My Personal Credit Crisis: And More

Edmund Andrews responds, explaining why his second wife’s bankruptcies “had nothing to do with our mortgage woes.” Megan McArdle begs to differ. She finishes with a paragraph that sums up my own feelings quite well:

On a very broad note, I don’t see this as a story about the goodness or badness of Andrews or Barreiro—and I’ve been dismayed by some of the nastiness about her in comments here and elsewhere. Rather, I think this matters because the story Andrews told was basically about the subprime crisis, and the book casts him as a sort of everyman, lured in by cheap credit and a likeable scoundrel of a mortgage broker. That may be what happened to many, or most people in the mortgage crisis—but the back to back bankruptcies strongly suggest that this is not what happened to Andrews. That said, I think the story told with the bankruptcies included would still be a story well worth telling.

In order for Andrews to be “everyman,” his wife has to be “everywoman,” and that’s the way he wants to depict her, but his (indirect) response to Megan McArdle makes even more clear the particular gender dynamic of their marriage, something only hinted at in his NYTMag article: His wife Patty exists as the object of his desire (she is “brainy, regal, sexy, fiery and eclectic”), calling forth his manly impulse to rescue and protect her. She has no agency in her own right, and hence no accountability. Neither of her two previous bankruptcies, you see, was really her fault. The first was caused by a deadbeat (now ex) husband who “blindsided” his “stay-at-home mom” wife into signing fraudulent tax returns. The second was caused by a sister who, like a harpy,”followed her east” to collect the loan that Patty, caring for four children without a permanent job or any child support [damned deadbeat husband!] had taken from her. By the time the sister caught up with her, Patty had remarried, and her devoted new husband would have raided his 401k to pay the sister back, but the court wouldn’t allow it.

Why didn’t Andrews reveal all this from the outset? He wanted to spare his wife the pain: “Since Patty had been so brave in letting me tell our own story so candidly, I wanted to spare her the public exposure on these older woes.” Brave? Candidly? Please. The success of Andrews’ tell-all — scratch that, I mean Andrews’ tell-some book is all that stands between her and a third bankruptcy in ten years.

Andrews wrote his book to protect his wife and save them from foreclosure, but his failure to disclose his wife’s full financial history now brings his credibility as a reporter — all he had left to sell — into question. Andrews and his wife are the victims not only of their own bad financial planning and a deeply irresponsible and reckless mortgage industry but also some pretty retrograde ideas about gender roles.

Neither of the stories Edwards now tells of his wife’s two bankruptcies holds water, if you know the pertinent law. As I understand it, when his wife was the stay-at-home mom of husband #1, he had her sign tax returns (not clear if the returns were false) but he never filed those returns. If she had no separate taxable income, and they never filed returns, then she had no tax liability at all. The burdens of joint liability for a married couple under federal tax law only arise when the couple elects the benefits of joint filing status — which can only occur if they file a joint return. No filing, no liability for the non-earning spouse. Hence, wife’s first bankruptcy could not have been triggered by the ex-husband’s tax derelictions (assuming the rest of that story is true). (This is also putting aside whether she really could have been unaware that he wasn’t paying their taxes — i.e., unaware that they seemed to have 20% or more disposable income than they should have.

As to bankruptcy #2, Edwards says he was “not allowed” to cash in his 401K to help her pay the debt to her sister. I’m not as sure of this one (please correct me someone, if I’m mistaken), but I don’t think either the IRS or the bank/brokerage can stop you from cashing in your 401K prior to reaching retirement age. The problem is that doing so generates a big punitive tax liability and penalty for premature withdrawal. If I’m right about this, what he’s really saying is that they were unwilling the pay the price for making good his wife’s obligations to her sister, and decided (through bankruptcy) to make the sister and all of his wife’s other creditors pay that price instead. And he doesn’t explain why he didn’t borrow against the 401K to get the money to pay back the sister, as you are definitely allowed to do.