But I was not like the people running the organisation. I knew full well that buying a house could be a financial time bomb. I hadn’t drunk the home-ownership-leads-to-prosperity Kool-Aid. But I had drunk enough cola to rot my teeth. I led people down the road to financial collapse – and I did it for the dental insurance.
It all started out innocently enough. In March 2002, fresh out of college, I got a job at the Center for Economic and Policy Research (CEPR) in Washington, DC. Soon after, one of the co-directors, Dean Baker, began looking into soaring housing prices, and, by the end of the summer, he had begun railing against the housing bubble....
Dean’s argument was compelling: if house prices rose significantly faster than rents, that meant people were buying homes as an investment, not for shelter. As more people saw housing as an investment vehicle, prices would rise, even though the underlying value of the property would not. It was the textbook definition of a bubble – and even if others weren’t taking him seriously, I was. But after more than a year at CEPR, I had itchy feet. I had gone straight from the suburbs of Washington to an Ivy League university to an economic think-tank. For a fist-in-the-air activist, it was all a bit ivory tower. I wanted experience working with the people getting screwed by bad economic policy before – inevitably, I assumed – I spent my life as a policy wonk.
So, like any good leftie from a privileged background, I started my job search on idealist.org, where I ran across a posting for an associate position at an Individual Development Account programme in Los Angeles. IDAs are an anti-poverty measure to encourage low-income individuals to buy “productive assets” – purchases meant to provide financial security for the future and encourage a habit of saving. The programmes encourage savings by providing financial education classes and “match savings”. In the case of the LA programme, for every $1 someone saved, up to $1,000, the person would receive a $4 match. Participants, who had to be referred through government-funded agencies serving low-income residents, could use the money to start a small business, go to school or buy a home. The buy-a-home option should have raised a red flag. But I was eager to get a “grass roots” job, and I reasoned that people who met the programme’s incredibly low-income requirements – no more than about $36,200 per year for a family of four – were in no position to buy a home, $5,000 in savings or not.
So I wiped the problem from my mind, unaware that easing lending standards would make loans accessible to people who would never have qualified for a mortgage before. Besides, the job sounded great. ... I was hired as a financial counsellor and flew out to LA to get a sense of the place.
The Community Financial Resource Center (CFRC) is located in South Los Angeles [4600 S. Figueroa, a couple of blocks from the LA Coliseum, home of the USC Trojans. It's right off Martin Luther King Blvd. but now most of the billboards are in Spanish)] – formerly known as South Central, a name that conjures up images of gangs and riots. The almost-windowless building stood across from a windowless food-aid office. Barbed wire protected the parking lot. ...
It didn’t take long for reality to set in. By the time I joined the centre, many of the clients had been roped in to the programme by their case managers. “To buy a home or to start a business sounds too good to be true, too hard to believe!” one letter told members of a family development network – and that they were eligible for an “exciting opportunity” where they could be helped to do just that.