All items from Credit Slips

How exactly do people make ends meet? While there are a few formal studies of "payment hierachies" courtesy of the big data organizations, there is little ethnographic work. A new contribution in this regard is "Robbing Peter to Pay Paul":  Economic and Cultural Explanations for How Lower-Income Families Manage Debt by Laura M. Tach and Sara Sternberg Greene. The authors interviewed 194 lower-income households, finding that debts generally receive less attention than regular monthly expenses where credit cannot substitute for meeting the need (e.g., paying rent). The best findings of the paper describe how households choose among debt coping strategies, which Tach and Greene categorize to include debt juggling such as rotating which debt to skip paying, rejecting responsibility/ignoring debt, using an EITC refund to make a large payment, and others. Tach and Greene sketch out an "Injustice Narrative" based on respondents' own understandings of why certain debts should be ignored or rejected. In their sample, these debts were frequently subprime credit cards or debts ballooned up with fees.



Posted 8 weeks 2 days ago

I just read Jennifer Taub's outstanding book Other People's Houses, which is a history of mortgage deregulation and the financial crisis.  The book makes a nice compliment to Kathleen Engel and Patricia McCoy's fantastic The Subprime Virus.  Both books tell the story of deregulation of the mortgage (and banking) market and the results, but in very different styles.  What particularly amazed me about Taub's book was that she structured it around the story of the Nobelmans and American Savings Bank.  
The Nobelmans?  American Savings Bank? Who on earth are they?  They're the named parties in the 1993 Supreme Court case of Nobelman v. American Savings Bank, which is the decision that prohibited cramdown in Chapter 13 bankruptcy.  Taub uses the Nobelmans and American Savings Banks' stories to structure a history of financial deregulation in the 1980s and how it produced (or really deepened) the S&L crisis and laid the groundwork for the housing bubble in the 2000s.  



Posted 8 weeks 6 days ago

OupbookCredit Slips readers, please note the publication of a new book edited by Marion Crain and Michael Sherraden. The New America Foundation is hosting an event on the book tomorrow, Wednesday, May 28, 2014 at 12:15 EST. Not in Washington, D.C.? The event will be webcast live



Posted 9 weeks 1 day ago

Yves Smith has a fascinating post about how private equity firms (which, as she notes in the comments is largely a polite rebranding of "leveraged buyout firms") charge fees for services provided by captive affiliates to their portfolio companies.  On some level none of it is anything so new--part of the LBO game has always been to suck out fees and dividends from the target company, while gambling that the target would be able to service the debt incurred for its acquisition.  Even if the target goes bankrupt, the LBO sponsor may have still made money because of the fees and dividends. 
What I thought was really interesting here was to see the parallel with the private-label mortgage securitization market.  



Posted 9 weeks 5 days ago

I have a multi-book review essay on the financial crisis that is now out in the Harvard Law Review. Sadly, Timothy Geithner went to print to late for me to include his book. James Kwak has written a nice response to my essay here.   



Posted 9 weeks 6 days ago

Arrows...but first, a new (and short!) article: Please download here a just-published piece on the first months of Detroit's bankruptcy, resulting from a fall 2013 Fordham symposium. It reflects efforts to follow public parts of Detroit's chapter 9 through recordings of court hearings and monitoring the docket. And although largely descriptive, the piece sets the stage for unpacking the institutional and functional roles played by the federal court in municipal bankruptcies and beyond.



Posted 10 weeks 23 hours ago

Paul Krugman has a column today about the blind, fundamentalist faith in efficient markets.  This is a phenomenon that Stephen Lubben and I have been discussing recently (did Krugman just preempt our paper idea?), as we've both encountered it in the financial regulatory policy debate: 



Posted 10 weeks 4 days ago

You thought that Google was just a search engine.  It turns out that Google is also a credit reporting agency.  The octopus has a 9th tentacle.  Didn't see that coming. (I guess that makes it a Googlepus...) That's the implication of the European Court of Justice's ruling ordering Google to take down links to the advertisements to a foreclosure sale from 16 years ago.  
The commentary on the ECJ's Google ruling has focused on the ECJ classifying Google as a data processor, but I think the credit reporting part of the decision may be just as significant. The ruling looks a lot less radical when understood from the credit reporting perspective, although it remains a problematic ruling because it is not limited to such a context.  

Here's the background.  In 2010, a Mr. Costeja González, a Spanish national, filed a complaint against a Spanish newspaper and Google for violating his privacy rights under the EU Data Privacy Directive (Directive 95/46) and its Spanish implementation, particularly his "right to be forgotten".  González's complain was that when he ran a google search of his name, he would obtain links to the newspaper's pages advertising his home in a 1998 foreclosure sale.  



Posted 10 weeks 6 days ago

I have an op-ed in today's American Banker on the supposed efficiency and fairness of binding mandatory arbitration.  We've given arbitration occasional coverage on the Slips over the years, but it's never been a major focus of our posting, in part because it isn't inherently a credit issue. Instead, the fight over arbitration is another chapter in the fight over whether public services should be privatized.  It's worth noting, however, in the time since our coverage began (not to take any credit for it), the needle has moved a bit on binding mandatory arbitration in consumer contracts--both ways.  



Posted 11 weeks 22 hours ago

 
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Some thoughts on the anticipated bondholder objection to Detroit's "art deal," up now over at Dealb%k.



Posted 11 weeks 1 day ago