Maxed Out

Maxed Out: Hard Times in the Age of Easy Credit (2007) is a nonfiction book by American author and filmmaker James Scurlock examining the multitrillion-dollar personal debt crisis in the United States and the history of how it came about. Maxed Out is based on a 2006 documentary film of the same name directed by Scurlock. In its review of the book, The Christian Science Monitor writes, "Smartly written and by turns funny, irreverent, serious, and angry, Scurlock's book builds a persuasive case that deserves serious attention."

Scurlock traces the problem of personal debt to a major shift in the banking community in what type of customers they seek. In the past, banks sought out wealthy customers who would keep massive sums in their institutions and pay back their debts on time. Over time, banks began to target lower-class individuals whom these institutions expected to rack up large debts that they were unable to pay back, at least not immediately. The banks made massive profits from late fees and interest charges on these sums. These practices begin in 1958 when Joseph P. Williams, a product development manager at Bank of America, convinced his employer to send out a mass mailing of unsolicited working credit cards to customers. This "BankAmericard" program eventually spun off into his own company, which founder Dee Hock named the Visa Credit Card Association.

As increasingly more Americans tallied ever greater collective sums of debt, the banks partnered with debt collection agencies to impose punitive interest rates and even repossess customer's property. Sanford Weill, the former chief executive officer of CitiGroup, reportedly told his deputies that the customers he seeks are "people who eat at MacDonald's."



To be sure, Scurlock grants that Americans who wanted to live beyond their means, spending more than they earned in income were also to blame for the crisis. However, he also strongly suggests that banks deliberately created this mindset among many customers to enrich themselves to the tune of trillions of dollars. This idea is underlined by various interviews he conducted with individuals whose lives have been ruined by credit card debt. A mother grieves for her daughter who killed herself to escape massive credit card debt. Another woman was convinced by her bank to take out a second mortgage on her home to pay for healthcare expenses for her disabled son. As a result, she might lose her home. Others were hoodwinked by the notion that credit is the same thing as wealth, a myth Scurlock argues is reinforced by both the banking industry and popular culture. He quotes one woman who bought an 11,000-square-foot house on credit as saying, "If you look like you make money, eventually you will, you know."

Much of this is made possible by the federal government's removal of financial regulations that had been in place since the New Deal legislation of the 1930s, which was enacted to protect the United States from suffering a repeat of the Great Depression. Scurlock attributes this to the massive influence of financial institutions' lobbying arms. For example, he points out that MBNA bank was the single biggest contributor to the campaigns of President George W. Bush.

One of the most dangerous acts of deregulation came during Bill Clinton's presidency when Republican majorities in the House of Representatives and the Senate voted to repeal the Glass-Steagall Act. Passed in 1933, Glass-Steagall prevents investment firms from taking deposits while preventing federally-backed deposit institutions from making risky investments. The repeal of this law, Scurlock argues, paved the way for financial institutions of all stripes to invest heavily in subprime mortgages. In effect, the institutions artificially created a housing boom wherein customers who could not afford homes purchased houses and failed to keep up with their monthly payments. This was a repeat of banking institutions' ongoing gambit to convince low-income individuals to rack up credit card debt, only on a much larger and potentially more devastating scale. Beyond the personal impact this had on individual homebuyers, Scurlock argues that this system was likely to lead to a global financial meltdown. This meltdown did indeed take place later in the same year Scurlock published this book.



Finally, Scurlock lists a series of troubling statistics about the banking industry. For example, more than 90% of credit bureau reports contain errors. He also points out that General Motors, along with several other major American manufacturers, makes more money from interest payments on their products than they do on the actual sale of the products themselves. Most absurdly, close to half of Americans think they will win the lottery, underlining the fantastical attitudes of US consumers concerning wealth and debt.

Maxed Out is a frightening and infuriating chronicle of America's addiction to debt.