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Media Whores / S.H.A.M.E. / October 19, 2012

I was passing through the Mojave Desert and by chance stopped by a local thrift store in Joshua Tree. I’m glad I did, because I spotted a book that I just had to own. At $0.50, it was priced to sell. And as you can tell from the title above, the book’s a classic. It’s bound to remain fresh and relevant through the ages—not as a useful guide to homeownership, but as a fossil record of the biggest real estate scam in the history of the United States.

A lot of people still wonder how and why so many millions of people bought such ridiculously overpriced homes and took out mortgages and loans they clearly could not afford?

Extra! Extra! Yasha Levine makes frontpage news in Victorville!

That’s what I kept wondering when I moved out to Victorville back in the Spring of 2009 to do immersion reporting from the front line of the real estate meltdown. Located about 100 miles east of Los Angeles on the edge of the Mojave Desert, Victorville got higher and crashed harder, in terms of real estate, than almost any other place in California. It doubled its size to 100,000 in just eight short years, growing from an isolated hick outpost into a booming commuter suburb filled with the cheapest McTractHomes south of Fresno. By the time I got there, Victorville was a ruined city filled with empty master planned communities, some of them half built and abandoned, rotting dry in the sun. I spent nearly two years reporting on the real estate swindle out there, and I never could stop thinking about the central question: How the hell were people coerced into moving out here?  Why would anyone think that buying a $500,000 house in a desert 100 miles away from Los Angeles be good idea, no matter what kind of loan deal you got or how booming the market. What kind of propaganda were these people subjected to?

Well, this book provides a part of the answer: people were explicitly instructed to do so.

The Automatic Millionaire Homeowner hit the front bookcase displays at Barnes and Noble in March 2006, at the very top of the real estate market and just a few months before the whole thing crashed and burned. Its main message was simple: If you take out a mortgage to buy a home, you will always make money. There is no way you can lose—no matter when you buy, how much you pay or what type of loan you get. And the kicker is: both the book and finance expert who wrote it were bankrolled by Wells Fargo and Bank of America.

This book is just one of dozens—if not hundreds—of similar self-help snake oil guides promising a sure bet system to get rich in real estate. But it’s a good example of the massive propaganda effort financed by Wall Street that was designed to funnel as many people as possible into the mortgage meat grinder. The book was packed with blatant lies that seem so obvious and even comic in retrospect. The book was not put out by some shady fly by night operation, but by a supposedly credible financial expert who had the backing of the most well-known and respected banks, TV networks and newspapers.

But the whole thing was a fraud, shamelessly boosted by some of the biggest names in news media—none of whom have been held accountable for their role in defrauding millions of Americans.

So let’s take a look…Crack open the book and turn to the introduction, it begins like this:

What if I told you the smartest investment you would ever make during your lifetime would be a home!

What if I told you that in just an hour or two I could share with you a simple system that would help you become rich through homeownership?

What if I told you that this system was called the Automatic Millionaire Homeownerand that if you spent an hour or two with me, you could learn how to become one? [emphasis mine]

Would you be interested? Would you be willing to spend a few hours with me? Would you like to become an Automatic Millionaire Homeowner?

Interested? Intrigued? Want to know more? Well, turn a couple of pages and you get this:

As I sit here in August 2005, I have no idea when you will be reading what I’m writing. Maybe it’s March 2006 (when this book is scheduled to be published)—by which time the real estate market could be slowing or cooling down to modest single-digit annual gains (or not). Perhaps this book was bought by a friend of yours who passed it along to you—and it’s now 2007 and those once “certain” boom markets are going bust due to speculation. Or maybe the opposite has happened—interest rates have remained at historic lows, and home prices have continued their march upward.

In fact, it doesn’t really matter when you happen to be reading this or what’s going on right now in the markets. This book is not about the boom . . . or the busts. . . . What this book is about is the truth. And the truth is this:

Nothing you will ever do in your lifetime
is likely to make you as much money as
buying a home and living in it. [emphasis in the original]

What’s this sure-fire system? Well, it’s so simple it fits on the inside flap! Here’s how you do it:

What Makes The Automatic Millionaire Homeowner Essential:

■ You don’t need a big down payment to buy a home.

■ You don’t need great credit.

■ You should buy even if you have credit-card debt.

■ You can buy a second home even if you’re still paying off the first.

■ You can get started in any market-boom or bust.

■ It’s easier to be a landlord than you think.

Just a few months after the book came out, the real estate market went into a death-spiral. Victorville and other Mojave Desert exurbs like Palmdale and Lancaster were packed to the brim with people who followed this book’s advice to the letter. They took out no down payment adjustable rate mortgages, bought at the peak of bubble, had horrible credit scores, were struggling to make ends meet and were probably up the hilt in credit card debt. Over the next year and a half, home prices collapsed by 30% and just kept falling. By the time that I packed my bags and fled West towards the Pacific Ocean in 2010, homes that had sold for nearly $400,000 at the top of the market in 2006 couldn’t find a buyer at $50,000 or $75,000. People were kicked out of their homes, lost all the “investment” payments they had made on the loan and had to find other places to live—rental homes if they were lucky; their cars or tents at the hobo camp down on the banks of the Mojave River if they weren’t.

So the Automatic Millionaire was a bust—well, at least as far as the now-former homeowners were concerned. But as we now know, the latest homeownership craze was never meant to benefit the homeowners. The only Automatic Millionaires created by this book were David Bach and the financial oligarchy he served.

See, before David Bach began his bright career as a New York Times bestselling author dedicated to spreading the gospel of homeownership, he was a senior vice president of Morgan Stanley and a partner of The Bach Group, a wealth management outfit started by his father. Yep, he was born into it. Finance runs through his veins!

So it’s no surprise that both Bank of America and Wells Fargo sponsored David Bach and his revolutionary Automatic Millionaire Homeowner wealth creation system.

Here’s an excerpt from Wells Fargo’s press release:

Wells Fargo Home Mortgage Joins with David Bach to Promote Shared Vision of the Lifelong Benefits of Homeownership to Millions of Americans

Best-Selling Author, Leading Retail Lender to Encourage People to Build Long-Term Financial Success through Homeownership

DES MOINES, Iowa – Oct. 28, 2005 – Wells Fargo Home Mortgage today announced a three-year agreement with financial coach David Bach, author of several best-selling books including No. 1 New York Times best-seller The Automatic Millionaire. The partnership is designed to increase the number of first-time, second-home and investment homebuyers and help homeowners best manage the equity in their home as an asset to achieve their long-term financial goals.

Yep, Wells Fargo is only interested in educating homeowners for the greater good. And the bank is not alone. Just look at all the smart people who praise and recommend his work. They wouldn’t lie, not with their reputations on the line!

Jean Chatzky, Financial Editor of NBC’s Today, blurbed: “The Automatic Millionaire gives you, step-by-step, everything you need to secure your financial future. When you do it David Bach’s way, failure is not an option.

Fox’s Bill O’Reilly also endorsed the Automatic Millionaire wealth creation system: “David Bach’s no-spin financial advice is beautiful because it’s so simple. If becoming self-sufficient is important to you, then this book is a must.” Yep, this is the same O’Reilly who bashed homeowner “losers” who took out loans that they weren’t able to pay, and yet here he is endorsing a plan that says there’s no such thing homeowner who loses money. Wonder what kind of cut Bill gets off Bach’s loot?

He rips you off, puts you in debt and sticks by your side to help make sure you pay it off. What a guy!

So what’s up with David Bach today?

The man’s still doing regular TV gigs and giving financial advice to unsuspecting victims, including a weekly appearance on NBC’s Today Show. But he’s changed his racket: Bach’s no longer out to make automatic millionaires; these days he’s motivating debtors to get second/third jobs and convincing them to adopt austerity measures in their own personal lives. He’ll help you pare down your consumption footprint to the bare minimum necessary for physical survival. Yep, Bach’s our debt handler. His job is to make sure we peons keep making those monthly payments to Wells Fargo and Bank of America!

The day that degenerate shysters like David Bach are afraid to show their faces in public and feel the need to flee across the border is the day that we’ll know that we as a country are making progress towards a brighter future.

Yasha Levine is an editor of The eXiled and co-founder of the S.H.A.M.E. Project. Read his book: The Corruption of Malcolm Gladwell.

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56 Comments

Add your own

  • 1. Friendly Coward  |  October 24th, 2012 at 6:43 pm

    @15 Here. Absolutely not self promoting, just promoting. I never knew the phrase ‘there is this one guy’ held such a depth of hidden nuance. It just seems to me there is something of a venn diagram to Yasha and Salty’s beats, you know, the whole “scumbag scammer’s promising people financial stability and happiness while selling them awful, unhelpful, unproducts” If those products are horseshit self help retreats, horseshit multi-level marketing businesses, or horseshit mortgages, or horseshit mortgage backed securities, the end result is the same: the hustled get a great big sack of debt and misery, and the hustlers walk with their cash.

  • 2. super390  |  October 25th, 2012 at 9:16 pm

    Just need a place to post this article on the ideological ties between Paul Ryan’s social security privatization scheme, and General Pinochet’s:

    http://www.talk2action.org/story/2012/10/25/9257/3229

    No SHAME Project for Ryan, he is too low to qualify.

    AEC: Pinochet’s privatization plan is Cato/Koch’s privatization plan.

  • 3. exileDEAD  |  October 27th, 2012 at 2:40 pm

    > they canned alyona
    jane hamsher wanted her more
    after a long day of work jane hamsher is very dirty
    and sweaty
    you are incapacitated with a drug she has injected
    into your spine
    jane hamsher is doing something odd
    jane hamsher sat on your face

  • 4. Bresner  |  November 7th, 2012 at 5:22 pm

    So they read this guy’s book and then they bought a home? Get serious, most people don’t read at all. This guy was just riding the wave.

    The U.S. govt has subsidized the troll market for decades now via the non-profit no taxes scheme and the tax write off for “charitable” contributions to orgs that pay troll monkeys like myself $6.95 per hour, no benefits to come on here and shill for poor Mr. Instant Millionaire. Yes, I will say onto you that Big Government did all this by offering VA, FHA mortgages, artificially low interest rates, tax deductions for mortgage interest, and not taxing gains on housing below $500k. You reaped what was sown.

  • 5. Vernon Hamilton  |  November 9th, 2012 at 9:55 pm

    @47 I am delighted to learn of the expertsindustryassociation, thanks for sharing – perhaps the least productive “industry” ever devised!

  • 6. wietog  |  September 23rd, 2013 at 3:55 am

    Our grandparents and parents were able to buy homes while working blue collar and mid-to low-level white collar jobs.

    Our salaries have not kept up with inflation.

    While it may be true that we overspend, it is NOT the reason we aren’t wealthy nor have adequate savings or retirement accounts. A few hundred a month makes NO DIFFERENCE when a root canal or basic car repair costs $2,000. You won’t change your life by saving a hundred or two dollars a month, is what I’m saying.

    Yes, there was a strong push to encourage people to purchase homes, but that has been going on for some time. Why? Well, the mortgage brokers/banks, realtors and all the other quasi professionals (escrow officers, inspectors, contractors, etc.) stood to benefit as well. It was the exponential result of all those marketing campaigns, both subtle and overt.

    So what happened? Those of us who were in a position to buy – some more likely than others – were caught at a bad time.

    Case in point:
    In 2005, my husband and I had decent jobs; we made over $100,000 per year. We were renting, and had about $20,000 saved.

    We had NO DEBT, no kids, no pets and no student loans, nor did we have any medical issues or other responsibilities.

    My husband was managing properties, and we saw that a snazzy 2-bedroom in our town (in the NW) was about $1500-2,500/month.

    At the time, we were paying far less per month, however, we lived near bums, crappy retail and in a small, old building.

    We knew that if we had a kid/kids, that we couldn’t stay there. We had to move.

    So, we considered renting…but as we viewed places, we were painfully aware of all the limitations and the fact that we would have little to no control over our living space.

    Would there be drug addicts, alcoholics, bums, smokers, partiers and/or criminals in the building/neighborhood? Most apartment communities that weren’t super high-end were iffy.

    We weren’t keen on having neighbors right above/below us or sharing walls – we wanted some privacy and a sense of ownership.

    We had been brought up to believe that renting was “throwing your money away.”

    And yes, we assumed that if we bought a nice property in a viable neighborhood, took good care of it, kept up payments and lived there for 5-10 years that at WORST we would break even (but have good credit and the experience of owning a home) or we would make some money. We NEVER factored in that we’d lose, but that’s because so many things in our life were OK at the time.

    The person in my life who encouraged us the most to buy was my boss, who, it would turn out, had not purchased her own condo – as she claimed – but had coerced her “business partner” into doing so for her (interesting side note: this “business partner” was an insecure woman who was raking in money in the CA real estate market and was influenced by my woo woo boss into funding her soon-to-implode “lifestyle business”.

    My parents are invalids and were never homeowners; my husband’s mother depends on the state and his father was handed part of the family business (rich grandaddy). My husband did get help paying for his undergrad degree, but nothing more. His dad? Retired early, traveled and blew money on expensive property (he got burned eventually, too).

    So, we didn’t have trustworthy advisers. Although we did have friends who have been successful in the NYC real estate market (even through the bubble). However, they operate in a completely different strata (millionaire developers) so their only useful advice – which we did not take as it seemed ludicrous at the time – was to hire a lawyer. We would live to regret that.

    We shopped around for some time, and even though our mortgage broker prequalified us at half a mil, we balked and self-imposed a ceiling of $350K or less.

    We strongly considered a rental property (a place with a mother-in-law unit or a duplex) but after a long hunt, we realized that the price would be too high AND if anything went wrong, we would be required by law to fix the problem – plus, we could end up dealing with evictions or just plain late payers. We didn’t have enough in reserves to cover it, so we abandoned the supposedly “smarter” idea.

    We were shown a LOT of junk and then found a great place ourselves (although it would turn out to be WAY too small eventually). It was in one of the best neighborhoods, it was adorable, it had been upgraded and well cared for and had a lot going for it: a new deck, a garage, an alley, great landscaping, skylights, nice finishing touches, a gas fireplace, original pine floors, and it needed ZERO work to move in.

    Our inspector tried to buy the house out from under us, and there was a bidding war. We ended up paying a little more than we had hoped, but it was still close to $350K.

    However, after all the fees, it turned out that we didn’t have much for a downpayment. We turned to family, but no one stepped up. We had really good credit, but our mortgage broker processed us in a way that was more lucrative and easier for him – which resulted in a higher interest rate, with a long prepayment penalty period and the dreaded ARM adjustable rate mortgage loan.

    At escrow, this was all revealed. We had no one there (our realtors sucked and the mortgage broker tried to bail) but we got him in. I hesitated (my husband trusted the guy – he was our very much above board insurance agent’s boyfriend). We went through with it.

    Afterwards, our realtor flipped out. We approached the mortgage brokerage and got ALL our fees back. The broker was fired (lots of drama; our insurance agent let us go, it was a mess). But he had screwed us and had processed us with a no-paperwork loan. EVEN THOUGH WE HAD GREAT CREDIT AND AWESOME JOBS.

    A month later, the company I had worked for for years went belly up. I found more work, and we proceeded to outfit the house, buy lawn equipment, spruce it up, etc. Not anything major, but here are some additional expenses that increase your monthly costs:

    Mortgage (much higher than the rent we would have paid – $2500).
    Homeowner’s insurance (which is offset by the tax deduction at the end of the year, so it’s a wash).
    Utilities: ALL of them (including water/sewer/trash). These are MUCH higher than when you rent.
    A water leak costs us $4,000 and was never even resolved!
    An inept pruner cost us $500 to remove some branches.
    Plants, stones and pavers cost $1,000.
    A new fan was $300.
    The stove wasn’t connected properly: $250.
    The dryer gasket was inserted incorrectly: $200.
    We had to check for black mold.
    The windows were crap, but we didn’t have the $7-10K it would cost to replace them.
    A mower, weedwacker and trimmer cost us about $1,000.
    We had to fix a leak in the garage: $500.
    Etc.

    So, we held on for a few years, until I got pregnant in 2008. I had a great job with a seemingly strong company (they were willing to let me work from home after my leave AND kept asking how soon I could come back).

    My husband was told he’d be getting a raise and steadily increasing bonuses.

    I had several freelance clients I worked with, too. And we still had zero debt, plus the house seemed under control.

    The pregnancy was hard, but I worked up until 8 1/2 months. During my 3-month UNPAID leave, the CEO and executives of the company I worked for were indicted and ended up going to prison for lying to their investors. It was a complete and utter shock to the employees and the business community.

    We had the baby (thank GOD we had insurance). I was overwhelmed, exhausted and had terrible postpartum depression. My husband spent the only week he got for paternity leave in the hospital with me as I battled an infection. Fabulous. We ended up fighting and have continued on a downward trajectory since.

    My husband’s boss was fired; the new boss would not honor the agreed-upon raise or bonus structure.

    This is when the house sprung a leak, among other things.

    Meanwhile, several family members and friends went through cancer, divorce, suicide…your typical salad of horrors.

    We attempted (or I should say I attempted) the ridiculous homeowner’s programs to help us adjust our loan, but the prepayment penalty fucked us up. I sent our information in about 4 times and we waited up to 6 months with no word. Each time they claimed our info was lost and once they just sent it to some random company to be processed. Instead of being at the top of the list, we kept getting bumped to the back.

    I tried desperately to work. Our daughter was born August of 2008 – the month the recession was officially “called”. I tried to get work from my freelance clients to no avail. We had almost no help from family with the baby (mother in law is disabled, father in law is an alcoholic; my parents are invalids and my brother has kids with severe disabilities (plus, my family lives far away). No siblings or friends or family to help meant VERY expensive, hard to find care whenever I went on job interviews or for meetings. I barely eked out any money, especially since the need for my line of work (writer/editor/marketer/etc.) was one generally shelved by companies during the recession.

    We did refinance finally, which only served to reduce the interest percentage by like a point, the monthly costs were just as high. Ridiculous – the only ones who benefited were the bank, the broker and the escrow company, as usual. We should have sold, but with a newborn I was freaking out – moving would have been a nightmare (again, few people to help us and not much money to hire anyone).

    When we tried to sell ourselves, it was a joke. Realtors would show up at the last minute – no warning – and nearly each time my baby would suddenly need a nasty diaper change – how do you change a baby’s diaper and get rid of the evidence (by disposing it out back) and attempt to spray away the stench and entice a new buyer who is now waiting for like 15 minutes outside your door with a realtor who is trashing your place to them (they HATE it when you sell yourself).

    We wasted time and money on the MLS, storage and ads. We couldn’t get the banks to help – they only woke up if you stopped paying your mortgage, apparently. And to sell using a realtor meant that we’d lose money. It all made no sense.

    But staying made the least sense. Our house was now worth $50-$100K less than what we’d bought it for. It was small. We had planned on renovations that thankfully we didn’t do and now couldn’t afford. It was an older house, which we realized was a bad idea (although the roof and structure were sound, things were likely to go south). AND the floor plan SUCKED for a baby/toddler – small rooms, hard to childproof, no storage, etc.

    So, we ended up shortselling. Another realtor who sweet talked us into using him was unable to manage the banks, and it ends up looking like we foreclosed on our credit reports (because it took so long). Our credit was fucked, we wasted $1,000’s on prepping the house for sale (landscaping, painting, repairs, etc.) and ALL of the mortgage payments/costs/fees disappeared.

    We probably should have just foreclosed and stopped paying for a year to save up money prior to moving, but my husband didn’t want to chance us not being able to find a decent rental/landlord. We’ve lucked out with a great landlord and frankly, a nicer, bigger place, but it’s an apartment and we have no yard or parking. We are in debt, I’ve had trouble finding work. My husband has been reluctant to switch or even look for new work (afraid he’ll get fired in the process) and his company has offered shittier and shittier diminishing “benefits”, cut his pay and eliminated bonuses, all while piling more work on him and paying him WAY less than previous employees.

    If we had bought our home a few years before – that is, if we had met earlier and had been at the right time in our lives to buy, we would probably be fine. Some people like that tend to look down on people like us – “Oh, I worked HARD for my home; you paid TOO MUCH for yours; you shouldn’t buy a house you CAN’T AFFORD; you are not a responsible person, etc.”

    BULLSHIT.

    We were so responsible and loyal, we FUCKED ourselves. We followed ALL the rules. When investors strategically go bankrupt (like Donald Trump does regularly) it’s considered smart business; do it as a homeowner, and you are a lowlife scumbag greedy loser.

    We invested in a home that was snapped up during the shortsale – there was even a bidding war on it (but it still sold for far below what we’d paid for it 5 years earlier). It is in a GREAT neighborhood near a thriving city. We WORKED HARD. Our BOSSES screwed us over.

    Right now, there are many intersections in our town where there are 3 empty properties and a fucking new bank branch (Chase, B of A, etc.) A perfect visual metaphor for what happened: the little guys got screwed and the banks made out like bandits – their only risk was getting bailed out…with OUR OWN MONEY.

    I get FUCKING PISSED OFF when I think about it all. Especially since we are often mocked and looked down on, when frankly, all we did was get involved in real estate at a bad time. Who knew WHEN the bubble would burst? we knew we had to get in before it got worse, or so we thought.

    We bought our house for $360,000 in 2005. A few years later it was worth about $430,000. It didn’t seem to make sense to sell, since we were having the baby, and once we factored in all the taxes/fees/costs, we’d break even if anything.

    5 years after we moved in, we ended up shortselling for $330,000.

    3 years later – a few months ago – it sold for $360,000.

    Bad luck, bad timing, bad advice, bad move.

    Meanwhile, my husband also lost out during the dot com bubble – he was up a few hundred thousand…next thing you know, he lost it all.

    The USA is a game, and the house always wins.


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