Financial

Hooked on debt

Hooked on debt

John Burns stopped by last week to talk to The Real Story about some of the issues that just don’t seem to go away in this prolonged recession…from consumer debt to FICO scores to foreclosures in the pipeline to the pleasure of purchasing a new home.

Where to start? John jumped right in on the subject of consumer debt, which he has charted as being as high as 50 to 60 percent of some consumers’ gross salaries, as a result, he says of Americans applying “the right to buy whatever the heck we want”. Consumers aren’t alone in their profligate spending, he reminds us—they have the government and business leaders to model themselves after.

He shared a shocking statistic—that currently approximately 5 million Americans are living in homes that they have not made a payment on in the last 90 days. Whether that number is an indicator of how slowly the foreclosure process is moving, how many people are playing the system, or how frustrated folks are at not being able to hear back from their lender, it is a whopping number of mortgage delinquencies that are yet to be dealt with.

John also defends Fannie Mae and Freddie Mac’s performance. He points out that since Fannie Mae was created in the 1930’s to create mortgage liquidity during THAT economic crisis, it is actually doing what is was supposed to do. He opines that had Fannie Mae had not been lending so aggressively, home prices could have fallen even further.

More from John today and every day this week, available on iTunes.

Learning to live within our means

Learning to live within our means

In today’s final segment of The Real Story interview with Brian Pretti of Mechanics Bank, Brian talks about credit as the lifeblood the U.S. economy. He notes that lending is at a 40-year low, and says that the “destruction” of loans is keeping banks from lending at the magnitude that a robust recovery requires.

He also mentions that the numbers on consumer debt are staggering—in a good way. Last month alone, consumer debt decreased by $10.6 billion—meaning, with little hope for an increase in assets, that consumers are addressing the liability side of their lives. And, for the first time in years, the consumers aren’t borrowing money to take care of old debts. Does this mean we are learning to live within our means?

Finally, Brian spends a few moments on the subject of globalization, and gives his view of the future of the US as a global citizen, embracing production over speculation; manufacturing over trading; and equity over debt.