NY Times: Given a Shovel, Americans Dig Deeper Into Debt

[marmar]

Given a Shovel, Americans Dig Deeper Into Debt


By GRETCHEN MORGENSON
Published: July 20, 2008


The collection agencies call at least 20 times a day. For a little quiet, Diane McLeod stashes her phone in the dishwasher.

But right up until she hit the wall financially, Ms. McLeod was a dream customer for lenders. She juggled not one but two mortgages, both with interest rates that rose over time, and a car loan and high-cost credit card debt. Separated and living with her 20-year-old son, she worked two jobs so she could afford her small, two-bedroom ranch house in suburban Philadelphia, the Kia she drove to work, and the handbags and knickknacks she liked.

Then last year, back-to-back medical emergencies helped push her over the edge. She could no longer afford either her home payments or her credit card bills. Then she lost her job. Now her home is in foreclosure and her credit profile in ruins.

Ms. McLeod, who is 47, readily admits her money problems are largely of her own making. But as surely as it takes two to tango, she had partners in her financial demise. In recent years, those partners, including the financial giants Citigroup, Capital One and GE Capital, were collecting interest payments totaling more than 40 percent of her pretax income and thousands more in fees.

Years of spending more than they earn have left a record number of Americans like Ms. McLeod standing at the financial precipice. They have amassed a mountain of debt that grows ever bigger because of high interest rates and fees.

While the circumstances surrounding these downfalls vary, one element is identical: the lucrative lending practices of America’s merchants of debt have led millions of Americans — young and old, native and immigrant, affluent and poor — to the brink. More and more, Americans can identify with miners of old: in debt to the company store with little chance of paying up. .....(more)

The complete piece is at: http://www.nytimes.com/2008/07/20/business/20debt.html?hp#

[NightWatcher]

1. the credit companies have access to credit reports and still give people credit who shouldnt have it

they do this to give some of us who have nothing a few extra dollars for toys or groceries. Then when people cannot pay (even when they figured they wouldnt be able to pay- having read their previous credit history) begin to harrass people by turning collection agencies on them after increasing their rates to 29-34%.

Collection agencies get paid only if they can harrass and threaten people enough to force money out of them.

Credit companies get their money from insane interest that in previous societies would be considered usery.

I personally believe the predatory nature of the "business of credit" is evil. People who work for some of the more predatory credit companies and practice these behaviors are just as responsible as the CEO's that write the policy. I also support anyone who commits fraud that targets these corporations (not the individuals who identities are stolen).

[flashl]

2. "Owe the company store" wasn't that the goal? Outsource jobs, suppress wages,

costs for basic necessities galloping, while creating a norm where the average American 'must' work two-three jobs to meet obligations?

[lunatica]

3. It's an inevitable self fulfilling vicious circle

It all started when both spouses had to get work just to make ends meet. Women became viable credit card customers on their own as they fought for and got jobs which had been mostly male. The mortgage companies saw dollar signs as they assessed that every household now had double the money coming in and everything went up for that extra profit. It got so no one could function in this society unless they went into debt. Buying a house, owning a car and living the same way their parents did was impossible without going into debt. Add to that the cost of health care and the cost of sending your kids to college (just so they can cope with their future debt) and the American Dream explodes in massive debt.

It's a lose lose situation for the regular citizen. Try getting a job without a college education and you lose. But then try being a college graduate without going into deep debt. And it gets worse for those who want to be doctors and lawyers. Only the corporate sharks with their lending practices win something, and now they're losing too.

[marmar]

4. Very true

n/t

[gratuitous]

5. Keep this scenario in mind

When Republicans are trying to sell you the snake oil of "it's your money" whether it's in the form of taxes paid to the government or social security withholdings from your paycheck. We do a piss-poor job of educating people about their personal finances in this country, and while Ms. McLeod is in a bad state, she's by no means exceptional. Why should I, a young and healthy go-getter, have to spend my money on something as unsexy as health insurance premiums, when what I really want is a 42-inch flat screen HD television?

It's easy enough to berate someone making such a foolish choice, but the reality is that people don't know any better, and our society is heavily weighted against providing any education along those lines. And this is the inevitable result. What will we do if the fondest wish of the overclass is realized and social security is dismantled? Surely some people, okay a lot of people, will invest foolishly or invest unluckily or get snookered by flim-flam artists. That money will be gone, gone, gone, and the persons it was supposed to take care of in old age will still be here. Will our society be so hard-hearted as to let them starve in the streets? That would be catastrophic. No, we'll bail them out in some fashion. And who's going to pay for that? Why, the same people who were scammed out of the social security system, of course.