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Material Man

Posted on February 28th, 2008 by Will Marre.
Categories: ADP Diary, Leadership, Lifestyle.

If you hang around the wizards of high finance (investment bankers, bond traders, brokers, and the like) you’ll soon hear the word “monetize.”  It’s a synthetic term meaning turning something of value into money.  In it’s most practical sense it’s used to describe how a new company like Google can monetize their search engine technology by selling advertising connected to search results.  Similarly, we can monetize our golden retriever pet by breeding her and selling the puppies.  It’s not a bad thing in and of itself, but when it becomes the only way you look at the world, it transforms you into a scoundrel.  Please excuse my shocking example but young girls are being monetized in countries like the Philippines and Thailand by being sold to pimps as young prostitutes by their own parents.  You see when we lose sight of the inherent, spiritual dignity of human beings and lose respect for the sacred value of nature we begin to see people and our planet as “things” to be monetized.  The reason we need to regulate our financial markets is that the mindset of Wall Street is to turn everything into money.  There is no financial language for human, spiritual, or nature’s inherent value.

So now we have a growing economic crisis.  Economists hope it’s simply a modest tidal wave.  They want it to hit quick and recede so the mess can get cleaned up and they can get back to monetizing things, people, and the planet.  Business as usual.  But their economic problem is likely to be more like global warming submerging our coastline rather than a single wave.  The melting icebergs are the declining values of trillions of dollars of residential real estate.  Sure the sub prime mess might be contained at losses of $200 billion or so.  But now prime borrowers who used their good credit on bizarre loans that encouraged interest only or even minimum payments that added interest to a loan’s principle every month are in deep yogurt.  Eighteen months ago a client of mine was offered a $1.5 million loan to buy an overpriced house in San Diego for $1465 a month!  The true 30-year amortization of the loan was over $10,000 a month but not to worry.  He was assured he could always sell in 6 months for $2 million.  When he asked me what I thought, I told him my mother taught me whenever “my eyes were bigger than my stomach” I would get a bellyache.  Yes he could afford $1465 a month; what he couldn’t afford was a $1.5 million house.  He passed.  Well lots of other people didn’t pass, and they’ve got a looming heartache.  Some estimate there are more than $500 billion of over-bloated prime mortgages that are at risk in the next 4 years.  If prime borrowers start walking from their homes, the impact on the global economy and our children’s well-being could be staggering.

I, of course, don’t know what‘s going to happen.  What I do know is that all this was caused by Wall St. trying to monetize our homes.  Yours and mine.  The idea was simple.  American homeowners on average owned nearly 60% of the equity in their homes in 2002.  They represented trillions of dollars of “locked up” value…money.  Banks began to offer home equity lines in the 1990’s to get at this value by creating secured, interest-earning loans.  But that was chicken feed for Wall St.  They got federal regulators to relax oversight of the mortgage market then they trained an army of retail mortgage brokers to sell homeowners on refinancing their old fashion mortgages with a new variable rate, payment option loan to “monetize” the equity in their homes.  Free up cash for us to pay for granite countertops, Hummers or just blowout vacations.  The financial wizards made billions in fees and we got suckered into thinking there was such a thing as a free lunch.  Now we’re paying for it.  All of us.  Not just those who took out loans, but also our children who are already having a harder time finding jobs in a frightened economy or are paying higher credit card interest for gas they can’t afford.

Could all of this been avoided?  Absolutely.  The hyper-inflated real estate boom made our whole nation Enron 2.  The lack of oversight and regulation of Wall St.’s monetization of our assets is a direct result of a failure of leadership.  Leaders of financial institutions and regulators who are supposed to insure our financial markets have integrity completely failed.  Meanwhile, today oil speculators have driven the price of oil to at least $20 a barrel higher than real demand says it should be.  You see prices of nearly every commodity from wheat and corn to oil is going up faster than demand because financial wizards are now focused on “monetizing” the essentials of our lives.  No, it’s not a conspiracy.  It’s simply the result of only seeing the value of things as money.  When powerful people operate without rules, we all pay more than we should.  It would be great if the world could operate on the honor system.  But it can’t.  We need real leaders who can’t be bought and who aren’t afraid.

And speaking of fear, it doesn’t hurt to look inside.  We also have our own inner “Wall Street Banker.”  An inner voice calling us to monetize our own lives.  To work at jobs we don’t value or to work too long and too hard for money at the expense of our relationships and peace of mind.  We need to take care to regulate ourselves lest we become corrupted by our own fears.  All of us need to stand for the quality of our lives rather than quantity of what we can produce.  We need to own 100% of the equity of our souls.

To visit American Dream Project’s home page, click here.


Scott Tuton - Seattle, Wa
Comment on February 29th, 2008.

I’ll admit. I feel duped.

3 years ago, the real estate in this part of the country was rising so fast, I thought if we didn’t buy now, we might never be able to afford our own home. My wife and I purchased a town home east of Seattle, WA in King County in December ’05. We worked with a Mortgage Broker to help us sort through our first home purchase.

The bottom line became that if we wanted to purchase, there was only one loan that we could afford (sound familiar?). We purchased with a Jumbo 30 year Pay Option ARM with a prepay penalty before 3 years (Dec. ’08). Now we are negatively amortizing on our mortgage. We owe $8K more now then we did at the outset.

The one thing saving us? We happen to be in a market where values are still on the rise (up 4% over ’07 and a total increase of 9.1% over the purchase price.)

BUT WE ARE SO HOUSE POOR we can’t afford to go back to school, travel, or have a baby.

What can we do? We want to avoid a prepay penalty, but refinancing to a 30 year fixed today sounds appealing since the rate would be about 3 points lower then our ARM is currently.


Grizzly Bear Mom
Comment on February 29th, 2008.

This financial situation was caused by BUYERS not living within their means or delaying gratification in purchasing homes for zero interest loans, or homes they couldn’t afford. If housing prices had gone up, would they have shared the wealth with the taxpayer? No? They don’t share the loss with them either. They weren’t suckered, they were self indulgent. Also, our children don’t have to pay credit for most anything, including gas, unless they don’t live within their means and delay gratification. This is not a leadership issue, this is an issue of irresponsibility. I am responsible for 100% percent of consequences of my decisions, and worked my way up from an Air Force E-1 to a six figure income and no debt at 47, which gives me the ability to be generous with the deservingly needy.

Jerry - Carlsbad, CA
Comment on February 29th, 2008.

I so agree with you assessment of the current situation. Where are our principled centered leaders of the financial community? Do they exist? It seems to me that we must all work to develop our leadership skills to help guide our society on this perilous path to a higher quality experience. The power lies within the individual to develop a balance of material with spiritual that is not easily defined or quantified. Will, keep up the good work of communicating your passion on this subject.

Comment on February 29th, 2008.


I enjoyed this article in part because I was having a discussion about similar subject matter with some colleagues this morning. Nowadays, when I see Larry Kudlow or any of the numerous people discuss the “best presidential candidate for the market” I shake my head and think we are now confusing Greed with Free Market Capitalism. The reality is that the confusion is only in the minds of the people expected to get the short end of the stick.
Hopefully, we’ll find our before the hole gets any deeper.

Pingback on February 29th, 2008.

[…] Original Post To visit American Dream Project’s home page, click here. […]

Comment on February 29th, 2008.

This is the exploitation of resources. This is what humans do, whether it involves shooting buffalo, or digging for gold. As a school teacher for many years I noticed that kids naturally seek this activity. We reward and encourage people who are skilled at the acquisition of goods. Is it moral? Is it instinct?
I have found in my own life, the idea of “enough”. I have today, enough for me. More than you or less than you is greed or envy.

Comment on March 1st, 2008.

Humans do this, yes, but they over exploit resources when there is something to be gotten from it. Native Americans would hunt the buffalo before the trade in bison robes, often wastefully, but mostly to the level they could use. Whether that was sustainable depended on their own population and the horses’ population, etc. But when the bison robe trade introduced a market economy where th Indians could accumulate wealth by killing more buffalo and selling the hides, they did.

The way to prevent people from monetizing something is to remove the demand for it. That can be done through regulation or cultural change, and I’m not sure how to affect either.

Richard E. Bull
Comment on March 1st, 2008.

The second part of your blog, it seems to me, is much more important than the first. It is true that most Americans have had little or no real educataion re: economics, money, etc. We simply are economically iliterate. Herein lies a much greater danger than deregulation. The government cannot regulate everything to save us from our own “ignorance” regarding our financial lives.
I wrote last spring about teaching in a college where the students did not appear to be motivated. I am teaching again this semester, Research Methods and Critical Thinking. It seems as if I’m teaching in another universe. The students are ravashingly hungry for knowledge in the critical area of evaluating what is out there and thwir own life choices. They are a joy to teach, dynamic, questioning, questing for practical knowledge that will help them live their lives effectively. This hunger must be satisfied so that Americans can make solid choices and avoid a lot of the mistakes American’s have been making of late.
Richard E. Bull, M.A.

Comment on March 2nd, 2008.

A friend said to me a few weeks ago that among friends who earn similar incomes, there will nevertheless become a disparity of resulting wealth. And the study revealed that the one difference between them was patience. Those who were patient became wealthy while those who were impatient ended up poorer. Delayed gratification is one aspect of patience.

Things that people do, such as build so many extra homes which are unoccupied… seem like a tragedy. But, if we have patience, and dare to believe that for those who love God, “all things work together for good,” even this tragedy has some good purpose. I imagine one is that these extra homes will become a haven for climate refugees suddenly fleeing a big global warming disaster that hits the next US coastline….

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