Robert Kuttner on why the financial system needs to work for consumers at all income levels:
America’s financial crisis and the related recession are not hitting everyone equally. While many well-to-do investors have lost wealth in the plunging stock market, lower-income Americans were the first victims of the calamity, taken in by rapacious sub-prime mortgages and other predatory forms of consumer credit. As many as 10 million families will lose their home before this crisis is resolved. Tens of millions more are finding that their home equity, the fruit of many years of faithful monthly mortgage payments, has shriveled up because of declining housing values.
Meanwhile, other forms of consumer credit are also in disarray. Moderate-income Americans, who faced decades of declining job and income security, found themselves relying on home-equity withdrawals or exorbitantly priced credit-card borrowings as a substitute for adequate income and decent social protections. Tamara Draut has called this the plastic safety net. But with banks tightening credit requirements and home equity plummeting, that personal financial strategy is no longer available; it was always a precarious cloak for shameful levels of inequality and insecurity. So hardship continues, and it is no more equally distributed than anything else in America.
