Maxed Out

Dear Friends,

I watched the documentary "Maxed Out" last night. I am a big fan of the creditslips.org blog, and Professor Elizabeth Warren of HLS, a regular contributor to that site, is given a lot of camera time by the filmmaker.

I am not sure that the reasons for today's credit problems are as simple as the film might have one believe (i.e. greedy bankers and evil politicians) and I do feel sorry for the sad state of the many "victims" featured but I also understand that it is not a crime to take advantage of the uneducated, as cruel as that may sound. A vast majority of the people in this country are completely unaware of the consequences of credit card debt. They want more than they can afford and they seem willing to live paycheck-to-paycheck until the day they die. Everyone interviewed talked about the difficulty they have paying bills and then would list the car note, the house note, the credit card debt, and the cell phone bill.

One of the people interviewed was going on and on about all of his problems while sitting in front of his computer in what appeared to be a large house in the suburbs. None of them seemed to understand the connection between all of the things they had and their sad state. It is tough to get by without a car. I sold cars for a while and understand the position some folks are need. That said, I also saw a lot of people buying cars WAY out of their price range. They would take on $500 a month car notes on $35,000 a year salaries. Oh and that's for 72 months. Cell phones are not a necessity. Cable TV is not a necessity. Living in a big house in the suburbs is not a necessity.

I find it hard to feel bad for people who would rather spend their money than save it. On the other hand, the banks are not making life easier for the average American. I must get a new offer for a loan or a credit card every single day. Some of them want to give me well over a hundred thousand dollars. For someone that is broke, I imagine this sort of offer is very tempting. I also know why I get these mailers. I have average credit and live in a poor, black neighborhood in the South. Seriously, I live in what most would describe as "The Ghetto." Most homes on my block go for under $100K. I mention that it is a predominantly black neighborhood because I feel it is important to draw attention to a certain aspect of "Maxed Out" that I felt was not given enough time. Slavery ended 150 years ago. The blacks were freed, but had absolutely nothing to begin life with. Most turned to sharecropping, which, for all intents and purposes, made them debtors right out of the starting blocks.

Martin Luther King, Jr. used to discuss the myth of the bootstraps. "How," he would ask, "can we expect them to lift themselves up by their bootstraps, if they haven't got any boots?"

Being black and being poor go hand-in-hand in this country. It is one of our nation's greatest blemishes. Obviously there are exceptions to the rule, but whether we admit it or not, the effects of slavery and sharecropping are still taking their toll on the nation's black population. We have created a culture of debtors who have no intentions of ever paying off their debts. Why would they? Reparations will come when the economy collapses and banks are forced to forgive their debts. We are already seeing the warning signs as hedge funds built on sub-prime loans fall every few weeks.

Is that too doom and gloom for you? Sorry. The banks are shooting themselves in the foot by relying on the lower-middle class for all of their profits. The bankruptcy law passed recently is the most obvious example. We are treating the symptoms without treating the disease. I am, first and foremost, a capitalist and have great faith that the market will fix itself. That said, I fear what will happen in this country as it does. There is a great and destructive recession looming. The bottom is about to fall out.

Good luck.

-LCC