Manning Addresses the Crisis of Debt

(L to R) Director of the Fischer Institute Len Harmon; Nichols President Debra M. Townsley, Ph.D.; Speaker Dr. Robert Manning

"For the Love of Money" by the O'Jays was pulsating over the loudspeaker system in Davis Hall as Nichols College students arrived to listen to Dr. Robert Manning's presentation on America's attitudes toward credit and debt. It was part of an April 21st Annual Robert C. Fischer Memorial Symposium called "In Debt We Trust."

"America is in a crisis," Manning began. Over the last three decades of the deregulation of the U.S. banking industry, the banks' best customers have changed from those who pay off their loans to those who are perpetually in debt. America has witnessed an historically unprecedented rise in household debt levels and a record low consumer savings rates.

Manning told students that credit card debt is going to be a defining feature of their generation and that Americans are going to experience the first consumer-driven recession. "As a nation, our collective economic security is at risk."

Manning stated that the debt crisis is both an issue of individual responsibility and institutional irresponsibility. During the Colonial Period, Ben Franklin's stated, "A penny saved is a penny earned," was the typical consumer attitude toward personal finance.

By the time the credit card industry started to take off in the late 1970's, the U.S. economy experienced a shift from low cost manufacturing production to financing consumption. Two Supreme Court decisions paved the way for institutional irresponsibility: the Court found in 1978 that banks could move to a state without an interest rate cap, and in 1996 that a state could not limit a bank's penalty fee.

In terms of consumer abuse, Manning detailed problems associated with "rent to own" stores requiring high interest payments and increasing the number of people borrowing money on revolving credit. Today, easy credit and a lack of institutional and personal responsibility mean that people with jobs are increasingly filing for bankruptcy.

Manning concluded: "We are looking at a very, very difficult two years in front of us. The question is: how is this pain going to be shared?" He urged Nichols students to ask our presidential candidates tough questions about debt. And most importantly, "start demanding social equity and social justice in banking credit practices."

Dr. Robert Manning
Manning is Research Professor and Director of the Center for Consumer Financial Services at Rochester Institute of Technology. He is author of the widely acclaimed CREDIT CARD NATION and is currently involved in developing national financial literacy programs for college students, community based alternatives to high cost "rent to own" stores, and informal bankruptcy options for consumers who seek to retain their homes. Manning received his Ph.D. from Johns Hopkins University, M.A. from Northern Illinois University, and B.A. from Duke University. His website is: http://www.creditcardnation.com