Eric Janszen of iTulip Interviews James Scurlock, author of the book Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders, and the movie by the same name, about the consumer credit bubble and what's in store for the US economy after it ends.
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.
- 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 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 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?
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