Blogs For Victory

Interesting story from the Wall Street Journal:

Shirley Davis, a 66-year-old retired phone-company administrator who lives in Brooklyn, N.Y., is more than $33,000 in debt, earns just $2,414 a month and filed for bankruptcy in June. Shortly before that, she ripped open an envelope from Capital One Financial Corp., which pitched her a credit card even though it sued her in 2006 to recover $4,470 she owed on a different card from the bank…

…Fannie Mae, seized by the U.S. government in 2008 to avert the mortgage company’s failure, launched an initiative in January that allows some first-time home buyers to get a loan with a down payment of as little as $1,000. Securities firm Morgan Stanley Smith Barney, a brokerage operation jointly owned by Morgan Stanley and Citigroup Inc., is offering some clients home-equity credit lines of as much as $2.5 million.

Credit-card issuers mailed 84.8 million offers of plastic to U.S. subprime borrowers in the first six months of this year, up from 43.7 million a year earlier, estimates research firm Synovate. Nearly 8% of loans for new cars in the latest quarter went to borrowers with the lowest range of credit scores, up from 6.2% in 2009’s fourth quarter…

I’ve seen it at my employer, too – keeping in mind that I work for a very large financial institution. I’ve seen us weaken underwriting on retail loans and issuing credit to people who in one way or another defaulted on a previous loan with us. I won’t name my employer because that would be inappropriate, but I was wondering what the bosses were up to.

Now, I just wonder even more.

Given that Fannie Mae is government owned, I wonder if there is a concerted effort, led by the government, to force-feed a borrowing frenzy upon the United States in order to get the economy back on track? Keep in mind that the last time we had a genuinely production-led recovery was back in the 1980s. In the recoveries since then, it has been debt driving the economic engine (the Fed tightened fiscal policy in 1980-81 to choke off inflation, so it took actual work and investment – opened up by Reagan’s tax cuts on wealth creation – to get the economy rolling…since then, each time we’re in a jam the Fed just eases rates, so people pile up debt to buy houses, cars, gadgets…all the while, our wealth is shipped to China, Mexico and Chile).

China’s alleged growth this past quarter was more than 10%. I say “alleged” because in that tyrannical society, there’s no way to know if the numbers provided are true. China got that number by doing one thing we did and then another thing we couldn’t. Like us, they printed up piles of money and handed it nearly free to the banks. Unlike us, China’s government could order China’s banks to lend. And lend they did – they are now in the grip of an acute housing bubble which is about to come crashing down…but, for the past year it has seemed as if China’s economy was humming right along, and that is all Obama and Co want for us, right now: the appearance of prosperity.

Here in the US, the money was handed off to the banks but the banks were wary of lending, while consumers were wary of borrowing. I sure as heck haven’t wanted to borrow any money in the past year. Have you? Anyone with a bit of wisdom right now is determined to get out of debt and get some money saved. If it turns out that the economy recovers, then it’ll just be nice to be out of debt and have some money in the bank – if the economy goes south, then being out of debt and having some savings will be even better. Who would borrow up a bunch of money right now and go on a spending spree?

Only the mos irresponsible among us. In other words, people who are lousy credit risks. And now comes this story – confirmed in my own experience – that at least some financial institutions are essentially encouraging the profligate to go on a spree. I can’t imagine anything more stupid than this – it won’t be enough to propel growth (no matter what: the total national debt is too high), but it will set up a huge increase in defaulted loans because if you’re loaning money to the irresponsible, its a cinch that a large percentage of the debts will go bad.

Remember, folks, for the government and the banksters (who owe the Democrats a great deal since the financial “reform” bill just passed does nothing to reign in irresponsible banking practices) the primary thing is to keep the economy in some sort of reasonable shape until after the election. They don’t want a crash before then – and so they’ll use whatever expedient they can find to push things up. Including lending money to people who can’t or won’t repay.