Meltdowns Fire Us Up This Cruel Summer

August 20, 2007

Just hours ago, the newsroom I share with a dozen other journalists caught the mortgage meltdown fever. A Wall Street Journal story about a family that earns $90,000 taking on a mortgage of $567,000 set off the animated conversation, which soon had us more fired up than I have witnessed in ages.

How could people look at those numbers and make that decision? Many of us wanted to know. And we, as a group, are not conservative. We are simply rational human beings who wonder how so many average Americans could so absurdly overextend themselves.

(No one needs to ask how mortgage brokers could take advantage of this human folly. Greed, plain and simple, answers that question.)

So consumers made bad decisions, opportunists took advantage of them and investors, who should have known better, are losing a bundle. And some, or every, part of this mess makes everyone watching it just a little crazy.

Case in point, two weeks ago Jim Cramer flew into a tirade on the subject - specifically on whether the Fed should step in with a bailout - on CNBC. Not unusual for Cramer, you say? Of course not. The notable part follows The New York Times business section posting of a YouTube link to the video on its DealBook page. By last Thursday afternoon, that link and the accompanying blurb had garnered nearly 100 comments. Ninety-eight and counting. Now I don't know what sort of response the average article or blog gets, but the phrase "nowhere even close" feels pretty safe to me.

Of course, Cramer's personality evokes strong reactions and some of the comments were insults. However, the vast majority had something to say, one way or another, about the mortgage crisis. One poster even remarked on its leakage into the corporate credit markets and the troubles it's causing even companies with strong balance sheets. And therein lies the maddening part for the high yield loan and bond markets. It's one thing when lousy deals don't get done but quite another when the whole market comes to a near standstill. All because of an spiraling epidemic of indulgence.

So should the Fed step in? I don't think so. I don't want families to lose their homes, but if there's a bailout around every corner the message booms, "Go ahead and screw up. We'll have our mop handy when you do."

So I leave you with the message of responsibility and self restraint as we head off on a two-week publishing break. When we return in September, the investment banks will begin trying to syndicate a cumbersome pipeline of debt. Those characteristics on all sides might help get things back in order.

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