I am sure nobody has noticed, but I have been making an effort to take The New York Times less seriously. This has been hard. This could be because of my New York upbringing or, more likely, the degree to which the Times takes
itself seriously. But every time I criticize something in it there is a nagging wonder at the back of my head. Am I holding the Times to a higher standard than I would any other newspaper?
Saturday’s Your Money column When Not to Pay Down a Mortgage is a case in point. The basic thrust of the piece, that paying down your mortgage may not be the best use of your spare cash, is sound. But that point can’t be adequately made without some math and a discussion of the tax code and the article screws up on both. What’s more, what you see if you click on the link above is a corrected version. And it’s still wrong.
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Just to mix it up a little, I thought that today I would write about something I liked and would recommend to others. Over the weekend I read Michael Lewis’ latest tome, The Big Short: Inside the Doomsday Machine
. It’s not bad. Good even.
The book tells the intertwined stories of a handful of investors who saw the subprime disaster coming and bet big accordingly. It is not a broad explanation of broader events. That sort of thing is not what Lewis does, and indeed the book’s prologue and epilogue, in which he tries gamely to put his yarn in a larger context, are the weakest portions of the book and might be skipped by the reader in a hurry.
But what Lewis does well, and in this case masterfully, is tell an interesting and entertaining microcosmic story that has wider implications and lessons. If the as yet unwritten full history of the Great Recession could be thought of as a large mural, The Big Short would be an exquisitely rendered corner of that larger, unfinished, painting. It does not actually cover much surface area, but it helps a viewer imagine what the whole work might someday look like.
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A little more than a year ago the Obama administration announced a scheme to help mortgage borrowers in trouble, in which the loans would be modified in a way that would make the terms more affordable. I thought it was unlikely to 
work as promised and said so at the time. The plan was greeted with some widespread skepticism, although a lot less than I thought was warranted.
At the time, I assumed that what lukewarm enthusiasm it did garner from the media was due to a bias in favor of government intervention in general and this administration in particular. Now I am not so sure. I think it may be that the journalists charged with explaining the scheme to others did not really understand the fundamental flaws so obvious to so many of us.
The latest update on the plan’s progress in the New York Times repeats what has become a recurring theme, that the scheme is at least an order of magnitude less effective than envisioned. But read the text closely and you get the impression of true disappointment and surprise at this failure. The piece contains not a hint of discussion of why the plan failed, as if it was a unfathomable act of nature, rather than something that many thoughtful people accurately predicted from the start. And it ends with finger pointing.
The Treasury is being accused of moving the goalposts a bit. It now says its intention was merely to offer help to those four million borrowers, not to make sure they actually got it.
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SmartMoney, which I scan occasionally on-line, but which is still apparently a real magazine printed on paper, currently has a cover story that includes a bit
called Life Plan: Make Your Home Pay Off. It is just one section of a larger feature on planning personal finances. I cannot bring myself to read the other bits.
As an exercise in laying bare the state of mainstream personal finance advice and/or journalism, let us examine this piece in detail. It’s not long, at seven paragraphs and 532 words. I should be able to get my hands around their advice and, if necessary, refute it without too much fuss.
Paragraphs 1 and 2 tell us about a retired couple, Bob and Linda Gillet of San Diego, who live a life of European cruises and dinners out. They can do this because they paid off their mortgage early.
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Conventional wisdom holds that a mortgage on the house you live in is a special kind of debt, one that, mostly because of favorable tax treatment, is so cheap that you should be in no particular hurry to pay it off.
But there is a popular heresy that opposes this firmly established orthodoxy. It holds that all debt is a bad idea, and paying 3X to the bank so you can save X on your taxes is loopy. Free Money Finance made this case recently. And Dave Ramsey is probably the high priest of this particular sect.
I have an instinctive contempt for orthodoxy and a sympathy for heresies of all kinds. But, alas, this is one of those cases where the conventional wisdom is spot on. Sad and boring, but true.
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itself seriously. But every time I criticize something in it there is a nagging wonder at the back of my head. Am I holding the Times to a higher standard than I would any other newspaper?
Housing, Media | Frank Curmudgeon | 
March 23, 2010 11:59 am | 
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