Interview with James Scurlock, Creator of "Maxed Out"

[FRED]

Eric Janszen of iTulip Interviews James Scurlock, author of the book <a href="http://www.amazon.com/gp/product/141653251X?ie=UTF8&tag=wwwitulipcom-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=141653251X">Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders</a><img src="http://www.assoc-amazon.com/e/ir?t=wwwitulipcom-20&l=as2&o=1&a=141653251X" width="1" height="1" border="0" alt="" style="border:none !important; margin:0px !important;" />, and the movie by the same name, about the consumer credit bubble and what's in store for the US economy after it ends.

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Part I (free)


Do you see a generalized or systemic crisis in the making as a result of banking industry practices over the past few years?
Why did the credit standards required to get a credit card decline so much?
In the old days you needed very good credit to get a bank credit card. Now, you don't. Why is that?
Are historical lending rules, like 20% down on a home, likely to go back to return?
What does that imply for the economy?
We joked years ago that if Greenspan gave a 30 minute lecture on prime time TV on sound household finance, on following age old rules of finance such as not purchasing depreciating assets like flat panel TVs on credit, the US economy would implode. How much lending remains legitimate, and how much of total current lending might that represent?
What is the proper role for consumer credit?
Should households save up for big ticket purchases, such as autos?
Some argue that even houses are a poor use of credit, since according to Robert Shiller's research their price only rises at the rate of inflation, and interest expenses necessarily rise faster, else lenders don't make money.
We have interviewed a Dr Michael Hudson who contends that monetary and tax policy is intended to create inflation in home prices in order to keep them rising more quickly than the rate of CPI inflation, which largely determines interest rates. Does your research indicate intent or something else?


Part II (iTulip Select only)

Available now here. (http://www.itulip.com/forums/showthread.php?t=1173)


What are the likely outcomes for changes in the lending laws, and how will the credit card folk try and work around them?
iTulip, as you know, has been a harsh critic of the banking industry for going on eight years now. We criticize the banking industry for creating what we call the Frankenstein Economy (http://www.itulip.com/frankensteineconomy.htm) in which banks and borrowers no longer engage in lending and borrowing with the degree of mutual personal accountability that existed even ten years ago. Do you agree that both lender and borrower accountabilty has been lost?
We also coined the term Risk Pollution (http://www.itulip.com/riskpollution.htm) to refer to the credit toxins which have built up in the financial system, akin to the environmental toxins that chemical companies dumped into the ground after the Clear Air Act was passed in the early 1960s. Via securitization, banks have been allowed to externalize the costs of making risky loans, in effect turning them into social costs. Do you agree with this assessment and that the cost of the inevitable clean-up of risk toxins in the financial markets, like the Superfund cleanup of environmental pollution, will fall on taxpayers in a global S&L Crisis writ large?
Do you think the credit bubble was allowed to grow to such huge proportions because Fed and FDIC are incompetent or are they corrupt?
Do you think the banks are at risk or will holders of securities and, ultimately, taxpayers be left holding the bag?
Do you agree that asset inflation is an objective of monetary policy?
How do you expect the credit bubble to turn out and how deep do you expect the resulting recession to be and how long will it last?

Sign up for iTulip Alerts (http://visitor.constantcontact.com/email.jsp?m=1101238839116) to be notified when Part II is available.

iTulip Select: The inside scoop (http://www.itulip.com/forums/showthread.php?t=1032).
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[qwerty]

Anyone find a reference on the web to that? One third of all car sales in California bought with home equity loans.

New cars? One third of cars or one third of dollar loans? What time period? etc etc

If it's one third of all auto loans in last year, I need to go lie down.

[don]

What are the likely outcomes for changes in the lending laws, and how will the credit card folk try and work around them?I think an important element in this equation is the ongoing goal of reducing wages/salaries while increasing the need for compensating consumer (working people) debt. Virtuous, no?
iTulip, as you know, has been a harsh critic of the banking industry for going on eight years now. We criticize the banking industry for creating what we call the Frankenstein Economy (http://www.itulip.com/frankensteineconomy.htm) in which banks and borrowers no longer engage in lending and borrowing with the degree of mutual personal accountability that existed even ten years ago. Do you agree that both lender and borrower accountabilty has been lost?Certainly but one is driven by necessity. Guess which one!
We also coined the term Risk Pollution (http://www.itulip.com/riskpollution.htm) to refer to the credit toxins which have built up in the financial system, akin to the environmental toxins that chemical companies dumped into the ground after the Clear Air Act was passed in the early 1960s. Via securitization, banks have been allowed to externalize the costs of making risky loans, in effect turning them into social costs. Do you agree with this assessment and that the cost of the inevitable clean-up of risk toxins in the financial markets, like the Superfund cleanup of environmental pollution, will fall on taxpayers in a global S&L Crisis writ large?Absolutely, the system is designed for just that eventuality. The S&L fraud. the year 2000 scam. Nasdaq. The housing and debt bubbles. The hits just keep on coming.
Do you think the credit bubble was allowed to grow to such huge proportions because Fed and FDIC are incompetent or are they corrupt?Define corrupt. Class interest is more appropriate. When Greenspan actually allows words like "an equity based economy" to escape his lips, whaddathink?
Do you think the banks are at risk or will holders of securities and, ultimately, taxpayers be left holding the bag?Too obvious a question.
Do you agree that asset inflation is an objective of monetary policy?It's the cheapest way to finance bread and circuses.
How do you expect the credit bubble to turn out and how deep do you expect the resulting recession to be and how long will it last?Badly for most of us. That's why I read iTulip. How long will it last? That will be decided by the interplay of US foreign policy and those states who decide they have had enough of the bonar.

Keep up the good work, you're one of the best!

__________________________________________________

]

[bill]

The IRS may request Stated Income Loan Documents from files of mortgage brokers. The stated income (liar loan docs) in many cases are higher than the tax return filed with the IRS. Based on the stated additional income found in the liar loan docs, the IRS will be sending out bills accordingly.

[Uncle Jack]

The IRS may request Stated Income Loan Documents from files of mortgage brokers. The stated income (liar loan docs) in many cases are higher than the tax return filed with the IRS. Based on the stated additional income found in the liar loan docs, the IRS will be sending out bills accordingly.

That will not happen, but the reverse could happen; bankers/mortgage originators asking for tax returns to verify income. The bank where I used to work used the tax return as a rule of thumb: "You want this loan, show me the income number that you reported to the IRS."

[bill]

Most of the lenders that made borrowers sign a IRS form 4506 never even requested the tax returns from the IRS. The lenders used the stated income or the source of income from the borrower to approve the loans. When these borrowers take a unusually high interest deduction on their tax return it will trigger a IRS audit. The audit will produce the source of additional income that has been serving the mortgage and be taxed accordingly.

[bobola]

(director’s comment) “We're all led to believe that people get into financial trouble because they are irresponsible, but I've learned that most people are getting in trouble because the banks and credit card companies are setting their customers up to fail. Why? The more credit they give us, the more credit we need. When we inevitably fall behind, they can charge the huge late fees and the over-limit fees and the stratospheric interest rates that drive their profits.”

This credit situation reminds me the fast food effect in this country – cheap and easy to get, but the more you consume the more you will pay for it down the road.

What's in a last name?? - Morgan Spurlock made the anti-fast food documentary Supersize Me.

[FRED]

http://www.itulip.com/images/Scurlock.jpgToday we caught up with James Scurlock who was covered by the Washington Post in a article that gives James credit for predicting the current meltdown in mortgage lending.

'Maxed Out' Man James Scurlock, Right on the Money (http://www.washingtonpost.com/wp-dyn/content/article/2007/08/15/AR2007081501921.html)

August 16, 2007 (Ann Hornaday - Wasington Post)

When the film "Maxed Out" arrived in theaters in March, it met with a modest reception: James Scurlock's documentary about America's debt crisis featured crisp editing, engaging stories, a poppy music score and an urgent message about Americans' addiction to credit, our alarming level of personal debt, and the financial services industry's cynical attempts to exploit both. The film stayed in town for only three weeks -- who wanted to see a movie about the subtle inner workings of subprime mortgages?

What a difference a few months make. With subprime loans suddenly in the headlines and a looming financial crisis erupting over the summer -- in other words, with the film's Cassandra-like warnings largely coming true -- it seemed an opportune time to catch up with Scurlock, whose "Maxed Out" is now available on DVD and will appear on television early next year. More... (http://www.washingtonpost.com/wp-dyn/content/article/2007/08/15/AR2007081501921.html)

When we interviewed James, our only disagreement was this. We think the process of the consumer credit bubble will be relatively gradual, taking years. He thinks that once it starts, the process will be rapid. Time will tell.

Here's our interview with James.


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[GRG55]

Congrats to EJ and the iTulip team for once again being well ahead of the curve with the Scurlock interview.

For a bit of amusement in these turbulent times check out Jim Cramer's revisionist article "Bloody and Bloodier" on the New York Magazine website. As recently as May 7, in the same publication, he was advocating buying the shares of these same i-banks. EJ's profile of Cramer, and the psychology of his ilk on Wall St., suggests that having been caught holding the bag this time, the masters of the universe will not go down without a dogfight. Yesterday's remarkable recovery in their stocks late in the session seems another good opportunity for insiders to distribute, all the while uttering incantations that they "see value" and a "buying opportunity".
In 1929 there were repeated whispers of "organized support". In 2007 it's whispers of a "PPT" and "the Fed will ease"...