The Washington Post published an investigative report last week that highlights troubling continuities between the pre-2008 financial crisis economy and today. In it, reporter Peter Whoriskey details the activities of Mariner Finance, one of the largest “consumer installment lending” companies in the United States. Companies like Mariner are in the business of offering extremely high-interest loans — with interest rates as high as 36% — to economically-strapped, credit-compromised individuals. While this industry presents itself as providing a vital service to people otherwise unable to obtain loans, and so filling a necessary niche in the economy, the article clarifies how such a service is inextricably linked to a predatory and immoral business model.
In the case of Mariner, we see that the business model is not simply to reap outsize interest from people living at the financial edge, but to drive such people into default on these exorbitant loans. Ex-employees of the company describe efforts to push further loans on people already unable to pay back the original money, in an obvious effort to get them to default so as to stick them with even more fees. Adding insult to injury, the fine print of the loan contracts requires defaulting customers to pay the company’s legal expenses; in a telling detail, Mariner defends this practice by stating that it is the lawyers, not Mariner, that make money off this arrangement, as if the fact of the customer being screwed is somehow mitigated by haziness around which corporation is doing the screwing.
The individual stories told here shock the conscience. A woman in the midst of a medical crisis and a non-native English speaker are among the victims of the hardball tactics of Mariner employees.
The final layer of merde in this shit sandwich of a scam is that the president of the private equity fund that owns Mariner is none other than Timothy Geithner, former treasury secretary under President Obama, who in his former role opposed such predatory lending. Geithner’s willingness to profit off such behavior in the present offers yet more fuel for the already well-grounded case that the Obama officials in charge of dealing with the financial crisis were ultimately more sympathetic to the needs of big finance than the public at large, the consequences of which we continue to grapple with.
But it’s when you pull back from the sleazy tactics to contemplate the broader picture that the story of Mariner and its ilk grows even more disturbing. Consumer installment lending companies engage in bottom-feeding and exploitative behavior, but these companies in turn have become darlings of private equity funds that invest the money of the wealthiest strata of American society; the Post notes that “three of the largest companies in consumer installment lending are owned to a significant extent by private equity funds.” Stated as plainly as possible: this is a way that the richest people in the United States not only make money off the poorest people in America, but in a way that makes them even poorer. Pretending to alleviate the ravages of inequality, in reality they seek to profit off of it. This is a blinding instance of class warfare perpetrated by those awash in riches against those barely afloat or already underwater. As one former Mariner employee remarks, “It’s basically a way of monetizing poor people.”
But along with such stark revelations, the story of Mariner steers us headlong into some of the most powerful questions and mysteries of American life today. The central one may be how a democratic society can find itself trapped in a spiral of increasing inequality for the great majority of its population, including the increasing immiseration of a large percentage of those people.
The Post story provides some tantalizing leads. One is Mariner’s justification for its practices: essentially, that the company is providing a loan service to people otherwise not served by the credit industry, and that in doing so they are helping this population. Put a little more abstractly, Mariner has in effect both discovered and created a market, and asserts that this creation of a market is synonymous with serving a public good. Yet this apparently virtuous connection between serving a market and serving a public good would have us ignore the reason why these folks can’t get loans through the banking system in the first place: because they have a high risk of not being able to pay back the money back. The fact that Mariner’s lending practices are so thoroughly exploitative suggests that there is a mismatch between the crisis these people are in and the notion that there’s a market solution to the problem. If your solution is the same as making people’s problems worse, that’s not a solution; it’s making yourself part of the problem.
The notion that every problem can be solved by a profit-seeking corporation ignores the ethical and political dimensions of millions of Americans being on the edge of destitution. Essentially, companies like Mariner see their customers not as citizens deserving of compassion and respect, but as marks to be taken advantage of; they substitute the morality of the casino for the morality of a democracy.
That corporations would prefer the cold logic of profit over the humane and ethical standards of democratic fraternity is hardly a shocker, but it seems critical that we fully grasp the degree to which the U.S. has deferred to such thinking on fundamentally moral questions such as how to offer assistance to the poorest segments of American society. But this arrangement couldn’t survive were it not for a complementary mindset lurking in the American population: that people in dire financial straits deserve what they get. This judgmental moralism seems like a prime candidate for why the exploitation of the already down-and-out doesn’t provoke widespread outrage. If you deserve to be poor, then you deserve to be poorer. In a tortuous maneuver, Americans seem indifferent to the purely economic logic that if there’s money to be made, these people should be exploited, yet endorse the parallel logic that because they’re poor, they deserve to be exploited. This thought process has the additional advantage of placing those who engage in it outside the realm of the exploited. I’m not arguing that all of this is a wholly or even partly-conscious line of reasoning for most people, but the idea that what people get is what they deserve feels like a key piece of how we justify to ourselves a situation of extreme inequality. In such a claustrophobic and self-perpetuating scenario, empathy begins to seem downright revolutionary.