Maxed Out

John ArmstrongEconomy/Economics

Maxed Out
is a documentary that every reader of this blog should take time to watch. It takes you on a journey deep inside the American style of debt. Given our present problems we all need to face this crisis honestly. How has the credit crisis impacted you, me and almost everyone else that we know unless they earn $200,000 plus annually. (In one sense even the wealthy are often misusing credit but they can recover in most cases since their income is so large.)

The villains are to be found everywhere. First, the consumer is often clueless. Some of this is clearly their fault. They were never taught to save or to live within their means. They have been taught to spend now and pay later. An entire generation is hooked. Our president has actually encouraged it and Congress tried to stimulate it with checks this year.

Students are hooked in their first year in college and they have no way of paying back what they will charge. I consider the whole business of banks recruiting students with credit cards to be predatory lending and immoral. The whole premise is to get you hooked, as on a drug, so that you will be paying high interest for years to come. Make no mistake about this the major banks know full well what they are doing and they know who is hurt by their lending practices. Why can they write off so much bad debt? Because so many people are hooked and this remains so hugely profitable to the lenders.

And tougher bankruptcy laws, passed under President Bush, have actually created a system that makes it harder to find a solution. Now we are talking about "bailing out" the big three auto companies and I wonder who or what is next? Somewhere, somehow, this has to stop, for both individuals and the nation. We will face this music, one way or the other.

Here is the sad fact. Both students and older adults have taken their own lives (suicide) precisely because their day-to-day debt has become so bad they could see no way out but to die. (The sad fact of this is that it is true. Banks write off you debt when you die.) Do you know anyone who ran up enough debt to take their own life? I do. And the brutal truth is that these people should never have been given the credit they used in the first place. Somewhere along the line the law ought to protect us, even from ourselves.And home loans are another version of the same thing. Millions of people should never have been given money for a home. They could not afford it and the lenders knew it. They walked away with huge profits and the nation is struggling. Why is this not a crime? I wonder, I really do.

This fine film shows how the modern financial industry really works. Who is a "preferred customer?" It is not me. I hope it is not you. I pay off all cards at my first bill cycle. The banks do not make much on me. But when a debt goes unpaid, or the minimum payment is made, then the banks start to make their real money on any of us. We need tough laws that prevent the kind of interest banks can charge and we need laws that stop the misleading sale of credit. Yes, the small print is there but most consumers pay little attention to it. And we need laws that keep banks from raising interest rates to 35% and higher once a person is buried in debt.

Fannie and Freddie are just mega-lenders who took advantage of the same problem. Yes, consumers should have been more careful but my anger is pointed at two groups after watching this sobering documentary. First, our government. Both President Clinton and Bush have openly advocated policies that allowed the big banks to operate in this way. Congress has gone along with it. Some members of Congress have even profited from all of this mess. Second, the banks themselves are to blame. Watching their CEOs testify before a senate committee was so provocative as to keep me awake late one evening last week. I hope our new president does something about this mess but I fear he will not. This will be a "real" test of the change he promised to bring to Washington as an outsider. I will be watching very carefully.

Finally, every church and pastor ought to openly help people deal with this issue. It is killing the church and our ability to support real mission. There is a brief clip on this film of Jerry Falwell preaching about tithing. Frankly it makes the typical Christian approach look simplistic. It sounded almost like a "health and wealth" message at one point. Tithe you way out of debt!

Past Due
On top of all of this personal debt crisis we have a huge national debt crisis. From the time of President Reagan to the present we have spent what we did not have and raised the level of debt again and again. I do not care what your economic views are I do not see how you could ever justify turning our country into a debtor nation. This change happened in the 1980s and nothing has altered it. Simply put, as a nation we owe much more than we are owed. It appears the chickens have come home to roost. May the new administration have the sense to seek a real (painful) solution.

Meanwhile the rich get richer and the lower middle class and the poor get poorer. This is just the hard truth. And there is no easy way out of this mess. Maxed Out will convince you that we face a national nightmare that is more real than most of us could imagine. I strongly urge you to watch it and even share it with your friends. It is alarming stuff. Maxed Out is 87 minutes and includes several useful features as well. It was released in 2006.