Wednesday, March 28, 2012

Will America's Growing Mountain of Private Indebtedness Lead to Another Windfall for Banksters, at Our Expense?


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Yes, it will be another windfall for them -- ifthey manage to get bailed out again by the US government, using the magic money created out of thin air by the US Federal Reserve.    
But how many times can the Fed bail out the banksters (who are getting ever more obscenely rich off this scam), as they continue to collect trillions in magic money from the Fed, . . before this racket cripples our economic system and flattens most of us financially?   In other words, for how much longer are the majority of Americans going to remain deaf, dumb and blind as regards this larcenous scheme that is slowly driving most of them out of the middle class and into poverty?   And as America becomes ever more debilitated as a result of this parasitical "crippling' and decimation of its middle class, at what point are the world's investors going to refuse to fund this larcenous scam any longer, by refusing to purchase the US Treasury bonds whose continuing sales make it all possible?  
As Richard Escow recently pointed out at the Huffington Post, we've spent hundreds of billions of dollars -- likely trillions -- to rescue big banks.   But instead of dialing back on the risky behavior that shattered the economy in 2008, they are instead doubling down on it.   And when that bill comes due, we won't just be asked to pay it again.   We'll be asked to take the blame for it again, too.
So who are the real deadbeats in this country?   Banks acted recklessly in the years leading up to the financial crisis -- and ran up a bill that the rest of us have been paying since 2008.   And guess what? They're doing it again.  
Take student loans.   Americans now owe more than a trillion dollars on their student loans, a figure that's growing by $50 to $60 billion every month!   And now we've learned that as many as 27% of these loans are delinquent, meaning they're more than thirty days past due.   That amounts to roughly $270 billion in troubled loans -- most of which have been guaranteed by the US taxpayer.   So who do you think is ultimately going to pay for this?   Three guesses.
We've already rescued American banks with hundreds of billions in public money, saving them from the consequences of their incompetent underwriting of mortgage loans.   Now we're about to do the same thing with student loans, which were part and parcel of a risk-free money-making scheme gifted to those same banks by our bought-and-paid-for Congress, which the banks and Wall Street essentially own.

Politicians "privatized" Sallie Mae, thegovernment-sponsored enterprise (GSE) created to help students borrow for their education.   Sallie's greed-crazed executives promptly went on a spending spree, using their lavish government backing to pay themselves inflated salaries and buy corporate jets so they could travel in luxury.   Yet, without irony, their backers and shills shrieked "socialism!" when wiser heads wanted to stop private-sector skimming at the expense of our nation's students.   (See " Sallie Mae's jets .")
And now that a shortage of decently paid jobs for most new grads are forcing most of these student loans to go bad, who do you think will pick up the tab?   Well, it won't be those high-flying executives.   And Wall Street certainly won't be held accountable for the fact that today's graduates face the worst employment situation in recent memory (even though that's a direct result of bank malfeasance).   Instead the public will pay this new cost of the banks' behavior, just as it has paid for so many others.
But student loans aren't the only burden young people -- and the rest of us -- are carrying today  
Today's college seniors are also graduating with an average of more than $4,000 in credit card debt -- and then entering an economy where only 46 percent of their peers in the 18- to 24-year-old age group have jobs.   That's the lowest percentage of employed young people since the government began tracking these figures in 1948.  
Plus, credit card debt is another exploding area of risk for America's too-big-to-fail banks -- and therefore for the federal government, i.e. the American people.   In this country there are nowmore than 50 million American Express credit cards in circulation, along with 176 million MasterCard credit cards and 261 million Visa credit cards.   That's nearly half a billion active credit cards from these three companies alone.  
Credit cards are unsecured debt, meaning that nothing has been put up as collateral if the borrower defaults.   Credit card holders owed a reported $771 billion -- more than three-quarters of a trillion dollars -- in the second quarter of 2011.   The average amount owed by a credit-card-holding household was more than $16,000.  
The debt train is picking up speed
Lenders wrote off about $250 billion in bad credit card debt between 2008 and 2011.   Credit card debt increased by more than $36 billion in the fourth quarter of 2011, which was 30% more than the increase in the same quarter of 2010 and more than twice the increase during the same quarter in 2009.   (Source: www.CardHub.com )
But banks aren't pushing this kind of risky debt on consumers anymore, are they?   They've learned their lesson, right?   No, actually they haven't.   Credit card solicitations were up in 2011.   And the worst offender was and is Citigroup, the too-big-to-fail superbank that only exists because of Washington's 'bipartisan' agreement to allow the merger that created it.   Last year Citi mailed out more credit-card solicitations than there are people in the United States (346 million credit card offers in a nation of roughly 308 million people, according to theWall Street Journal ).
In fact, the total number of direct-mail solicitations mailed out by credit card lenders in 2011 comes to nearly five billion!  
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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've always (more...)
 
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