We've spent billions of dollars -- perhaps trillions -- to rescue big banks. But instead of dialing back on the risky behavior that shattered the economy in 2008, they're doubling down on it. And when their 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.
But 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 which the rest of us have been paying since 2008. And guess what? They're doing it again.
Take student loans. Americans owe more than a trillion dollars in student loans, a figure that's growing by $50 to $60 billion every month. 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.
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, many of which were money-making ventures for those same banks.
Politicians "privatized" Sallie Mae, the government-sponsored enterprise (GSE) created to help students borrow for their education. Its greed-crazed executives promptly went on a spending spree, using their government backing to pay themselves inflated salaries and buying 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 their loans are going bad, who will pick up the tab? It won't be those high-flying executives. And Wall Street 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 the tab for this consequence of the banks' behavior, just as it has paid for so many others.
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 since the government began tracking these figures in 1948.
Credit card debt is another exploding area of risk for America's too-big-to-fail banks -- and therefore for the federal government. In this country there are now more 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 trillion 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.
And the debt train's 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 percent more than the increase in the same quarter of 2010 and and more than twice the increase during the same quarter in 2009. (Source: CardHub.com)
But banks aren't pushing this kind of risky debt on consumers anymore, are they? They've learned their lesson, right? Wrong. Credit card solicitations were up in 2011. And the worst offender 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 it 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 the Wall Street Journal).
In fact, the total number of direct-mail solicitations mailed out by credit card lenders in 2011 comes to nearly five billion.
But then, why not chase down those bad risks and write as many as you can, if you're a too-big-to-fail bank? Someone else will pick up the tab if they go wrong.
When you add up all the forms of consumer debt in this country -- medical bills, mortgages, credit cards, student loans, car loans, and other forms of indebtedness -- the Federal Reserve Bank of New York says the total amount owed by consumers is now more than $11.5 trillion. These runaway debts aren't just another big bill the taxpayer may have to pay to the banks someday soon. They're a burden to individuals and families -- and an obstacle to economic recovery.
The banks pay out huge fees to advertisers, psychologists, and other consultants so that all of their solicitations and offers are as persuasive as possible. So first they'll convinced Americans to borrow money -- something that's easier to do now that the banks' own recklessness has left many people with no alternative but to borrow.
Then, when billions of dollars' worth of those loans turn out to be unpayable, they'll blame the very same consumers they've just prodded, pressured, and persuaded into borrowing. We'll be subject to another round of lectures about 'reckless consumers' who are 'living beyond their means,' even as we're writing fat checks to the people who got rich convincing them to borrow the money in the first place.
Who's really indebted to who around here?
Americans have become indentured servants in thrall to their lenders, manipulated into borrowing money by their culture and chained to bad debts by their FICO scores. There are those who will fight any attempt to rescue underwater homeowners on the grounds that it would "reward the undeserving" -- and will then fight just as hard to protect banks from the consequences of their own actions. They'll lecture Americans on their "exorbitant" borrowing while rescuing the institutions that spent billions of dollars persuading them to borrow in the first place.
But the real debt in this nation is the one that bankers owe the rest of the country. And as long as our politicians are allowed to rescue banks while ignoring consumers, it's a debt that will continue to go unpaid. And it will continue to grow.
We need to tell the deadbeats that their credit's no good with us anymore -- and that it's time to make good on what they already owe.
Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future and the host of The Breakdown, which is broadast on WeAct Radio, AM 1480 in Washington DC.
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow