US Debt Culture

Discussion in 'Economics' started by libertad, Aug 17, 2008.

  1. "Humm, the marketing executive in Merrill's credit division, said he was concerned about ads from other banks that suggested using home equity loans for family vacations, new pools and shopping jaunts."

    One point that I think got lost in the mess is the fact that banks were trading unsecured credit card debt for secured homeowner equity debt. it was a transfer from signature loans to secured. It does make sense if you are a lender to replace a debt with collateral.

    Heloc/refi were a lower interest rate than a credit card, "consolidate" and lower your interest rate. The monthly savings added up on the interest expense.

    Once the CC were paid off with a refi, people began charging again on the cards.

    One more point, perhaps we could have avoided the sub prime mess if the consumer bankruptcy laws hadn't changed a few years ago. People could have erased the unsecured loans and kept their homes, this would have put the burden on the lenders of unsecured not to offer increasingly higher cc limits.

    Face it, the banks saw this coming, the bk laws were changed in favor of the banks, prior to the change, the law provided comprehensive relief for the debtor.

    Too many comments about stupid consumers yet if you treat them like idiots, they'll act like an idiots.