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Wednesday, 31 January 2007 05:31

Danny Schechter Dissects America's Credit Card Culture -- A BuzzFlash Interview

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As one expert in the film argues, if things continue like this, we're going straight into serfdom. Instead of being a serf to the landlord, you're a serf to the bank and to your debt. ... Prices are going up across the spectrum. Interest charges are going up. Adjustable rate mortgages are going up. All of this is squeezing the American consumer and your working people in this country tremendously. And our politicians are not speaking to it. -- Danny Schechter, maker of the film, "In Debt We Trust"

* * *

Danny Schechter is a media and coporate gadfly who has partnered with Rory O'Connor over the years to creat MediaChannel and Globalvision. In a cramped office off of Times Square, bustling with interns and staff, they do a yeoman's job at catching the latest corporate/media deceit.

Recently we interviewed Schechter (he's a former high-ranking TV producer and current documentary filmmaker, among his many talents) about his latest documentary, "In Debt We Trust: America Before the Bubble Bursts" is a low-budget doc that packs a wallop. It's about America's addiction to debt -- and how debt fuels the PacMan consumer society; that is to say, right in to personal and national bankruptcy.

Schechter is your personal guide through the stratagems of credit card companies, banks, and the finance industry to suck Americans into a lifetime of owing money, beginning with credit card companies seducing students in college -- and never letting up.

Contrary to common sense and general opionion, for most people, the more you owe, the more valuable you are to the finance industry. They make all their money off of the "juice," of course.

One of the most lamentable realities of the "debt industry" is that both parties in Congress are pretty much in the pockets of the credit card companies and the finance industry. This was most recently revealed in the revamping of the bankruptcy laws that further limited options for individuals, but did nothing to reduce the ease with which large industries declare bankruptcy and "restructure," often with the assistance of our tax dollars.

There's something terribly wrong with this picture -- or credit card -- and Danny Schechter shows us why in "In Debt We Trust: America Before the Bubble Bursts."

* * *

BUZZFLASH: You've done an excellent film, "In Debt We Trust: America Before the Bubble Bursts." If this were a commercial feature film, the star getting top billing would be the credit card industry. Why did you choose to focus on the credit card industry as the main attraction?

DANNY SCHECHTER: I don't think many people understand that our economy today is driven by debt. In fact, the debt itself is financing both industry and government, yet it is also making us more and more dependent. This is not discussed much in the media, because the credit card companies have a $5 billion marketing budget.

The Super Bowl is probably brought to you by MasterCard, but we don't see the "financialization" -- the kind of control exerted over society by a debt and credit complex every bit as insidious as the military-industrial complex. It is running the show here. The big banks, the finance companies, and credit card companies are, in a sense, transferring wealth from working-class people, from poor people, from middle-class people, to make rich people even richer. You got a glimpse of that when Goldman Sachs declared $16.8 billion in Christmas bonuses on Wall Street. But by and large, this whole process is almost invisible.

That's why I made this film. And I was experiencing the same problems -- finding my savings account disappearing, finding my debt and bills growing. I know that if I'm having this problem, with a Master's degree from the London School of Economics, other people are being even harder hit.

BUZZFLASH: Your film points out that college students are bombarded with applications for credit cards and free credit -- absolutely bombarded. Someone in the film tries to dissuade college students, or at least inform them of the risks they're undertaking, since many of them don't realize what they're getting into.

DANNY SCHECHTER: The average student is leaving college with thirty or forty thousand dollars in debt. That's the student loan debt, plus their credit card debt. So kids have to get a job immediately. The take the first job they can get, to begin paying off their loans and their debts. They can't go to Europe, or get involved in social activism, or the rest of volunteer or community projects. They're under tremendous financial pressure.

In my film I talk about one student that robbed a bank, others who committed suicide. Now, it's not always that extreme, but the pressure on students is growing, and colleges recognize this. But financial literacy is not really being taught. Students don't understand what's happening to them until they're too deep in debt to do anything about it.

BUZZFLASH: How do credit cards make companies money?

DANNY SCHECHTER: In several ways. Of course, if people can pay off their credit cards every month, they get a free ride. But what's happening is that people increasingly can't afford to pay off their bills, so they're paying minimums. Soon they find the interest rates growing. They're paying interest, and then the late fees start. Late fees have gone, in the last few years, from $3 billion collectively to $14 billion.

Finance charges are added and the like. As a consequence, the debt keeps growing, and you don't know what to do about, so you try to get 0% cards and transfer your balances. But if you miss one month, you're not only back up at the top rate, but there's a procedure which basically says that all of your credit will also go up, because you're considered, now, a credit risk. Your credit score takes a hit as well. So they have you in a highly computerized, data-bank-driven system where your behavior on one credit card could impact the actions of other credit card issuers.

The industry itself is also being consolidated so that fewer banks are controlling it. Something like ten banks control 92% of the industry. MBNA, which was the biggest company, was bought by Bank of America. Fewer and fewer people are benefiting, and only those at the very top of the system. Marketing is a big part of their expense.

If you are in debt, they'll send you more cards. In our film, a woman tells a story about her dog that died, and the dog got approved on a credit card. The whole idea is they know that only X percent of the people will respond to these solicitations, but that's enough to finance the whole marketing program and keep more and more people looking for a way to get free money. Free money, of course, is something which is not possible and not sustainable.

And if you live in a poor neighborhood, then you may be dealing with other kinds of predatory lending. There are no banks in some cases. You're dealing with rent-to-own stores, where you could be paying 700% interest on renting TV sets and the like. There are payday lenders, where you have to get a new loan to pay off the old loan, to pay off the old loan, et cetera, et cetera. It becomes a cycle of debt and dependency, which is an incredible financial crisis for a large number of people in our country. And it's getting worse.

Another part of the credit problem concerns mortgages. Many people have adjustable rate mortgages which involve a "reset." A reset means that they will raise the cost of the interest that you're paying, which will make it much harder for ordinary Americans to cope. The Washington Post had an article about what they called mortgage moms -- sort of like the old soccer moms -- women in the suburbs who are trying to pay the bills for their families, and are finding it increasingly difficult to do so. These different types of loan arrangements and credit offers are driving people into bankruptcy.

Yet the Bankruptcy Reform Bill was just passed with bipartisan support, Democrats and Republicans. $156 million was spent on lobbying for it, and the bill makes it harder and harder to get a second chance. The bill also exempted floods as grounds for bankruptcy -- this is just before Katrina happened. So people were not only losing their homes, but they were losing their financial stability.

BUZZFLASH: As you point out in the film, the law made it harder for individuals to file for bankruptcy, but if you're United Airlines or another large corporation, you don't have any problems. In fact, the government will come to your assistance.

DANNY SCHECHTER: That's true. Obviously there are two standards here. If you have wealth, if you're politically connected, if you're in the know, you're doing fine. But most people aren't. You've got stretches in the Midwest where we've had this tremendous wave of plant closings, and people taking the severance packages. Fifty thousand people losing their jobs. They'll be all right for awhile, because they've gotten some money now. But that's going to run out pretty soon. And then what? What happens to them?

Moreover, a lot of this debt situation is being funded itself by loans from from China. We have "communist" China financing capitalist America. We're increasingly dependent on them. If we spend a billion dollars a day in Iraq and Afghanistan, it becomes completely unsustainable. But people aren't talking about it. That bothers me.

That's why we made "In Debt We Trust" -- to try to get people to focus on this. Our web site, indebtwetrust.com, has a whole lot more background information such as links to other web sites and organizations that are working on the issue. Our hope is that we can get people to pay attention to this key economic justice issue that's been ignored by the Republicans, certainly, but also by many Democrats and progressives. As one expert in the film argues, if things continue like this, we're going straight into serfdom. Instead of being a serf to the landlord, you're a serf to the bank and to your debt.

BUZZFLASH: Let's return to credit cards again. How much profit do they make?

DANNY SCHECHTER: Credit cards are a major profit center of the banking industry. Thirty billion is one figure that was cited. The credit card industry is extremely lucrative. That's why, if you call them up and complain about a given charge, they often say, we'll take that off. Only a small percentage of people do call, so they can afford to be flexible. They also know, on the basis of their extensive research, that they can count on a certain number of people to default on loans and count on a certain percentage who will incur late fees and finance charges and the like. So the credit card business is a very lucrative industry. In turn, it finances other credit-driven industries as well.

BUZZFLASH: You have some clips of politicians in the film. Orrin Hatch was one. While he's usually wrong, in this case, he actually said something that was true. He said there was bipartisan support for the bankruptcy bill which took away many options for individuals to declare bankruptcy. Over the years we have, indeed, seen bipartisan support on behalf of the credit card industry. Why?

DANNY SCHECHTER: There has been a big K Street lobbying effort. According to a recent book, $156 million was spent just to get this one bill through. That's campaign contributions, that's favors, that's support for a lot of different politicians. These people are extremely corrupt. The point person on the credit card issue was Bob Ney from Ohio, who was forced to resign because of his tie-ins with corrupt lobbying. These guys have their fingers in the till deeply.

Some of this corruption has come out, but it's sort of like a cesspool. Some Democrats who try to raise the issue are very frustrated because their colleagues will say, "Look, I really need these campaign contributions." They call Joe Biden "the senator from MBNA," because he's from the state of Delaware, which is one of the two states that has given very low tax rates to all these credit card companies, and unlimited opportunities for them to operate out of the state on a national basis. South Dakota is the other state. Many politicians benefit from this arrangement, even if their constituents and America doesn't.

BUZZFLASH: If I recall, Daschle, from South Dakota, also supported the bill. There's a large presence of the credit card industry in his state.

DANNY SCHECHTER: Citibank moved there, and they got all kinds of special deals. Senators and representatives from those states are dominant on the committees that regulate the industry. It's the old story of special interests running the show. And because it's "economics," we have what's called the "me go" effect, which is, my eyes glaze over... It's so complicated for me to understand. People tune out when there are discussions of it.

Often the public discussions themselves match up some advocate from a community group against a very slick representative of a credit card company who has his message points down and is extremely persuasive. It's very easy, also, to blame the public, if you didn't pay your bills on time, or if you signed the agreements, which are essentially unreadable.

BUZZFLASH: You have one gentleman who holds up twenty pages in small print.

DANNY SCHECHTER: A law professor writes, "I can't even read these." This - and the companies can unilaterally change the terms of the agreement after you sign them.

BUZZFLASH: All of us who are reading this and have credit cards, of course, know you get these notices that say: here's an addendum. Who reads it?

DANNY SCHECHTER: Nobody does. They're made so that you can't read them. They're small print, very dense, and they're done by risk-minimizing lawyers who are there to guarantee that nobody can sue or get their rights.

At the same time, laws against usury have been rolled back. The only place to find them is in libraries. So the protections for consumers have been whittled away. Instead, you have a market-driven economy, and a market-driven government, where the big players are benefiting by these arrangements and most people are not. That's why this is such an important issue for us all to try to understand.

We showed the film at the Salt Lake City Film Center at the University of Utah, and we did another screening at the Rochester Institute of Technology. Twelve hundred students came out to talk about this. That's how massive the anxiety level is. One kid who was on the panel said, "Well, I'm $100,000 in debt because I'm financing my own education. And because I am taking such a heavy course load, I can't work on the side."

It seems like everybody has what you call a "topper" story. In other words, you tell people what's going on, and their response is, you think that's bad? Let me tell me about my cousin, my brother, my uncle, or myself. This issue resonates with everybody.

I've never worked on an issue that cuts across the spectrum the way this does. Everybody is feeling this pain, although some don't feel it's okay to talk about it, because they're complicit in the problem to some degree. They try to scam the system, and then the system is trying to scam them. Like in Las Vegas, the house always wins.

BUZZFLASH: Let's get back again to credit cards. As you wonderfully show in your film, the companies seduce college students into acquiring even more debt. They offer more and more credit cards and increase the credit lines to levels that the students could not ever afford.

DANNY SCHECHTER: One scene in the film shows a lecture by Professor Robert Manning, who's written the book Credit Card Nation -- an important book about this whole situation. Manning is basically speaking to parents on orientation weekend and explaining the problem. Kid after kid, parent after parent, they are testifying about having been warned about credit problems. But kids don't listen. They've gotten in deeper and deeper.

There was a little break in the professor's presentation, so I went next door, and in the hallway outside the lecture hall, there were the banks from Rochester, set up at tables, signing up kids for credit cards right there in front of me. We filmed it.

You can see the contrast here between this relentless, nonstop marketing machine, and ordinary consumers who don't know how to deal with it. Obviously, we all need money. We can't live without it. And we need credit. We have mortgages on our homes. We take out car loans. You can't just finance everything with your own money. But you often must do so on terms that are extremely disadvantageous to you and you're not even aware of it, and nobody's there to try to help explain it to you. That's the problem.

I went to Notre Dame in Indiana and spoke to Father Theodore M. Hesburgh, the great, grand old president of Notre Dame. He was telling me about the problems at his school and saying that this is one of the top problems that every college and university in America is facing. We need to do something about it.

The Congress is starting to stir on the student loan issue. There have been many increases, going from fixed rates to adjustable rates, with an overall increase in student loans. But Congress hasn't really dealt with the credit card side of the equation yet, so we need to make this a national issue. If we do, I believe it will unite people from different sectors of our society.

BUZZFLASH: The credit card industry is a major component of the engine driving the consumer society. If you look at ads for VISA or for any of these cards, they all promise you a certain lifestyle. It's like, if you wear a Michael Jordan shoe, you'll be as tall as Michael Jordan. Well, if you have a VISA credit card, suddenly your life has improved, your fantasies are fulfilled. You go on vacations. We forget that this product we're talking about is credit, meaning you don't have to have the money. You're being extended credit. I think a lot of people get credit cards and they don't realize the credit part of it.

DANNY SCHECHTER: It's a status symbol in many respects. The marketing approach is that you start with the blue card. Then you get the gold card and the platinum card. Now there's an American Express black card for people who charge $300,000 and more. All of this is designed to appeal to our desire for status, our desire to impress our neighbors, impress ourselves. It becomes a very easy way. Look, I have credit cards. And I'm trying to cope with them, too.

Sometimes credit cards are very useful to have. But you've got to keep it under control. One of the things we need is a government that will help ensure protections for consumers and make sure these companies live up to their promises. One of the things I show in my film is gigantic fines that have been levied on various banks and credit card companies for all kinds of abuses. Yet in the media, all we hear about is credit identity theft or credit card scams. We never hear about institutional crimes by financial institutions against their own customers and consumers.

BUZZFLASH: Credit cards feed the economic engine of the American economy, which is based on rampant consumption. We buy things. We throw them away. VISA says your fantasies will come true. The whole concept of the credit card helps to encourage consumption. The more you consume, the more you charge. The more you can't pay, the more interest that the credit card company collects. So you skip a month. You get assessed a $100 fine plus late charges. Essentially, a credit card company wants you in debt. This is one of the basic assumptions of your film -- they can't exist unless you go into debt.

DANNY SCHECHTER: Exactly. Also, just in terms of our society, we used to control the means of production. U.S. Steel was the major corporation in America until the steel industry went overseas, then the auto industry. Michael Moore did his film about Flint, Michigan and the auto industry. But today the real center of economic activity is not the factory, but the mall. Shopping has become our national obsession.

It's encouraged, and it's never been bigger. Consumers go to the malls in December, and then, suddenly, January comes along, and it's the return season. People are returning a lot of their presents or trying to get money back on them, because the bills have come in and they can't pay them.

Prices are going up across the spectrum. Interest charges are going up. Adjustable rate mortgages are going up. All of this is squeezing the American consumer and your working people in this country tremendously. And our politicians are not speaking to it. I'm really pleased that BuzzFlash wants to focus on this issue and talk about it. It's something we need to debate and need to discuss.

BUZZFLASH: You and I both know that many progressives -- and David Sirota is the great example -- feel that too many Democrats in Congress have joined the corporatist party, so to speak, which is a bipartisan party. Yet, as you pointed out earlier, this really should be a populist issue. It's the middle class and the poor who are the victims of this Capitol Hill deference to increasing the profitability of an already grossly profitable financial services sector. What's it going to take to get the Democrats to return to their voter base, who needs to be protected, rather than the K Street lobbyists, who are giving the contributions to their campaign funds on behalf of the financial services industry?

DANNY SCHECHTER: Well, independent media has done a great job in putting the war issues on the agenda. When we started, the major media was lined up behind the war almost totally, and other information was not available. Persistence at raising this issue has helped change public opinion. The Bush Administration doesn't have public support for what it's doing certainly, although it keeps doing it anyway. But the power of information can make a difference.

I think we need to do something similar on this issue. My film ends with the former governor of Georgia, Roy Barnes, saying: "If I was running for President, because I'm not," he says, "but if I was, or someone who is running for President takes on this issue, they will find tremendous support for it." This is the kind of issue that could really make a difference in America. I'm hoping that my film, and that articles on BuzzFlash and elsewhere, will get people involved in the issue, discussing it, and finally doing something about it.

BUZZFLASH: Thanks so much.


BuzzFlash Interview conducted by Mark Karlin.

* * *


"In Debt We Trust: America Before the Bubble Bursts" (DVD), a Danny Schechter film, available from BuzzFlash.com

"16 Tons" (lyrics and historical background)
"You load sixteen tons and what do you get?
Another day older and deeper in debt.
Saint Peter, don't you call me 'cause I can't go,
l owe my soul to the company store."

Danny Schechter's blog: http://www.newsdissector.com/blog/


Read 2893 times Last modified on Thursday, 08 February 2007 22:25