Credit used to make sense to me, and now it doesn’t. Here’s the way it once worked, according to my sepia-toned memories:
When I got out of college in 1975, I went to work for The Jackson Sun in West Tennessee as a copy editor for the lordly sum of $130 a week. That’s $6,760 a year. After a three-week trial period I got a $15-a-week raise, which was quite a thrill at the time. I was married, my wife was in graduate school, and our first child would arrive about a year later.
My first week, a woman who also worked on the copy desk, taking me under her wing, told me her husband worked at one of the banks, and to contact him if I needed help in that line. As it turned out, I did soon need a loan to pay for a used Vega (yes, I know, a bad call there).
After the baby came, we decided we needed a credit card to help us through the weeks when my pay (by then $160!) didn’t meet the necessities. So I went to see Paul at the bank, but he said I couldn’t get one until I had established more of a credit record. The car loan helped, and so did the fact that we paid the hospital for the baby in installments. But that wasn’t enough to get a BankAmericard.
Paul suggested I go to Sears, because they’d give a credit card to anybody. So I did (after which we rewarded Sears’ faith in the proletariat by buying most of the children’s clothes, and all tools and appliances, from there for years to come). Once I produced my Sears card at the bank, I got my “real” credit card.
My wife, who handles the accounts and pays the bills at our house, now curses the day that piece of plastic came into our house — she has told me more than once in the past week, and apparently will keep telling me until it sinks in, that at our current rate of payment, we will not live long enough to pay off our credit card debt, according to all the actuarial tables or something like that (in one ear, out the other).
But back then the card was helpful, and actually earning the privilege of having one seemed a sort of milestone. I was now someone deemed worthy of credit.
In the intervening years a lot has changed. For instance, the Sears card morphed into a Mastercard that I no longer use (under threat of bodily harm) because the usurious rate is high even for a credit card, but that I carry in my wallet for sentimental reasons: It still says “member since 1976.”
That’s a distinction that wore off long, long ago, though. Today, on the rare occasions when I get to the mail before my wife does, there is always at least one offer of a new credit card, and usually more than one. My children have been getting those come-ons at our house since they entered their teens. Even with all of them moved out, they still come. And my wife still throws them away.
But that’s credit cards. Let’s talk mortgages.
My understanding of mortgages does not extend beyond the explanation offered by George Bailey in “It’s a Wonderful Life,” which Robert Ariail lampoons in his cartoon today. Here’s the original dialogue:
No, but you’re... you’re, you’re, you’re thinkin’ of this place all wrong, as if I had the money back in a safe. Th-th-the money’s not here... why, your money’s in Joe’s house, that’s right next to yours, and in the Kennedy house, and Mrs. Maitland’s house, and, and a hundred others.... Why, you’re lending them the money to build, and then they’re gonna pay it back to you as best they can, now what’re you gonna do, foreclose on them?
That I understand. And while my mortgage might not be with ol’ George down the street, I did take it out with a very nice person in an office that I could go to and ask questions later if I needed to. But before long my mortgage and yours got bundled up with a thousand others and turned into a financial product that greedheads would buy and sell back and forth across the country as though the biggest contract I’ll ever enter into were merely another drop in a barrel of oil.
Meanwhile, mortgages were being extended as casually and promiscuously as those credit card solicitations, without regard to the buyers’ ability to pay back, which eventually, as near as I can make out, led to this bizarre situation in which the president of the United States went on the TV last week to tell us that if we don’t come up with $700 billion in one quick hurry, we’ll all soon be living in Pottersville instead of Bedford Falls.
Apparently, this happened in part because as a nation we decided that everybody ought to have a mortgage, whether they could afford one or not. That sounds really nice and egalitarian and everything. It also sounds just like the arguments I hear from the payday lending industry — that they have to exist because everybody needs to be able to take out loans, and you don’t want to be all paternalistic and tell them they can’t afford it.
But I’m of the paternalistic school, I guess, if that’s what you want to call it. For years, I was on the local Habitat for Humanity board, and we didn’t sell those houses to just anybody. We made sure that while the families were low-income enough to need our service, they had enough income to make their payments. We provided counseling. We required that they pile up sweat equity by working to build other people’s houses before their own foundation was laid.
Those hurdles existed to keep the unwary from getting into debt over their heads, just as Paul’s bank once required certain demonstrations before I could have that card.
And now, apparently the whole nation is being sucked into a vortex of bad decisions chasing each other ’round and ’round.
And to me, that just doesn’t make sense. But that’s because I don’t understand credit. Not anymore, anyway.
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