Saturday, February 16, 2008


The typical conservative leans back on his couch, meditatively stirs his Chivas and water with a pinkie and declares (with some considerable justification) "Well, it’s their own damned fault if they got in over their head. What the hell were they thinking?"

Relaxwithadrink The typical conservative leans back on his couch, meditatively stirs his Chivas and water with a pinkie and declares (with some considerable justification) "Well, it’s their own damned fault if they got in over their head. What the hell were they thinking?"
People are indeed responsible for their own actions. But when you take advantage of the ignorant and the dirt poor, it’s not only disingenuous to hold them to middle class standards, it’s very, very dangerous. A number of the ‘brightest and best’ in Congress went through a little experiment a couple years back, trying to live just one month on minimum wage.
Not many of them made it, but that didn’t blast loose the minimum wage laws. Like water-boarding Navy Seals to show how tough they are, the Congressmen knew they weren’t going to drown in debt.
Knowing you’re not going to drown changes the game. Who among us in legislative control of our neighbors’ financial destiny has ever been truly poor?
Workingpoor Take a walk on the have-not side sometime, it’s not all that dangerous. Price a used car (or a new one), a loaf of bread, a TV or an apartment over on the seedier side of whatever town you live in and see how much more costly it is to live there.
What’s the interest rate on your credit card, 10%? Try 28% and see how easy it is to pay off. 0% financing on a new car? Not on this side of the tracks. Try 24% and watch what happens to monthly payments, the years necessary to pay off a 6-year-old car and the total cost to buy a beater. Warrantee? Get Serioius.
Businessweek Vincent Humphries needed a computer when his old one died? We’ve all had that happen. Vincent needs his because he does a little freelance programming to subsidize his $875 social security. A little background on Vince; he’s not a bad guy, but it’s been a hard life and he’s not all that well educated.
(Business Week; The Poverty Business) Raised in Detroit and now living in Atlanta, he never got past high school. He started work in the early 1960s at Ford Motor Co.'s hulking Rouge plant outside Detroit for a little over $2 an hour. Later he did construction, rarely earning more than $25,000 a year while supporting five children from two marriages. A masonry business he financed on credit cards collapsed. None of his children have attended college, and all hold what he calls "dead-end jobs."
Whether some lives are hard life is not the point. Whether they are unnecessarily expensive is very much the point. We don't expect that. Most of us don't even know it. Vince always worked hard and was never jobless, but it’s expensive raising five kids on $25 grand and somehow they all missed out on college, reinforcing the cycle of poverty.
Bluehippo The setup:
When his computer broke down in 2005, Humphries fretted that he would never be able to afford a new one. A solution appeared one night in a TV ad for a company with a catchy name. BlueHippo offered "top-of-the-line" PCs, no credit check necessary. He telephoned the next day.
Bluehippohome The sting:
He remembers the woman on the other end describing the computer in vague terms, but she was emphatic about getting his checking account information. She said BlueHippo would debit the account for $124, and Humphries then would owe 17 payments of $71.98 every other week. At the time, $800 would have bought a faster computer at Circuit City Stores, (CC ) but he didn't have the cash.
It wasn't until a week after placing his order that he realized that BlueHippo's terms meant he would pay $1,347.66 over nine months, Humphries says. He called to cancel. The company told him that would take as many as 10 days, he says. When he called again, a week later, a customer-service representative said cancellation would take an additional 15 days. "I sensed then that I had my hand in the lion's mouth," Humphries says. During his next call, a phone rep told him BlueHippo had a no-refund policy. He would lose his $124, even though he had never received a computer.
Bluehipporensin Blue Hippo is run by a crook by the name of Joseph K. Rensin. If you live in the Baltimore area, Joe may be a member of your country club. It’s possible he has a trophy wife and a Mercedes, even probable, but he’s still a crook.
The attorneys general of New York and West Virginia are investigating the company, and the Illinois AG has filed a consumer-protection suit in that state. In response to a Freedom of Information Act request by BusinessWeek, the Federal Trade Commission says it has accumulated 8,000 pages of consumer complaints about BlueHippo. The FTC is investigating whether the company has engaged in deceptive practices.
Eight thousand pages of complaints. Way to go, Joe. Who goes to the bother of an FTC complaint? Ten percent? Two percent? What we have here is perhaps a world-record in the cheating-the-poor department.
BlueHippo sells well-known brands such as Apple Inc. (AAPL ) computers and Sony Corp. (SNE ) televisions. Gateway Inc. (GTW) became a major supplier in December, 2003. "We've clearly been aware of their business model from the get-go," says Gateway spokesman David Hallisey. More recently, Gateway became troubled by customer complaints and decided earlier this year to sever ties with BlueHippo. Given its knowledge all along about BlueHippo's methods, why did the separation occur only this year? Hallisey explains: "We're publicly traded and trying to make a profit, so that's a consideration."
Well now, with a spokesman like that, who needs PR?--publicly traded and trying to make a profit answers it all. That’s essentially the same thing the bums and thieves in the sub-prime fraud were doing, fishing in the same puddle of the poor, it seems.
Darkcloud Interestingly, where credit-cards are involved, a cloud three times as dark as the sub-prime fraud is rapidly forming on the horizon.
And for the same reason; everyone's publicly traded and trying to make a profit. There are all these poor and desperate and uneducated customers out there. We can preach the gospel of it being all right to join the consumer hallelujah chorus.  In this newly invented consumer economy, you don't have to worry about whether the poor bastard can ever pay off--his debt has been sliced and diced and passed off to others.
A victimless crime.
A few months after his BlueHippo experience, Humphries did buy a new computer. He borrowed $400 from a friend and bought a General Quality PC from Fry's Electronics, a retail chain. The loan covered the purchase of a 17-inch flat-screen monitor, a DVD burner, and a desktop computer with a 40-gigabyte hard drive. Humphries tightened his belt and paid his friend back in $100 installments over four months, interest-free.
Micro-loans to each other. The way families and tribes and even kids trying to buy their first car used to get along. Life before the credit-card. Life before strangers took over and turned us all into statistics.
So, Vince got a better computer at less than one third of what Joe Rensin was going to lay off on him, but the key is that he had a friend to help out. The poor have lots of friends. That’s one thing about being poor is that you understand and appreciate the plight of your neighbors. But not many are able to help, at least not out of their own pocket.
Creditunion When the poor form their own credit-unions, they’ll begin to get out of the crack they’re in. The local credit-union can explain about those flashy late-night BlueHippo ads and offer alternatives before the axe falls. Credit unions might actually keep the axe from falling, which is why so many banks hate them.
Rather than a complaint about how we treat our poor in this country, this is a cautionary tale about the next big explosion in consumer finance fraud. The same gamers are guilty of predatory lending and the house of (credit) cards they’ve built is about to tumble.
The numbers, when they begin to unravel, are three times what's at stake in sub-prime mortgages. Government hasn’t the foggiest notion of what to do.
Ben Bernanke is soiling his pants and the best Henry Paulson can come up with is to give us each $600 to go out and spend. Which is akin to buying your alcohol-addicted uncle a bottle of Jack Daniels.
Media comment;


  1. Being your typical conservative that sits back and drinks his Chivas and water ... and then chews the ice until another glass magically appears... and your typical conservative that in the last four years combined has made less than someone getting min Unemployment for 3 months has... I can say that you pretty much missed the boat here.
    Do you honestly expect any business that wants to stay in business to offer loans to people that have very little money at decent interest rates?
    Its called risk. They know that are going to get a bunch of defaults and there is nothing they can do about it. The company selling the computers knows that a good chunk of the computers they send out they will only get the initial payment on and nothing else - and have no real recourse to recoup the loss. That means that the others in that group that actually do make all their payments are going to have to pay for the others that do not.
    The benefit for those that do make all their payments in that group is that its one small step towards leaving that group and its interest rates.
    Oh ... and I love "and somehow they all missed out on college, reinforcing the cycle of poverty"
    Sucks to be them. They reinforced the cycle on themselves. Anybody in this country can get the loans (at very good rates, low pressure to pay them back any time soon) to go college. They didnt - to bad - their problem.
    Throw in the simple fact that even if someone walks up and offers to let you use their 2008 Vette, you just have to pay for insurance, maintenance, and gas - and you do not make much money... you can not afford to accept the offer because you can not afford the insurance, let alone maintain it.
    No difference when it comes to kids. If you can afford to maintain them - buy a condom - much cheaper investement... or just keep it in the pants... even cheaper.

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