Again, I do not mean to imply that business and general-circulation publications ignored changes in the credit-card industry, a reality that was obvious to millions. A spate of excellent stories, for instance, appeared in 2003 and 2004. Business Week, for example, did a fine job on corporate America’s new fee addiction in September 2003:
FEES! FEES! FEES! Companies can’t raise prices, so they’re socking consumers with hundreds of hidden charges—and that’s creating stealth inflation and fueling a popular backlash.
And in July 2004, the Journal’s Michelle Pacelle offered a pointed look at new and underhanded credit-card practices:
FINE PRINT—Growing Profit Source for Banks—Fees From Riskiest Card Holders. Late Payers and Big Borrowers Are Becoming Cash Cows; How Interest Rates Balloon—A Nasty Surprise on Page 54.
In November 2004, The New York Times and Frontline combined forces for “The Plastic Trap: Soaring Interest Compounds Credit Card Pain for Millions,” an excellent and clear-eyed exposé.
There was more. A Journal story in August 2004 revealed how credit cards contributed to the creation of a surprising new class of bankrupts, while last May Business Week contributed a devastating look at the credit-card industry’s unattractive stepsister, the high-fee, high-interest payday and consumer-product lenders that prey on the poor.
But while the press did augment its normal corporate coverage with good work, in retrospect none of the outlets displayed the editorial vision to step back and see the big picture that was described with such urgency or foresight by the non-traditional outlets.
And beyond sins of omission, business publications routinely transmitted an utterly bogus and credit-industry-sanctioned myth—that recent increases in consumer debt were due mostly to discretionary spending, as though American consumers in recent years spontaneously and for no reason other than some unspecified general cultural decline suddenly became profligate and undisciplined borrowers, mindlessly piling up debt for flat-screen TVs and other frivolous consumer items.
The Journal wrote this in 2002, in a typical example, which included an anecdote about a thirty-one-year-old Denver salesman:
Yet like many Americans Mr. Stouder doesn’t have any qualms about going deeper into debt, and his lenders are encouraging him to borrow “I want to enjoy everything and not worry about cutting back,” says Mr. Stouder.
The twin myths of over-consumption and the immoral debtor, to use Elizabeth Warren’s phrases, have been debunked for years. Warren documents that the average American household today actually spends less than in the 1970s on clothing, food, and major appliances, and that, after paying for education, housing, insurance, and health care, it has less disposable income, even though the household now has two wage earners.
Research shows, for instance, that nearly 30 percent of low and middle-income people with credit-card debt reported medical expenses to be a major contributor. And in a study cited by Warren, 87 percent of families with children filing for bankruptcy listed one of the “big three” reasons—divorce or separation, job loss, or medical expenses—as the cause.
In its 2004 documentary, “Secret History of the Credit Card,” Frontline quotes Stephen Brobeck, executive director of the Consumer Federation of America, whose point now seems obvious: “People are people. People don’t change. What’s changed is the marketplace.”
Today, as the credit crisis unravels, the business press can be fairly blamed for inattentiveness to the growing strains on middle-income borrowers. Maybe that’s why so many middle-income people don’t read it.