Hallucinated Wealth

We've seen the evaporation of a few trillion in equities, in people's retirement accounts, in housing valuation, but I maintain that most of this wealth was hallucinated to begin with. It never really existed. My dad described home equity as Chinese dollars several years ago, and it's an apt term today; a Chinese dollar might look good until you try to put it to use, and like everything ever imported from China, it either immediately or eventually turns out to be a worthless piece of shit. Equity is only valuable if you sell.

Home equity is given too high a mark. What really matters is how much you owe...it has always mattered how much you owe. We've heard a thousand times how the 2001-2006 buyer planned on re-financing when values rose. But none of that equity ever impacted how much debt they carried...because no one ever did a cash-out re-fi and moved "down" to unload their debt. No one. And they never, ever, planned on doing that.

To (sorta) switch gears for a moment -- in 2003 I had my credit files from Experian, Transunion, and Equifax frozen under what was then a new California state law. I wrote each a letter, paid each a $10 'fee', and to this day my files are frozen, unable to be accessed by potential creditors.

The 'fee,' by the way, can be waived if you have proof of being an identity victim. Beautiful. Just fucking beautiful. One cannot even be preventative without having to pay. I'm convinced convinced! that the state law includes this fee as a bribe, a kickback, to the massive consumer credit lobby that fought tooth and nail to prevent this law from ever seeing the light of day. What this 'fee' is, is a payment to the credit bureaus to offset the fact that they can now no longer sell your information to others.

These three credit bureaus were accomplices to this 'credit crisis.' For example, a number of businesses popped up in the last decade that would buy information from the bureaus, combine that info with all other public info they could get, such as court records when you bought or sold property or public bank records, then 'combine' these data and put you into a profile tranch or 'trigger list' with a few million other similarly profiled Merikans. They'd then sell this info to issuers of credit who then agressively targeted those in the trigger list.

Then, as soon as someone bites on a trigger, other information on this person is gathered and used to build a predictive model for the next round of credit offers, sent to people with similar financial profiles. Equifax themselves sells a product called TargetPoint Predictive Triggers, a list of people with a statistical propensity to take on new credit.

Then somewhere, someone applies for a mortgage! The mortgage company would almost certainly ping the credit bureaus to determine their creditworthiness. But then each credit bureau would immediately turn around and sell a list of these people to other banks or brokers, who would then aggressively market their offers to these people. So imagine average Joe the Merikan Plumber: he wants to re-fi his house he bought in 2003, so Joe goes to bank X to apply and within days he gets a call from another lender offering exactly what he wants to do. He's thinking "Man, I can't believe you just called me! I was just getting ready to do that with bank X!"

Let me tell you, freezing my credit immediately stopped, stopped! the thousands of pre-approved credit card offers I used to get in the mail or by phone. I can't go into my Wells Fargo bank and even change my home equity line info without the bank running into a credit roadblock...as would someone trying to open or change any line of credit in my name. I can get all the financial details of an offer by a cable subscriber only to have them stop dead when they can't access my credit...so I don't have to commit then and there. I can tell a car salesman at any dealership "assume I'm your best qualified buyer" and negotiate the price independent of my credit score because they can't ping my creditworthiness ahead of time.

To all these people, any wealth I may have is hallucinated. To every credit issuer, I may as well not exist. My dad said years ago he was denied a credit card because he 'had no credit history.' He rhetorically asked, "How am I any more a credit risk than an 18 year old applicant with no credit history?"