America Needs More Credit, Not More Debt!


Our former web editor Tim Cavanaugh (whom I hereby acknowledge as an important influence and A-1 fella) has some amusing thoughts (as well as worthwhile data) at the LA Times's opinion section blog about the crisis in debt–and the crisis in lack of debt. Worth a meaty excerpt, with that standard Cavanaugh wit and an apt old movie reference for every occasion:

The economic left, values conservatives and bien pensant moderates are in full agreement on this one: Poor people's access to debt is driving them to fiscal ruination or worse. The new documentary Maxed Out makes the case for massive increases in federal oversight that will prevent suicidal college students from getting credit cards. Generation Debt glamourpuss Anya Kamenetz, whose hard-luck bio includes the Dickensian detail that she "graduated from Yale seven months after the 9/11 attacks," has built a stellar career on the premise that having to pay your student loans is no different than serfdom. Ambitious politicians and math-unencumbered reporters are in hot pursuit of the culprits: predatory lenders, indifferent regulators, Madison Avenue captains of consciousness—everybody except people who borrow large sums of money with no intention of paying it back.

It's interesting that the conventional wisdom once said the precise opposite—that the deserving poor didn't have enough access to debt. As an audio-visual aid, you can do no better than the great "collateral" speech from The Best Years of Our Lives….. Fredric March, playing a rising bank middle manager who has just returned to his job after serving as an Army NCO in the Pacific, reads a rambling riot act to a banquet of porcine small-town bankers who have criticized him for providing loans to bad-credit-risk veterans…..

The joke of history is that all that easy money March was calling for created one of the greatest booms in the country's history—the suburbanization of America, which is now derided by the bien pensant classes who claim there's too much ready credit out there. The difference now is that it's coming from the free market rather than a package of government guarantees, from an industry that expanded to fill a demand and is now contracting as the demand has been filled. In a sane world, we'd say this is a free market behaving as it should, and marvel at an economy where so many people who were once locked into the renters market have gotten a chance at homeownership. Some of them have blown their chance—by exhibiting the same kind of behavior that made them bad credit risks in the first place. But most have not. In fact nine out of every ten Americans carrying sub-prime loans are still making their payments.

No question: read the whole thing.