America's Economic Ills: Loose Spending, Lending

Ted Koppel has been thinking about the country's economic ills — from a dishonest company promising to improve your credit score, to the proposed economic stimulus bill in Congress.

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ROBERT SIEGEL, Host:

Senior news analyst Ted Koppel is not impressed with the stimulus plans put forth so far. He says they speak to a larger problem in our troubled economy, that we like lending and spending money that just isn't there.

TED KOPPEL: The evidence is everywhere. I'm fascinated and, I must admit, a little bit repelled by the activities of a company called TradeLine Solutions. According to a recent story in The New York Times, the company claims it can improve a borrower's credit score by, and this is a quote, "adding his name to a stranger's recently paid-off loan just before the account is closed." In effect, and for a fee of $1,399, TradeLine Solutions improves a bad credit record by adding it to someone else's good record without, I should point out, the knowledge of the person with the good record. It is clearly dishonest but not - the company's president hopes - illegal.

Why should we be surprised? Our credit card industry, after all, seeks out the very people who are least able to repay what they have borrowed on time. People who've paid their bills on time, after all, are of marginal interest to the credit card companies, whereas buyers who run up charges they cannot afford to repay are the very borrowers who end up paying 15, 18, 22 percent interest on their monthly bills. Now, you're talking profit.

More and more, some of the key building blocks of our economy resemble nothing quite so much as a giant Ponzi scheme, in which offering credit to the least qualified borrower is the grease that keeps the engine moving. The collapse of the housing market shows signs of that mentality, too. Let's expand the mortgage industry by lending money to people who really don't qualify. We'll call them subprime mortgages, and as long as real estate prices keep going up, no one will recognize what a risky scam it is.

Which brings me to the president's current proposal to revitalize the economy with something like $150 billion stimulus package. No one else seems particularly troubled by this, but where exactly is that money coming from? Is the Treasury going to print $150 billion worth of new money? Are we cutting the Pentagon budget perhaps? Or are we just borrowing it, like the $1.4 trillion that China has lent us over the past several years?

I'm sure there's a perfectly simple answer. It's just that neither Democrats nor Republicans in Congress seem inclined to press for it these days. After all, if the stimulus package works and the economy revives, it'll all pay for itself. That's how it always works, in theory.

This is Ted Koppel.

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