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Debt Stress in Middle Class America

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Some readers like to demonize those who get in over there heads with debt as people who lived high on the hog and had their day of reckoning come upon them. This story, forwarded from a reader, shows the picture is more complicated.

When I was young, savings of six months of living expenses was considered to be a good cushion against risk. Is that true any more? I doubt it. Although this couple didn’t even have that much stashed away, the sort of buffers that worked a generation ago are insufficient now. People spend longer between jobs than in the past, and if/when they do find new work, it is often at a lower level of pay than before.

Job loss and major illness rather than an overly lavish lifestyle are still the biggest causes of bankruptcy. And now that the average tenure at a job has shrunken considerably, people need to have more in the way of savings, yet the high cost of unemployment means it is even harder than before to build up a big enough kitty.

Via one a correspondent:

Just like most everyone I know, my husband and I are in big debt with our credit card companies. My husband was laid off on New Year’s Eve last year. We were in total shock. I am retired from the USAF and receive a small monthly check, and my husband began collecting a meager unemployment check. He searched all over the US and made several trips out west knocking on doors and handing out his resume. NOTHING. Anyway, we had no saving and a little bit of stock which was cashed in at an all time low. No help there. Then we started living off our credit cards. Without them, we would have not made it, period. Our daughter and her family moved in upstairs and her husband was working of a whopping $8.50 an hour. No help there. So basically we were supporting them as well.

We have a mortgage payment of $1175 and $30,000 equity still in our home, but we are unable to refinance at a lower rate BECAUSE my hubby was unemployed!

Getting back to my B of A card, I have NEVER been late on a payment in 10 years (until last month). I have always paid more than the minimum (until January 1st). BUT, my interest rates have inched up and up in the last few months and then, BOW! I tried to use my card about 3 weeks ago at the grocery store and it was denied. Needless to say, I walked out without the food. We don’t waste anything, not money, not food, not heat or lights, nothing, but we are going down fast. The good news is that my husband got a job this week (at a much, much lower wage) and will finally get a pay next week after almost 10 months. The bad news is that B of A is killing me and will ruin me soon. I sent them a “token” $10 payment on the $450 monthly that I owed. The payment was on time, but the $10 sure didn’t make them happy. They slapped a “LATE FEE” of $39 even though my “payment” was not late AND of course the dreaded overdraft fee of $39. Yesterday I got a statement from them saying that my next payment due 11/11 is $950. I can see the snowball at the top of the hill ready to roll. What do I do? Do I revolt and refuse to pay? Do I keep sending them $10 as a promise to pay? OR do I write Kenneth Lewis and say I want some of their TARP/bonus money back so I can apply it to my B of A account? It’s not fair, although I know we lived off our credits cards and much of what I owe is money that I spent on essentials, BUT, the ultrahigh interests rates combined with their slap-on-every-extra-fee-we-can mentality is outrageous. We have worked all our lives to have and keep our excellent credit ratings and now all that is shot.

What do I do? What do we do? Like I mentioned before, my husband just got a job, but he will be making much, much less than he used to. Our mortgage is behind, the bank is on us about that, our credit cards a behind and they want even MORE blood, our kids and their families aren’t making it even though they work and pinch every penny, no insurance is within reach for them or their babies, so we have been shuffling payments to help our grandchildren, the list goes on and on and on and on…

Please, what do we do? How can we stop the madness that has engulfed us? We are good citizens, worked hard all our lives, paid all our bills on time and paid more than the minimum – until lately -, penny pinch, reheat the reheated leftovers, eat toast, never go out, never hurt anyone, love our family and served our country, and now this.

Please, what do we do?

Update 2:45 AM: Reader T. Rex Bean offered to make a generous contribution (see comments) if other readers participated. I will also make a donation, and hope you consider doing so as well.

If you would like to help, please e-mail me at yves@nakedcapitalism.com, and put “Stressed in America” in the headline. It may take me a day or so to get their address.

Update 12:50 PM: I am trying to get some leads for pro bono debt counseling. I do not have the coordinates yet, but the message my colleague forwarded indicates they are in Georgia (note it did not provide a full address). I had somehow misread it and got Florida in my head. Anyone who has any leads here, either for national services that would have sufficient local knowledge, or better yet, one within state, please ping me.

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191 comments

  1. Vinny G.

    “When I was young”

    What do you mean? You are young, beautiful, and obviously brilliant.

    Vinny G.

    1. Yves Smith Post author

      Flattery will get you everywhere! So are all therapists required to take Dale Carnegie classes as part of their training?

  2. T. Rex Bean

    Yves, if you and your readers agree to pitch in too, I will contribute $1,000 for this family. I might add that my job is at risk these days — I work for a daily newspaper. What say you?

    1. Yves Smith Post author

      I’ll certainly chip in, but let me get an address for them. Sending a check directly is probably the most straightforward method, unless you or other readers have a better idea.

    2. Vinny G.

      But what if instead of buying food, they turn around and pay off their loan shark (a.k.a. BoA credit card) bill with the donations?

      Perhaps educating them about bankruptcy might be a better option. Their credit is already ruined, so bankruptcy won’t make things much worse. They also need to understand they’ve contributed enough toward Ken Lewis’ 52 million dollar pension and 75 million stock options he is to receive in December.

      Vinny

      1. bob

        I’ve taken to the role of ‘out of the box’ credit counseling on just these issues. It’s amazing what conventional wisdom is and how badly it has been perverted by the banking establishment. People living rent free in their houses waiting for foreclosure is the latest crack, there are others.

        There are plenty of things that people can do on the edges that can make a big difference. Don’t quote me on that.

    3. Debt Elimination Don

      They might want to settle their debts and then repair their credit – that is what I did. A better strategy might be for those who wish to donate is to save up enough money for about 40%-50% of their debt. That is the amount they will need for debt settlement.

      They can get the course I used to settle my debts at my website. I know this sounds spammy, but I thought I would take the risk knowing that these people need legitimate options.

      If they want, I can send them the information on the credit repair program that I used to fix my credit after I smashed it negotiating my debt.

      I hired a professional debt negotiator to coach me. He is available as an option as part of the debt settlement course. From my perspective having a coach was critical.

      You have my email and website. If you go through the effort to contact me I would be more than happy to provide advice and guidance.

      Just so you know, in the last 18 months I have negotiated my business credit card debt down from $120,000 to $47,000 – no joke! I also did a Dead in Lou Of Foreclosure on a investment home for another $189,000 reduction of debt.

      Because I was insolvent enough at the time I will not have to pay taxes on my forgiven debt.

      1. MM

        If they live in GA then there is no way they need to be shuffling money around to pay medical bills for the grandkids. Those kids all qualify for medicaid and would be 100% covered if they only make $8.50 an hour.

        I live in GA. My husband lost his job last October. BofA has our mortgage and tried to steal our home when we tried to apply for refinancing. Seriously. They held our mortgage payments in a separate account. Claimed we were late. Never told us they were holding the money till they sent us a notice of foreclosure with a date to auction off the house. It took a while to get that settled. It was horrible and we were never late on the house note. We just made the mistake of applying to lower our rates while we didn’t make enough money.

        That said we lived off $10 an hour for the last 8 of 10 years without living off credit cards. An army pension, plus unemployment, plus $8.50 an hour ought to pay the bills. If that son in law makes $8.50 an hour and isn’t paying for insurance, which I totally understand, he ought to be contributing in a meaningful way. We supported SEVEN of us making only $10 an hour all this time and in the same state.

        Even if you make all your payments on time for years but fail to really put away for hard times when you CAN afford to you are still being stupid. While making that piddly salary we got our payments cut to below what it would cost to pay utilities, mortgage and food and had to live off our emergency fund and George Bush’s stimulus money TO the people. Then my husband lost his job. All this time we were relying in a large way on our food storage. Something I will NEVER be without.

        We’d be living with family too by now if we hadn’t been VERY blessed to get a job quickly. I really can sympathize with the fear and misery of it all. The job loss and BofA threatening to take our home just about pushed me over the edge. BUT most people really are just stupid with their income and they do not prepare and they do not lower their expenses adequately.

        I am assuming this family is NOT like my sister and bil who lived high on the hog and got everything they could on credit and then stopped paying the bills. It’s taken them two years to lose the house and they have been ripping off family and friends left and right in the process.

        I’ve bought them food when my sister called up crying over having none in the house. Yet her dumbass husband can’t be bothered to keep working when he can. And thinks that in the midst of foreclosure, no winter clothes for the kids, and a house full of things they never paid for, that need to be packed up, is a good time to spend all his time playing some indoor laser crap and going to the fair and any other distraction that costs money and keeps him from doing anything.

        And this is the only person I know personally who actually went to the Atlanta Tea Party. He has a tea party sticker on his car. AND he has never once paid his income taxes. He’s a leach. And those people ought to be living in their cars until they decide to stop feeding their egos and actually provide for their families.

        We had “no money” and we lived within our means on our “no money” which means we had to be careful how every $5 was spent. And we will continue to prepare and plan ahead to the best of our ability.

        If you rack up debt paying bills on the credit card you shouldn’t just bail on it if you can pay it even if it makes it all horribly tight. This family now has a full time but lower income for the husband, a pension for the wife and an $8.50 an hour son in law living the house. They sure as heck ought to do their best paying off their debt. If not they are only contributing to the further increase in interest rate for everyone else out there who is still paying their credit card off.

    1. Yves Smith Post author

      T. Rex,

      Your comment is still there, along with my reply. Try refreshing your page.

  3. t. Rex Bean

    Oop, never mind, I see it now. Sorry. Yes, OK, though I’d rather you round up as many of your readers as you can and send a lump sum.

    1. Yves Smith Post author

      That has the advantage of being sure of the total but causes delay, when they sound pretty stressed to me. And a “lump sum” means running it through someone’s bank account. That isn’t something I’d recommend for a lot of reasons.

      1. t. Rex Bean

        Fair enough. Send me an address. I hope your readers kick in too. Beat the drum a bit, won’t you? I don’t know that these people are any more deserving than al the others down on their luck but I’m not doing it so much for them as I am for my own self-respect.

  4. Dave G

    Yves,

    These people should check to see if there is a homestead exemption in their state. In Co. it is $60,000, higher if elderly or unable to work. If they file for BK that equity would be preserved, they can stop making mortgage payments while the bk goes thru and shrug off the credit cards, saving the money her husband is now earning. If they have an adjustible rate mortgage, they should ask the judge to cramdown a mortgage mod with a fixed rate (quite likely denied, but worth asking), then Get a “live debt free” book, forget about having “credit” for awhile , join a CSA (with a CSA and a decent cookbook a family of 4 can eat fantastic, healthy food for about $600.00 a month), then break bread as a happy family and try to laugh a little and make some memories of these days. (I am not an attorney and not giving BK advice).

    1. Yves Smith Post author

      They are in Florida, but I don’t have a specific address.

      If I read this correctly, they were using their cards for food. They are really on the edge. Even a cheap BK costs money under the new law. But yes, they should just quit paying the cards altogether, they have nothing to lose on that front now.

      1. IF

        I know this is abstract, but wouldn’t it make more sense on many levels to give to an organization like second harvest to feed the poor?

        1. Yves Smith Post author

          I agree, they are very efficient in terms of cost per meal, and I give to one locally like that (CityMeals on Wheels) but my sense is that if you are not in a densely populated area, all there are are soup kitchens, if that.

    2. S.Miller

      This notion of a CSA is something that does not work for people who are poor. They cannot save enough to pay the significant lump CSA fee. I asked someone why they bought the small sizes of food at the grocery store even though they were more expensive. They were living pay check to pay check and could not scrape more together for food and still pay all their bills. It is interesting how these upper-middle class wisdoms just do not work for people below a certain income level.

  5. bob

    Here is an idea-

    Why don’t people who have extra money get together and put it all in one place. That place would then have the ability to loan some of that money out to people who are in need of it.

    Sorry, couldn’t resist, post an address or just set up a paypal account.

    Folks, watch out for your neighbors and friends…

    And to those who are in trouble, ask for help. More people than you think are willing and able, they can’t read minds.

  6. rick

    The solution is quite simple: sell the house and free yourself from debt. It’s not an terrible sacrifice, it is liberation.

  7. Are you kidding?

    I’ve spent the last two decades getting criticism from nice people like these because I DIDN’T buy a house. Because I did not want to risk getting into a situation exactly like these people. What do you want to bet that five years ago these same people were tsk-tsking at people like me for not taking on a ridiculous mortgage? I got truly sick of being lectured by the herd for not being “responsible” and buying a house. When I tried to explain that I preferred to rent and not mortgage my life away, these people got ANGRY at me. And now I’m supposed to feel sorry for them? Will these same people now stop criticising people like me who use their own brains and make independent decisions? Will they stop believing the mainstream media? Doubt it. Bet you anything they will excoriate me when I take the next position that is different to what “everybody knows” you “should” do.

    1. oldtimer

      This story, forwarded from a reader, shows the picture is more complicated.

      The picture may indeed be more complicated, but this story is a perfect example of what went wrong. Just look at the first paragraph:

      Just like most everyone I know, my husband and I are in big debt with our credit card companies.

      Look at that first clause: I justify my actions because “everyone I know” behaves similarly. When “everyone I know” is the load-stone for your behavior, it might be time for self-reflection.

      In and of itself, the above might not be so bad except for one of the next clauses:

      Anyway, we had no saving…

      Why *exactly* did they have no savings during employment?! It wouldn’t be because “every I know” spent money to the exclusion of putting away savings, would it?

      Now, I’m really sorry that they get to learn the lesson the hard way, but I was really hoping that the OP was going to elucidate why the picture is more complicated. This story ain’t it.

  8. charles

    You mean you people are going to send your dollars so that this family can pay its overpriced mortgage (notice the “unable to refinance at a lower rate” in the text) ?
    Why not send money directly to Ken Lewis and Vikram Pandit for good measure !

    What this family, and the whole american society, needs is de-leveraging, maybe even through bankruptcy if their net worth is too negative (“equity in the house” is always smaller than one thinks…).

    They will do just fine, finding a rental (plenty of offer available and rental prices decreasing fast) and living with what they earn.They may actually discover that their life is better without debt and all the different “stuffs” that generate negative cash flow.

    Don’t get me into the “credit card compulsory for buying food”, food stamps covers more or less the price of food if they earn too little. If they were too proud to apply for it, they should be too proud to receive your money.

    Save it instead for :
    1) the taxes that should pay for food stamps program and a future cheap subsidized “government option” for healthcare (one can always hope…).

    2) the losses that your direct and indirect bond/equity holdings will suffer as a result of the credit losses generated by bankruptcies. Yes, ironically, through their diversified 401K/Pension holding, lots of you are actually on the other side of the stick that currently beats this family.

    Pressuring the poor for one dollar and giving them one cent as charity is a time honored way for the upper class to absolve itself from its sins.

    1. Yves Smith Post author

      I find it intriguing that you project your stereotypes on to what was written.

      They could manage their lifestyle, which does not sound extravagant, until the husband was unexpectedly fired. The cause of their distress is job loss, not a big mortgage. But contrary to what was written, you act as if it was the mortgage.

      Yes, they could refinance cheaper, but there is no indication that they had weak credit (as in they had a teaser mortgage). They say they paid their bills on time prior to the job loss.

      It is now late October. Even if they had had had 4-6 months of savings, they would have exhausted that, and started using credit cards for daily expenses so they could use the USAF check for mortgage and utilities. The children who moved are not able to paying their way (as in they aren’t able to contribute to household overhead), so who knows how that played into this.

      The one lucky break in this is that the husband found work before their credit went to hell. He would have even fewer job options.

      You and other readers are completely unrealistic about renting. Have you not been reading the news? No one will rent to a couple, much the less four people, with a trashed credit record. If they lose the house, the next step is living in a car, tent, or homeless shelter.

      The homesteading option, or staring down the banks (certainly on the credit cards), might be their best gambit, but they are at the end of their rope.

      1. Are you kidding?

        If they have been paying an average (or smaller than average) mortgage for over 10 years and only have 30K equity in their home and they are old enough to have adult children then they could NOT afford that mortgage and they shouldn’t have taken it out. Job losses are normal even in good times and one can’t afford a mortgage if one can’t afford to pay a mortgage or sell if there is a job loss.

        As for T Rex Bean, I am not an Ayn Rand devotee, I am a lefty community lawyer who helps people in exactly this situation when I could be making a lot more back at the firm. I have enormous sympathy and personally help people in this situation every day. But they made a bad decision – one that the prevailing culture shoved down their throats. And in this forum, where we are discussing macroeconomics, I am critical of their decision, as I am critical of the political system and media that encouraged them to think it was a good one. And I am critical of Yves, not for helping them – I do that too – but for not acknowledging – in this forum – that they made a bad decision.

        1. Yves Smith Post author

          Did you notice I said they were in Florida? I have a buddy who bought in 1999 there, is in a mess for completely different reasons (his business, estate jewelry, collapsed, which is true of the diamond district in NYC generally). He had a very nice place, well done up, had three offers fall through, and will be lucky to get enough to cover his mortgage. And he was self employed in 1999, so he put some equity down. Now there are plenty of different communities in Florida, but some have had very wild rides and have given up all their gains and more.

          People who do not make a lot of money, and I infer this couple probably never earned very much, do not have the resources to have much in the way of buffers against crisis. You presume that their is some way they could have comported themselves differently that would have made a big difference in outcomes. I doubt this is the case. If you are without income for a protracted period, you wind up broke. That is why I do take offense at blaming them.

          There is a cognitive bias called hindsight fallacy and a related one called the halo effect. I suggest you Google them. People in assume certain things could/should have been known at the time. I have made plenty of decisions that looked logical at the time that turned out badly. That does not mean the decision was bad, that means things turned out badly (however, if a course of action does start deviating from plan, if one has any degrees of freedom, one should try to course correct. That is where most errors lie, not in the decision itself, but in the inertia around a decision that turns out much worse than one could have expected. Say you take an exciting job and your boss gets cancer and suddenly you are high and dry. Do you go looking for a new job? That’s probably the best course of action, but most people don’t do that, they’ve gotten to know the ropes a bit and figure they’ll find a way to persevere. And there may be valid arguments against it, like you’ve been in the new job such a short time that looking for a new job looks like a red flag).

          Life is all about making decisions with imperfect information. It is part of the human condition that we do not have perfect foresight, that there are unknown unknowns. If you go on a daily walk and are hit by a drunk driver, does that mean going on your daily walk was a bad decision?

          We do not know enough about their fact set to judge them, and I am amazed at the willingness of people to do just that. There are a lot of people who did the best they could, often based on advice and research, and still got caught in this train wreck of an economy.

          If they were renting and fell behind because they fell behind, they’d be out on the street even faster, and as I pointed out, no one is going to rent to someone with a trashed credit record.

      2. charles

        But the cause of their distress IS the mortgage ! Unless one is a government employee or has very good long term visibility as far as job prospects are concerned, it is irresponsible to leverage because a job loss is not an “unexpected” act of god, but some of the things that can happen in life.

        This is why significant equity on a house is important (by significant, I mean that net worth of the family (ex pension funds) should be higher than 50 % of the value of the house). It enables to cut leverage without being bankrupt if things go sour.

        Leverage + volatility is a deadly combination, true for corporate, and true for households too, especially modest ones.

        1. Yves Smith Post author

          You forget that someone has to pay for housing regardless, that’s an inevitable cost. Moreover, if you rent, you are at the mercy of a landlord, they can jack up the rent or not renew a lease. Moving unexpectedly means costs too.

          You do not know their situation. Jobs have become much more unstable over the last decade. You again are applying the rules in place now to the situation when they made the decision. Again, you need to Google hindsight bias.

          It used to be that putting down 20-25% was considered prudent. I would have trouble thinking of someone 10-15 years ago who would have recommended to ordinary people the standards you are suggesting.

          Again, yes, undeniably the decision turned out badly. But you are ignoring the fact the rules of the game changed, and are assigning blame when you of not have the fact set. Maybe they did overextend themselves, but they say they lived modestly, and given the military background, I suspect that is true.

          Let me use a more extreme example. Six million Jews died in Nazi Germany. Clearly, the decision to stay turned out badly for them. It was clear that the Nazis were incredibly hostile to Jews, and many fled. But the logical worst case scenario was internment (which in my mind would be reason to leave, and many Jews did try to leave but were too late to act) But could anyone have foreseen that the Nazis would gas Jews on a mass basis? People who stayed made a decision based on what they thought would play out, and a scenario developed that no one had foreseen.

          1. charles

            “It used to be that putting down 20-25% was considered prudent. I would have trouble thinking of someone 10-15 years ago who would have recommended to ordinary people the standards you are suggesting.”

            This statement shows how insane personal finance planning became in most developed countries. 20-25% is not prudence, it is the bare minimum equity for leverage.

            Regarding your remark about hindsight bias, I am tempted to reply with the Dunning-Kruger effect…

            You can google that, together with the Godwin’s law for good measure ;-)

          2. Simon W.

            Charles,

            From the Wikipedia page on Godwin’s law:

            “The rule does not make any statement about whether any particular reference or comparison to Adolf Hitler or the Nazis might be appropriate, but only asserts that the likelihood of such a reference or comparison arising increases as the discussion progresses. It is precisely because such a comparison or reference may sometimes be appropriate, Godwin has argued, that overuse of Nazi and Hitler comparisons should be avoided, because it robs the valid comparisons of their impact.”

            In other words, Nazi references can be perfectly valid (like Yves’ example of hindsight bias) but they will often be dismissed simply because they feature Nazis. Your response was a perfect example.

    2. sharonsj

      What you get in food stamps depends on the state you live in, your income, and how many are in your family. Until recently, as a single woman on Social Security of $11,000 a year (before school and property taxes), my food stamp allotment was $10 a month. (It finally went up to $29.) That’s because I had no mortgage. Another friend, who earns even less but has a mortgage, gets $l30 a month. You also don’t get medical assistance unless you are completely poverty-stricken. I was considered “too rich” for help. Most of the people who flap their gums don’t know and won’t know what’s really going on until they personally need help.

      As for credit cards, when my business failed, I could no longer pay the monthly bill. MBNA refused to even discuss lowering the fee, so I stopped paying. After a few years they gave it to a collection company and now I pay them $45 a month. The collection agencies will also settle for pennies on the dollar (if you have the money).

  9. T. Rex Bean

    I find it intriguing that not one person posting here — except for Yves — has offered to help this family. As I said, I don’t know if they are any more (or less) deserving than any of the millions of unfortunates caught up in a financial catastrophe that they didn’t cause. It doesn’t matter. It doesn’t even matter if they don’t spend the money wisely (how many here would take the time to advise them on what to do?). Clearly, $1,000 — or whatever — isn’t enough to rescue these people from the financial morass they’re trapped in. But it may give them a bit of hope, a feeling that a few of their fellow citizens sympathize. And, I might add, it may make a few of you, my fellow readers, feel a bit better about yourselves (all followers of Ayn Rand stay late for special counseling).
    C’mon, now, anybody?

    1. IF

      I’ve been in India on a company paid trip helping to potentially outsource my own job. I wanted to see the country! In the evenings I traveled around the city, and on the weekends the surrounding are when I found time. I wasn’t even in a touristy area, but I was a constant target for beggars. Oh, many of them were more than deserving! Skinny children, men with leprosy. It was tough to stomach. Really. (And I have relatives and friends in rural Russia and Bulgaria that live a peasants life.)

      Why do you think your money will make a difference? Even if you safe this family (from what?), there are thousands if not millions just like it. You teach them to beg (or to play the mercy lottery). And finally you’ll help their bank with the usury payments. As I wrote before, structural help/change has to be more abstract and less emotional.

      1. S.Miller

        Why are you making assumptions that being destitute will teach people to beg?

        What you saw in India was probably different than what is going on here. People with few other options sell their children into slavery. Some people are working to stop this.

  10. Matt

    I’d love to help them but am a furloughed state worker and am barely making it myself. I hope some others who have made it through this recession without serious damage will help this family.

  11. Skippy

    Ok..what gives, Vinny and Yves running some psych 101 test here.

    Vinny starts out with gushing flattery after a post about family soon to hit the streets and Yves does a blushing *oohh stop it now* bimbo response. Which she is defiantly NOT! Ive seen allot of video of you Yves and totally out of character in my opinion, followed by a second, by a new anon T.Rex Bean who pops up out of nowhere lol and who’s ready to pony up with a grand to prime the pump ROFL to resolve his self respect issues….ohh and is a news paper man?

    Come on now, they need 35k large and then there is no guaranty’s that some other calamity won’t knock them down again after a brief respite, that would truly do their heads in…emotianal DAI eh Vinny.

    What ever, I’ll bite just for the fun of it.

    Helping people by handing cash over is always a bad idea.

    Pro bono professional help would be better, until they could stand on their feet again. Every time something bad happens in this world Americans think money will fix it..bah. I have endless examples of our maiming and killing people whilst we try and help them..infinite. In fact the more people that find the American dream a lie the more chance they awaken out of the bloody dream inserted by MSM and past governments and start acting like active citizens.

    This is a test of the American people being played out in front of the world, we will be judged by our actions after judging the rest of the world for so long…hay.

    Skippy…I feel for them as some one who has done the streets twice in my life, after helping a family member out with money and punching out of the mad world for a bit. My two rules in life are if you get your self into strife, get your self out and never allow any one, to put you, into their pocket…full stop.

    1. Vinny G.

      As far as I’m concerned, Yves is the best blogger around. I actually only read this blog.

      I agree that pro bono work is probably a better idea than handing out cash.

      Yeah, you’re right about the American dream. It’s turned into a real nightmare now. When everybody is a 3 month contractor, the idea of a 30 year mortgage sound ridiculous. Unless, of course, the dollar hits hyperinflation in a year of two, in which case it makes sense to borrow as much as possible now.

      Btw, aren’t you in Australia?

      Vinny

      1. Skippy

        My import was not to diminish you or Yves, but only to point out my incredulous observations with regards to the post *it self* and the opening comments…Gaussian drive by?…small sigma?

        The reason I hang out here so much is the quality of thought, by our host and others. That said I have around 200+ economic and political blogs that I scan weekly and cross references to conditions globally, with personal contacts with-in most of the region’s, for a grounds eye perspective.

        Yes I reside in Australia, but born and raised in the states, matter of love and not mind, although I have to admit when planing our family I did see Australia as a better choice, against my Aussie wifes protest (bloody american dream machine on over drive).

        In ending whether I stay here or change my citizenship on paper I will always remain a yank, if not only because the world will always see me a such, and that is something I must contend with regardless of my internal thoughts.

        Skippy…the land of my youth, home to my kin and friends, regardless of my geographical location.

  12. Vinny G.

    I used to live in Florida. The state has a $25,000 homestead exemption provision for property taxes. However, what is more important for this family is to know is that in Florida you do not lose you home in bankruptcy when the mortgage that is on the house is not directly involved in bankruptcy. As I understand it, Florida protects one’s home from liens more than most other states. Perhaps they can only apply for bankruptcy for their credit cards.

    I think somebody above suggested they sell their house. Well, two weeks ago, I went over almost a hundred listing from the Orlando area for a friend who did fly down there and made a really low-ball offer on a property. Most properties in that area lost over 60 percent of value from 2 years ago. Practically all listings that I looked at were “short sales” meaning the owner owed more on the property than the asking price. Florida is an absolute disaster right now. If these folks sold their house it likely won’t cover the mortgage. A better option may be to take cash advances from their cards to pay off more of the mortgage, then to declare bankruptcy on the cards only.

    Vinny G.

    1. oldtimer

      Florida is an absolute disaster right now.

      Or even worse, Florida is absolutely normal right now. Price-to-rent ratios are returning to normal, and $$/sqft are returning to historical norms.

      1. S.Miller

        Wow. Renting is so awesome until you get kicked out because the landlord didn’t tell you that he stopped paying the mortgage of the property that he bought when credit was easy.

    2. bob

      Cash reserves should be built up before the trouble really gets going, and yes I mean cash, not cash in a bank account.

      Take a page from messy divorce stories. There are lots of ways to make money disappear, and leave someone else holding the bag.

      Number one point, don’t do it slowly, decide to do it and then do it, very quickly. As she points out in the story, they will cut your credit cards quickly when you fall out of ‘the normal spending patterns’.

      Eventually you have to stop spending what you don’t have. The idea is to get the music to stop when you can handle it, and are prepared for it.

      Doing this properly is always based on an honest assessment of the situation. What does psychology have to say about most peoples ability to do that?

  13. nanute

    Vinny,
    I don’t think the cash advance on the credit cards is an option. They couldn’t even by food with em’. The best option is to stop paying every creditor and file for bankruptcy. Any one in Florida that can provide the pro bono representation?

    I left Florida just before the bubble and moved back to NYC. Anyone with half a brain could see the train wreck coming. Most of my friends in real estate were adamant that this was a normal progression in values. The state is in a real mess, as you have observed first hand.

  14. JUNKER ROTE

    I’m not sure how our brains are being controlled but all of these folks with credit card problems having forgotten the fine print: the loan is unsecured! Vinny G gets it above. Bank of America made an error lending that money to you and that is what the TARP money and accounting changes were for-to hide the fact that folks like you are not going to be able to pay the money back. A debtors revolt should start with the fact that credit card debt is unsecured. I don’t even see a reason to declare bankruptcy. So what if they put a lien on your house. Do you really think B of A wants another house in Florida. Ben’s Helicopters (the Tarp Banks) can’t take a pound of flesh, steal your children or put you in debtors prison.

  15. Brian

    No other article in recent weeks has struck me so much as the story from the NY Times about how private equity firms essentially drove the Simmons bedding company with increasingly higher and riskier leveraged investments while extracting real value from the century old company. The line that stood out for me was this: “Simmons’s woes, said Scott A. Schoen, a co-president of the firm who sat on Simmons’s board, are entirely caused by the ‘unprecedented and unforeseeable’ downturn that has shaken the entire bedding industry.”

    When I read that line I was just incredulous. For, I hear from so many in the financial side criticize so many families like you highlight here as “living above their means” and/or “bringing it upon themselves”, when our entire financial class was doing and promoting the exact same behavior (and calling it “free market capitalism”), except with the risk assumed by everyone but them.

    So I suggest to families in the situation above to simply tell their creditors, “Thanks to a ‘unprecedented and unforeseeable’ downturn I can’t make my credit card and mortgage payments this month or in the near future. Just business, you see. When the market returns I will look into perhaps resuming payment.”

    Yeah. I’m sure that will work, right?

    1. Anonymous Jones

      I watched some “acquaintances” unfold the same PE strategy at Mervyn’s…extracted all the value from the real estate owned by the company and then let it die.

      All the analysts said, “Oh, Mervyn’s was dying for years.”

      Maybe, and maybe it is sometimes good to strip out unrelated assets to see the viability of the underlying business, but at the same time, there is always an incentive in these situations to overleverage, to extract more value than was *ever there in the first place*, either by fooling a lender into making too big a loan or engaging in this little inter-company beauty: sale-leasebacks in which the third party buyer gets an above market rent from the seller and thus pays more in the sale, leaving the business to slash employee costs to make its rent every month. I believe in markets, but not in cases when there is clearly asymmetrical information and/or bargaining positions that lead to ‘unconscionable’ results.

  16. craazyman

    Get with the program Brian.

    Don’t you know that leverage helps these firms run their capital structure more efficiently — which enhances their profitability and produces cash flow that can be invested in other private equity deals that help other firms boost efficiency?

    I mean, really.

    You need to go get an MBA or at least a GED, you loser.

    -Jolly B. Banker, CFA, CPA, MBA, LLD, LLC, PhD, MS, MRS, AA, BYOB

    1. Brian

      Ha…yeah my master in poly sci has me really ill equipped to deal with this, eh?

      I remember back in my undergraduate days getting into arguments with the economic major students saying “But where the f*ck is there a rational human being??! How are you basing entire theories on some mythical rational agent?” and getting blank stares in response like I had two heads.

      And now, twenty three years later I am vindicated.

  17. Bruce Krasting

    Yves, I help lots of people who fall into problems. But I have a rule. I never give money to someone who will use the money to pay down a bank.

    Nothing will happen to these folks for at least 18 months if they stop paying their bills. No one will bother them and foreclose on their home. The CC’s are over. They have to go back to a cash way of life. But they do not have to pay these bills.

    I have worked with people in FL who have been non payers for more than one year. Life is going fine for them.

    The cc company will settle for pennies in a year. The mortgage will be rolled over at a very low rate through the HAMP program. There is an 80+% the mortgage is retained be either the Fannie/Freddie/FHA of FDIC. They should determine who is now holding this mortgage. If it is on the above I would say they are on easy street for more than one year. Indymac borrowers are getting a free ride from the FDIC.

    We need to help our neighbors. But not to pay the banks back. We already did that with TARP.

  18. Kevin Smith

    It sounds like these people are insufficiently ruthless.

    I’ll be happy to contribute to the cost of legal and financial counselling to bring them up to speed on how to optimize their chances for survival in the current situation; but not a penny for their creditors.

    1. eh

      It sounds like these people are insufficiently ruthless.

      I agree. And an advisor to show how them how to optimize their newfound ruthlessness is also a good idea.

    2. DownSouth

      Kevin Smith,

      Brian and Bruce Krasting allued to it, but you nailed it.

      The other day Yves posted something that really stunned me:

      Yet, 17% of households would default, even if they can afford to pay their mortgage, when the equity shortfall reaches 50% of the value of their house.
      http://www.financialtrustindex.org/images/Guiso_Sapienza_Zingales_StrategicDefault.pdf

      The stunning part is not the 17% that would default under these circumstances, but the 83% that would not.

      This would seem to indicate that most homeowners still have a moral compass that is pretty much intact.

      All this leads me to believe the problems of this family might go beyond their legal and financial problems. Being that most people in this country are still capable of and do in fact experience moral sentiments, the family members most likely are experiencing feelings of guilt and failure. These can be quite debilitating, not to mention the fact that these sentiments can and most frequently are exploited by bill collectors.

      The rugged individualism that has become so much of the American credo attributes all failure or success to the individual. This belief system, however, was created to serve the interests of the ruling class. As Reinhold Niebuhr pointed out in Moral Man & Immoral Society:

      Dominant groups indulge in other hypocrisies beside the claim of their special intellectual fitness for the powers which they exercise and the privileges which they enjoy. Frequently they justify their advantages by the claim of moral rather than intellectual superiority. Thus the rising middle classes of the eighteenth and nineteenth centuries regarded their superior advantages over the world of labor as the just rewards of a diligent and righteous life. The individualism of nineteenth century political economy and the sanctification of the prudential virtues in Puritan Protestantism were used by the middle classes to give themselves a sense of moral superiority over both the leisured classes and the industrial workers. This individualism, and the emphasis upon the virtues of thrift and diligence, allowed them to believe that the poverty of the workers was due to their laziness and their imprudence…

      The middle classes were proud that their property, unlike that of the inheritances of the leisured classes, sprang from character, industry, continence and thrift; and they were therefore quite certain that any one endowed with similar virtues could equal the competence which they enjoyed. Failure to achieve such a competence was in itself proof of a lack of virtue. This middle-class creed sprang so naturally from the circumstances of middle-class life that it ought perhaps, to be regarded as an illusion rather than a pretension. But when it is maintained in defiance of all the facts of an industrial civilization, which reveal how insignificant are the factors of virtuous thrift and industry beside the factor of the disproportion in economic power in the creation of economic inequality, the element of honest illusion is transmuted into dishonest pretension.

      So does this family need legal and financial advice? Sure. But it might also need some moral guidance as well.

      1. oldtimer

        The stunning part is not the 17% that would default under these circumstances, but the 83% that would not.

        This would seem to indicate that most homeowners still have a moral compass that is pretty much intact.

        The “homeowners” signed a contract that promised:
        1. Regular payments, or
        2. Return of the asset (house) if regular payments stop.

        The 83% are absolutely within moral bounds to stop paying, so long as they return the keys.

        1. John Kissinger

          There is no reason to return the keys until the lender request the keys. Why would a lender on a Fl asset want the keys back? To pay the taxes? To maintain the property? Certainly not to bring forward the day when they will have to book the loss… the bank CEO’s will lose their jobs if and when they book sufficient losses to establish what we know, i.e. their insolvency.

          Stop paying even a dime on the credit cards. Stop paying the mortgage. Live free until the sheriff arrives with an eviction order. The agreement between the borrower and lender is that the home is sufficient collateral, there is no other agreement, moral or otherwise. Are the big CRE borrowers walking away from non-recourse loans immoral? Certainly not.

          I don’t think it is that hard to rent a house or apartment with poor credit. I am renting a house to somebody who lost their house… they were paying a 3500 mortgage and now are paying 1500/m… the new now is that many renters have jobs and can afford to pay rent but have poor credit… rentals have growing vacancies and falling rents, owners cannot require gilt credit if they want to rent their properties.

          Regarding the credit cards… it was the moronic banks that sent them around like candy (or drugs), let them eat these losses as we go forward into the cash and carry future… Imagine future sales as credit cards crash and burn…

          You have nothing to lose but your chains! There is not even any need to unite…

        2. bob

          oldtimer-

          It drives me crazy when people bring up morality with respect to banks and money. There is NOTHING moral about what they have done, and what they continue to do.

          Anytime you hear a banker appealing to a borrowers morality, run, they don’t have anything else to use against them.

          It is not moral to lend someone money that they will never be able to pay back.

          It is not moral to own another person.

          I knew a loan officer once who said that as soon a banks start talking about morality with respect to a loan, that loan should morally be written off. He was not too popular with the bank.

          1. oldtimer

            It is not moral to lend someone money that they will never be able to pay back.

            No more or less moral than it is to borrow money that they will never be able to pay back.

          2. bob

            So morality has left the building, it is not justification.

            Banking is about money, you are paid as a banker because you are better at managing money than people who come to you looking for it.

            What about the ‘morality’ of keeping an obviously non-repayable loan on the books? The banker, who refuses to write off that loan is in effect lying to his shareholders, regulators and debt holders of the bank. If a loan can’t be re-payed, how can it be counted as an asset on a balance sheet?

            Counting on the morality of the borrower now becomes systemic fraud.

            William Black- I’ll trade you my dead horse for your dead cow. They are both fictional ‘assets’, but as long as no one questions the morality of the bankers who are writing loans against them, they are moral?

            Extend and pretend.

  19. Gloppie

    “It’s not fair”
    I agree, stressed-in-America (for lack of a real name).
    I am sorry to hear about your situation. We are not that far away here neither, just a job loss or illness away. I am not going to take sides on the who is to blame for the debt game.
    But I will say this; It’s not fair indeed, and Martin Luther King said that without Justice, there can be no Peace.
    I believe the looting of the kings will not stop until the peasants revolt.

  20. Siggy

    I am in forced retirement. I can’t afford to send money to anyone.

    I have a brother who retired, moved to Florida, bot a bigger house than he needed, sold it when the price of the house went two and half times his acquisition price. He then bot and lives in a smaller condo that is now priced at 50% of his acquisition cost. His condo cost him 40% of the proceeds of the house sale. He does not have a mortgage. He says he is lucky to have sold the house. He has little empathy for those who are underwater on their mortgages. They made a choice and have to live with it.

    He wants to leave Florida because he finds the natives to be, as he describes them ‘wooly bullies’. By that he means he sees them as being theocratic biggots; rednecks. Our heritage is eastern european and we were taught to not trust organized religions and governments. It was demanded of us that we see the world as it is and that we make decisions that would protect us from the predations of religion and government.

    Thus, my brother’s view is that we make choices, having made a choice we have to accept the consequences. The story of this family is an exemplar of what has and is happening to the middle class. The better choice for this family would have been a much higher rate of savings. It is quite probable that this family did not see higher savings as a viable choice. They were getting by, but not doing well.

    Now their bell has tolled and they need to consider bankruptcy and every legal right avaialable in their state. If their payment history is documented, BOFA ought to consider a workout. There’s a problem with that, BOFA is not set up to do a workout, would resist the idea, and, doesn’t have competent staff to handle it.

    The family described in this thread is representative of the financial cannon fodder that is being exploited by a fiat currency and a fractional reserve banking system that is itself bankrupt.

    For those of you who would offer aid, I say God Speed and once you’ve rendered aid, perhaps you could consider demanding that our political representation do their job. It’s time to demand that the regulatory agencies do their job and begin prosecutions of the massive fraud that has been perpetrated!

    1. john

      > the predations of religion and government.

      The former having nothing to do the issue at hand and while the latter watched as its people were fed to the wolves.

  21. eh

    Do I revolt and refuse to pay?

    Short answer: Yes. And destroy the card; as you say it’s not accepted anymore. Your husband has a job and you should concentrate on living off of your check, his income and his credit card, and keeping his card current as best you can. You can get back to BAC later. First things first.

    Those high interest rates and late fees you (somewhat justifiably, but were they detailed in the card agreement?) complain about are how BAC deals with the risk of non-payment. So they have gotten and are getting theirs.

    It’s not fair,…

    What’s not fair? Do you expect BAC to continue to grant you credit when you clearly cannot pay? As you admit you’ve already had a long period where you ‘lived off the card’. Have the terms and conditions of the card changed significantly from when you got it?

    Between you and your kids (?) I hope you will be able to make the mortgage and utility payments, buy enough food, as well as keep a card or two going (stop paying on and get rid of the rest).

    Good luck.

  22. NS

    To judge these people is akin to blaming the sick for being sick. Who we need to judge and harshly are the Bankstas that got a free line of credit in the TRILLIONS for the specific purpose of extending credit to main street. Instead that cash is hoarded or sitting in the Federal Reserve collecting INTEREST!

    This economic paradigm makes people, their lives, health and their FUTURE productivity commodities. Its peaked, there is no more to squeeze from the Turnip class, no fancy drill can find anymore $$$$$$s to buy that next luxury villa or yacht.

    I wish these people the best of luck. I would contribute but like others here, my circumstances on a fixed income aren’t perilous yet but there is none to spare. They need to decompress, look at defaulting/bankruptcy as a something which today isn’t what it once was and might be considered a patriotic act in the face of those who hijacked our government.

  23. Nick

    Credit card companies are the modern equivalent of loan sharks.

    They loan you lots of money when no one else would loan. And then they charge you such high interest payments that getting out of debt to them often becomes impossible. You end up being in debt to them in perpetuity. It’s like becoming an indentured servant or a slave as a result of unpaid debts.

    And the moral of this story is that you shouldn’t use credit cards as the lenders of last resort, no matter how much you need the money. Because borrowing from loan sharks is a bad idea in any circumstances.

  24. Gordon

    most times when you peel back the onion on these “sob stories” you find people who acted irresponsibly. never saved, lived beyond their means, didn’t improve their job skills/education or cultivate their careers, had more kids than they could afford, multiple divorces etc.

    everyone is a victim. how about some personal responsibility?

    the banks can’t charge you interest if you don’t borrow from them. debt is slavery.

    1. BDBlue

      Most times I think that’s what people tell themselves to keep from panicking over how easy this could happen to any of us. We are all at the mercy, to some extent, of forces beyond our control (job loss, disease, etc.). And, of course, it presumes – in a nation where 1 in 6 people live in poverty – that people ever had meaningful career choices or the ability to save money and weren’t, in fact, working long hours to barely be able to feed themselves and put a roof over their head. And it ignores the fact that the people this country sacrifices first and foremost in any economic crisis is its poor or near poor and then we all justify it to ourselves with libertarian, neoliberal bullshit designed to not make us feel bad for letting struggling people drown while the rest of us drive $30,000 cars. And as the economic divide continues to increase between haves and have nots to third world levels in this country, those of us fortunate to have will one day wonder why we live in such a politically and socially unstable nation. The answer will be that we didn’t care as millions of our neighbors sank into poverty.

      1. Rush

        I have about had it being told that the plight of the homeless is my fault. I’m sick and tired of turning on my TV and being told that the AIDS crisis is my fault too, because I don’t care enough. That burned me up. The homeless man on my TV screen wasn’t in that condition because of anything I had done or because I didn’t care. I hadn’t done anything to cause his homelessness. The fact that I had a home and a turkey wasn’t the reason he was in a shelter, any more than cleaning my dinner plate as a child would feed the starving Chinese.

      2. Gordon

        where’s a photo? i bet this biiitch is 300 pounds yet is complaining about not having enough money to buy food and all of her medications and health problems. and somehow that’s my fault too.

  25. Bob_in_MA

    Yves: “I agree, they are very efficient in terms of cost per meal, and I give to one locally like that (CityMeals on Wheels) but my sense is that if you are not in a densely populated area, all there are are soup kitchens, if that.”

    Actually, I live in a rural county and we have very active food pantries. I volunteer at one.

    Frankly, giving money to people based on an email is a really, really bad idea. If you do, keep in mind the complete story will very often be quite different from what you were told and be willing to accept many people will take advantage of you.

    Sending this woman money to forward to BofA isn’t much of a solution. Send it to food bank in a particularly hard-hit area.

  26. BDBlue

    I hope my comment with all the pro bono legal services links is just caught in moderation because of the links and didn’t get lost. Eep!

  27. deep_tongue

    What a whiny welfare biatch. I wonder how many Iraqis, Serbs, and Afghanis she killed at the USAF. You wanna do charity, give it to Iraqis, not American military welfare deadbeat crybabies. Dumb bitch.

    1. BDBlue

      Of course, this family’s real problem is that they live in what is essentially a cruel and unmerciful society that is modern day America. Thanks for the reminder of that.

  28. on the arm

    Good, the way the conversation turned around. Charity is just a palliative for systematic commercial predation. Borrowers have to exert the power they’ve collectively acquired and break the banks.

  29. JOHN IN DISBELIEF

    She retired from the military and still does not have a house paid for? Guaranteed paycheck for 20+ years, free medical, free dental, BAH, BAS…FOR 20 YEARS! Sounds like someone doesn’t know how to manage their money. I would bet they are making car payments and eat fast food at least 3 times a week. Probably have cable T.V. and deluxe cell phone plans. They probably get a new car like every two years. What happened to her reenlistment bonuses? Or this whole story is just that- A story. Solution: Get basic cable or turn it off. Get pay as you go cell phones. Stop eating at restaurants and start cooking at home. Sell your financed car and buy an old used one. Don’t buy anything if you can’t pay cash. If you can’t afford your house, sell it. You may not like living around poor people but guess what? You are one of them. You deserve a bad credit rating because you ARE a credit risk. The military did not train you to be a whiner. You were trained to be self-reliant and successful. Start living within your means and suck it up.

    1. Tony S

      This story has me pretty sad and disturbed, but then I read John in Disbelief’s comments. He has a point. I know several people with military retirement benefit. One retired at age 45 and was able to buy a massive house because of the excellent way she’s now set up.

      That said, if one person loses a job and there’s little hope of getting another and you own a home, you generally downsized. They can take the equity on their house a nd put that into a condo and have a place they could theoretically pay off.

    2. CPA in TX

      I would really like to see some facts before passing judgment or helping out. How many cell phones (including the kids upstairs)? What is their cable/internet bill? How many cars in the garage?

  30. DownSouth

    As the second year of the Depression drew to an end and the third one began, a change was taking place in the mood of the American people.

    “Depression,” as Peter F. Drucker has said, “shows man as a
    senseless cog in a senselessly whirling machine which is beyond human understanding and has ceased to serve any purpose but its own.” The worse the machine behaved, the more were men and women driven to try to understand it. As one by one the supposedly fixed principles of business and economics and government went down in ruins, people who had taken these fixed principles for granted, and had shown little interest in politics except at election time, began to try to educate themselves. For not even the comparatively prosperous could any longer deny that something momentous was happening…

    For the Depression had wrecked so many of the assumptions upon which the American people had depended that millions of them were inwardly shaken.

    Let us look for a moment at the pile of wreckage. In it we find the assumption that well-favored young men and women, coming out of school or college, could presently get jobs as a matter of course; the assumption that ambition, hard work, loyalty to the firm, and the knack of salesmanship would bring personal success; the assumption that poverty (outside of the farm belt and a few distressed communities) was pretty surely the result of incompetence, ignorance, or very special misfortune, and should be attended to chiefly by local charities; the assumption that one could invest one’s savings in “good bonds” and be assured of a stable income thereafter, or invest them in the “blue-chip” stocks
    of “our leading American corporations” with a dizzying chance of appreciation; the assumption that the big men of Wall Street were economic seers, business forecasters could forecast, and business cycles followed nice orderly rhythms; and the assumption that the American economic system was sure of a great and inspiring growth.

    Not everybody, of course, had believed all of these things. Yet so many people had based upon one or more of them their personal conceptions of their status and function in society that the shock of seeing them go to smash was terrific. Consider what happened to the pride of the business executive who had instinctively valued himself, as a person, by his salary and position–only to see both of them go; to the banker who found that the advice he had been giving for years was made ridiculous by the turn of events, and that the code of conduct he had lived by was now under attack as crooked; to the clerk or laborer who had given his deepest loyalty to “the company”- only to be thrown out on the street; to the family who had saved their pennies, decade after decade, against a “rainy day”–only to see a torrent of rain sweep every penny away;
    to the housewife whose ideal picture of herself had been of a person who “had nice things” and was giving her children
    “advantages,” economic and social–and who now saw this picture smashed beyond recognition; and to the men and women of all stations in life who had believed that if you were virtuous and industrious you would of course be rewarded with plenty–and who now were driven to the wall. On what could they now rely? In what could they now believe?

    —Frederick Lewis Allen, Since Yesterday: The 1930s in America
    http://gutenberg.net.au/ebooks06/0600221.txt

  31. donna

    Unfortunately helping one family doesn’t fix the problem, other than making them and us feel better. I was helping a friend in L.A. for a while, but he’s past his second year of unemployment now, doesn’t even have a house, just a crappy apartment.

    And there are so many more like these people. What we need are JOBS, good ones, and soon. We need to encourage our government to get a real jobs program going, and get people back to work again. Preferably jobs with health care.

    1. DownSouth

      Riggsveda,

      Our political class and the MSM, with all their sophisticated propaganda, have struggled long and hard to portray these bashers as something other than the fringe minority they are.

      I found a Gallup poll yesterday that shed considerable light on the matter:

      The views of the 39% who are undecided on healthcare may be of particular interest to the nation’s lawmakers. The poll suggests these Americans would generally be receptive to a bill that includes a public option (56% are in favor), as well as one that raises income taxes on the wealthiest Americans to help pay for the plan (67% in favor).
      http://www.gallup.com/poll/123782/In-U.S.-39-Say-View-Healthcare-Depends-Details.aspx

      When I see things like this, it gives me great hope that the current depression will result in the same sort of moral renaissance that followed in the wake of the Great Depression of the 1930s, and that the evangelists of greed and selfishness will be banished from the political stage as they were then.

  32. Yankee Frank

    Wow. Empathy in America hits all-time lows. Perhaps some of these fellows must be laid low themselves before they will ever learn that we are all connected spiritually. The funny thing is that they pontificate that these losers should not have listened to the world around them yet they themselves are the lonely and sad victims of the last 30 years of greed is good and selfishness better. I’m sure this family is in trouble partially due to decisions they have made, but those reasons are likely a tiny part of what put them in their current predicament. I guess its easier to focus anger than compassion, especially when you are feeling insecure yourself. I’m not saying we should all throw money at these people. What I am saying is that apparently its easier to say no with an excuse. After all, if they did it to themselves you don’t have to feel for them right? I feel for them, and for all Americans who are in dire straits. I thought Obama would care but I was wrong. What is wrong with saying that you feel sorry for them but that you would rather give (if you have the means of course) to a food bank? Our culture shows its continuing hubris and weakness in the baseless opinions of scrooges. During the depression many Americans gave much when they had nothing (according to current standards), and it is happening now as well. I guess we will always have the sad and bitter few who cannot find a place in their hearts for others… maybe some day they will learn to shut up if they have nothing nice to say.

  33. Joseppi

    In the fine print of destiny the devil is in the debt. Self-preservation may help us rationalize not helping, but as fellow members of the human dilemma club, I think and feel that we should remain empathetic and focus our energies on changing the fine print on the rules of a corrupted system by which we all live. Thanks Yves for doing your part.

  34. wtf

    “Just like most everyone I know, my husband and I are in big debt with our credit card companies. ”

    – and almost no one i know. maybe it’s just me.

    “My husband was laid off on New Year’s Eve last year. We were in total shock.”

    – i never understand this excuse. do people think their job is guaranteed for life? i wouldn’t be surprised if i got laid off tomorrow, and my company is doing well. if you think you will never get laid off, you’re stupid.

    “I sent them a “token” $10 payment on the $450 monthly that I owed.”

    – $450 monthly?! jesus, lady, how much did you put on your credit card? did you think the bank was just gonna let that slide?

  35. craazyman

    Help me Spock. I was laid off from my job at Goldmint Stacks with only a $5 million severance. I don’t want to hear about some idiot bimbo who didn’t manage her risks and has lost her house.

    My Hamptons House is underwater and my wife is having an affair with the Polo Instructor. Even my 23-year-old mistress is looking at me funny.

    If you can’t send me money, send me some young women — or at least a lap dancer with bunny ears.

    -Jolly B. Trader, PDh, PDA, BSD

  36. JJF Sr. CMS Col Ret.

    I would not send any money to anyone at this time. You are just opening yourselves to a potential mock-up of things. I would suggest that they check their state laws regarding B/K-7′s before going that route. Lets say they can place their home into the B/K the lender will not modify their loan since it is in B/K. They only way the lender will modify is with the home out of B/K. But with BoA owning 75% of the residential mortgage business I would place a great deal of pressure on BoA with the house in B/K. Particularly if they have not been late . Plus, understand BoA is working at their own pace (slow) regarding modifying any loans. you can figure 6-8 months min. and then some.
    If they decide to go B/K-7 they could place their cards into the package. Stops the calls and family can start saving money. The Kids, Nice that they are home but they will have to participate in paying for bills, heat,a/c, water, food. And don’t tell me or anyone else there are no jobs. The traditional path of job search is over. Be direct, professional look your best and work at getting a job as if your life depended on it. IT DOES!!
    This country has a great deal to offer and it is available to all to reach for it and run with it. It doesn’t matter what it is. You are at the lowest point now and there is only one way to go. Right? UP!! So work at it everyday. Don’t give up! If any of you served then you know exactly what I mean. People don’t like quitters! Stand up tall brush yourself off and get moving. I was left behind in Cambodia when the war ended. Did I give up? Now I have become someones worst nightmare come true and I am just as good now as I was then. Stop cruying, stop worrying. Why? This is the only country in the world that won’t send you to jail if you default. They are not going to touch you. Its against the law. If you don’t like what is happening to you then change it. Its not easy and I know that. But change it. Don’t sit in the rtocking chair waiting for someone to come and help you. No one cares about you or me. Remember, everyone likes a winner. It won’t be easy, it will be evry tough, but one thing is for certain, once you get where you want to be no one, but one can ever take it away from you. Remember that!

    1. kevin de bruxelles

      Colonel,

      This is the only country in the world that won’t send you to jail if you default.

      Since I live in one of those countries where they will “send you to jail” (not literally of course, but in most cases they will make you pay back your loan), I have been pondering this couple’s dilemma all day. Assigning guilt or innocence is not my mission; I am, however, keen to do a post mortem to see what I can learn from their travails. Although I live in relatively privileged conditions, I am well aware that any idea of stability is at best a chimera and that we must always be prepared– or at least aware—that disaster may be lurking just around the corner; and that we should always have a river to fall back on.

      You make an important point about the liberal nature of America’s bankruptcy and foreclosure laws. In Europe “jingle mail” means sending your last spare coins to the bank to help pay off for that loan you defaulted on years ago. Most Americans have no idea that they live in the Debtor’s Socialist Republic where Romper Room Rules are in full effect. The yin of socializing the banksta’s losses is balanced by the yang of the consuma’s bad debts being assumed by the many. One of the discussions that I have not seen take place in the aftermath of the financial crisis is over the wisdom of recourse vs. non-recourse loans. Is it better to have consumers preferring offence (as in the US) vs. a bias towards defence (as in Europe and the rest of the world)?

      So not only is credit in America offered without long-term commitments, it is also offered promiscuously. In Europe it takes years to get access to any sort of credit card and after it is rare for anyone to carry a monthly balance. But herein lies that elusive river for Americans to fall back on in case of financial disaster. Just as Keynes counselled Nations to run surpluses in the boom years to enable deficit spending during the bad times; the best fallback position for consumers is to secure-–but not use– plenty of easy credit during the boom years, but to then only cash in this credit when confronted with the disaster of unemployment in the bad times. This seems so simple in concept but in practise it is anything but. And just as the US government was unable to avoid the seduction of easy credit during the recent good times; many consumers have fallen to the same temptation (I obviously have no idea if the family that is the subject of this post did or didn’t). Instead of finding in their credit cards a safe river of retreat; many Americans are finding instead a rising river of debt drowning them just as unemployment is unleashed upon them.

      1. michael

        For me (being grown up in Germany where all loans are recourse) that took me only 5 minutes to figure: Overall I clearly prefer non-recourse loans.
        Because it lets the lenders think a little longer about who they’re lending to – that is, if the imprudent lenders were also allowed to fail later!

  37. craazyman

    I like your attitude Colonel!

    This is a war and the sheep need to see it that way.
    They have to get into fighting shape and start firing back.
    “Woe is me” doesn’t win battles, especially against lawyers employed by securitization shell companies. They are worse than the priests of Ba’al.

    This man and woman need to understand that they are their own Temple of the Lord of Lords, the Alpha and the Omega. There is no need for outside confirmation — that’s only an illusion of chance and gravity. It’s all inside — the true Gold Mind.

    They can start by sobering up and eating well. And turn off the damn TV! Go for a walk and look at the sun, orange on the branches in the late afternoon against the dark blue sky. And pray. Pray. The Spirit will Find You. And the Lord will smile upon you, gently, like a loving and wise Brother.

  38. anonymous

    Yes, no one is sending money because I have to think we all know people who are much closer to us who are in worse shape. For example, I have a good friend that bought a small business three years and seen his revenues drop through the floor. Should he have seen the GFC coming? Maybe, but he’s not that kind of person. His family includes four kids.

    Also, I hate to say this, but this family appears to have been rolling credit card debt for 10 years (“I’ve always paid more than the minimum”). Wonder what all these purchases were for.

  39. Karen

    There is a lot of information missing from this story…

    How old is this couple, and why did they have no savings and only “a little bit of stock”? Didn’t they save for a rainy day, and DIDN’T THEY SAVE FOR RETIREMENT?

    But all that aside, my advice to them is to get some expert advice, from someone local who comes well-recommended (ask everyone you know, as well as any financial/foreclosure/bankruptcy advice columnists there might be in the local newspapers.

    They probably should have done that earlier, but now for sure they will need good, knowledgeable help to avoid stepping on any landmines through ignorance of the law and of current lender “standard practices”.

    I suspect they won’t like some of the advice they will get, but they need to realize that they are in a real bind and they need to treat their situation like the emergency it is.

  40. Anonymous

    This family’s reality is a reality shared by tens of millions across the country.

    The group that I have the most experience with – because I and much of my social circle are in it – is a failing small business. Huge numbers of us saw revenues crater between September 08 and March 09. We’ve muddled through since on lines of credit and personal credit cards, and those options are rapidly running out even as business is now beginning to pick up, just not enough to carry the debt that has been built up.

    For many, if not most of the truly small businesses out there, failure of the business means personal bankruptcy, and likely no unemployment benefits. If you’re looking for the next wave of personal bankruptcies and foreclosures, look there because it is just around the corner.

    1. anonymous

      This guys gets it right. To their “credit” Citi sees what is happening, but they are just going to make the situation worse:

      “Huge numbers of small business owners – especially sole proprietors – use these cards as a means of financing operations. They relied on that 10 or 12% interest rate, and most of them have huge balances outstanding.

      I have since confirmed that this letter is not just going to people who have had credit “challenges”. Indeed, this appears to be a blanket change on the part of Citibank. I now have multiple copies from people who assert that they have 750+ FICOs and have never missed a payment on this or any other obligation – the “paragon” of so-called “responsible” credit use. All of the letters are identical.”

      http://market-ticker.denninger.net/archives/1537-Hisssss-Citibank-Overpressure-Warning.html

  41. craazyman

    Dear Abby,

    I went up to my ears in debt and lost my house and dog. I am living in a shoe box. What do I do now?

    Sincerely,
    Rupert Mondavalo

    * * *

    Dear Rupert,

    Whatever your situation, remember that good manners and respect for others may seem to be old-fashioned, but they never go out of style. Start your day with a smile and end it with a prayer. Give thanks for what you have. Even a small shoebox is something special to behold, if it is warm with love. Your home is where your heart is, and your heart is always in the hands of the Lord.

    Yours truly,
    Abby

  42. pat b

    why not file bankruptcy?

    if they are making below median wage they could wipe out that short term debt

    1. Yves Smith Post author

      It costs money to file for bankruptcy. You have to pay a lawyer and pay for counseling under the new law.

  43. anonymous

    Using credit cards that you know you can’t pay back is called STEALING even if you are buying food! If a homeless person stole a twinkie from a store he would be put in jail.
    I know we are going through a hard time as a nation, and this family had hard choices to make, but instead chose the easy path…stick it to the faceless credit card companies. Guess who is paying for their food…Us the taxpayers who had to provide TARP funds to the government to give insolvent banks (the issuers of credit cards!).
    And this family has the attitude that it’s the credit card company’s fault that they are in credit card debt?? Outrageous! There’s no sense of personal responsibility today. They did not save for a rainy day and when the rainy day came (as it always does) they had no choice but to borrow money at a ridiculuous interest rate. Time to pay the piper or declare bankrupcy. And stop ‘helping’ your family. They need to make it on their own and you are not ‘helping’ them by going under yourself.
    If your whole family is going under, then everyone needs to trade down in house, car. Younger family members can move in with the parents and help pay the rent/mortgage. Work as a team, pool resources and seek the help of government and church agencies rather than running up credit cards that cannot be paid back.

    1. Yves Smith Post author

      A very well documented cognitive bias is optimism. I suggest you read “The Dark Side of Optimism.” And BTW that is encouraged in America, we have it much worse than in most countries. Most people assume they will not lose their job in the next six months, for instance, unless there is a reason to worry, like negative feedback from the boss, cutbacks at company, rumors internally that sales are falling, etc.

      They did not run up their credit card debt “knowing” they would not be able to pay it back (at least until recently). The husband desperately hoped he’d get a job, and some of that debt was incurred on trips to pursue employment.

      I’m not certain how banks set their minimum payment on cards, but with a 60 month principal repayment alone and $15K of debt, you get to $250 per month of principal, that is part of minimum payments, and I believe (readers chime in) you need to pay the monthly interest too, which assuming 20%, is another $250, or $500 total under these assumptions. That’s before you get to penalties, which are now operative here. And If they’ve kicked into a higher interest rate category, or have penalties, it’s even more pronounced. My understanding is required payments spike up as a result of higher interest charges when you fall behind, but INFORMED reader input would be useful here, these mechanics are not my category.

      I can see with ten months of no income (assume the wife’s check covers the mortgage) and $2-3K in the job search costs (for lower level jobs, travel is often not reimbursed), you have $12K, or a bit over $1K a month for food, gas, electric, and living expenses. My mother lives in a paid for house, no cable, no cell phone, cheap HMO, hardly ever goes out, pretty much doesn’t buy clothes, five year old car, and when I take her big expenses out (travel and her $300 a month of meds), it costs her as a single person more than that to live. Just sayin’.

      So if they have $30K in the house, they are still positive net worth on paper, so the charge that they are immoral or could not pay the debt (in theory) may not hold (whether they should is another matter). But I’m sure they haven’t allowed for brokerage and closing costs on the house.

      I don’t read them as blaming BoA for their indebtedness, that is entirely your projection. I do read them as hysterical over the fact that the bank is ratcheting up fees and cutting down their credit. Given that their situation has obviously deteriorated, that’s understandable in general, but I see no justification for the business model that banks have in place now, in particular 24.9% 29.99%, and even 34.99% interest rates. In the 1980s, when usury laws were in place, banks could only charge a maximum of 19.8%. And short term interest rates were much higher. Guess what, they charged everyone an annual fee and were much more stringent about extending credit. That was a healthier model for them and society as a whole.

      Yes, the couple should have saved, but many readers assume the reason they didn’t was that they lived high on the hog, and I can come up with other explanations. That doesn’t mean mine are correct, but I am struck by the propensity to assume a particular fact set. Again, this is another cognitive bias, halo effect, the propensity to see people as all good or all bad.

      This couple very much wants to honor its obligations; many readers have hectored them for NOT stiffing the banks sooner.

      You can argue I am too sympathetic, but I have a small business (meaning erratic income) and I have a lot of friends in similar situations. I’ve had friends who’ve maxed out their credit cards trying to keep their business going. One did it three times and was able to save his company (which BTW employed 100 people, so this was not all about him). Another had to declare bankruptcy and yet managed to keep his core team together (a tribute to how much some people believed in him) and has now rebuilt and is doing very well, but he had five years of hell in between (including, BTW, a disastrous brief marriage, which to me confirms how people’s judgement becomes impaired when they are under stress).

      1. oldtimer

        but many readers assume the reason they didn’t was that they lived high on the hog,

        Her story strongly insinuated that she was carrying a credit card balance for 10 years.

        That is a helluva long time for a financial emergency. Readers are not going out on a limb by guessing that these folks were living beyond their means.

        1. Yves Smith Post author

          That is projection again. She does indicate she has been running balances, but you have no idea whether this was occasional (some people do run up balances at Christmas and pay them off over the next few months), nor do you know if this was “living beyond their means” as in overspending on a routine basis, or whether they had an emergency, tried to help the kids who now have moved in, etc., got behind, kept trying to catch up, etc. Again, we have no knowledge either way, but you assume only one fact set.

          1. oldtimer

            That is projection again.

            No, it is careful reading.

            She does indicate she has been running balances, but you have no idea whether this was occasional

            Like I said above: She strongly insinuates that it is a constant state of affairs, from her letter

            I have NEVER been late on a payment in 10 years[...]. I have always paid more than the minimum

            Now, while it can be parsed that she might have paid off the entire balance at times over those ten years, you would strongly suspect from her choice of words that she was in hock for 10 years. Perhaps she makes her own case weakly and “just forgets” to mention that some points of her 10 years of payments result in $0 balance.

            nor do you know if this was “living beyond their means” as in overspending on a routine basis, or whether they had an emergency,

            10 years. That is why a sensible reader comes away with the conclusion that she is either beyond her means or in a constant state of emergency.

            Again, we have no knowledge either way, but you assume only one fact set.

            The only assumption is that her self-described payment history would have included the words “paid off” if she had actually paid off the balance. Judging from the rest of her self-description, I seriously doubt she would have omitted it. Perhaps I am wrong.

            But again, a sensible reader walks away with the impression that she was in hock for 10 years.

            The larger issue: This story, forwarded from a reader, shows the picture is more complicated. The picture may be more complicated, but this story reinforces to the major narrative of living-beyond-ones-means.

          2. Yves Smith Post author

            I read the same text. She has run balances “paying more than the minimum” before Jan. 1. You have absolutely no idea how long that has been going on, and you jump from that statement to assuming it has been a full ten years. That is a a huge stretch. She also indicates they have been supporting the kids. That played into this, how much I do not know.

            Once you start running balances, given the high interest rates, it is very hard to get off that treadmill.

          3. oldtimer

            I read the same text. She has run balances “paying more than the minimum” before Jan. 1. You have absolutely no idea how long that has been going on, and you jump from that statement to assuming it has been a full ten years.

            OK, time for a quiz. A person has made credit card payments for 10 years. They have sometimes paid the full balance, and sometimes made partial payments. When this person self-describes their payment history, are they more likely to use

            (a) I have always paid more than the minimum and sometimes paid the entire balance due, or

            (b) I have always paid more than the minimum.

            A sensible reader is well within bounds to walk away thinking that (a) is the correct answer. Again Yves, she omits any reference to paying off the balance, which leaves a sensible reader with the impression that she has been in hock for 10 years straight. Now, you might point out that CC interest rates are usury (they are) or that providing for kids is hard (it is), but simple arithmetic indicates that you must spend less than your income on an integrated basis, not just monthly.

            Again, your assertion that this story elucidates why the bigger picture is somehow more complicated just doesn’t hold.

            Addendum: Since you will be contacting this person with a donation, you will also be in a position to correct me if (b) turns out to be the right answer. I would enjoy being proved wrong on this issue (really, really, I mean it), and it would provide your readers with an excellent update.

      2. Vinny G.

        “Again, this is another cognitive bias, halo effect, the propensity to see people as all good or all bad.”

        Just as a comment only remotely related, in psychology that is called “splitting”, and it is considered to be a very maladaptive defense mechanism and pattern of relating to others. People that split don’t see other people for what they really are, namely a mixture of good and bad, and complex creatures that often hold conflicting beliefs and ideas without falling apart in the process.

        Psychiatric patients with very severe mental illness (usually Borderline Personality Disorder) exhibit that pattern of relating to others. They are every therapist’s worst nightmare. One week you are your best friend, the greatest therapist since Sigmund Freud, but the following week you are the devil incarnate just because you started their session 5 minutes late because you had a major car wreck on the way to the office to see them. They throw things at you, spit on you, curse you out one week, and bring you gifts and try to seduce you the following week.

        And, BTW, because it is a “personality disorder” the prognosis for recovery is very very poor. To see “splitting” at work, see the movie Fatal Attraction.

        Just my 2 cents…

        Vinny G.

      3. rick

        This outcome was inevitable:

        The couple is at retirement age and have NO SAVINGS. The job loss is a red herring. They should have had hundreds of thousands of savings or equity prepared for retirement.

        They don’t require charity:

        They can sell their home and pay their debts or declare bankruptcy.

        They don’t deserve charity:

        Most of the world’s population have nothing. Not even hope. Let’s put this couple’s troubles into perspective. By proposing this couple deserves charity, you’re saying that anyone who chooses to live more responsibly should subsidize the lifestyle of those who do not.

        Your stories of struggling small business owners don’t elicit my sympathy for one simple reason: they took a calculated risk. Failure was a known possibility.

        1. Yves Smith Post author

          Hundreds of thousands? You assume these folks are well above middle income. I sincerely doubt that, but again neither of us has the facts here. And if they are not above middle income, your assumption is way off base.

          I posted this elsewhere, but it bears repeating:

          The bottom 50% of the population income wise has 3% of all wealth. You simply cannot accumulate much if your income is not high. I submit that those of you on the other side of the divide have NO idea how the other half lives. My brother has one of the few remaining semi-decent union jobs in America (in a very cost competitive paper mill by world standards) and a fully paid for house. He does not go to Starbucks, eat out, etc. yet he has very little built up (his wife developed severe allergies after they married and she cannot work). If he lost his job, they’d be desperate in short order. They are careful and are banking the former mortgage payments, but even so, they have an inadequate buffer against adversity, given how hard it is for people over 40 to get jobs. So if people of modest means who try to prepare cannot, I’m not so certain we who are higher earners can readily judge how the other half lives.

          1. rick

            Are you saying that having mortgage payments is acceptable during retirement? If not, then they should have had all the equity of their house from which to draw. I’m assuming an average house value which is close to $200,000.

        2. Yves Smith Post author

          Re the self employed, this sounds as if it was written by someone who does not know many in that boat.

          You assume this was a risk people chose. In many (and I might even hazard to say most) cases it was thrust upon them. Notice how someone in the thread suggests the couple start a business as a way to earn some income.

          I’d find the source, but it was print and doesn’t seem to be online, but I read a study 15 or so years ago that the most common characteristic of self employed people was that they had been fired twice. And back then, when jobs were more stable than now, that would taint you pretty badly.

          A friend of mine (Amar Bhide) is an expert in entrepreneruship and criticizes most of what passes for research, because almost without exception, it focused on VC backed companies, which account for less than 1% of startups. He has done fieldwork to try to fill the gaps, and confirms that a substantial amount of business startups are of necessity (as in the principal needed to create a source of income) not voluntary, or out of a desire to make a lot of money.

          Moreover, in some fields, much of what used to be jobs have now been redefined into self employment. IT workers are often required to set up their own corporations and become “consultants” because their employers don’t want to pay payroll taxes. So they get say six month+ gigs with no idea where their next meal ticket is coming from. And many of those gigs are intermediated by agencies who take 20% off the top.

  44. larry k.

    If I read it correctly, Neither her nor her daughter are currently working. Does it take two people to watch the kids?

    1. Yves Smith Post author

      Husband has been trying to get a job with no success. Doesn’t surprise me at all, if you are over 40 and unemployed, it is brutally difficult to get hired.

  45. larry k.

    And if no work is available, two people can watch quite a few kids(i.e. start a in-house day care center).

    1. Yves Smith Post author

      With all due respect, starting any business requires money (advertising, even just flier layout and printing, preparing a space in the house, getting toys to amuse kiddies). They have no money, nada,

      Plus you do not know if there are competing day care services.

      And if I had kids, I would NEVER send them to a startup day care business with people who had no history or record (ie, never taught kids). And there may be licensing issues too.

  46. frances snoot

    I think the family is at odds with the definition of ‘essential’, as are most Americans. Americans eat out often and call that essential. The food prepared at home is packaged in boxes for convenience: essential. Cell phones, well of course, they’re essential. Cable television? Ditto: essential, after all the cable is cheaper than Blockbuster late fees. Large hummer type transport? Essential: fought a war for that one. Sodas and chips? That’s called lunch.

    The mindset is vast and expansive as a vacuous cow cud-chewing session.

    I am not at all palliating the banksters’ sins. But to send money to a family that is whining now after racking up ‘essential American expenditures” is not wise. It’s time Americans get cognizant of the realities of want versus need.

      1. frances snoot

        Yves:

        Frankly, having lived in this country for the last ten years, I have a healthy mistrust of American individuated ethics. Without an independent audit the letter is suspect.

        Fraud runs straight through this great land: like the veins in a rich cheese.

        1. Yves Smith Post author

          Read the message. They were NOT asking for a handout, they were asking for ADVICE. T Rex volunteered to help. Again, you are projecting motives that were not there.

          1. Markel

            Frankly this thread gives me great hope for a hungry nation, in that we have just identified a readily available and long-overlooked source of meat.

  47. frances snoot

    “You can argue I am too sympathetic, but I have a small business (meaning erratic income) and I have a lot of friends in similar situations. I’ve had friends who’ve maxed out their credit cards trying to keep their business going. One did it three times and was able to save his company (which BTW employed 100 people, so this was not all about him). Another had to declare bankruptcy and yet managed to keep his core team together (a tribute to how much some people believed in him) and has now rebuilt and is doing very well, but he had five years of hell in between (including, BTW, a disastrous brief marriage, which to me confirms how people’s judgement becomes impaired when they are under stress).”

    Americans refused to think independently and prepare earlier for the coming economic collapse. The reasoning was that ‘green shoots’ were appearing: and that spending was good for recovery in our consumer-based economy. The stupidity of the behaviour last spring, especially at the local governance level with bond purchases even after the fall 2008, and the lack of preparation for a sure loss of income and a sure deficit-based devaluation of the currency is a matter for wonder. And now we are to evoke sorrow for those who continued to spend at the mall or Starbucks? Where were the adults?

    Please. It is hard to believe the family in question ate oatmeal out of twenty-pound sacks stored with the potatoes in the cool basement. We Americans assume entitlement to a luxury and a lifestyle which is outrageous. Please send the family condolences and tell them that this is only the wee beginnings of the deprivation. Time for thrift and innovation, not handouts.

    1. Yves Smith Post author

      Again, I see massive projection in what you write. My mother never goes to a mall, never goes to Starbucks, never goes to movies, maybe eats out ONCE a month and not at a fancy restaurant, has NO mortgage, and her living costs ex special items are well over $1 K a month. You and many reader keep assuming the couple had a profligate lifestyle. That is an assumption. It MAY be correct, but a lot of people on this thread ASSUME that, which I find remarkable.

      I suggest you consider another fact set.

      The bottom 50% of the population income wise has 3% of all wealth. You simply cannot accumulate much if your income is not high. I submit that those of you on the other side of the divide have NO idea how the other half lives. My brother has one of the few remaining semi-decent union jobs in America (in a very cost competitive paper mill by world standards) and a fully paid for house. He does not go to Starbucks, eat out, etc. yet he has very little built up (his wife developed severe allergies after they married and she cannot work). If he lost his job, they’d be desperate in short order. They are careful and are banking the former mortgage payments, but even so, they have an inadequate buffer against adversity, given how hard it is for people over 40 to get jobs. So if people of modest means who try to prepare cannot, I’m not so certain we who are higher earners can readily judge how the other half lives.

      1. rick

        “My brother has one of the few remaining semi-decent union jobs in America (in a very cost competitive paper mill by world standards) and a fully paid for house.”

        “They are careful and are banking the former mortgage payments.”

        “If he lost his job, they’d be desperate in short order.”

        They’d presumably have hundreds of thousands of equity and savings. After selling the house, your brother would have well over 10 years to find a job.

        1. Yves Smith Post author

          You have just proven my point. They bought their house for $49K and in the town they live in (Upper Peninsula of Michigan) would have a great deal of difficulty selling it at all, and would probably only get that $49K back net of brokerage and fix-up costs.

          And they still have to pay for housing after they sold. With that little equity in the house, selling does not improve their position.

          Ditto re their savings. I don’t know the particulars, but trust me, I am highly confident it is less than $200K, and a chunk of that is an an IRA, so less than that after tax. ~ $100K does not take you very far, especially when you lose your insurance and you have a wife that is not healthy.

      2. holomorphic

        They don’t have basements in Florida, Frances and it’s not exactly cool either.
        You should go there once.

      3. charles

        Yves,

        When mentioning the fact that 50% of the people only have 3% of the assets, you fail to recognize that a lot of this wealth that they don’t have comes actually as a liability that is burdening them :
        - mortgage payments that go into MBS possessed by the “wealthy” class,
        - credit card payment that go into ABS possessed by the “wealthy” class,
        - taxes that go into Treasury and Muni bonds.
        - oligopoly high prices that goes to stakeholders of value destroying corporate entities (for instance, health insurance)

        When the real interest rate paid by these people has been excessive (as mortgages and credit cards have been for many years), or when the taxes that they paid went for uses they had nothing to do with (like bankrolling wall street or Halliburton), they have a legitimate case to try to avoid paying these liabilities.

        The first thing people need to do to sustain themselves is to stop sustaining others. This is why cleaning their personal balance sheet from liabilities is the essential step to their financial recovery.

        Giving them a loaf of bread to a starving chained slave may seem a good act of charity from you, but releasing him form his/her chains is the right thing to do.

        1. Yves Smith Post author

          Charles,

          You are correct re their liabilities being assets for the other classes! In fact, that is an even bigger deal than most realize, and a bigger factor in the wipeout too.

          I am also trying to find them a debt counselor (pro bono, the paid types are often scams). Agreed that assistance without getting them some advice is very suboptimal. If you have any leads here, that would be very helpful

  48. frances snoot

    “Please, what do we do?”

    Stop whining.

    This is the smallest wee bit of suffering coming down the pipes for Americans in the next five years. Whining is unbecoming.

    Get ready for stage two: hell without a viable currency.

  49. frances snoot

    Americans have been waving flags while the bankers stole from them through the American channels of advertising and political rallies. It was easy. Now the baby hasn’t got candy, and she’s starting to bawl.

    Instead of worrying about convicting our war criminals, we worry about credit card charges. It’s depraved and sickening.

  50. Gordon

    lots of people spent like drunken sailors over the last 10 years. well guess what, the bill is here and it’s time to pay up!!!

  51. michael

    Yves,
    you write “when I was young, savings of six months of living expenses was considered to be a good cushion against risk”.
    I still believe that to be true, but what has changed is the ability to cut ones expenses quickly.
    If you have six months of savings, then after being unemployed for 2 months and pessimistically looking you are not sure you will get a job within the next 2 months, you HAVE to immediately cut expenses to the bone. Cancel cable, fixed line and cell phone plans and go to pre paid cell and the cheapest internet access available. Sell your big car and use public transport or get a small cheap car or just a scooter. Cut everything unnecessary. Move into a cheap apartment while you still have the money to cover moving expenses.
    Nowadays how many people are totally locked up in mortgage payments, student and auto loans, minimum payments on revolving credit card debt, 2 year cell phone plans and pay tv plans?
    So “the inertia around a decision that turns out much worse than one could have expected” is often due to circumstances that people got themselves into long time ago. Because they never asked themselves:
    “What if?”

    1. oldtimer

      you write “when I was young, savings of six months of living expenses was considered to be a good cushion against risk”.

      BTW, that advice was given only to young people. It was a guide for getting on your feet financially when you first left school.

      Somewhere along the way, people forgot that they were supposed to have more in the bank as they got older.

  52. Anonymous

    Wow. Hard luck stories really do bring out the judgmental and pretentious pricks.

    The deserving poor and the undeserving poor is a false dichotomy. Anytime an individual or family gets into financial trouble you can always find something they did wrong.

    - Should have been more alert to the fact that they might lose their job and saved 36 months of living expenses!
    - Started a business in 2007? Didn’t they realize the party was over?
    - How could they eat out at TGI Fridays TWICE a week?
    - If they would just eat oatmeal and white rice in a studio apartment, they could be out of debt in only three years. They’re just weak.
    - Lost a leg from type 2 diabetes? Should have eaten fewer candy bars and drunk less soda.

    I don’t know what these people did wrong, and neither do any of you. I am, however, sure it was something. I also don’t care. Debt is killing the economy, and the sooner people stop paying it and it gets written off the better.

    Even better would be a jubilee.

  53. Sacrifice

    Bleeding heart bull…

    Let’s start with basic economic education.

    Rule #1: Obey all rules.
    Rule #2: Don’t ever carry a balance on your credit card.
    Rule #3: Don’t spend money you do not have.

  54. Kevin Smith

    My wife remarked to me the other day that:
    “There is a lot of injustice in the world, and we’ve benefited from some of it.”

    Kind of put our affluence, assets, relatively high security and stability into perspective.

    We’ve worked hard, been thrifty and prudent, and dodged a few bullets over the past 25 years.

    The harder we worked, the luckier we got.

    Our lives have played out pretty much the same as our parents.

    But we are not in a position to regard those who fall by the wayside as weak and stupid. There have been many occasions along the way where things could have turned out very differently for us, notwithstanding our thrift, prudence and hard work.

  55. Dave Raithel

    I first looked through this early this morning, and thought to myself: Starfish moral theory (Bush the First, his grandkid on the beach, saving the single Starfish, matters to it, etc.) but I bit my tongue, as other people dutifully raised most the other relevant points, and who the fuck can explain charity and who am I to judge?

    But after a day of obligations, I was bothered enough to check in again, and I found someone referencing Megan McArdle. And I thought: Once upon a time, this woman wrote a complaint about her toilet backing up. When reading it at the time (and God as my witness, I’ve read about three of her banal odes, and once saw a YouTube clip of her gibbering nonsense to some inept counter-point) I thought: Well, you’re so full of shit, I am not surprised ….

    Starfish morality or shit slingers: These are our choices. What does Hotelling’s Law have to offer about this?

    1. Yves Smith Post author

      Altruism lights up the pleasure centers of the brain. Probably not as much as ice cream, but effects probably last a little longer.

  56. craazyman

    This couple is hardly irresponsible and they don’t merit such defamation.

    They merely have a duration mismatch between liabilities and future income.

    If they declare themselves a bank holding company and borrow at 0% from the Fed, they can bide their time until the job market turns and they earn their way back to prosperity.

    This is nothing but a confidence issue.

    They should look for venture capital or even float in IPO, actually.

  57. Vinny G.

    A few comments:

    First, I suspect many of the harsh “anonymous” comments here were made by bank executives and collection agency owners. Actually, one comment in particular resembles Ken Lewis’ writing style (it’s the anonymous one with lots and lots of spelling and grammar errors).

    Second, all these comments urging this family to just pick itself up by the bootstraps are yet another reflection of the stupidity of the average American (I am an American too, just that I grew up in Europe, and so I can think for myself, at least occasionally). That mentality of every man and woman for himself or herself may have worked in the 18th and 19th centuries, but it is time we, as a nation, rise above that and try the concept of “community” for a change. The idea of associating individualism with being American is already outdated. Remember: united we stand, divided we fall. What these banksters want is precisely to divide the people, to turn one against the other, because that way they can enslave us. A small island is easy to conquer, but a continent is impenetrable. I suggest we start acting like a continent. The banks, insurance companies, retail chains, fast food joints, etc, are already united against us, the people.

    Third, those here that suggested this family just walk away from their debts are beginning to see the light. It is the Robin Hood syndrome. It always surfaces when the rich are screwing too hard on the poor (formerly known as “middle class”).

    So hopefully Robin Hood will teach this nation the concept of “community” at last.

    Vinny G.

  58. Ina Pickle

    The readers who are saying such nasty, stupid things deserve to find out what life is like when things outside your control destroy your best-laid plans. Are you unaware of what has become of the working poor in this country? By the way, the “working poor” is what we used to call the “middle class.”

    It is easier for a camel to get through the eye of a needle, folks. Have a care for your soul. Is it so hard for you to believe that bad things happen to good people? I think I’m slowly losing faith in this country.

  59. Vinny G.

    You wrote: “I think I’m slowly losing faith in this country.”

    Great! Better late than never.

    It obviously looks like the end (of the capitalist world as we know it) is nigh at hand. Behold, it is descending upon us already, like a thief in the night!

    But YOU need to be prepared. So, once again, here’s Dr. Vinny’s 5-easy step prescription for your continued health and well being:

    1.) A residence outside of the US and Western Europe

    2.) 2+ passports

    3.) Enough physical gold and silver to survive for at least 20 years

    4.) A high quality blue-ray recorder, large-screen digital TV, and digital cable service, so you can record in high definition the collapse of the evil western world as we know it. You really do want to capture every gory detail!

    5.) A stockpile of high quality coffee and a decent cappuccino machine, so you can maximize your viewing pleasure of the recordings made in point (4) above.

    Now, if you have not already covered items (1) through (3) above, may I politely ask, “What is wrong with you?”

    Vinny G.

  60. Gordon

    Evenyone’s perspective is colered by their experiences and background, and I’d like to offer a different one. I lost my job, the first one out of graduate school, in 2003, 18 months after graduation. That time was an absolute catastrophe for scientists, when venture capital suddenly dried up and the Bush funding cuts to science struck. It was almost imposibble to find a job in the hard sciences. Man, I could have used a bailout then.

    Anyway, I had to move back in with my parents and didn’t get anything resembling a bailout, instead I was fed the party line, that anyone who wants to work can find a job, &c.

    And here is this couple, who bought their house in the 70s, perhaps in the 80s, when one could count on some job stability and not only do they get to stay a year in the house if they stop paying the mortgage, they have a bloody homestead exception. I rent, the prudent thing to do when you are not sure when your employer might move, and if I stopped paying rent I’d be evicted the following month.

    We hear nothing about those peoples’ savings either. Why didn’t they manage when I can, where did the money go?

    Theirs is the generation of the tax cuts, they voted for them, they wanted everything but didn’t want to pay. Cut them off, I say, if I had gotten my bailout six years ago I’d probably argue different, but I didn’t get one when I needed it.

  61. Scrooge

    “More notorious even than his miserly ways are Scrooge’s cynical words. “Are there no prisons,” he jibes when solicited for charity, “and the Union workhouses?” Terrible, right? Lacking in compassion? Not necessarily. As Scrooge observes, he supports those institutions with his taxes. Already forced to help those who can’t or won’t help themselves, it is not unreasonable for him to balk at volunteering additional funds for their extra comfort. Scrooge is skeptical that many would prefer death to the workhouse, and he is unmoved by talk of the workhouse’s cheerlessness. He is right to be unmoved, for society’s provisions for the poor must be, well, Dickensian. The more pleasant the alternatives to gainful employment, the greater will be the number of people who seek these alternatives, and the fewer there will be who engage in productive labor. If society expects anyone to work, work had better be a lot more attractive than idleness.” – Michael Levin – In Defense of Scrooge

    The Ant and the Grasshopper – IN a field one summer’s day a Grasshopper was hopping about, chirping and singing to its heart’s content. An Ant passed by, bearing along with great toil an ear of corn he was taking to the nest. 1 “Why not come and chat with me,” said the Grasshopper, “instead of toiling and moiling in that way?” 2 “I am helping to lay up food for the winter,” said the Ant, “and recommend you to do the same.” 3 “Why bother about winter?” said the Grasshopper; “we have got plenty of food at present.” But the Ant went on its way and continued its toil. When the winter came the Grasshopper had no food, and found itself dying of hunger, while it saw the ants distributing every day corn and grain from the stores they had collected in the summer. Then the Grasshopper knew: “IT IS BEST TO PREPARE FOR THE DAYS OF NECESSITY.” – Æsop. (Sixth century B.C.) Fables. The Harvard Classics. 1909–14.

    1. Vinny G.

      Okay Scrooge, so you’re saying that it matters not that in this society the deck of cards is fixed, the rules are blatantly biased against the working classes, and a massive plutocratic and diabolical alliance of corporate-media-government entities is working and plotting day and night against the welfare of the individuals and their families. Are you saying that, at the end of the day, despite what I described in the first sentence here, the individual is still responsible to stack up on grain just because the wisdom of that 6th century BC fable for children says so?

      And, Scrooge, exactly what type grain would you suggest that this family stores up for the winter? Would you recommend savings in a steadily devaluing fiat currency like the dollar? How about stocks? Should these people have invested into stocks? You know, things like mutual funds that lost 60% of value in the past 2 years. Or, how about this favorite investment recommendation made by the above diabolical plutocratic alliance: real estate. Do you think they should have invested in real estate? How about real estate in Florida?

      May I politely suggest you read more recent current affairs works, and leave the 6th century BC wisdom into the 6th century BC.

      Vinny G.

  62. on the arm

    There’s almost enough desperation out there to spur measures that will actually work. By work I mean catastrophically take out large chunks of the FIRE sector. People cannot wait for the antitrust machine to warm up before breaking up the predatory banks. There are much quicker and simpler ways. People will spontaneously find them, all at once.

  63. Mary Margaret Flynn

    My mom born 1898, dad 1900 me 1942. These two “average ordinary americans”–not college educted–emphasized two things; education and the only debt you should have is the house. Dad loosened up a bit when I got goverment loans for college. I followed those two principles;but I’m planning I may end up in a nursing home with with few assets if I live long enough. My mother was indigent when she died at age 83 and only medicare and social security provided the safety net. I’ve never married, I’m fortunately still working, I hate the fact I can’t cancel some of my contracts–eg the cell phone used only for emergencies on the road, high speed internet because of how it is sold. Now you have to buy more than you want. I compare it to how people used to rent furniture—you pay huge ammt. I don’t have cable T.V. etc etc. But I do pay out for long term health insurance–hopefully we will get “the public option” and I won’t need it. Insurance for the house takes up a lot of my moneytoo–morgage doesn’t go up, it gets paid off but insurance sure rises. Most often packed and still pack my lunches. Paid off my college debts within two years of graduation. Haven’t traveled overseas, have simple pleasures—hiking in national parks, forests, state parks and Kindle. I plan my chairtable giving and give much more locally now since the recession–Ths USA has become a bananna republic with the income inequality and completly bought off congress. I really tremble for the generations since mine that thought their credit was income. I remember being so nervous owing money I worked double to get out of debt. So I see a coming depression and living with less. Don’t like it tho’.

    1. Vinny G.

      Mary,

      Your father was a wise man. But then again, those were very different times.

      You say you paid off your student loans in 2 years after graduation. Among other things I also teach doctor and graduate students. They graduate with student loans ranging between $150,000 and $600,000. Some of my former students who graduated a year or 2 ago have still not found a job, and they are smart, well trained, and capable people. I bet that they will have to default on their student loans if they haven’t already. Actually, I expect student loans to be the next train wreck in this wacky economy.

      Also, remember that while you grew up with a sound-minded father that told you that debt is bad, people today have been indoctrinated into things like “we have to spend our way out of this recession.”

      No, the entire responsibility for what is happening now in this country, including what this family described in this story is going through, lies with the policies of this government and the systematic manipulation and brainwashing of this nation by a diabolical alliance of corporate-media-government entities. Let’s place the blame where it belongs. Let’s just stop whipping on the poor individuals already, shall we.

      BTW, what I wrote here is not against you, rather against some of the ludicrous comments made here by others.

      Vinny G.

  64. Mary Margaret Flynn

    I read Paul Krugman, Baseline Scenerio, Naked Capitalism, Naomi Klein–love the Physicians for National health Plan, stuff elevelopes in elections, always vote—And I feel very fortunate actually. And since I am thrid generation Irish and rode on the coat-tails of feminism–not much hate directed at me as it has been to people who are not white men. Just loved the Civil Rights movement–a hopeful time and so I keep Hope even in these desperate times now.

  65. craazyman

    Advice to the Bankrupt, Indebted, Desperate, Rage-Filled and Forlon

    One generation passeth away and the next generation cometh . . . and the sun also rises . . . raising the sleepless night like a blinding dream . . . the whole din of history loud like thunder in your contemplations and you and you and you who thought you had escaped the whirlpool are meat inside the belly of the beast . . . Jerusalem, how many times the prophets called for thee and you were lost in sin and nothing will save you now for wasting the dawn. No children, the Lord is no respecter of persons. Save yourselves if you can, walk softly in grace and in the tender illuminations of charity and humility, for your brother is not your keeper. (Unless you are a bank holding company or have a lot of cash or liquid investments, or even better, are hot and know how to flirt and do a lap dance).

    Eat well, lose weight, do yoga and go fly fishing on mountain creeks–use bait if you have to for God’s sakes–, but best of all . . . find the Spirit that hides in every path. The Lord meant it all like locks on doors, but The secret mercy of the Lord is patient and the great metamorphosis awaits, like a loving angel, to open your eyes to the world beyond the skies.

  66. BB

    These are the people who bid up the price of everything using credit. Now they’re in trouble and I’m supposed to feel bad? No, sorry. I will buy your stuff, if I want it, at fire sale prices to help you out. That’s about it. You see, like you, I wanted a nice SUV for my family, and nice clothes, and a big house. I didn’t buy all those things, even though my income would probably support it. I did not lever up, so for almost a decade, I felt left behind–like I was the asshole. Now it’s their turn. The tide went out, we can now see who was swimming naked.

  67. JJF Sr Col Ret

    The comments are a flyin’ suggestions opinion abound just know all of you know who becames the boss don’t you?? Yep, the ass hole!!

    The much bigger picture ladies and gentlemen is more than anyone can handle at this point in time.

    Let me ask all of you a question; You are at ajam,med packed football game, 80000 people plus strong…an anouncer comes on as a huge American Flag is lowered in the mid of the stadium…and the annoucer asks…” how many of you would give your life for this flag???

    How about this…Can you sing God Bless America without humming ???

    When was the last time any of you sat at the dinner table as a family???

    When was the last time any of you said grace before dinner???

    What happened to our family values???
    What happened to our morales???
    What happened to “in god we trust???”

    Do you think that all this bull shit that we are living through today could have been avoided?? Probably not.

    Everyone thought that there would never be another “Nam”
    well they didn’t know about Iran and afgahnastan the great thinkers of our time. Everyone has a opinion don’t they.
    Yep, opinion

    I am sick and tired of helping other countries when our own country needs the most help. I am tried of Iran this ands afghan this and china that. Lets face it boys and girls if you don’t like playing in this fucked up sand box called life then move aside. Who do you think put China on the map as the greatest manufacturing power in the world?? A dah,,,Yep you geussed it Our very own Uncle.Just like we did for Japan and Europe. Now even Vietnam, Cambodia, Laos, Yes you are right again… our very own Uncle??

    Now is the time to sit back and put this country back to work. No free hand outs… no tarp, barps or another carp. Our inferstrature is weak, our borders wide open ,, the home of the free and the brave … as we worry whether our not our currency will be wortjh anything tomorrow. Who is going to help the USA… Vietnam, Europe,Japan, The only country with any respect for us as a country is_______?? You figure it out. We have never invaded this country but always stood by her side in the time of her need? You guessed it everyone has an opinion juts like they have an ass hole…

    What has happened to our educational system? Are they truly teachers or are they just a replacement baby sitter??

    What happened to trade schools?? Plumbers, HAVC, Electrians brick layers, builders? Auto mechanics? When was the last time you pulled into a gas station and had someone fill your tank?? Andd forget about the ones in Jersy OK There are doing it because of too many drive offs.

    There is so much work than needs to be statrted, repairs to be done, What happened on September 2001?

    We are at war with the very same poeple that we put out of service many years ago for what ever reason.. And we just sat back and got fat jack. We became the managment consultants around the world using the latest techinics, news informational systems, Just in Time, New venues for drilling and exploration, automation at its best? And what did we build as a country for our young fat uneducated adults? They serve us at the D Land, Burger Kings, and the like. Instead of learning a trade, having goals in life for life …
    Ladies and gentlemen, we need to bring back the Family… and what it stood for in the past what it stands for today and what it will stand for in the future.. You see where we are today,any of you like it? If you think its going to get better real soon think again. Think people think. Look around you think..

    This great nation of ours needs our help as one people under god indivisable liberty and freedon for all. If you are not willing to help just stand aside while the others do your job. These people that are doing youir job did all the dirty work in WWI, WWII, Korea, Nam, Iran, Iraq, Afgah and there will be more…but first lets take care of ourselves first…then and only then should we even consider assisting others. Respectfully JJF Sr. Col Ret.

  68. Jim in MN

    We’ll help, Yves. Don’t worry about the bittermongers. They have a lot of ‘basement alone time’ for blog commenting.

    Silly primitivist Nietzscheans. It reminds of a comment in grad school (context unimportant): “But–we live in a SOCIETY!”

  69. Lizbeth

    I notice this story asking for ‘advice’ and not a hand-out managed to hit all the emotional triggers: military service, lay-off, always paid their bills before, adult son-in-law working valiantly at a low-paying job, grandchildren, no medical insurance.

    And as another poster pointed out – why are the 2 women in this extended household not looking for work to help their ‘menfolk’ out?

    I am aware that hard times happen to honest people. However the calculated pull for pity in this letter reads like a professional beggar.

    Additionally, the letter implies it’s these older parents responsibility to help support the daughter’s family. It isn’t.

  70. Yves Smith Post author

    One BIG correction to my comments above: I reread the forwarded message, and it does say they are in Georgia (no street address). That puts a different coloration on things. Unlike Florida, Georgia has one of the fastest foreclosure proceedings in the country, and housing prices were taking a hit early as a result. I am not up on that market, banks may be slowing the process of their own volition, but banks can foreclose in as little as two months. I have also put out feelers for a pro bono debt counselor, and if readers have any leads, please pass them on.

    1. DownSouth

      Yves,

      If this family is from Georgia, then my hunch that they might need moral and spiritual guidance is even more pronounced.

      While religion is not terribly important to me, my belief being that a highly moral stance is totally consistent with rationality, Georgia is nevertheless a place where religion is extremely important.

      The moral environment in which this family lives–right in the heart of the Bible belt—is dominated by conservative Christianity. I think it is worthwhile to be apprised of this belief system, not only to understand its potential impact upon this family, but also for the reason set out by Kevin Phillips in American Theocracy. “We can begin,” he writes, “by describing the role of religion in American politics and war with two words: widely underestimated (emphasis his).”

      As Phillips goes on to point out, there are somewhere between 50 and 100 million evangelical Christians in the US, making up perhaps 30 to 40 percent of the electorate. “By a careful synthesis of polling results,” he says, “we can affirm that ‘about one in four Americans (or 25 percent) are now affiliated with a church from this network of conservative Protestant churches’.” Almost to a man (or woman) they identify with the Republican Party and constitute way more than 50 percent, perhaps even as much as 80 or 90 percent, of the Republican Party base. Conservative Christians are most populous in the Deep South, Georgia being one of the bastions of evangelical Christianity.

      That bad things can happen to good people is not part of the theology of modern conservative Christianity, which derives most of its tenets from Calvinism. “There is no question,” declared Calvin, “that riches should be the portion of the godly rather than the wicked, for godliness hath the promise in this life as well as the life to come.”

      It should be pointed out that Calvinism was not the defining ethic of early American Puritanism. It was not until later in the colonial period that it would triumph over Christian humanism, which searched through Scripture to document the Jesus who emphasized caring for the poor and hungry. “Prosperity was not,” Reinhold Niebuhr explains, “according to the (17th century) Puritan creed, a primary proof or fruit of virtue.” It is also worth pointing out that, even though Calvinism now forms an integral part of the American “cult of prosperity,” it nevertheless stands in stark contrast to Jeffersonianism and the spirit of the American Revolution. The Jeffersonians considered prosperity to be the basis of virtue. “They believed that if each citizen found contentment in a justly and richly rewarded toil he would not be disposed to take advantage of his neighbor,” Niebuhr explains. This is the exact opposite of Calvin’s conviction that regarded virtue as the basis of prosperity.

      One of the abiding traits of Calvinism is hypocrisy. Its adherents anoint themselves as God’s regents on earth, and since bad things do invariably befall good people, and good people do on occasion do bad things, it is they alone who decide who is to receive Jesus Christ’s grace and forgiveness or Jehovah’s hellfire and damnation. In this thread we saw this trait manifested in the comments of Gordon. “I had to move back in with my parents and didn’t get anything resembling a bailout,” he tells us. This admission comes right on the heels of this admonishment: “sorry, my sympathy meter is at zero for deadbeats.” Of course the irony that inheres in these two statements is totally lost on Gordon–the fact that his parents’ intervention was a “bailout,” and that not everyone has that family safety net to fall back on when life’s road becomes rocky.

      Calvinism has of course mellowed over the centuries, but it might be instructive to turn the clock back 450 years and take a peek at the religious tradition that modern-day conservative Christians operate within:

      John Calvin’s Geneva…represented the ultimate in repression. The city-state of Geneve, which became known as the Protestant Rome, was also, in effect, a police state, ruled by a Consistory of five pastors and twelve lay elders, with the bloodless figure of the dictator looming over all. In physique, temperament, and conviction, Calvin (1509-1564) was the inverted image of the freewheeling, permissive, high-living popes whose excesses had led to Lutheran apostasy. Frail, thin, short, and lightly bearded, with ruthless, penetrating eyes, he was humorless and short-tempered. The slightest criticism enraged him. Those who questioned his theology he called “pigs,” “asses,” “riffraff,” “dogs,” “idiots,” and “stinking beasts.” One morning he found a poster on his pulpit accusing him of “Gross Hypocrisy.” A suspect was arrested. No evidence was produced, but he was tortured day and night for a month till he confessed. Screaming with pain, he was lashed to a wooden stake. Penultimately, his feet were nailed to the wood: ultimately he was decapitated.

      Calvin’s justification for this excessive rebuke reveals the mindset of all Reformation inquisitors, Protestant and Catholic alike: “When the papists are so harsh and violent in defense of their superstitions,” he asked, “are not Christ’s magistrates shamed to show themselves less ardent in defense of the sure truth?” Clearly, he would have condemned the Jesus of Matthew (5:39, 44) as a heretic. In Calvin’s Orwellian theocracy, established in 1542, acts of God—earthquakes, lightning, flooding—were acts of Satan…

      Of course, it proved impossible to legislate virtue. Some of Calvin’s devoted followers insisted it was possible, that the Consistory’s moral straitjacket worked; Bernardino Ochino, an ex-Catholic who had found asylum in the city-state, wrote that “Unchastity, adultery, and impure living, such as prevail in many places I have lived, are here unknown.” In fact they were widely known there; the proof lies in the council’s records.
      –William Manchester, A World Lit Only by Fire

      1. SidFinster

        I suppose by Calvinist standards, the native sheiks and sharifs of the Arabian Peninsula must be the Godliest people on earth.

        Not only are they rich beyond the the dreams of avarice, they do not need to lift a finger for their wealth. It literally just comes up out of the ground.

  71. AyeCarumba

    Although I wholeheartedly agree with the premise, the example is awful. Someone who created extra expenses from themselves deserves absolutely no sympathy. No one made these people get a mortgage or have CHILDREN. Who deserves help and sympathy? The single person or couple who takes public transportation, lives in a tiny studio or one bedroom apartment, has no ridiculous habits, and does not have any children. These people deserve massive help – free higher education, health care, unlimited unemployment, the works.

    Not those who make their own steads worse by adding huge optional expenses.

    1. michael

      You should move to Germany, they would love you there.
      Actually the biggest thing these people did for society was having children, raising them in not too bad circumstances AND teaching them some values and integrity (hopefully).

    2. Ridge Runner

      Michael is correct. The inter-generational blindness of this comment is astounding. Those who are able to have children and avoid doing so are depending on the kindness of strangers and the promises of short-sighted politicians who vote in future “entitlement benefits” without providing the revenues to fund said benefits. The childless-by-choice “deserve” nothing, but may get something anyway if their neighbors’ childrens’ income can be taxed to provide them.

      Eventually, if enough of their neighbors choose the same course, their culture and their neighbors’ will be replaced by a child-valuing culture. This is apparently happening in Europe, with the migration and fecundity of North African muslims gradually ‘filling in the gaps’ left by child-avoiding Europeans.

  72. T. Rex Bean

    Wow. had no idea my impulsive offer would generate so much comment. And I had no idea that it would leave Ms. Smith to defend both the offer and the prospective beneficiaries from such a flurry of criticism. Some, of course, is from sources who don’t deserve a response (I mean you, Gordon, among others). A quick review:
    • Matt, the furloughed worker: You know why I made that offer.
    • Skippy: Why don’t you and Gordon take a hike?
    • Kevin Smith: Your wife is the first person I know of to acknowledge benefiting from injustice. I once got into an almost-fight with a co-worker in Boston (this was years ago) when I happened to mention that we both profited from racism — meaning that we owed our jobs, in part, to our boss’s (unspoken) refusal to hire blacks. I admire her perspicacity.
    • DownSouth: Thank you for the excellent quotations; I’m going to read Neibuhr because of you.
    • BDBlue: What you said.
    • Riggsvede: Boy, it sure seems that way, doesn’t it?
    • Yankee Frank: Maybe. Someday.
    • Yves: She’s absolutely right: It’s clear that many of those commenting have NO IDEA how the other half lives.
    • Anonymous: I liked this: “I don’t know what those people did wrong and neither do any of you. I am, however, sure it was something. I also don’t care.” Exactly. It’s easy to make choices, that in retrospect, weren’t the best. Does that mean you should be cut off from all aid from your fellows?
    • Ms. Flynn: What a lovely person you are. Thank you for contributing, it makes me feel good to know you exist.
    There is one point, made most forcefully by IF and Charles, that stung me. IF says giving money to the destitute “only teaches them to beg or play the mercy lottery.” And Charles says giving to individuals is a way for “the upper class to absolve itself of its sins.”
    Well, IF, I suppose you’re right. But if you’re destitute you have no choice but to beg. And playing the mercy lottery? Not much mercy out there, as we can see from the postings here. Yes, my donation won’t make much of a difference. I’m no fool and (Charles) I’m not rich. Most of you would laugh if you knew my salary. I don’t hand out money to every street person I see. But, every once in a while one touches my heart and I give. It’s not rational. It’s no excuse for not working for structural change. It’s entirely emotional. Yes the pleasure centers of my brain do light up a bit from the altruistic gesture — but I also feel gloomy at the world’s cruelty and guilt for not doing more to alleviate it.
    That’s why, after I send this check to whoever this family is, wherever they are, I’m going to have a nice bowl of ice cream. Cherry Garcia, I think. It’s been a long time.

    T. Rex Bean

    1. Skippy

      You would be the person to give a 3rd world person 5 bucks in the open market for a chicken that cost normally 50 cents and walk away with a good/warm feeling. Although, you do not see the problems that your good deed cost them after you leave. The eyes of all others upon them and the consequence of that, but you’ll never be there to watch the damage you cast upon them.

      Do you really think you can fix their problems with money or good will, because it seem thats how they got there in the first place. Regardless of the condition of the world and its masters one must adapt to a changing environment, was not writing was on the wall ages ago and yet they dug a deeper hole for them selves. Politics, economics, religion, psychology etc aside in this world one must survive and not just follow fashion, yes some lessons are hard, ugly, un-fare, but in the end it is up to the individual to survive and take responsibility for them selves…eh Vinny.

      Small local groups which spring forth to address local problems fair better that the long arm of your breed, they must contend with the reality’s at hand locally (resources, taboo’s, local history’s, who is searching and who is in need,) enhancing the community strength in the process.

      If you need so desperately to help some one out do it locally and not half way across the country, try volunteering with some of your good time and not with your wallet. You can start with a bucket of water, soap and a rag, now go wash the poor, mentally ill, drug users, hapless feet whilst making promises of their impending good fortunes, and be there when it doesn’t work out the way you said it would and cop that, own the thing and not by remote distance remove your self from the responsibility’s you incur with your actions.

      Skippy…you are a fools-fool blinded by your desire to address the conflict of emotion with-in your mind…do your due diligence before spraying money around fool. You’ll end up creating more harm than you think or even death, and Ive have lots of experience with your type and fixing their mistakes, get stuffed do goody, for you know not what you create.

      OOh but I was only trying to help…well you can kiss my marsupial back side, you Victorian Arm Chair Thinker, your type creates more problems than you fix and then run away.

      1. Yves Smith Post author

        No one here is talking about giving these folks a large amount of money, and per my update, I’ve asked about getting leads for debt counseling, and one person has come up with what look to be some very good pro bono leads.

        The key item is the husband has found a job. The question is whether they can afford their home and basic living expenses on their new income, and whether a combination of negotiation with/staring down the banks can help them resolve their credit card debt.

        There are unanswered questions here, but with an income, this is not a couple necessarily on a hopeless slide, but they were not on solid footing before, and ten months of unemployment pushed them into a hole.

        And for those who are asserting SUVs and malls and whatnot, I don’t have a street address, but one writer who knows the city they are in says is it boonies Georgia. This is not an area with fancy lifestyles. And if rural Georgia is anything like rural Alabama, it has been depressed for some time.

        1. Skippy

          Yves said…I’ve asked about getting leads for debt counseling, and one person has come up with what look to be some very good pro bono leads.

          Now thats the first good news related to this post yet. Personally I hope things work out, with the caveat, that they modify their lives to better contend with such problems in the future…no back sliding.

          As far as the mud slinging about spending habits goes, well ain’t that just a pretty slice of Americana now isn’t it.

          And as I have stated here before I have lived in both worlds rich and poor it divides my family in two, right down the middle, so I speak from experience not just projecting.

          Skippy…in the future please use a sock on the door handle next time vinny and you want to share k……RUN AWAY SKIPPY!!!

  73. mp

    Recommended course of action for Family X:

    1. Contact the card company and tell them you’re declaring bankruptcy. It’s unlikely, but if the card company is convinced you’re serious they may offer an alternative payment plan.

    2. Head for the nearest food pantry and stock up.

    3. Pay a visit to the local assistance people. The children, based on the SIL’s alleged pay, may be eligible for Medicaid.

    4. If this is rural Georgia, selling the house in a timely manner and preserving the alleged equity is unlikely, so find a lawyer and prepare to file for bankruptcy.

    5. Sell anything of value that isn’t nailed down, including engagement rings, wedding rings, televisions, extra furniture, everything. Keep only enough transportation to get everyone who is working to and from work. If you have them, keep the tools necessary to keep the vehicle(s) running. You may be able to raise enough money to get the bankruptcy started.

    6. Winter is approaching and it gets cold, even in Georgia. If you still have credit with your propane or heating oil supplier (I’m assuming you’re rural), have them top off your tank and set the thermostat back to 60 degrees. You can worry about paying “them” later.

    7. The USAF veteran should already have medical care. Her husband may or may not. Then again, he may be a veteran. If so, he should sign up with the VA for medical assistance. Just in case.

    8. Although we don’t know the family situation, it may be possible for the one of the women to go out and find work. The other can stay at home with the children. It’s important that the children have some semblance of stability at a time like this one.

    9. If you still have a telephone, have it disconnected. It’s not a necessary expense and only makes it easier for bill collectors to contact you.

    Finally, if you have to ask why I’m saying these things, it’s because you’ve never been backed into a corner before. It’s obvious these people aren’t thinking clearly under the circumstances, so they’ll need a little prodding.

    And, lest we take all of the moralizers on this board seriously, remember one thing:

    Walt Disney declared bankruptcy–at least once that we know of–before he finally got it right.

    1. SidFinster

      Another piece of advice.

      Cash is much harder for a creditor to locate and seize than is money in a bank account.

  74. mp

    I forgot to add:

    10. If you’re buying anything on credit, be it furniture, televisions, etc., do a voluntary repo.

  75. mp

    And one final thought for all of the moralizers here:

    If you have any kind of significant debt in this environment, the probability is high that you’re going to end up the same way unless you’ve got “fuck you” money.

    And, somehow, I don’t think anybody here has that kind of money.

  76. Robert Dudek

    This situation is a reflection of the way US society has been set up – to create the largest disparity between rich and poor in the developed world.

    Other developed nations, with less income inequality, will still suffer during these economic hard times, but the people at the bottom of the economic pile will have many more options to come out the other side in decent shape than the poor and lower-middle class in the US.

  77. Daniel

    I am not American so perhaps I am not getting it: You are retired from the USAF, you have grown-up children and are obviously a grandma so I conclude you have reached a certain age. Are you seriously saying that after decades of living on a double income, you have absolutely no savings and you are unable to buy food after only a few months since your husband lost his job??? Sorry, not trying to be offensive here but, err, didn’t it occur to you 20 years ago that you may, one day, go through a rough patch and need some savings to get through it? I personally have savings that can easily last me 2-3 years and that’s considered only average in my circle of friends. Just wondering….

  78. Omerine

    I work in middle management consumer lending for a credit union in California. This situation is all too common. We are working with many of our members who are drowning in debt and have been out of work for an extended period. There are many reasons for the debt, but we also supply some helpful contacts, which, I believe, is the real need here.

    If this family is a member of a credit union, they can probably obtain some counseling assistance. Many credit unions offer a program to their members free of charge called Balance. This is a non-profit organization that educates, provides debt counseling, will help you set up a budget plan, will negotiate payments and interest rates with your creditors (they have contacts with many of the larger banks). I have personally seen some good outcomes from their services. If this family is now earning some income, they may also qualify for a debt consolidation loan (although I personally do not recommend these as in most cases as the recidivism rate is high). Another counseling source I might recommend is Incharge Debt Solutions, a second non-profit that is often able to negotiate rates/payments. I DO NOT recommend hiring an attorney to threaten your creditors in an attempt to negotiate lower rates as these other companies can do it and will do it for free. Bankruptcy is sometimes the best recommendation, depending upon the level of indebtedness but if there is any way a budget can be put together to pay the debt, it is preferred. When lending, I do tend to review loans from the perspective of the member’s willingness to pull their financial situation together following a period of indebtedness like this, so bankruptcy is a last resort recommendation.

    1. David

      Of course you creditors would prefer to be paid in full, one way or another. You hate bankruptcy, where you might not be paid at all.

      But with freedom from debt through bankruptcy, the people are more likely to be able to save their money and not have to borrow from you in the future, and having learned the dark side of debt, they are likely to avoid it if they have half a chance. Therefore, they wouldn’t give a flying you-know-what about your opinion of their bankruptcy. :)

  79. Richard

    Without being judgmental, I find it that someone can accumulate so much debt. Not surprisingly, I share the view of some posters here that most Americans have far too many expenses and don’t save enough.

    In my undergraduate years, my roommate and I did a comparison and found that a homeless person begging on the street earned more (based on conversations with them) than what either of us spent each month. We shared an apartment with 2 other people, making rent $385 for each of us. Electricity was $20 each. I spent about $200 a month for food (eating out quite often; now I’ve cut it down to $100 a month). We had no other recurring expenses.

    Granted, most Americans aren’t accustomed to living so frugally, but I would think that in an emergency, one could easily shave expenses down to the level of basic physiological needs (food and shelter).

    The way I would help this person is to ask for a list of their expenses and start crossing items out for them. But then again, her reactions would probably be similar to that of http://www.getrichslowly.org/blog/2007/06/27/you-are-your-own-worst-enemy/

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