Brain Drops: Crisis, give credit where it's due

By David Zizzo

Published: October 1, 2007

You've probably heard from news reports or the guys changing the locks on your house that America is experiencing a credit crisis.

How this happened is a complex and boring tale that doesn't involve Kevin Federline, the Nextel Cup or upgraded iPhones, which could be why nobody has paid attention, including nerdy guys who get paid to pay attention — Alan Greenspan, for instance.

As former Head Nerd of the Federal Reserve Bored, Greenspan took seriously his responsibility to write a book. He also tried to keep an eye on financial things such as lending practices when he wasn't working on his manuscript.

But Greenspan now says even he was surprised when all the large mortgage loans given to people with small incomes didn't work out. Many other experts in the federal government also missed subtle signs of the impending crash, including borrowers parking their Porsche Boxster pizza delivery vehicles in their air-conditioned, four-car garages.

Regulators were too busy with their own credit-related problems — finding enough zeros to express the national debt, for instance — to worry about whether we really could afford that home-theater room with 65-inch plasma screen. (Tip: Definitely go for the 5.1-channel sound system with progressive-scan DVD. No payments until May.)

But government regulation isn't the real root of the credit problem. In fact, all the borrowing and lending isn't, either. It's just that paying-back part. If we didn't have to give stuff back, none of this would have happened.

Still, some people claim Americans borrow too much. There is even a growing fringe movement urging people to take radical steps, spouting crazy talk such as "Save your money, then use that to buy things.”

Of course, that would mean putting off buying a plasma Jumbotron and putting off other gratification for this instant. Where would America's credit industry be if such ideas spread? Imagine the effect ... hey, wait, isn't that K-Fed using that iPhone in that Boxster?

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