Subprime

Hopefully, everyone who’s reading this has heard of “sub-prime”...whether it be followed with “crisis”, “loans”, or whatever. it’s long been used to describe a loan to someone who has less-than-stellar credit. for the rest of us, it means a loan that looks more like a blackjack bet than an extension of credit.

a good friend who knows i was a financial planner a while back put to me an excellent question: if a client were to come to you and lay out their finances and those finances showed the client to be $100,000 in credit card debt, $250,000 in mortgage debt, $0 in savings, a monthly budget that exceeded the client’s monthly after-tax income of $4,000, two car notes that take up $1,200 per month, the client’s kids are scheduled to go to college (and have the client foot the bill) within a few years, the client’s parents were counting on the client to help support them in their old age, and the client had no retirement savings...what would you say to that client?

when he put it that way it was easy to answer. i’d actually spoken with several would-be clients who were in similar circumstances. as a financial planner, you can’t advise a person to declare bankruptcy. you can sure-as-heck tell them to seek the counsel of a good bankruptcy lawyer, though. these would be classic “sub-prime” clients.

what’s the u.s.’ credit score?

if the u.s. were to come to me seeking financial planning advice -- back when i was a planner -- i would have told it the same thing: go seek a good bankruptcy attorney. why? well, we have credit debt that can’t be paid back in one lifetime. we have social obligations through medicare and social security that compound the inability to re-pay any debt. we continue to spend billions of dollars per day in interest yet take out more loans from other countries to fund our overspending. our ability to take care of our kids through smart fiscal management and resource allocation is absolutely nil. the u.s.’ gasoline bill is devouring any personal, state, or federal incomes we eagerly hope we can maintain. and our plans for getting out of this mile-deep hole we’ve dug ourselves into involve griping about our situation without looking at what brought us here in the first place.

who’s the scapegoat?

in the sub-prime crisis -- quickly turning into the prime crisis, as well -- there are all sorts of culprits. greedy banks took advantage of duped customers. greedy credit card companies took advantage of unknowledgeable over-consumers. greedy mortgage-holders took advantage of easy credit. greedy things got greedy.

in the oil market, the list of culprits is getting longer by the day. greedy speculators are trying to turn illicit profits. greedy oil companies are making too much off of our poor, hapless citizenry. greedy convenience stores are trying to get more money out of our pockets. greedy OPEC members won’t turn on the spigots for us greedy drivers. greedy SUV owners are getting what’s coming to them. greedy things got greedy.

in the food markets, the list of culprits is about tapped out. greedy speculators, again. greedy hoarders keeping in warehouses what’s rightfully the “people’s” grain. greedy ethanol producers using all of the corn for fuel rather than food. greedy americans eat too much, get fat, and the rest of the world is paying for it.

this is classic avoidance. no one wants to look at what’s behind all of this -- the behaviors that brought us here in the first place. it’s so much easier to blame one person or organization than to look into the mirror and fess up that the person looking back is the culprit. we, ourselves, are to blame for this. we’ve elected ineptitude (if we voted), counted on it to run things so that we wouldn’t need to learn how to manage our civic responsibilities, and we’re getting what we deserve. as the saying goes, “people get the government they deserve”. i’m not pointing fingers at you. i’m pointing fingers at me AND you. i’m just as much to blame as anyone reading this.

where’s a good lawyer when you need one

here’s the kicker, folks: there is no way to get out of this mess except to admit our ridiculous nature, take our lumps, and climb out of the hole. we have to start saying to future social security beneficiaries, “sorry, if i help you with your bills i will never, ever see the light of day.” we have to own up to our kids that we’re horrible at managing money, that we can’t help them pay for college, but we’ll try our best from now on to make sure we’re not leaving them a burden to carry. we have to get our expenses down enough to where we’re saving money...not spending credit. we need to take a hit on our house and move into something we can afford. we need to cut up our credit cards. we need to go into the credit hibernation-period, pay back to the extent we took out on future expectations, and begin the long, hard road to a better country.

there’s no “lawyer” in this, folks.

or, we can lament our bad luck, find more scapegoats, and prolong the agony until our house is foreclosed on, our cars repossessed, our parents are left to the salvation army, our kids fall into the same hole, our jobs are lost, we’re fighting with our fellow citizens over food and water, and on and on.

we have to stop looking to others for some negotiated solution. we have to begin negotiating with ourselves.

-Bob Hall for Crudeawakening.org