A recent news item out of Cleveland, Ohio, relates how a contractor found some $182,000 in old currency hidden in the walls of a bathroom he was remodeling. A previous resident had secreted U. S. gold notes, dating from 1927-’29, inside three metal boxes. Appraisers have estimated the value of the treasure – which includes rare 1929-series Cleveland Federal Reserve $10 bank notes – at $500,000. The stash included several $500 bills and a $1,000 note. Gold notes – i.e., currency that entitled the bearer to gold on demand – have not been legal tender since 1933, but such currency typically has a numismatic value exceeding its face value.
One would imagine that discovery of such an unexpected treasure would occasion rejoicing by all involved parties. But (sadly) one would be wrong. A feud immediately sprang up between Bob Kitts, the contractor who found the money, and the owner of the house – his old high school classmate, Amanda Reece. The latter claims the find because it was discovered in her house. Although she offered Mr. Kitts a 10% “finder’s fee”, he has rejected it and retained a lawyer to press for a 40% share on grounds that it was “lost money”. Miss Reece contends that anything secreted inside her home must belong to her. Litigation is proceeding.
When I saw the report, I remarked to my wife that I knew who would get the money – the lawyers. This was not idle conjecture, as the incident recalled a case in Montgomery County, Maryland. In the early 1970s an old farmer died out in the northern part of the county. It had always been rumored that he was rich, so his estate’s handlers commissioned digging around his property. Ultimately, investigators unearthed metal barrels full of money – a large part of it in silver and gold coins dating back to the mid-19th century. The hoard totaled over $2 million. That’s plenty now, but in 1971 it was really serious money.
Predictably, a gaggle of relatives immediately came out of the woodwork to grab the treasure, including a housekeeper who claimed to be the farmer’s common-law wife. Each of a dozen claimants – assisted by personal attorneys – wanted the whole bundle for himself (or herself). Litigation dragged on. Eventually the case dropped off the radar screen and nothing more was heard of it.
Around 1982 a small item in the local paper announced that the “buried fortune” was gone. Lawyers had consumed it over the previous decade, and the actual claimants had not realized a penny. Because each one hoped to get the whole bundle, and was too greedy to compromise with the others, no one got anything. Greed had paid its wages. This outcome is also likely in the Case of the Cleveland Bathroom Stash.
These two cases of obvious greed reminded me of the recent “crisis” in the mortgage industry – another extravaganza of greed. Much time and ink have been expended on the pathos of people who borrowed too much money at low, “tickler” mortgage rates – only to get into difficulty when the rates went up (as they were bound to do). Some of these buyers got into more house (and more debt) than they could afford, but at least it was a house they wanted to live in. The “greed” aspect is much overlooked in such cases, since the idea that one should buy only the house one can afford is now considered hopelessly old-fashioned.
Little-mentioned are the borrowers who never planned to bear the “matured” interest rates on their mortgages, but who bought homes they expected to “flip” for quick profits long before those rates kicked in. When the market turned down and homes stopped selling, they were stuck – like the odd player in “musical chairs”, when the music stops. Lenders who had blessed those loans have delicately kept a low profile during the “crisis” they helped cause.
Depending on their political stripe, some politicians (mostly Democrats) have denounced “irresponsible” lenders, or else called for “protection” of the mortgage industry (mostly Republicans). In truth, lenders are neither fully culpable, nor entirely blameless. Certainly, some lenders cut corners by failing to verify borrowers’ ability to pay, should the higher interest rates take effect. In the rush for “market share”, prudence took a holiday.
On the other hand, race-hustlers and community activists have long been beating the drum for mortgage companies to “support” their communities with more relaxed lending. (Read: lending to unqualified borrowers.) Now that lenders seem to have done this, some politicians want to bash them for “imprudent lending”. (No good deed goes unpunished.)
Populists embrace incautious borrowers as “victims”, while lending-industry shills see no evil except defaults that might hurt banks. Both sides want government action. Populists want bailouts for borrowers who gambled on the overheated housing market – now that they have lost those bets. (This crowd includes Mr. Bush, who has proposed a plan to freeze mortgages at their lower rates.) The banking crowd wants federal cash to prevent loan-defaults injurious to careless lenders. It is hard to see “prudence” in either course.
Both sides resemble parties to the found treasures in that greed motivates their unwillingness to compromise and take responsibility for the collective good. When two million was at stake, a mere $150,000 share looked intolerable to the old farmer’s heirs. Greed kept each claimant from getting anything. Similarly, responsible lenders who made only a few bad loans invite a bailout that could excuse shysters who made many imprudent loans. The latter should suffer for their poor business practices, but a general bailout would let them skate by. A proper compromise would require sacrifice from all lenders, commensurate with their lending-sins.
Ditto for borrowers. Some might deserve sympathy for unforeseen reverses that put them in financial difficulty. Others who overbought “on the come”, expecting to reap quick profits, should not become a “protected class” lined up for a “new entitlement” (as George Will calls it).
Pop historians like to call the late 19th century – with its Carnegies, Rockefellers and Vanderbilts – the Age of Greed. But it is a misnomer. All those zillionaires made their own money and asked nothing from the public till to build their mansions and live their extravagant lifestyles.
The true Age of Greed is now. People build houses in hurricane-prone coastal regions, expecting succor from taxpayers when storms sweep through. Obviously, the tendency is catching on all over. Greed is a powerful motivator and a seductive tempter. But it can ruin you.