To ARMs! to ARMs! ye brave!

To arms! to arms! ye brave!
Th' avenging sword unsheathe,
March on! march on! all hearts resolved
On victory or death!

- Claude Joseph Rouget de Lisle, French soldier and song writer, author of Marseillaise (1760 - 1836)

Well, this is a different kind of ARM, and the NY Times has an excellent article about how "taking up ARMs" has led to disaster. The article is entitled "Once Trusted Pioneers, Now Pariahs" and features the story behind Herbert and Marion Sandler who founded World Savings Banks that pioneered the ARM (Adjustable Rate Mortgage).

Known as an option ARM — and named “Pick-A-Pay” by World Savings — it is now seen by an array of housing analysts and regulators as the Typhoid Mary of the mortgage industry.

Pick-A-Pay allowed homeowners to make monthly mortgage payments that were so small they did not cover their interest charges. That meant the total principal owed would actually grow over time, not shrink as is normally the case.

Now held by an estimated two million homeowners, the option adjustable rate mortgage will be at the forefront of a further wave of homeowner distress that could greatly delay or even derail an economic recovery, mortgage industry analysts say.

The article features a video where you can see how they trained their agents to sell these ARMs. For me, the killer bit is the following:

Marion Sandler, now 78, was a Wall Street analyst in the early 1960s when she and her husband decided to buy a bank that took only savings deposits and made mortgage loans — a thrift, or savings and loan, in banking shorthand — and run it themselves.

Mr. Sandler, now 77, was a lawyer in Manhattan who grew up poor on the Lower East Side, the son of a compulsive gambler whose earnings were consumed by loan sharks.

Terms like "savings and loan" and "compulsive gambler" should give you a frisson d'horreur.