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TV Blames Victims, Not Perps
I was watching the evening news last night and they had a story about credit cards. It seems a lot of people are no longer able to service them. In response, in hopes of getting at least something back on their bad loans, card issuing banks now often cut deals for a lot less than outstanding balances.
This is not a very surprising phenomenon, given the way the economy has tanked. Banks made an enormous number of foolish credit card loans because they thought they had gamed the court and legislative systems so cleverly that no matter how high their interest rates, and how numerous and unfair their add-on fines and fees, borrowers would have to pay up in full. What choice did they have, after all? Credit scores are now so important these days, and bankruptcy has been made so much more difficult.
Except things haven’t worked out that way. When medical bills and lost jobs forced many Americans to choose between food and servicing their credit cards, the banks’ cunning huge-profits-forever-by-screwing-borrowers paradigm flopped. Which of course should have been the conclusion of this TV report about the growing number of credit card loan settlements.
Except it wasn’t.
Instead, this report noted that to make up for losses generated by settlements, banks are raising rates for consumers still paying up in full and on time, cutting back these people’s borrowing limits, and charging even more numerous fines and fees. Some card users still paying in full and on time were interviewed saying how angry they are that deadbeats are causing them so much pain. And a bank spokeswoman piled on, claiming banks were forced to go after good payers because other people are not servicing their card accounts properly.
What conclusion might a viewer take away from watching this report? Not that banks long engaged in predatory lending practices that reduced millions of Americans to a state of debt peonage and now seek to lessen well deserved loses by abusing millions of other Americans. Instead, this report led viewers to believe that nasty deadbeat borrowers are hurting their more prudent and responsible fellows, as well as innocent lenders.
This reportage, in other words, turned victims into perps, and perps into victims. One can only hope that TV stations that produce such twaddle eventually wise up and accurately report who is doing what to who and why.
44 Responses to “TV Blames Victims, Not Perps”
[...] hopes of getting at least something back on their bad loans, card issuing banks now often … Go to Source Related Posts:Cops ‘too busy’ for credit card fraud (Daily Telegraph)’Credit card fraud’ victim [...]
“……..Silverstein honed has knowledge of financial markets as a senior editor with Bloomberg Financial News in Princeton.”
You must be kidding. If this portion of the bio is true, I shouldn’t need to explain basic economics to you.
Credit cards were offered to less-than-creditworthy individuals under duress and threats of lawsuits for discrimination. Interest rates were established to cover the higher default rates that everyone knew would result from issuing these cards.
Once they were in circulation, banks found that the desire for these cards was so strong that even with the confiscatory interest rates people flocked to have them. They were a great source of profits, but in order to maintain the required ratios of good to bad debt, the banks needed to attract good paying customers also.
This need led most banks to offer very favorable interest rates to the top end of the market, in order to gain their business.
When everything fell apart with housing bubble, rates, credit lines and minimum standards for having a card needed to change. Rates, even for the best credit risks, needed to be adjusted up due to the loss of the more profitable lower end customers. Credit lines were cut in order to balance potential leverage ratios and unfit (but most profitable) customers were denied credit.
No one holds a gun to consumer’s head forcing them to spend more than they can pay. Although liberal’s entire worldview is centered around being or “helping” victims, there are none here.
The people used the cards knowing that they had to pay the money back with interest. The banks took their risks issuing cards to people who had no business getting credit, but they also reaped the profits from those who paid.
Everything is copasetic. This is how capitalism works. People make choices and take responsibility for their actions. Thinking beings operating in an atmosphere of freedom as opposed to mindless sheep being herded by elite overlords.
That’s where you might have gone wrong. Bloomberg – Princeton. Not exactly bastions of capitalism.
Banks pay for TV commercials.
Well said, jwest. Lenders were too aggressive, borrowers too irresponsible, and the market has already punished both. The victimization sermons are not only misguided, they're too late.
How were the lenders punished?
I ask because it seems to me that the lenders are pushing any punishment off onto their dependable customers.
The lenders have lost a big source of income, they've been posting losses, and their stocks have tumbled.
Punishing their dependable customers? You're illustrating one of the two big flaws of the Roadrunner School of Economics many liberals subscribe to: identifying the real victim. Is it the roadrunner or the coyote?
In this case, consider that those “dependable customers” with good credit ratings have been *exploiting* the people with lousy ones. The Poor (well, at least the Fiscally Irresponsible) have been paying 22.5% interest rates to subsidize the low rates, rebates, and rewards enjoyed by the Rich.
I'm interested to hear more about how I can sue Mastercard if they refuse to grant me a Platinum Card.
Anyone?
Ethos,
I like your idea. Perhaps we should start a class action lawsuit. (grins to those with no sense of humor.)
My Advanta small business account was recently frozen and effectively closed (along with every other Advanta small business account) because they “lost their funding.”
Somebody shut off their credit, so they shut off my credit.
I'll survive, but am mad as hell, because I always made my payments.
What do you bet that their source of funding received our tax dollars to bail them out of the bad shit they invested in.
Jwest: bailing out the banks and screwing the consumers; capitalism at it's finest? I don't think so.
to jwest:
“People make choices and take responsibility for their actions.”
you are kidding aren't you?
all of the Wall Street wise guys who default swapped themselves into oblivion had to be bailed out by our tax dollars.
This is your idea of responsibility?
big joke, right?
Joe, government's ham-handed regulations and bailouts aren't capitalism at its finest. They aren't capitalism at all. That's a command economy in action, with its characteristic wisdom and finesse.
Dr_J:
“That's a command economy in action, with its characteristic wisdom and finesse.”
I like that word construction. If you are not already, you should be a political specchwriter.
I do agree with you, the current administration is doing everything they can to keep the whole damn thing from flushing down the pipes.
But when the wall street boys want it both ways, unlimited risk taking, with a guarantee that the gov will fund the losses, I have to call bullshit.
and I'm callin' jwest.
Of course wall street boys want it both ways, who wouldn't? But handing over the taxpayers' money to them was a government decision, one jwest didn't defend.
I would rather have seen the government just let the bankers fail–and to have refrained from pushing them toward failure to begin with. Government for decades has been commanding the economy deliver more home ownership, through tax deductions and minority lending requirements and repurchasing loans. That worked out well, didn't it?
The government and its liberal-interest-group masters are just as guilty of wanting it both ways. Deliver the social equality we want by loaning to these riskier people, they command. What, they didn't pay you back, and now the whole financial sector is sinking? You greedy Wall Street SOBs! We must bail you out, if only to prove that markets don't work.
Dr J–
You mean, the policy–big income from questionable sources–pursued by the banks–the professionals who were supposed to accurately determine risk–was unsustainable?
Dr J again:
I'm sure you have some proof that the government demanded “social equality” by forcing banks to make loans to riskier people.
So where is it?
Isn't the real problem behind the banking crisis new financial products like Credit Default Swaps?
Which is to say the professionals who are supposed to determine risk instead thought they could just make it disappear.
George, the proof is right in front of your nose. Government provides a huge home ownership subsidy through mortgage interest tax deductions. They set up Fannie Mae and Freddie Mac to encourage lenders to write more loans. Mortgage writers used to redline dodgy borrowers until the government put a stop to it. Clinton gave minority homeownership another federal push in the 90s.
You're quite right, the banking professionals did an awful job of assessing risks. They've paid a price in their fortunes and careers, that would have been even heavier if the government hadn't stepped in.
You can see the Roadrunner School thinking in the original post. There are only two economic actors, villains and victims. Mr. Silverstein's big news is that someone mislabeled the actors in the credit card story.
I'm merely pointing out how absurd this is. Depending on your point of view, you can label the actors all sorts of different ways, using just standard liberal rules of thumb like rich=evil. That is, if you're encumbered with concern for more than one point of view.
Dr J–
Bill Clinton stopped being President on January 20, 2001.
The Mortgage Tax Deduction has been around since 1913.
Fannie and Freddie have sometimes loosened and sometimes tightened their lending policies. In 2004, under pressure from HUD, they escalated subprime lending, in which the borrowers pay higher interest rates.
Quoting from the linked Washington Post article: “From 2004 to 2006, the two purchased $434 billion in securities backed by subprime loans, creating a market for more such lending. Subprime loans are targeted toward borrowers with poor credit, and they generally carry higher interest rates than conventional loans. Today, 3 million to 4 million families are expected to lose their homes to foreclosure because they cannot afford their high-interest subprime loans.”
I'm not sure quite what you mean by “standard liberal rules of thumb like rich=evil.” That seems like it's just sloganeering.
I have sad news to report.
After contacting three separate national banks who offer credit cards and threatening to file lawsuits for discriminatory practices if they refused to provide me with new, high-balance cards regardless of my credit score and history, I am not only no closer to obtaining said credit cards, but my ego is also slightly smaller (negligible) as a result.
George, your dates sound about right, I'm just not sure what your point is. Perhaps you're agreeing that the government's thumb on the scales of the mortgage market helped tilt it into the recent catastrophe?
My point is just that the bailouts are of a piece with those interventions. Someone who supports the one has limited credibility to complain about the other.
Dr J–
You blamed Clinton, so I pointed out that Clinton hasn't been President for a long time.
You blamed the mortgage deduction, so I pointed out the mortgage deduction had been around for a long, long time.
Fannie and Freddie have also been around for a long time.
And yet the problems bedeviling us now are of recent vintage. What you're calling “government's thumb on the scales” seems insufficient. The government can, if managed properly, operate usefully.
It seems to me that you're, um, invested in the notion that the government is to blame. In spite of that, on the other thread where we argued abut such things, you were perfectly have the government write checks to doctors and hospitals.
Who's being inconsistent, Dr J?
“And yet the problems bedeviling us now are of recent vintage.”
They certainly aren't. The mortgage market bubble had been inflating for years, thanks in no small part to government policies. The financial sector's ingenuity with derivatives made the burst more spectacular, but the burst was coming one way or another.
“you were perfectly have the government write checks to doctors and hospitals.”
No, if we're going to have government-subsidized health coverage, I said it was much better for the government to write checks to *consumers* than to doctors and hospitals.
Seems to me the original post is built largely upon an oxymoron…….
Instead, this report noted that to make up for losses generated by settlements, banks are raising rates for consumers still paying up in full and on time, cutting back these people’s borrowing limits, and charging even more numerous fines and fees. Some card users still paying in full and on time were interviewed saying how angry they are that deadbeats are causing them so much pain.
How does either a rate change or a late fee change have any tangible impact on a cardholder that “is paying up in full and on time”?? The report and/or the author seem full of bs to me with respect to the main grievances. Since the reduction in limits grievance is essentially anecdotal, I will be happy to assert my own anecdotal evidence to the contrary exists.
And even when the rates are increased on timely paid balance accounts, most states require the opt-out election be provided allowing the existing debt remain at the original rate.
Once again, as with ARMs, if people are getting screwed, they are the enablers.
Dr J–
You're right about who you wanted the government to write the checks to. I am wrong. I apologize.
Still, you're expecting the government to write the checks to consumers that will allow them to pay the doctors and hospitals.
As to my “recent vintage” comment, the housing bubble began in 1997. The inflation of the bubble was practically asymptotic through 2005. That seems of recent vintage to me. Also, as I indicated earlier, HUD pressured Fannie and Freddie to loosen their standards in 2004. That also seems recent to me.
So I stand my earlier comments: the housing bubble is a recent phenomenon.
And in spite of your complaints, you still think the government is capable of administering some kind of payment-for-healthcare system.
Mr. Orwell, sir: (hopefully, my credibility is enhanced with that salutation)
I will see you your Pravda-on-the-Potomac link and raise you with this 1999 New Duranty Times link………http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage-lending.html.
And as you emphasize above……….Bill Clinton stopped being President on January 20, 2001.
Bushco clearly allowed the beast to be fed, but it was born of the seed of William Jefferson Clinton. Understandably so, as his seed is purportedly spread all over Washington.
Yeah George, and you can smoke for decades without getting lung cancer.
“And in spite of your complaints, you still think the government is capable of administering some kind of payment-for-healthcare system.”
Maybe you could unpack that for me. I don't think I ever questioned the government's ability to take money from one group of people and give it to another group.
Casualobserver–
Call me whatever you think will enhance your credibility. And those jokes about Clinton's “seed” are hilarious.
I guess you think it damages the credibility of the Washington Post to call it Pravda on the Potomac. Still, the article I referenced earlier contained a narrative of the Fannie and Freddie involvement. Your link to a 1999 NY Times article falls within that narrative, but the Post article was written after 1999, and it includes this description of a change in HUD policy near the end of The Clinton Administration:
I don't mean to let the Clinton Administration off the hook. But 2004 is a long time after Clinton left office. And instead of solving or alleviating the problem of the housing bubble, the Bush Administration only made it much, much worse.
“The Bush Administration only made it much, much worse.”
If by “the Bush Administration,” you mean “congressional Democrats,” you're right.
Dr J–
You have a number of comments on this thread and the other thread complaining about the government.
From this thread:
You also complained about the income tax deduction as if it were an important source of the current financial crisis.
On the other thread you questioned the government's “track record” at delivering social services.
I admit, I don't think I've misrepresented your stance toward the government. But maybe you'd like to take this opportunity to sum it up for yourself.
I also admit, I don't get your comment about lung cancer. But it's also possible to get lung cancer without ever smoking. Is that a good comeback?
If not, how about this: under our current system, if you get cancer, your insurance company, the one you've spent years paying premiums to, will look for ways to drop your coverage!!
Honestly, Dr J, when I complained about the Bush Administration, I provide links showing the activities of HUD, right? And HUD is a cabinet department, part of the executive branch, right?
The link you provided doesn't work. (It says, “The URL contained a malformed video ID.”) Yet I'm willing to stipulate until you've got something to back up your argument. Still, I'd also be willing to bet the Congressional Republicans are also at least somewhat guilty of what ever you're accusing the Democrats of.
Since your link doesn't work, though, I can't really tell what your point is. Maybe you found something that exculpates the Bush Administration? Is that what you're really saying, that the Bush Administration is innocent, it's all completely the fault of the Congressional Democrats?
That's a great comeback. Light up.
That's a broader question than I can do justice to. I think government is an organization trying to steer an incredibly complex system, while being handicapped by too many broad and conflicting goals. As a result its success rate is highly variable, and it sets off a great many unintended consequences. I also think the private sector can't do everything, but for the things it can do, it will reliably do them better than the government.
Then why are you wasting your money on the premiums? Oh, that's right, because you don't have a choice. Because it's your employer paying the premiums. Because the government tax laws encourage the system to work that way. See “unintended consequences” above.
Sorry about the link, maybe this one will work better.
Dr J–
As you know, there are about 45 million Americans without health insurance.
That strikes me as a very large unserved market.
When do you think the market solution will arrive?
The headline on the video is “Shocking Video Unearthed Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis”.
So even the people who made this video blame Fannie and Freddie.
So how does that exculpate the Bush Administration?
“So even the people who made this video blame Fannie and Freddie. So how does that exculpate the Bush Administration?”
Of course not, and kindly don't go accusing me of exculpating Mr. Bush. Fannie and Freddie are very much to blame, as our their government masters, both Democrat and Republican. Though the Republicans do come across a bit more responsibly in this video.
“When do you think the market solution will arrive?”
Shortly after we move to a system where market forces are left free to work (which is to say we will never know). Government has pinned down the market like Gulliver with more regulations than any other industry, intended to make health care a little bit safer, or a little bit more egalitarian, or a little bit friendlier to workers, all of which also make it more expensive and less free to adapt to meet demand. As a result millions of people are now priced out of the market, and on the current track that won't be changing anytime soon.
Have no fear. Daddy — excuse me, President Obama, has promised to set up a new consumer watchdog agency. Those fine people in Washington will also establish new rules about debt, so as to protect those victim debtors. It's probably not surprising that no threads have been started yet on this site about the new federal financial initiatives, the most important thing other than (and at this time more important than) health care, but aren't as exciting as liberal bashing of a Republican member of Congress over an affair, say. (“Moderate Voice” can often be “Liberal Enquirer”)
Note how the financial initiatives will be aimed in particular at helping debtors, while ignoring (deliberately neglecting is more like it) individual or small investors, I guess because they more often vote Republican.
I'm sorry I missed when credit cards turned into a civil right. I will say the ability to change the rates unalateraly is bad, but to say “accept the increase or we close the accout and you must pay at the current rate?” I have no problem with that.
George, no doubt the video was edited selectively, but I'm pretty sure those actors pretending to be congressmen moonlight as real congressmen. The one thing I think is unarguable is that they couldn't figure out whether to step on the gas or the brake with fannie and freddie. No surprise there, it's not like government regulators are more clairvoyant than anyone else.
Every company in every industry will claim more competition will mean the end of life as we know it. But in a real market economy, they don't bother. There's no one to claim that to, because no one is “managing” the market and deciding whether or not to allow more competition. If the 46 million uninsured are your first clue the market is out of whack, the suggestion that insurance companies might even get a vote should be your second.
Compare with other industries. Back in the day when IBM predicted a market for “about five” computers, the computer industry was leaving a lot of demand unmet too. A few decades later computers are ubiquitous, below-$100 laptops are becoming affordable even in the third world, quality continues to rise, and prices continue to drop. It's not because Dell and Adobe and Oracle and Microsoft welcome the competition.
So what do you think is the difference? Why does that market work and the health care market fail? For that matter, why do *you* interact with the health care market the way you do? Why don't you shop for health insurance companies or doctors directly and shop around for the best deals?
Dr J–
No doubt at all.
I don't have any interest in going back and re-making the same points yet another time.
If you think I am happy with the way I interact with the health care market the way I do, then I don't think you have been paying much attention.
If you've got some amazing answers to all those questions of yours, why don't you just tell us what they are?
George,you rejected my answers, remember? You didn't see any evidence government might be the problem, though government regulations about health care are voluminous if you have the mettle to dig into them. http://www.hpolicy.duke.edu/cyberexchange/issue… goes through them in excruciating detail, from ERISA to HIPAA to HMOs to MSAs, and that's just in the insurance section. Other sections get into regulation of facilities, managed care, providers, and malpractice. It's all rather excruciating.
And I didn't suggest you're happy with how you interact with the health care market. I just asked why you don't interact with it differently. I see a pretty straight line between that question and government-created incentives defining how you'll interact with it. You've ruled out government, but you don't seem to have another explanation. Perhaps it's somehow the fault of the wicked insurance companies?
Dr J–
I get this much: you like to ask questions?
I'm perfectly happy to let the readers of this thread decide how willing you have been to answer them.
As far as what you're sarcastically referring to as the “wicked” insurance companies–even after you've spent years paying your premiums faithfully, once you become seriously ill, your insurance company will look for reason to drop your health coverage.
This isn't the first time on this thread I've put that link out.
Then stop putting the link out and simply don't patronize the insurance companies. Lord, what a bunch of whining.
Thanks for giving us your best response, Dr J.
“[...] no one is 'managing' the market and deciding whether or not to allow more competition.”
Have no fear, though, for Team Obama will fill this long-neglected “need” to manage this and other new objects of their “need” to manage throughout the economy if their track record is indicative of the future.