Desperate and Distressed

Clearly, as money gets tight, some people are losing their minds.

Why else would you torch your car rather than allow it to be repossessed? What's the worst that can happen with repossession? You end up with a bad credit history. That hardly compares to a prison sentence.

And yet that is what some are doing to get out of their car loans report Post staffers Dan Morse and Matt Zapotosky in Saddled With Debt, Some Decide to Torch Vehicles (Oct. 13).

In one case an Amtrak employee is accused of burning his car because he was having trouble making the $800-a-month payment, police said.

Aside from the stupidity of setting fire to your car, what would possess someone to buy a car with an $800 monthly payment even in good times?

Oh right, because we have become a nation of consumers who get what they want when they want on credit no matter the long-term cost.

Thankfully the car burning incidents aren't a big trend, but it certainly shows how desperate some people are becoming. Others are just distressed according to a new Washington Post-ABC News poll.

Post reporters Jon Cohen and Jennifer Agiesta take a look at the poll results in Americans Financial Anxiety Rising, Poll Finds (Oct. 13).

Here are some findings from the poll:

-- Sixty seven percent of respondents said they were worried about their family's financial situation.

-- More than 40 percent said they've been hurt by the decline in the stock market.

-- Roughly 30 percent haven't even looked at their investment holdings.

-- More than 60 percent of people ages 50 to 64 don't think they'll retire with enough money.

Here are more results of the poll.

Economy Watch

Are you feeling desperate or distressed? Be sure to check out the Washington Post's new Economy Watch blog where we compile the latest news on the economic crisis. A narrated slideshow breaks down the origins of the crisis, a timeline provides a day-by-day look at the events of the past few weeks and a glossary defines those hard to grasp business terms. We're also gathering stories from readers on how the crisis is affecting their daily lives and answering common personal finance questions.

If you really want to dig into the origins of the economic crisis, be sure to check out The Crash, the Post's investigation of the decisions that were made by government officials that eventually brought the financial system to the brink of collapse.

Answers To Your Investing Questions

One of the most frequently asked questions I get these days is, "Should I still contribute to my 401(k) plan?" Personal finance reporter Nancy Trejos tackles the issue in Are 401(k)s Still Viable for Saving? (Oct. 12).

My response: Yes it's still worth investing in your company-sponsored retirement plan, especially if you are getting a match.

If you are an individual stock investor, you should read Kiplinger Editor Fred W. Frailey's essay on how he took a practical look at his portfolio to ease his fears. Find out why he didn't let fear erode his confidence in the stocks he owns in How I Keep My Sanity While My Savings Vanish.

Some people are also wondering where all this wealth is going. But was it even there in the first place? To find out read All That Money You've Lost -- Where Did It Go? (Oct. 11).

The Blacks Did It

There is growing criticism that homeownership programs aimed at minorities are at fault for this economic fallout we are experiencing. Specifically, critics are attacking the Community Reinvestment Act of 1977 for starting the housing meltdown.

As I wrote in my column recently, "that accusation and others like it are worth about as much as the stock of the failed mortgage companies -- the true culprits of this crisis."

Readers like Kathleen Petitjean of Mishawaka, Ind., agree with me:

"Fear and financial insecurity can wreak horrible things in so-called civilized societies," Petitjean said. "It is frightening to realize how easily a vulnerable class of people, such as those with little money, can be preyed upon by reprehensible lenders and then excoriated by the public at large."

Tom Boyle, a 77-year-old Laurel, Md., local, says, "After reading your column I now believe that the fault goes to the greedy. All the talk is about people who bought mortgages that they could not afford. I haven't heard anything about how money should be lent to borrowers responsibly."

The National Urban League's Executive Director Stephanie Jones weighed in, writing: "The National Urban League has been actively fighting this myth and pushing the media to stop allowing it to be spread, so I really appreciate your effort to set the record straight."

Others are still convinced CRA efforts to help qualified borrowers own a home were wrong.

Brad Rush in Leesburg, Va., wrote: "You completely neglected the broad ramifications of the CRA, choosing to focus only on the intent of the law, not the unfortunate consequences.

"Just as your Big Mama was irrational in blaming you for a car accident that was not your fault, so too were borrowers and lenders irrational for getting involved in loans that could not be paid back," said Kurt Kramer of Alexandria, Va. "The government encouraged this irrational behavior through acts such as CRA."

I appreciate Kramer and other's feedback, but they are still wrong.

Slate.com's columnist Daniel Gross thinks so too. Read what he has to say about this blame game going on in Subprime Suspects (Oct. 7). Or read Wall Street in Black and White by Emma Coleman Jordan on TheRoot.com or read the transcript of her chat yesterday about why poor blacks are being blamed for the mortgage meltdown.

Jordan writes: "The offensive new vogue in cable TV talking points goes something like this: Wall Street is melting down because the government forced banks to make loans to poor people -- especially poor minorities. They claim that the entire weight of the global financial collapse rests on the shoulders of unqualified poor, minority borrowers who got loans as a form of economic affirmative action."

This story line is a lie, Jordan says.

At least one recent academic report backs her up, as I write in my column today: Another Street Where Credit Needs to Keep Flowing.

Author Ross Douthat offers an interesting outlook in his op-ed piece. Douthat says that we should blame the main character, George Bailey, in the movie It's a Wonderful Life for our financial folly. See Not So Wonderful Now (Oct. 12) for more.

You Asked

I'm so sorry when my online discussion ends and I see that there are dozens of questions left unanswered. So again this week here are my answers to some questions I couldn't get to. If you missed my last chat here's the transcript:

Q: My husband is in his senior year for his BA in electrical engineering. We cannot afford our house. After struggling all the past year we are considering him dropping out of school so he can work full-time. I've cried over this, but we are very worried about a very bad mark on our credit if we miss payments. We have already had the mortgage company reduce our monthly payments (for a year). Would you recommend he drop out so that we can handle our bills? I already work two jobs. He works anywhere from 30 to 70 hours a week. The job is making his school work difficult to handle. I'm so depressed I just want to give up.

A: First, don't give up. It's just a house, not your life. If you can't afford for your husband to work and go to school then yes, perhaps he should take a break to stabilize your family finances. There is no use in him getting that degree while your marriage and family life falls apart. Taking a break doesn't mean he can't go back and finish school.

Or consider selling your home if you still have some equity. If you owe more than the home's worth consider some other measures. Can you take in a boarder for the next year to help with the expenses? Have you really cut all that you can from your budget? Have you sold everything you don't need?

And I wouldn't worry at this point about your credit rating. Your credit only matters if you are going to borrow more money -- something you aren't in a position to do anyway.

Q: My husband and I have adequate resources (pension, savings, IRAs, etc.) and have recently come into an inheritance. If we pay off our small remaining mortgage (about $50,000) we would only save about $10,000 to $12,000, at best, in total interest over the next 10 years. Still, I'd just as soon have it paid off, as a sure thing. Hubby votes to invest our inheritance, thinking it will make us more money over the long run. What Would Michelle Do?

A: Michelle would pay off the mortgage. With the markets continuing to decline, paying off your mortgage is a good investment particularly since you won't be house poor, meaning all of your savings won't be tied up in your house. You have enough income and savings, so why not free yourself from that mortgage bondage?

Me, I would want to be free.

Q: My car finally reached the point where I had to replace it. I was able to get a fabulous deal on an economical new car. (The new car price was less than similar used cars I'd been looking at). This is the first time I've ever bought a car as the one I was replacing was my parents' that I took over payments on.

I ended up getting a loan for the car with reasonable monthly payments. But looking over my bank accounts, I have enough money stashed away that I could probably pay off the loan right now (no early payment penalty) and still have 4 to 5 months of living expenses left in savings. But I'm scared about pulling that much cash out for such a big expenditure all at once. On the other hand, it frees up money to put back into savings every month rather than paying interest.

What would Michelle do?

A: Michelle would pay off the car. The last cars my husband and I purchased, we paid cash. We are taking what we would have made in car payments and saving it. We don't regret for a moment not having a monthly car payment.

You are welcome to e-mail comments and questions to singletarym@washpost.com. Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

Charity Brown contributed to this e-letter.