Thursday, October 14, 2010

Credit as the drug of choice


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Credit as the drug of choice
October 14, 2010, Letter


Bank of America has joined JPMorgan Chase in suspending foreclosures in 23 states following revelations that employees at several lenders had approved thousands of foreclosure affidavits and other documents without proper vetting. Attorneys general in California, Colorado, Connecticut, Illinois and Ohio have all launched investigations into what appears to be widespread fraud by the nation’s major banks and lenders. It is unknown how many homeowners lost their homes due to foreclosure fraud. Banks are expected to seize a record 1.2 million homes this year, a 12-fold increase since 2005.

Nearly 9 million households now have upside-down mortgages, and for the first time ever, mortgage debt is bigger than the total value of homeowner equity [cash invested] — bigger by $836 billion. The root of the problem is the same as it has been for centuries: credit, which leads to debt that spirals into ever greater debt. Then those who are lenders gamble that they can make even more money by devising new and more lucrative ways for people to go more deeply into debt, while the people themselves gamble on what they consider a sure thing, just what they need to pay off their debts, or set themselves up for retirement, or finance their lifestyles, etc. Credit has become the drug of choice of the modern world, far more widespread than any other.

Ted Rudow III,MA

Menlo Park

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