Hard Times, Easy Credit and the Era of Predatory Lenders
by James Scurlock
Scribner, 256 pages
Reviewed by Jason Gooljar
Bull! Not bull Guest Author
May 29, 2007
[Editor's note: Jason Gooljar is a 28-year old progressive activist and strapped twenty-something living in Greenburgh, NY. You can learn more about him by visiting his website www.jasongooljar.com, which he started to bring forward issues of progressivism and labor in New York.]
With recent news of the increasing number of defaults in the subprime lending market, it is no revelation that America is in for some rough sailing ahead. The nation is in a debt crisis in more ways than one. One only need look at the twin, bulging federal budget and trade deficits to realize that our society has become addicted to borrowing and spending. Now it is foreign nations – most notably China - that hold our debt. We are no longer as independent as we may have thought. It is said that every newborn child in this nation is immediately saddled with $30,000 of our national debt upon his entry into the world.
It is with this overarching theme - of a nation in debt - that James Scurlock, who studied at the Wharton School of Business, approaches his new book and film, Maxed Out.
What is important, however, is not only looking at the people who end up deep in debt with credit card bills, but also at the banks that sell people the products that get them there in the first place. By reading this book you will come to realize that financial institutions make a lot of money by selling debt, no matter the credit risk. This means that anyone is fair game, from the college freshmen who have just moved away from home for the first time, to the adult headed for - or just emerging from - bankruptcy. We also learn that banks don’t really like people who pay off their debt all at once! Ironically, these types of customers are called ‘deadbeats’ by the credit card industry because banks make their money from the interest paid on the debt, as well as the many ways they can jack up monthly interest rates and fees as hapless borrowers remain in their clutches. It appears that traditional loans are simply not cutting it anymore.
Throughout the book Scurlock highlights cases of families whose lives have been ruined by getting into debt. There is the mother who commits suicide once the reality of her credit reports are made known to her husband. It seems the credit cards were easy for her to obtain and she used them just to get by. Then there’s the gruesome story of a young man, who after racking up massive credit card debt, goes on to kill his family. He supposedly snapped from the pressure of constant complaints and threats by his parents while working multiple 'McJobs' in an attempt to pay off his debts. This is obviously not normal behavior, and clearly there something wrong with this individual. But he was brought into the debt trap like so many other young people his age. Too many young people are being led into debt through credit cards without fully understanding what they are getting into. Worst of all, these banks don’t care anymore about credit worthiness in the first place. It used to be that you had to qualify for a loan and be seen as responsible before credit would be extended to someone. How does giving people credit that they should not have in the first place help anyone? The term predatory lending is more than easily applied in these situations.
In the book we also hear from a former bank manager who sheds light on the fact that big banks have changed dramatically away from community development that puts people first into simply debt sellers: “Jon was nothing more than a cheerleader for mortgages, car loans, credit insurance, credit cards, and all of the other financial products that banks package.” Before that, his job resembled that of a small town banker. He talked about saving people from getting into debt and looking out for them. After all the mergers and acquisitions, that is no longer the case. As the book says:
The game is delivering credit (the enabler) as efficiently as possible to the maximum number of consumers and converting that credit into debt (the product). What’s really important, then, is being the low-cost provider. And to do that, you must maximize your economies of scale: You must get bigger and bigger and you must become ruthlessly efficient at every level of the company. This is why Wal-Mart is trying so hard to build a bank, and why the big banks are so zealously lobbying against it.
While I cannot cover the many things this book goes into, it is indeed recommended reading. One of the more important lessons to learn is that Americans are taking on more debt just to get by. This means that wages and income have not kept up and this is a real problem. Reworking bankruptcy as the banking industry did with the bankruptcy bill in Congress has done nothing to solve the ultimate trajectory we’re on. Normally, when people can’t pay, they default. The new law makes bankruptcy harder thus allowing banks to squeeze more money from millions of struggling workers.
The larger question is what this does mean for the nation as a whole? What kind of a world is it, when corporations profit from the suffering of people? Eventually, workers will be squeezed until they can be squeezed no more, and what happens next is unpredictable. Wouldn’t it better to lend to people who will be able to pay you back in the first place?
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Video: James Scurlock and Elizabeth Warren on Nightline
Maxed Out - The Movie
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Review: Deep Economy
The Fourth Turning - Part I
The Fourth Turning - Part II
Video: Peak Oil, Smoke and Mirrors
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