Archive for July 30th, 2014

by lizard

A few weeks ago I had a really interesting conversation with my dad. Like any healthy teenager, I rebelled against everything I thought he stood for. I held a grudge for years at being dragged from my friends in Seattle to grow up in midwest suburbia. Dad moved us to Kansas for a job at Sprint, where he climbed the corporate ladder to provide his family with a comfortable life, which teenage assholes like myself can pretend to reject but still benefit from immensely nonetheless.

So I rebelled against suburbia and conformity and corporate America blah blah blah.

Well, it turns out my dad was almost like a whistleblower, but his warnings up the chain of corporate command weren’t heeded, and things went south. How south? Here’s an article from the Washington Post (2008):

Sprint Nextel yesterday reported a $29.45 billion fourth-quarter loss and said legions of subscribers continue to abandon its service, many because they can’t pay their bills.

The nation’s third-largest wireless carrier last year courted people with poor credit to boost its number of subscribers. Now the company is feeling the pain disproportionately as the economy weakens and consumers default on their debts.

Essentially what Sprint did was target higher-risk consumers with sign-up gimmicks to prime short-term sales for Wall Street. If you think this sounds familiar, you’re not alone. This is the same short-sighted greed that fed the housing bubble and now, the auto-loan bubble:

Thanks largely to the U.S. Federal Reserve, Jeffrey Nelson was able to put up a shotgun as down payment on a car.

Money was tight last year for the school-bus driver and neighborhood constable in Jasper, Alabama, a beaten-down town of 14,000 people. One car had already been repossessed. Medical bills were piling up.

And still, though Nelson’s credit history was an unhappy one, local car dealer Maloy Chrysler Dodge Jeep had no problem arranging a $10,294 loan from Wall Street-backed subprime lender Exeter Finance so Nelson and his wife could buy a charcoal gray 2007 Suzuki Grand Vitara.

All the Nelsons had to do was cover the $1,000 down payment. For most of that amount, Maloy accepted Jeffrey’s 12-gauge Mossberg & Sons shotgun, valued at about $700 online.

How to react to this problem? Some people think better regulation of lenders might help. Some people would like to just blame the victims of predatory lending for the problem.

Regardless, these risky schemes driven by greed always seem to blow up. Maybe, if there were significant consequences imposed for the architects of these schemes, they would stop building them.

But there aren’t. So they do.

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