What Does A Failed Society Look Like?

Before I talk about America as a failed society, I want to follow up on yesterday's post about student debt while the subject is still fresh. I believe this material perfectly illustrates what a failed society looks like. Let's start with CNN Money's The other reason grads are drowning in debt. The standard story of woe the article leads with is worth reading.

The first in her family to go to college, Alicia Aiello wanted more than anything to study at Syracuse University. But tuition was expensive, her parents couldn't help much with the then-$46,000-plus in tuition and expenses, and she didn't get enough financial aid to bridge the gap.

So during her first semester, Aiello found herself taking out an $18,000 bank loan, on which she'd owe $6,000 worth of interest before she paid back even a penny of it.

"[W]hen I found out someone would give me $18,000 without a co-signer, I was really excited — until later down the line, when I found out how much I was going to owe," Aiello says. "That was probably the biggest mistake I ever made."

Many students are making mistakes like this. America's student debt crisis is not only being fueled by skyrocketing tuition and a weak job market, but also by students' ignorance about financial matters in a system that makes it surprisingly easy for them to attain a loan. In many cases, students barely understand the obligations they're assuming.

"A lot of us don't have parents who went to college or who understand anything about this process," Aiello says. "I have a lot of friends who just signed those loans without any idea what was going on."

... American university and college students graduated with an average of $26,600 of combined government-subsidized and private loan debt in 2011, according to figures released this month by the nonprofit Institute for College Access and Success' Project on Student Debt. More than 9% of new graduates default within two years, and 13.4% within three, the U.S. Department of Education reported last month.

Feeding this rising sea of red ink are loans from private lenders like banks, which typically charge more than federally-guaranteed loans administered by financial aid offices.

While federal loans have fixed interest rates and flexible repayment terms, private student loans carry variable interest rates that are usually higher, and while they sometimes are given without any co-signer, they often require parents or others to become responsible if the loan is not repaid.

All this is clear. We're dealing with student loan sharks. There is an obvious comparison: student loans = subprime mortgages. Either way, we have predatory lending. Only the loan type has changed. But it was this next paragraph that caught my eye.

A report this month by the government's Consumer Financial Protection Bureau [CFPB] found that private loans now account for $150 billion of total student debt, and at least $8 billion worth of these are in default. The agency said students who have borrowed from private lenders complain not only about confusing terms, rates, marketing, and sales tactics, but also about difficulties negotiating repayment plans or refinancing.

A report? Whadduya mean the CFPB issued a report? After the Dodd-Frank financial "reform" bill was passed by Congress and signed into law by Obama, for many months on end we heard that the CFPB was going to—

Stop predatory lending of all kinds as described by CNN Money above (the liberal political story);

or

Put a monkey wrench in the wheels of economic progress by hampering bank lending (the conservative political story).

But this is America, so everything you hear is sound and fury signifying nothing. The CFPB doesn't actually do anything; they issue reports. I found the details in Consumer Financial Protection Bureau Finds Student, Mortgage Lenders Have 'Uncanny Resemblance'.

The private student loan industry smells a lot like the subprime mortgage industry: Dead ends, runarounds and few live customer service representatives to speak with. The same tactics that mortgage borrowers have faced are now happening for student loan borrowers, according to a new report from the Consumer Financial Protection Bureau.

The government watchdog on Tuesday released its annual report on student loans, including details from a database of complaints that opened to student loan borrowers in March.

Watchdog!

“Student loan borrower stories of detours and dead ends with their servicers bear an uncanny resemblance to problematic practices uncovered in the mortgage servicing business,” CFPB student loan ombudsman Rohit Chopra said in a statement...

The report highlighted three servicing issues of particular concern: Surprises in loan terms and conditions; the runaround from servicers and difficulty contacting a person; and problems refinancing loans to take advantage of historically low interest rates.

Chopra called Tuesday's report an "early warning" for servicing problems [which] may hurt borrowers' ability to repay.

The CFPB over the summer compared loan servicing problems in the student loan industry with the subprime mortgage industry...

The report included the CFPB's recommendations for policy changes to help borrowers manage their debt. Recommendations include helping more borrowers refinance to lower rates and creating incentives for income-based repayment programs.

An early warning! Recommendations for policy changes! But it's far too late for poor Alicia Aiello and her friends as detailed in the CNN Money story. Now we can talk about what a failed society looks like.

• In a failed society, the Evil which lives within flawed humanity has become free to do what it will. Here it takes the form of predatory lending to naive young people. Once Pandora's Box is open, there is no putting the Evil back in the box.


• Therefore, a failed society talks endlessly about its problems without ever doing anything about them. You see lots of reports. You see lots of warnings, a lot of recommendations for policy changes. You get lots of false hope, but nothing substantive ever happens. You get lots of lip-service, which is bullshit by definition. There are many complex variations on this bullshit, but the bottom line never changes. The bottom line is No Meaningful Change. Such change is no longer possible.

In the general experience of humankind, there is little new here except insofar as America is in many ways a historically unique nation. Certainly for Americans this nation's failure is indeed new, and it has obviously been very hard for them to swallow. Speaking for myself, having grown up in the 1950's and 60's, I can say that nothing in my personal experience prepared me for the sort of America we have in 2012.

Being a historically unique nation, and the greatest military power the world has ever seen, America will no doubt (ultimately) fail uniquely and spectacularly.

The interesting questions now are when does all this end? How does it end? If we accept the premise that no meaningful change is possible, a premise which is supported by countless observations of what actually happens in America—nothing—we are forced to conclude that, sooner or later, America's story ends in tears for most of its citizens. On the other hand, America's manifest failure can probably go on for many years in its current form.

Beyond this point I don't want to go today. What I've said is already depressing enough.

Comments

[Dan Henry]

From my experience, I dont trust these figures at all(surprise!). Putting your loans in forebearance, deferment etc takes a few mouse clicks...just as ridiculously virtual as signing up for the debt in the first place. The percentage of my generation being fucked is much much higher than these numbers say.

[John D]

Don't worry. After enough students default on these predatory loans and the banks lose big money, us taxpayers will bail these banks out.

[JohnWDB]

"In a failed society, the Evil which lives within flawed humanity has become free to do what it will."

Hear, hear, Dave. This reminds me of my chat the other day with another reader. It isn't capitalism that destroys capitalism...it's greedy mofos. In a well-run society, the government serves to prevent exploitation of the weak and/or vulnerable by sociopaths. When the government gets bought by the sociopaths...well, sociopathy becomes the new normal. Mark Taibbi over at Rolling Stone has some ideas about when and how that buying happened. I don't think it really matters, as long as we can all see that it did indeed happen. Maybe then we can stop pretending like the Messianic politician du jour is actually going produce a modicum of change in the status quo. Curtis Roosevelt laments publicly that Obama isn't more like his grandpappy, who helped produce actual financial services industry reforms 80 years ago. He remains among the disillusioned, but at least he's being critical. The majority of Americans don't seem to actually look at results/facts/data.

[JohnWDB]

Dave, check out this link for more CFPB strong-armed tactics:

http://www.nytimes.com/2012/10/15/business/reverse-mortgages-costing-some-seniors-their-homes.html?pagewanted=all&_r=0

So, in order to mitigate the problem of having banks jerk old ladies' homes out from under them, "the Consumer Financial Protection Bureau is working on new rules that could mean better disclosure for consumers and stricter supervision of lenders."

What we need is rules that force banks to be honest about their theft. The theft will go on, but those old biddies won't have anything to complain about because they didn't read the 4-point font fine print on the back of page 38 that said "we're going to rob you".

[Dave Cohen]

@John WDB

In the sentence ...

"The Consumer Financial Protection Bureau is working on new rules that could mean better disclosure for consumers and stricter supervision of lenders"

... the operative word is could.

The word will was available, but did not fit the case.

-- Dave

[JohnWDB]

In the words of Captain Barbossa from Pirates of the Carribean, "And thirdly, the code is more what you'd call 'guidelines' than actual rules"

[Dave Cohen]

And even better would have been this rewrite...

"The Consumer Financial Protection Bureau has put new rules into place that require better disclosure for consumers and enforce stricter supervision of lenders"

-- Dave

[Bill Hicks]

"America's manifest failure can probably go on for many years in its current form."

I don't what is more maddening--that there is no chance that things will change before failure occurs or that we have so much wealth and prosperity to squander that even deliberately trying to throw it all away is likely going to take decades.

[Chris in chicago]

I believe it was Thomas Jefferson who said " Democracy creates wealth and wealth destroys democracy"

[BrianM]

To paraphrase the famous quote (original author apparently unknown), the greatness of a society is judged on how it treats its weakest members.

How do we treat the young (students), the old, the poor, the sick?

Nuf said.

[Shawn]

While we are doing the quote thing, I'd just like to add one of my favorites from a previous epic failure:

"We have been brought into the present condition in which we are unable neither to tolerate the evils from which we suffer, nor the remedies we need to cure them." - Livy

Sounds familiar.

[Oliver]

Dave - re: "On the other hand, America's manifest failure can probably go on for many years in its current form."

On the other other hand, the military 'defense' establishment (look up Orwell) is spoiling for a proxy war with Russia and China using Iran as the whipping boy once the election muck has settled, so on the basis that war is full of unexpected surprises, and this particular war will doubtless go nuclear quite quickly, the great country of America could have a life-shortening situation on its hands within the year.

Will mass protests on American streets rein in the politico-military-fascists? I doubt it.

[Oliver]

PS - What do you make of this Dave:

http://www.shalereporter.com/industry/article_fcd5b9cc-1a35-11e2-9cdc-0019bb30f31a.html

Is the failed society suicidal??!

Regards, Oliver