptcy from 1998, McCardle documents the discharging of $47,655 in credit card debt, $4,701 in medical bills and $14,303 in private school tuition. The second bankruptcy was similar.
One detail that caught my attention was that in the midst of enormous financial strain, Andrews and Patty rented a beach house for $1600 in December 2005.
Did he buy the house, even though he knew he couldn’t afford it, because Patty wanted it? Could Andrew’s decision making and predicament be more about love is blind than macroeconomics?
Andrews defended not mentioning the bankruptcies in the New York Times piece and his book in a piece on PBS from Friday:
These bankruptcies did occur, but they had nothing to do with our mortgage woes. They were both tied to old debts from before we were married or bought a house. They had nothing to do with my ability to get a mortgage; nor did they have anything to do with our subsequent financial problems.
None of this has any connection to our story. It had nothing to do with Patty being a spendthrift. It had no bearing on my ability to take out a mortgage, and it had nothing to do with our financial problems.
Fortunately or unfortunately, Busted is a simple story: we took out a mortgage we couldn’t afford, earned less than we hoped and couldn’t bridge the gap.
I can’t help but thinking that Andrews has an ulterior motive. Could it be that he saw writing the book in this way as having broad based appeal and therefore as a way to make money?
In a response to Andrew’s defense, McCardle sums things up well:
I think this matters because the story Andrews told was basically about the subprime crisis, and the book casts him as a sort of everyman, lured in by cheap credit and a likeable scoundrel of a mortgage broker. That may be what happened to many, or most people in the mortgage crisis–but the back to back bankruptcies strongly suggest that this is not what happened to Andrews.
This reminds me of the scandal surrounding Oprah Book Club selection A Million Little Pieces by James Frey three years ago.