Third World America - Arianna Huffington [25]
We got a glimpse into the back rooms of the mortgage industry in April 2010 when a Senate panel investigated the collapse of mortgage giant Washington Mutual. Among the findings, as reported by Sewell Chan of the New York Times, was that the bank offered its loan officers pay incentives to originate riskier loans.70 Loan officers and salespeople “were paid even more if they overcharged borrowers through points or higher interest rates, or included stiff prepayment penalties in the loans they issued.”
The behavior of the WaMu bankers, and the many others just like them, was no different than the behavior of corner drug dealers—and while they weren’t peddling crack or meth, they were selling something every bit as addictive: a no-money-down, no-proof-of-income-needed, interest-only, teaser-rate ticket to the good life. The bankers, with a green light from Congress, were determined to turn everyone into irresponsible consumers.
THE MORALLY BANKRUPT BANKRUPTCY BILL
Of course, the bankers knew that the housing bubble, like all bubbles before it, had to eventually burst. And when it did, massive foreclosures and bankruptcies would result. So they needed to set up their self-protecting bear traps.
Enter the bankruptcy bill that banking lobbyists pushed through Congress and President Bush signed into law in 2005.71 It was a bill so hostile to American families that it could have come about only in a place as corrupt, cynical, and unmoored from reality as Washington.
Instead of cracking down on predatory lending practices, closing loopholes that favor the wealthy, and strengthening the safety net for working people, single mothers, and elderly Americans struggling to recover from a financial setback, the Senate put together a nasty little bill that:
made it harder for average people to file for bankruptcy protection;
made it easier for landlords to evict a bankrupt tenant;
made it more difficult for small businesses to reorganize, while opening new loopholes for the Enrons of the world;
allowed creditors to provide misleading information; and
did nothing to rein in lending abuses that all too frequently turned manageable debt into unmanageable crises.
Even in failure, ordinary Americans could not get a level playing field.
And make no mistake, the inequitable nature of the bill—bending over backward to help the credit industry while sticking it to working people who fall on hard times—was not the result of chance. Time and again, the Senate shot down amendments that would have made the bill less mean-spirited. Senators denied proposals that would have made it easier for military veterans, the sick, and the elderly to qualify for bankruptcy protection. They even rejected an amendment that would have put a 30 percent ceiling on the interest rates credit card companies can charge.72 Thirty percent—that’s more than your neighborhood loan shark charges.
According to the Institute for Financial Literacy, in 2009, 9.1 percent of the people who filed for bankruptcy earned $60,000 a year or more, up from 4.7 percent in 2005.73 And among those who declared bankruptcy in 2009, 57.7 percent had attended college, an increase of 3.9 percent.
The institute’s executive director, Leslie Linfield, also points out that there is an alarming bell curve for bankruptcy filings in the thirty-five to fifty-four age group.74 “Fifty-six percent of bankruptcy filers,” she says, “are in this age group. This is concerning because you are looking at a group of people who are middle-aged and very unprepared for retirement. As a society we can’t help but ask the question what will happen in twenty years when this group does in fact retire?”
Our elected leaders utterly ignored the fact that the vast majority of people who file for bankruptcy are middle-class folks who can’t pay their bills because they’ve lost their jobs or been hit with high medical bills. In fact, a 2009 study by researchers at Harvard and Ohio University showed that healthcare problems