Unsecured

Here's a story from today's paper — "Rising rates, prices squeeze borrowers":

Rising interest rates and higher gasoline prices are putting the squeeze on consumers' budgets, and many are finding it harder to keep up with their bills. …

An important measure of consumer financial distress, late payments on credit cards, ticked up in the first quarter, according to figures from the American Bankers Association. The Washington-based trade group said the percentage of bank cards 30 or more days past due increased to 4.40 percent in the January-March quarter from 4.27 percent in the final quarter of 2005.

The Federal Reserve's decision last week to raise short-term interest rates for the 17th consecutive time will boost yet again borrowing costs for consumers, likely prompting more delinquencies on credit card bills — as well as on auto loans and mortgages.

The slowing economy also is depressing income growth, so a greater percentage of take-home pay is going toward necessities and less is left over for debt payment. …

Catherine Williams, a credit expert with Money Management International, a Houston-based financial counseling and education agency, said rising costs for gasoline and utilities were only part of the explanation for rising credit card delinquencies and increased consumer financial stress.

"People refinanced [their mortgages] six months or a year ago, so the 'house bank' is empty," Williams said. "Most can't go back and tap their home equity again."

Everything in this story is true, except that it's true from only one side.

One-sided coverage is typical of stories in the "business" section of most newspapers. They will report endless stories about the health risks of some prescription drug, considering only how those health risks might harm the value of the pharmaceutical company's stock and whether or not it might be time to sell that stock.

The strange thing about stories involving credit cards and America's enormous, untenable level of credit-card debt, is that the business pages maintain this one-sided approach but, uncharacteristically, approach such stories exclusively from the other side, from the side of the consumer. They get so worked up tut-tutting about household finance that they forget their usual obsession and never consider what all this insurmountable debt means for the producers of it — the over-exposed credit-card banks and their shareholders.

Stories like the one above suggest that the lenders — the credit-card banks that flooded America with all of this unsecured, unresearched, pre-approved credit — are nothing more than forces of nature instead of human actors making choices and business decisions. The writers of such stories are extravagantly aware of the fact that the borrowers have made decisions, and will therefore have to live with the consequences. But it never seems to occur to them that the same is true for the lenders.

Usury is lucrative. It's also very risky. That's why it's so lucrative. The credit-card banks have deluded themselves (and their shareholders, and their puppets in Congress) that it's somehow possible to reap the rewards of usury without accepting any of the inherent risk.

One-sided stories that focus only on the borrowers help to feed this delusion. But it remains a delusion. And that delusion is the foundation of the entire credit-card industry.

It would be interesting to read the story above if it were written from the other side. The credit-card banks, that story would note, have extended billions of dollars of credit gambling that interest rates and energy costs would stay flat, gambling that wages would increase over time, gambling that their debtors would never face $3-a-gallon gas prices, and pretending — it's too fantastic an assumption to even call it a gamble — that those same debtors would have an infinite reservoir of home equity to tap into. They've lost all of those bets.

If this were a typical one-sided business story, it wouldn't be written for consumers, urging them to call their local credit counseling services. It would be written for investors, urging them to call their brokers and to sell, sell, sell! their stock in these credit-card banks.