Martha Randolph Carr Martha Randolph Carr, 3/16/2009 [Archive]

Credit Comes Due

Credit Comes Due

By Martha Randolph Carr

There is a common perception in America that most of us live beyond our means with credit cards financing the party. However, the newly released Federal Reserve Board's Survey of Consumer Finances for 2007 tells a different story. According to their results it's easy to see that the middle class has been steadily increasing their consumer debt in order to keep up with inflation.

An easy translation of that is the average Joe is using his Visa card to pay the light bill and keep his family fed. He's not partying but trying to find a way to live from day to day. That news has real repercussions for what the next roll-out of bad news and blow to our already battered confidence in the economy is most likely going to be.

The Fed's survey, which is taken from a carefully selected cross-section of 4,500 consumers, shows that since the last reading in 2004 median family incomes dropped slightly for middle income Americans, particularly those headed by a single parent. Average incomes for the wealthiest 10 percent rose substantially by 8.5 percent.

The mean amount of credit card debt being carried by individuals rose 25 percent from $3,000 to $7,300, a much faster rate of increase than in previous years. That doesn't sound significant enough until all the pieces start to come together.

The survey noted that the majority of the credit card debt has shifted from stand-alone companies, such as Capital One, to 87.1 percent being held by commercial banks. Those are the very same banks that the Feds have been working with to ferret out poisonous mortgage debt. Commercial banks that are doing well also made the same decision to not lend short-term consumer debt in large quantities to high-risk people. That means that the debt that is most likely to go unpaid is sitting with the same banks that are already in trouble.

Also, most consumers in the middle income category reported that they were saving less than one percent, which makes sense if it's already taking a credit card to pay for the basics of life.

So the picture that's forming is an average voter who has a family to support but fewer real dollars in order to accomplish the feat and vital credit sources that have quickly disappeared except for the bill with no monetary reserve to get through a tight year.

Add on top of that the climbing unemployment rate of this very same group. It becomes easy to see the very real likelihood that a lot of the retail debt now held by weakened commercial banks will go unpaid. Consumers will choose paying for pretty much anything else before catching up the credit card debt when there isn't enough to cover all of the essentials. A damaged credit report will stop being seen as enough incentive if there's a risk of foreclosure on the house or the phone being disconnected.

Banks will start to make hard decisions about covering the debt owed to the retailers who accepted in good faith the bank-generated credit card. It all starts to roll downhill again.

What's astounding, given that the survey is generated by the Feds, is how little Bernanke and his crowd is talking about the coming tidal wave. It can't be that we're still practicing the idea that if we look away long enough it won't all fall apart, yet again.

Fannie Mae, AIG, Wamu and Lehman were apparently not a big enough lesson. One of the more galling aspects is that right now there is not only no significant consumer loan modification being offered in this category but instead banks are trying to generate bottom line income by charging fees of 25 percent based on a consumer's balance. There was a time when that was called usery in the United States. It starts to beg the question of what real differences exist anymore between the dreaded payday loan and some of the bank-issued credit cards.

It's also possible to conceive that consumers are now paying down debt that consists more of fees owed than actual retail debt. That's where we are at the moment.

If nothing is done then voters can rightfully say that once again big business and another pending bailout of some titan of industry on the taxpayer dollar mattered more. After all, the Federal Reserve was the one who gathered the necessary information and then stuck it in a drawer.

If you'd like to get involved in the 2009 America Challenge to raise funds for community-based charities email me at Martha@CagleCartoons.com for more information. Together we're going to build stronger communities and empower ourselves.

Martha Randolph Carr's latest book, A Place to Call Home, a memoir about the reemergence of U.S. orphanages is available wherever books are sold. If you'd like Martha to come and speak to your group visit: www.newvoicespeakers.com. Email Martha at: Martha@caglecartoons.com or visit www.martharandolphcarr.com.

© 2009 Martha Randolph Carr. Martha's column is distributed exclusively by Cagle Cartoons Inc. newspaper syndicate. For info call Sales at (805) 969-2829 or email Sales@cagle.com.

Download Martha Randolph Carr's black and white mug shot photo.

Download Martha Randolph Carr's color photo - Download Martha Randolph Carr's black and white mug shot photo
Why not run a cartoon with the column? We recommend the cartoons below as a good compliment to Martha Randolph Carr's topic.
Click on the thumbnail images to preview and download the cartoons.

Related Cartoons

Deposits Only
By: Nate Beeler

March 9, 2009

Deposits Only COLOR
By: Nate Beeler

March 9, 2009

Recession to Depression
By: Adam Zyglis

March 11, 2009

Frozen Credit Bailouts
By: Adam Zyglis

March 3, 2009

Sons Of Frankenstein-COLOR
By: R.J. Matson

March 16, 2009

Sons Of Frankenstein
By: R.J. Matson

March 16, 2009

Pot of Subprime BW
By: John Cole

March 14, 2009

Pot of Subprime COLOR
By: John Cole

March 14, 2009

In Hock Up To Our Ass COLOR
By: Bob Englehart

January 8, 2009

In Hock Up To Our Ass
By: Bob Englehart

January 8, 2009

We do not accept and will not review unsolicited submissions from cartoonists.
Sales & Information: (805) 969-2829 sales@cagle.com
Billing Information: (805) 969-2829billing@cagle.com
Technical Support: support@cagle.com

FREE cartoons for your website if you're already a paying print subscriber!
Artwork and columns are copyrighted by each creator. All Rights Reserved. Unauthorized reproduction prohibited. [Privacy Policy]