I received a copy of Charles Geisst’s newest book, Collateral Damaged: The Marketing of Consumer Debt to America*, from the publisher. As the subtitle suggests, the book is a history of consumer debt. I found it interesting and insightful.
After finishing the book, I decided to ask Mr. Geisst if he would answer a few questions for me. He obliged and the you can see the results below.
JLP: What inspired you to decide to write a book about consumer debt in America?
CG: Too much consumer debt has been created by securitization in the US and it was time to determine how much of a role it played in the crisis. Turns out it was significant.
JLP: What do you think was the main cause of the credit/mortgage crisis we experienced over the last couple of years? Was there one event that stood out to you as the main cause or was it a number of events?
CG: The main cause of this was ease of access to credit, from the lneding banks and credit card companies. But clearly it was caused by excessive securitization.
JLP: You talk about usury laws in the book. What are usury laws and do you think they should be brought back?
CG: Historically, in the US usury laws limited the amount of interest that could be charged on a loan, mortgages and consumer loans, although sometimes vaguely. The idea is to bring them back as one law on the federal level, limiting the amount of interest on credit cards and other forms of consumer interest.
JLP: Can another debt crisis be avoided? If so, how?
CG: Avoid next crisis by strict obedience to good lending practices and establish limit on consumer interest. Also, securitization must be effectively monitored.
JLP: What role do you think regulation plays in a capitalistic society? What areas should be regulated?
CG: Too broad to answer easily. Effective regulation on the credit creation process.
JLP: Do you think America is still a capitalistic society?
CG: Yes, capitalism is much more than unbridled, unregulated tomfoolery of the type we have seen over the last 20 years.
JLP: I have written quite a bit about the mortgage crisis. I know it is simplistic but I have always taken the stance that lack of personal responsibility played a huge role in this crisis. What are your thoughts on this?
CG: Yes, of course but it is too difficult to quantify and then qualify. Usually a political point made by conservatives.
JLP: Was it a wise decision for the government to get involved by bailing out financial institutions and some borrowers? Does this set some sort of precedent that the government will always come to the rescue?
CG: Government always has, except in cases of blatant criminality.
JLP: Where do you see the U.S.A. going from here? How long will it take us to move beyond this crisis?
CG: Hopefully, back to a simpler method of borrowing and lending, with less bells and whistles and exotic products. Probably take 5 to 7 years.
JLP: Thanks for your time.
If you are looking for a book that will give you a good overview of the history of debt in America, check out Collateral Damaged*.