Rich Galen

The sub-prime mortgage mess which a few months ago we were assured would cause no more than a ripple in the economy because so many of the potentially bad loans had been securitized and the risk was spread and … what's the official financial term for "blah, blah, blah?"

That ripple turned into a tsunami as mortgage brokers, banks, stock markets, hedge funds and financial powerhouses were flooded with bad news, bankruptcies, and margin calls.

The sub-prime mortgage issue will probably be made worse once the Congress sticks its nose into it and decides to bail out people who took out those impossible loans - meaning you and I will be helping make all those bad mortgage payments.

Think about that the next time your landlord takes his sweet time fixing the garbage disposal unit in your one bedroom, one bath apartment which is conveniently located on the third floor of a building which has no elevator.

One of the reasons we are in this mess - and there will be more messes to follow - is because we have become a Monthly Payment Economy.

Watch a car ad. Any car ad. You are not likely to every get the total price of the car. The only number you will see is the monthly payment (for highly qualified customers).

Want that luxury car? Not to worry about the total cost, we'll just stretch out the payments to 84 months - seven years. Think I'm kidding? Head over to your car dealer and hear it for yourself.

Need anything from any store for any reason? No problem. Stick it on your credit card. Card maxed out? No problem again. You've be PRE-APPROVED for another $2,500 or $5,000 or however much at a low, low annual percentage rate of 15 - 20%.

Anyone can afford another $50 or $70 per month payment. It's when you add $70 almost every month for a couple of years when you suddenly discover your walletful of credit cards is now costing about $1,500 a month just to make the minimum payments.

For those of you sending Trent or Missy off to college in the next week or so, keep this in mind: According to an article in the Ventura County Star, "freshmen who start out with no debt are likely to owe about $1,500 to credit card companies by the end of their first year of college."

Someone tell me the difference - other than scale - of a 17-year-old college freshman being driven by peer pressure to fill out app after app for credit cards (and getting an official school logo-emblazoned plastic beer stein for the effort) and someone 25 years older being brow-beaten by a mortgage broker into a mortgage which the recipient can't even make the payments under the "teaser rate" much less after the rate is "adjusted."

I know this doesn't apply to you, but according to a Marketwatch article on the foxnews.com website, "On average, households that carry a balance on their credit cards owe more than $13,000."

In Washington, DC there is a move afoot to put the brakes on the payday loan business. These are shops - generally in minority neighborhoods - which lend relatively small amounts - in the hundreds of dollars to be repaid on the next payday.

Of course, they are often not repaid so the initial annual percentage rates (which, according to the Washington Post "range from 349 to 550 percent" is jacked up even higher by fees and additional loans to pay off the initial note. According to the Post "99 percent of payday loans turn into long-term debt because the average borrower renews a loan eight times per year."

From the Congress' spending bills to the payday loan recipient. Our entire economy is based on making our monthly payments.

If very many begin missing those payments, it will make the sub-prime mortgage tsunami look like … a ripple.

On a the Secret Decoder Ring page today: Loads o' Links today. One for every article referenced plus a Credit Card Calculator which shows you how many months - or generations - it will take you to pay off your balance(s). Also a Mullfoto from the Iowa State Fair last week and a Catchy Caption of the day. Also, if you haven't yet, you should check out the Mullblog!. There is interesting stuff there and, you can respond for the whole world to see.


Rich Galen

Rich Galen has been a press secretary to Dan Quayle and Newt Gingrich. Rich Galen currently works as a journalist and writes at Mullings.com.