When I started out, my film was going to be about other people's economic woes. Soon I realized I was part of this story of how the credit industry targets poor and middle-class Americans. Not only was I a target, too, but all of us are.
There is a credit divide in America that fuels our economic divide. Put another way, the globalization of our economy is about more than the outsourcing of jobs. There is a deeper shift underway from a society based around production, with the factory as the symbol of American economic prowess, to a culture driven by consumption, with the mall as its dominant icon.
My film, tentatively titled "In Debt We Trust," combines storytelling, often in a voice laced with outrage, with investigative inquiry. It's about a nation where our credit score is the only score many people and institutions care about and where vast databases record our every purchase and consumer choice. Ours has become a nation in which the carrot of instant affluence is quickly menaced by the harsh stick of bill collectors, lawsuits and foreclosures. And yet this bubble can burst: The slickest of our bankers and the savviest of our marketers have been able to undo the law of gravity, that what goes up must come down.
Viewers of our film will be transported behind the scenes to meet their biggest scammers, the engineers and operators of the billion dollar credit card industry who have researched the details and minutiae of consumer needs and our fantasies so that they can deploy the deceptive art of seductive marketing and modern usury. We will scrutinize a carefully conceived but stealth electronic Web designed to entrap, cajole and co-opt the most powerful consumer culture on earth. It teases us with a financial advance when we want it, then sucks it away from us with more force than we realize.
Reporting These Stories
In the old days the poor couldn't qualify for loans. Today they are considered among the better risks because, unlike the rich, many feel an obligation to pay back. Steve Barnett, who worked in the credit card industry and will appear in our film, explains: "These are the perfect customers. They need credit, so they're not all that concerned about interest. They'll take a higher interest if you will grant them credit. They'll pay off a small amount each month so they're in a sense 'on the hook.' And because of their own sense of values or because of their own background, their family background, they're not likely to declare bankruptcy again. Given the change of laws that's more difficult, anyway." And manufacturers now know they can spur sales by lending money to buyers up front and then get them to pay twice — first at the register, then with credit card payments, big interest rates, and compounded interest.
Given the ubiquitousness of these practices — and the reasons why they exist and persist that stretch from corporate America into the halls of government and revolve around issues of corporate greed and political favors — the expanding gaps between those who have (and then have more) and those who don't (but pay anyway) need to be explored and exposed by journalists. I am raising this issue and suggesting ways that it can be reported because I believe this is an essential story for us to tell.
Report more regularly on these credit issues; billions of dollars are involved, not to mention millions of lives.
Identify the key corporate institutions and contrast the compensation of their executives with the financial circumstances of their customers.
Shine a spotlight on how special interests and lobbyists for financial institutions contribute to members of Congress and other politicians, across party lines, to ensure their desired policies and regulations. Investigate political influence affected by campaign contributions. Some reporting about this took place during the bankruptcy debate, but there has been little follow-up.
Examine the influence credit card companies have on media companies through their extensive advertising.
Take a hard look at the predatory practices in poor neighborhoods — and crimes committed against poor and working-class people, who are least able to defend themselves. Legal service lawyers tell me about how they are overwhelmed by the scale of mortgage scams involving homes whose value have been artificially inflated.
Focus attention on what consumers can do to fight back. Robert Manning, author of "Credit Card Nation," explains: "If 10 percent of American credit cardholders withheld their monthly payments, it would bring the financial services industry to a standstill. At a larger issue, what we have to do is to get people involved at the state level, get their state attorneys general involved, aggressively filing class-action lawsuits and then putting pressure on key legislators to say, 'This is unacceptable that they're not representing and balancing the issues of commerce with consumers. The balance is tilted dramatically against the average American.'"
The Story's Key Ingredients
Class struggle is assuming a new form in the conflict between creditors and lenders that reaches into many Americans' homes, where each month bills are juggled and rejuggled with today's credit card bills paid by tomorrow's new card. Meanwhile, with interest compounding at usurious rates, indebtedness grows, and people sink even deeper into debts they cannot manage. In this conflict, companies function as well-organized machines while borrowers are forced to react as individuals. Many are browbeaten with lectures about "personal responsibility" by corporations that only pay lip service to any form of social responsibility.
Centuries ago, we had debtor's prisons. Today, many homes become similar kinds of prisons, where debtors struggle with personal finance issues. The scale of indebtedness is staggering as consumers simply follow their government's lead. As of Christmas 2005 the national debt stood at $8,179,165,267,626.42. Break that down, and each American's share comes to $27,439.48, and our nation's debt increases $2.83 billion each day. Add to that two trillion more for consumer debt, including mortgages. That's a lot of money.
Who is really responsible for it? Few of us seem to know. And fewer appear to know what can be done about it. "They're never going to be repaid," says economic historian Michael Hudson, who for many years worked at Chase Bank. "Adam Smith said that no government had ever repaid its debts, and the same can be said of the private sector. The U.S. government does not intend to repay its trillion-dollar debt to foreign central banks and, even if it did intend to, there's no way in which it could. Most of the corporations now are avoiding paying their pension fund debts and their health care debts."
The government and big companies might not have to pay, but regular people do, as our collective consumer debt has doubled in the past 10 years. With mortgage debt included, it's now reached seven trillion dollars. Hudson compares the plight of millions of debtors in the United States to serfs of an age gone by: "For many people, debts now absorb 40 percent of their income. So many people are paying all of their take-home wages over and above basic expenses for debt service. And that's rising. In effect, 90 percent of the American population is indebted to the top 10 percent of the population."
The coffers of creditors — funded by the most prestigious banks and financial institutions — are swelling with payments for arbitrarily imposed late fees and rising interest rates that seem to be largely unregulated. Borrowing is now a national habit. Fueling this shift globally has been our national debt — now in the trillions — as other countries finance our trade imbalances and keep our economy strong. Without that influx of money, the U.S. economy would be in crisis. Everyone in the know knows this, but they do little to deal with it, relying on the theory that if it ain't broke, don't fix it. Occasional warnings and lots of noise surface about cutting the government's annual deficit, including a devastating report by Comptroller General David Walker, who compares the United States today to Rome before its fall. He is dismissed as a prophet of gloom and barely covered while debt keeps growing. All of this borrowed money keeps people pacified and, for the most part, politically complacent for now.
So many of us live beyond our means. This is not news, but what isn't found in most news reporting is how this shift has been engineered through corporate decisions that are aided and abetted by government polices. Questions of by whom and for whom need more and better investigation, as well as a look at who are the losers and who are the winners.
Business reporting that focuses on the upticks and downticks of the market provides little room for explanation, analysis or connecting-the-dots journalism. In part, that is a result of the fact that many of our major media companies don't operate in a world apart from these pressures. At least 10 credit-card solicitations have arrived recently in my mail, and the Disney (owner of ABC television network) card was in that pile. Many credit cards boast of partnerships and discounts from media companies and entertainment providers, from subscriptions to DVD's. Like car companies and airlines before them, the media industry has discovered that there's money to be made in the credit business and so credit card companies become big media advertisers. Why alienate them?
This credit squeeze is hitting the news business, too. Jobs are being cut and reporting trimmed. Joe Strupp of Editor & Publisher observed in his 2005 media wrap up, "Using the bizarre premise that newspapers can bring back lost circulation and ad revenue by making their products worse, top executives at major chains from The New York Times Company to Tribune took a butcher knife to staffing with buyouts and layoffs that appeared almost epidemic."
What happens to news business employees laid off in this environment? Like those in other industries where cost-cutting leads to unemployment, they enter what insiders in the credit business call "the turnstile," living on more and more credit from cards, soon to be followed by a dip into home equity. Nor have wages and benefits kept up with inflation and many are being cut. Health care extensions after a job ends are over in 18 months and then what? What's the alternative? More debt is one of the few accessible options. The turnstile keeps turning as personal debt keeps growing.
These issues and scams can be reported, and they must be, not just in consumer advice columns but also with serious investigative reports.
Danny Schechter, a 1978 Nieman Fellow, writes his "news dissector" Weblog for MediaChannel.org and is the author of two new books, "The Death of Media: And the Fight to Save Democracy," and "When News Lies." A former producer at CNN and ABC News, he is now executive producer at Globalvision, Inc.