Debt Myths

There's been a lot of talk of "predatory lending" lately. The media is filled with sad accounts of little old ladies losing their homes when their "exploding ARM" rates shot up, and the Senate Banking Committee is holding hearings on subprime lending.

Great, the government is getting involved. They'll save the little guy. Not so fast. The fact that all these loans are scams has been no secret for years. What has changed is that in the last few months more than two dozen subprime lenders have gone under. Sob stories stories sell copy, but only when wealthy donors start losing money do the politicians wake up and take notice. Sure, they might throw you a bone if you're up a creek without a paddle, but the real beneficiaries of any government intervention are going to be the large financial institutions that invested in these shady companies in the first place. Open your checkbooks, taxpayers, can you say "Savings and Loan"? Besides what good is a bone when you need a paddle?

No, I'm not holding my breath waiting for Uncle Sam to save us. The only surefire trick to avoid getting caught up in the debt trap is to steer well clear of it. That's why I've sworn off credit cards and car payments, and we live in a modest old house with a fixed rate mortgage that we can afford on one salary. The baby may keep us up at night, but the bills don't anymore. However, don't take my word for it. Maxed out writer and director, James Scurlock (not to be confused with Super Size Me writer and director Morgan Spurlock), succinctly exposes the myths of the credit industry. Most notably to me:

MYTH FOUR: The government is looking out for me. Wrong again, I’m sorry to say. Time after time, Congress and the courts have sided with the industry over the consumer... The Fed is a private corporation owned by the big banks; its mandate is to protect them, not you.

...And if you think you can outsmart them:

Worse, the terms and conditions can be changed at any time. Outsmarting your credit-card company is like beating the house at blackjack. As the dealers like to say, good luck.

Here's his interview last year on ABC's Nightline.


Or you can take Jerry Falwell's advice and give your money to him, and your debts will magically disappear.


ADDENDUM: In a related article on AlterNet,

Subprime lenders have coaxed eager consumers to buy or refinance their homes often with no money down, and at seemingly low interest rates. But now millions of homeowners are paying way more than they can afford.

Um, if they can't afford it, they obviously aren't paying it. I guess, 'paying far more than a sensible budget dictates' doesn't have the same impact.