An OC Family in the 2008 Financial Crisis

When I was a kid, I lived on a suburban island walking distance from the ocean, near a park with daisy yellow slides and three skinny palm trees that stretched above the grass like beacons. Water surrounded the houses from all sides except for a single bridge tethering us to reality. Our tropical paradise was tucked away into one small corner of Huntington Beach, off Warner Avenue and Bolsa Chica Street. 

My family moved to Davenport Island in 1998, when I was little more than a possibility, my mom’s belly still deflating from her firstborn child, my sister Heather. Growing up here was idyllic. We were physically cut off from the chaos of the outside world, a seclusion allowing me to roam and play with the freedom of a much earlier generation. My friends and I rode bikes through the maze of empty streets lined with rose bushes and cookie cutter mansions. We’d have sleepovers in the living room, roll out sleeping bags and watch movies, never sleeping because we couldn’t stop giggling. In the mornings we’d eat waffles and annoy our parents until they’d take us to the beach where, to their terror, we’d swim through ocean waves twice our height like professionals.

My parents raised me and my sister literally “by the book.” They followed parenting guides and discussed strategies, collecting advice from everyone around them with kids. Their goal was to be as close to perfect as possible, an ideology they carried into their careers as well. 

My dad was bright and witty, with a creative vision for the future. He began his career in physical therapy, but quickly became fixated on computer technology in the early nineties. He saw how revolutionary it would become. With a hunger to succeed and a knack for marketing, he joined the tech industry. He worked as a sales manager for Marisel, a hardware and software distribution company that began in the ‘eighties but had since become one of the top distributors of software from companies like Microsoft, Lotus, and Novel. It was here he met my mom, a UCLA graduate with a BS in economics, employed in the sales department. She was calm and grounded while he was high-energy and creative. They married in 1996 and started a business together. 

In 1998, they began working in software development on an instant messaging app with audio and video chat and software that allowed a person to program without having any skills or knowledge in programming. By 2009, their company had won multiple awards such as the Best Portal Lotus Award, the Best in Showcase at Lotusphere 2008, and they were a finalist for the Lotus Energy and Environment Award. The economy and the tech industry were exploding with no signs of stopping, and my parents were sharing its success. 

In 2001, they bought a company office building on McFadden Avenue and Graham Street, in an industrial sector populated with mysteriously unmarked buildings and random storage units. My family's company building came to be known as “The Office” and doubled as my daycare. One of the meeting rooms was converted into a playroom still fresh with the artificial aroma of packing peanuts and bubble wrap. I constructed a gigantic tunnel to crawl through, a caterpillar bean bag, and blankets to sprawl out on. Eventually, my toys became scattered throughout the offices. Hidden in one of my “secret compartments” was an action figure in an unused desk drawer and a race car under a couch. No one knew it, but my dad’s pen holder was also an undercover rocket launcher. The pen was the rocket.

In the back there was a music studio equipped with a drum set, soundboard, and electric guitars where my sister and I played. Daylight seeped in from the skylights above the central office space and blanketed the workspace in an innovative brightness. The employees were newly graduated computer programmers with hopes of changing the world. I’d follow them around until they gave me a fist bump or tossed me in the air. I was awed by the way they’d talk with my parents in their fast tech lingo and joke around casually with slouched shoulders. I always wondered how they could capture my parents’ attention so completely and immediately. Meanwhile I was left to traverse the building by myself, exploring its thinly carpeted floors and mazes of cubicles each with its own unique mess. 

One cubicle was stuffed with packing peanuts and cardboard boxes, the remnants of computer part deliveries that I jumped into like a pile of autumn leaves. Another room had a tangle of yellow, red, and green wires all scattered about haphazardly. To me, it looked like trash, but the adults all seemed to understand what each was for. They’d pick through them like squirrels separating nuts for the winter trailing off with whichever wire they needed for their current project. And then, there was the server room—a place I was not allowed. A single computer filled the entire space. It sparkled with green blinking lights and so many switches, knobs, and buttons strictly off limits to my reckless little fingers. I secretly hoped the maze of cubicles, computers, and meeting rooms would be my door to Narnia, that one day, if I went deep enough into the maze, I would emerge somewhere wild and magical. Mundanity would wash away, and I’d be crowned princess.

These were the days of the early 2000s when the economy was steadily growing with no signs of wavering. Yet, there was a slow descent, so slow I didn’t notice anything was wrong until the bustling office became a thing of the past, and the brightness that floated down from the skylight faded into dull gray. 

I didn't know that my parents had taken out a series of loans from Washington Mutual bank (WaMu) and were struggling to keep up with the payments. The first was a standard mortgage loan taken out in 1998 when they bought the house. Their mortgage was affordable, about $2,300 a month. In order to buy their office building in 2001, they borrowed against the house which increased their monthly house payment to $5,000. It was a risky investment but considering the technology they were creating and the steady growth of the economy, it was not outrageous. During this time, it was common for families to borrow up to 99% of the value of their properties, regardless of their ability to pay it off. 

However, they also now had two children, employees with salaries, and bills on both the house and the office. Another loan was needed to make all these payments. From WaMu bank, they borrowed what’s called a negative amortization loan. With this dangerous loan, the amount a borrower pays off each month is less than the interest rate. What's left over from the interest rate is added to what’s owed. This is a very fast way to accumulate debt and is usually not recommended by bankers, but my parents wanted to take this risk because IBM wanted to buy their software for a few million dollars. They just needed enough money to get by until the deal went through.

The local WaMu branch, on the corner of Algonquin and Warner, allowed my parents to borrow money even though they had no proof they could pay back their loans. The loan specialist that approved this transaction, who my mom refers to as “fast and loose lady,” gave off the impression that she got things done. She talked quickly and made wild hand gestures. Within minutes, they were approved a loan of $500,000. My mom recounts, “I was astounded we were asking for this money, and they were giving it to us. I thought they were crazy. I didn’t really want another loan. It didn’t make sense.” In hindsight, my mom wishes the banks would’ve cut them off. They might have been able to make things work without it. But now, they were drowning in interest rates they couldn’t afford. Their monthly payments increased to $17,000. Today, this behavior by bankers is called predatory lending.

The money they borrowed immediately went back into the economy, to their employees, to their real estate payments, to my own dance classes and school supplies, fueling all these families and companies with falsely generated income. 

My parents' financial decisions were not unique. Banks were being paid to hand out mortgage loans regardless of a borrower’s ability to repay. The more loans bankers gave, the more they got paid. Banks were flooding money into the economy through this unregulated lending, causing the US to appear much richer than it actually was. People had more money, so they bought more things. People sold more things. It was a time of abundance and ease. By 2006, the whole economy was propped up by falsely generated wealth. 

But this wealth wasn’t real. Instead, the economy was functioning like a giant Ponzi scheme involving the entire world. Everyone thought they were getting rich. However, behind the scenes the rich were gorging themselves, and they couldn’t stop, functioning like a positive feedback loop, a biology term that sums up the situation pretty well. When you begin to eat, your body gives signals to the brain to continue eating. Your mouth begins to salivate. Your stomach begins to rumble. You smell the food. Everything is telling your body to continue eating with the intention of getting you fed and strong. Every branch of the private and federal financial sectors were allowing the feast to continue. Any single branch could have called the others out on their greed, but instead they chose to keep quiet. There was a reason WaMu gave my parents so much money, and it wasn’t because they believed in their business. 

This period of wealth became known as the financial bubble of the early 2000s, named for the sudden boom of economic growth immediately followed by a bust. On September 15th, 2008, Lehman Brothers declared bankruptcy with $613 billion in debt, the largest bankruptcy in history. 

Stock prices plummeted, including the stocks of my parents' business, who were forced to sell off their things to make ends meet. The first month after the bust, our mortgage was paid by selling a telescope. Another month it was paid by selling a Duffy electric boat.

Soon, the expensive, expendable items disappeared, and my parents began to bicker with each other more and more each night after my sister and I went to bed. Their stressed discussions floated up to our bedroom from their kitchen table. One day, during a morning drive to school, I asked my dad how much money we had. He joked back to me, “There are currently five dollars in my bank account.” Surely this was something I could help with. I had saved up quite a few quarters over the years, yet when I offered, he respectfully declined my proposition. Some people just can’t accept help when they need it, I thought.

My sister, Heather, recalls one evening she and our mom were brainstorming a grocery list. Heather remembers her worried face. Her eyebrows formed deep creases where they met her nose, and her mouth tensed into a crinkly pout. “I don’t know if we can afford milk,” Mom said. My sister couldn’t understand this because we were already affording her dance classes and our most recent trip to Hawaii.

 In 2010, my parents stopped making payments altogether, but the banks were so preoccupied with the rising number of foreclosures, it was a full year until they received any form of repercussions. 

They’d been struggling under unpayable fees long before the official economic crash, and my mom admitted she felt a strange sense of relief when the world economy finally caved in on itself. People don’t talk openly about personal finances. The older you get, the more taboo the subject becomes, layered in comparisons and expectations. I think my parents felt pressure to hide their financial struggles, especially since they lived in a nice neighborhood in Huntington Beach. On the outside they had everything: a big house, a boat, two cars, two thriving children. Yet, when night fell, they could barely breathe from the stress of making day to day payments.

My mom recounted talking with the other dance moms, many of whom also appeared wealthy. Many lived in Huntington Beach or Los Alamitos, and at Christmas liked to go shopping at the polished and decorated South Coast Plaza, while my family was more familiar with the reliably decaying Westminster Mall. My mom remembers hinting at our financial struggles before 2008 and being met with vacant smiles. Once, another mom had the audacity to confess that their family actually had the opposite problem, that they often found themselves with too much money and no idea how to spend it. After the crash, the other moms could suddenly understand where she was coming from, and my parents felt unexpectedly liberated by the collective panic. Financial struggle finally became socially acceptable.

In October of 2011, a letter appeared on our doorstep, a notice of imminent foreclosure. My parents immediately made an appointment with a real estate agent. The three of them sat down on the living room sofa. At first, my parents were asking questions like, “Do we really have to sell?” At this point, the banks had been so loose with money, there had always been some way out of financial mishaps. But now the banks had sealed their doors. The agent told them there was no way they could salvage their debts. They were forced to sell their beautiful home, or the bank would seize it, leaving their pockets empty. By the end of their meeting, they began to see their house as a part of the past. The scattered toys on the carpet would soon be boxed up and shipped off somewhere new. The rooms where my sister and I took our first steps would no longer belong to them. The cement footprints of our toddler feet on the sidewalk outside would be lost to new owners. 

Business slowed at the office. With the downturn of the economy, their customers were less interested in technological innovation. Deals they had been waiting on fell through, including the huge deal with IBM. They even struggled to sell software, which had always been the backbone of their company. The innovations they’d been working on were lost. Much of the technology they had been working on still has no equivalent today. The young employees left one by one. The cubicles emptied of computer parts. Dust collected on the unused wires. Fallen branches and dried leaves clogged up the light overhead.

In a short sale, my parents sold the house just in time to escape foreclosure. They rented a house down the street, on the waters of Huntington Harbor with, if you craned your neck, a view of Pacific Coast Highway. The sale left them with enough to get through the next few years with unexpected stability. Their business was in shambles, but our family was extremely lucky to have food to eat and a roof over our heads. Others were not as lucky.

In 2007, there were 400,000 foreclosures in the US. By 2008, that number doubled. By 2009, there were nearly one million foreclosures across the country. In Florida, a city of tents was formed by working people who had lost their homes. Unemployment more than doubled, and the banks were frozen. There were no more loans available. Four months after the recession hit, Chairman of the Federal Reserve Henry Paulson said, “If you keep growing, you’re not in a recession.” 

The 2008 global financial crisis may be fresh in the minds of many readers, but I was only seven years old when Lehman Brothers collapsed. I remembered the stress and the instability but was too young to understand what was happening. When I got older, no one said anything until I started asking. It’s a complex, economically coded story, and it often feels like those in economics do not want people to understand. Terms like “CDOs” and “credit default swaps” are not understandable to those not directly involved with economics. The language is confusing, and what’s worse is that many of the statements given by those in government are lies. It is also a story that is hard to talk about. For many, this time was also a dark moment in their family’s life, a moment that often comes along with a lot of shame. But it’s important to bring these stories to light so we can remember and understand what happened.

I recommend the documentary Inside Job, which explains in depth the corruption of Wall Street, and government collusion. Not a single person responsible faced criminal action, and many of the same people are still in charge today. A handful of very wealthy people control the inner workings of the economic system, and their choices contribute to the growing wealth gap and the disparity of millions, while voters have very little say. Now more than ever, it's important to learn the names of those in charge of the Federal Reserve and who are leading the banks that are too big to fail. Learning how Wall Street and the Reserve function can inform our responses to decisions made at both local OC bank branches and on the top floors of skyscrapers.

Emma McCandless is a UCI alum currently obtaining her MA in English Composition at San Francisco State University. She served as a volunteer intern at Citric Acid. In her free time she writes nonfiction essays and poetry at her favorite bench high above the city.