Slave to the lender

(Originally posted November 27, 2008)

In my Consumer Protection class, we just started talking about debt collection. Apparently, debt-collection agencies must abide by certain federal laws. Or rather, they’re supposed to. In reality, the government can barely even run a post office, much less “regulate” the economy successfully or “protect” consumers.


In the real world (as opposed to fantasyland), debt collectors have many interesting tactics, and they routinely pull out every trick in the book. They call repeatedly. They harass. They impersonate government agencies. They threaten to bring criminal charges or deportation proceedings. They call up employers and tell all the debtor’s friends that the debtor is a “deadbeat.” They even order pizzas, roses, and Chinese food — and have them sent to the debtor’s house! Their tactics are pretty hilarious.

Professor Stucke pointed out a study from the 1970s, which said that most defaults on debt were for understandable reasons. For example, the debtor might lose his job or take a reduction in income. Or he might get sick. With these sympathetic circumstances in mind, Professor Stucke asked if we should still treat debtors like “deadbeats.”

I answered, “Of course we should treat them like deadbeats. That’s what they are.”

Society used to lock people in jail for defaulting on their debts! Before that, debtors got sold into slavery! Proverbs declares that “The debtor is slave to the lender” (Proverbs 22:7). 

At this point, you may be thinking, Wow, Drew is a really mean guy. HAHAHA, YOU HAVE NO IDEA…

As far as I’m concerned, we are actually quite nice to debtors. Just think of all the niceties we provide:
1) We don’t sell them into slavery;
2) We don’t jail them in debtor’s prison;
3) We let them to file for bankruptcy.

If some deadbeat can’t handle a few pizzas being ordered to his house, he should go ahead and jump off a cliff — and put himself out of my misery.

Apparently, the same surveyor later re-performed the debt study in the 1990s. The second time, he came to a different conclusion:  Whereas debtors in the ’70s defaulted due to sympathetic circumstances, the overwhelming majority of modern deadbeats have simply run up way too much debt!

Even so, he didn’t entirely blame the debtors. No, he said the banks and credit card companies should stop enticing people to saddle themselves with debt. Yeah, and sharks should stop eating people.

Why do we need to deal with deadbeats harshly? So people will stop wracking up so much debt! Our country’s debt is eroding its power.

America owes about $11 trillion in national debt. You may think you are debt-free, but each American owes over $30,000 to help pay that debt off. That debt figure applies whether to the old, the young, the rich, and the poor. Every American baby starts out $30,000 in the red simply by being born! We seem like a nation of prosperity, but much of that prosperity remains unearned. Unearned pleasure is the allure of debt. Daily, we strike deals with the devil, and he will eventually collect.

And yes, banks are part of the problem. But instead of fixing the problem, the government fuels the problem. Congress established the Federal Reserve. Congress set up government-sponsored companies (Fannie Mae and Freddie Mac), which controlled most of the secondary mortgage market.

Now Congress has started buying up banks (and other industries) — and paying for them with national debt! Webster’s Word of the Year for 2008 is “bailout.”

Fascists told us to “bail out” the banks. They were “too big to fail.” Now the car companies are “too big to fail.” We must give them more bad loans, too. Heck, I’m too big to faill; give me some money. (Or better yet, don’t.)

In truth, we should let the incompetent banks die. We should let the poorly-run companies perish. And moreover, we should stop treating debt like it’s okay. People are deadbeats when they cannot pay off debts, so let’s stop being deadbeats. Let us pay off our debts now — while we still can.



Julianna posted,
“Watch Roger & Me…don’t argue….just do it. I know you’re probably not a fan of the man who made it…but it’s an eye opener. I’m not sure what we should do about these car company’s. I mean goodness knows, GM had no problem running out of Flint, MI & hurting people’s lives for its business reasons. There is something extremely unbalanced about the fact that it now argues that we have to keep it alive or American’s will be hurt when its past behavior shows that its concerns for Americans and the communities it is in…is really F-ing low. When I lived in Michigan, the Michiganders told me NOT to got to Flint; that it was worse than and more dangerous than Detroit. I watched Roger & Me when I lived there & it was just shocking…and that was during prosperous times. These companies want American tax dollars but they sent so much of the work to Mexico…why don’t they ask those countries for some money. In this global economy, and this is a good question for you Drew, how many companies are REALLY American companies? How do we measure that, and what is our duty to them? I’ve always been a fan of treating others like they treat me…if we apply that to GM…then Flint is proof that we shouldn’t give it money. And the car companies seem to be fronting the argument that we need to be able to have ‘home team’, i.e. U.S. companies to make cars in the U.S. But why? It’s not like farms, or mining, or the steel industry. It’s not like there will be no car manufacturers here if they go under-there will be- Toyota, Honda, Hyundai…all thought it was a good idea to have American companies began having the Mexicans build thier cars. What’s more, screw their shareholders. Part of the reason Congress is not approving the money is b/c, as they have repeatedly stated, they don’t trust the companies’ management. Well guess who can do something about that? The shareholders. The shareholders can vote the board out and replace it. And if they’re too reticent to be part of the solution, then screw them, let them bear the loss for that risky position. The only people I worry about, and the only reason I can’t be completely against the bailout, is b/c of the employees and after seeing Roger & Me, well I can’t even imagine what a Hell Detroit would become, if GM’s pull out of Flint caused that little city to turn into what it did.
I think it was Warren Buffet who said these execs. should have to put some ‘skin’ in….meaning they should have to put some of their own money in so they have something at risk, a personal reason, to make sure the bailout money suceeds in fixing the corporation. You might think keeping their jobs would be enough of a reason but I betcha they’ve got pretty good personal bailout plans guaranteed in their original employment contract- the golden parachute-which is another reason the shareholders may not be firing them. The unfortunate thing is – the government has been so intertwined with corporate america – that this is the next natural step…and it does have fascist undertones. Then again, we, the taxpayers can hardly cry innocence. After all, the taxpayers have passively allowed all this to transpire…and re-electing G.W. & Cheney didn’t help. It sucks that things have to get so bad to get Americans to tune in and give a shit, but clearly they do b/c this has been a long time coming, it was completely predictable, and everyone chose to play like they were ostriches.

Conversely, Many of the credit card companies, like the banks, bear equal responsibility for the debt they extend credit with the debtors b/c these companies extend credit to people who they should not extend credit to. They take a risk when they do that. They set the interest rate high to reflect that risk. The people who do pay off their debt at that high rate, the credit card companies win on…the ones they don’t they lose on…think of it as a balanced portfolio b/c trust me…they’re getting an ROI. So I don’t think they have any right to oppress the people who default…the credit card company….like the mortgage company…assumed the risk when they issued the line of credit.”
(12-05-2008, 1:27 am)

I posted,
“I suspect that any movie by Michael Moore is probably pro-communist. Like a lazy appellate judge, however, I will ignore that whole issue by answering the question on other grounds: The reality is that under bankruptcy, the car companies won’t just disappear. Their physical assets will still be around, but either 1) courts will rewrite their union contracts to help them pay off debts, or 2) thriftier companies will buy them up and use their factories more wisely.

Golden parachutes for executives are indeed a destructive setup. I’m the guy who has been calling for the firing of Athletics Director Mike Hamilton just because he negotiated Philip Fulmer’s $6 million buy-out contract. (Well, that, and he jacked up our ticket prices…) It makes no sense to pay any executive more than a year’s salary for SCREWING UP. If the executive gets mad during salary negotiations that you won’t agree to a golden parachute, you may have to offer them a higher base salary to compensate for it. So be it. The idea that people shouldn’t pay for their mistakes at all is just another destructive example of our judgment-free culture.

And I agree that many lenders accepted unnecessary risks (although the socialistic Community Reinvestment Act actually forced them to do it in many cases). I opposed bailing out banks and said we should let them die, if necessary (see We shouldn’t start going easy on deadbeats, however, because that would just encourage people to default. Like you suggested, if everyone started acting like a deadbeat, interest rates would increase for everybody even further. What remains of personal accountability would evaporate.”
(12-06-2008, 8:22 pm)

Julianna posted,
“It’s not really socialist. Its a true documentary. Michael Moore hails from Flint. He got into documentary film=making with that film. It was a true outcry. While, I like all of his films that I have seen, I think few people could argue that that film isn’t a little more raw. He didn’t have any ‘financing’ then; he wasn’t known. He was pissed.”
(12-08-2008, 5:38 pm)


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