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The Bank Mafia

The number of bankruptcies has risen 400% in the past 25 years, and soon experts think that 6 million families with children?that's one in every 7?will go bankrupt. Why is everyone going broke? One reason is that, due to deteriorating schools, families stretch their dollars too far to move into neighborhoods with good schools. Another is credit card interest rates, which are higher than the "vigorish" the Mob used to charge and puts most of America's money in the pockets of a few banks.

The Bush administration initially vowed to change the law to make it harder to declare bankruptcy, but backed down due to the economic recession. Marilyn Gardner writes in Christian Science Monitor that bankruptcy expert Elizabeth Warren, who teaches law at Harvard, rejects the theory that families are throwing their money away on big-ticket luxury items like wide-screen TVs. She blames the trend on the high costs of housing, education and healthcare.

No matter how much the economy tanks, housing prices seem to do just fine. How can folks who are broke afford a new house? One reason is that interest rates are at an all-time low. But another is that, because so many of our schools are in such bad shape, families increasingly feel the necessity to buy a more expensive house in a neighborhood with good schools. And a deregulated mortgage industry allows banks to offer homeowners much larger mortgages than they did in the past.

Job layoffs are a big problem, since in most families with kids, both parents work, and if one of them gets laid off, they can no longer pay the mortgage and often have no choice but to declare bankruptcy. Warren says, "Two parents working hard at two jobs is not a guarantee against economic disaster. Today's parents feel they have no option but to pour enormous energy and all of their economic resources into getting their children into decent schools." This is the reason she's behind school vouchers, which would allow parents to choose their children?s schools, without having to live in a specific neighborhood.

Warren thinks credit cards are another major problem and says there should be caps on the interest they're allowed to charge. She says, "Bankers who wear $3,000 suits and starched shirts are now charging interest rates that Jimmy the Leg-breaker didn't charge 25 years ago. Nobody sounds the alarm. The consequence is a wealth transfer of tens of billions of dollars every year from middle-class families to a handful of big banks."

Is everything for sale these days?

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