Lost in the Movies: Maxed Out

Maxed Out

"And you know, I run into some very smart people in our Congress and I ask the question...so what's the long-term plan here, what happens when the bills come due? What [do] the grand thinkers have in mind here? And all I ever get is this sort of blank half-smile." -Liz Warren

While preparing this blog's election series, I noted that most of the documentaries out there dealt with foreign affairs. The few which stepped outside the bounds of national security and international relations tackled trendy issues like global warming, the energy crisis, and universal health care. But this year, the economy crept up on the election and suddenly, without warning, took it hostage. I didn't see any docs that dealt with the economy as a whole, but ran across Maxed Out on Netflix and though the emphasis seemed to be on credit cards rather than the national debt (though it promised to address that too), I figured it was a decent compromise. It turned out to be more than that - it is indeed the most prescient film I've watched so far. Unlike many other documentaries which race after current issues to record them before they've slipped into history, Maxed Out saw the storm on the horizon. Watching it today, about a year and a half after it was released, in the wake of the meltdown of the debt-based U.S. and world economy, is an eerie experience.

By now we all know that bad debt isn't just a personal problem, nor a societal one whose toll will someday reach us. It's an addiction and we've suddenly OD'd. This is the morning after, and the waves of nausea are just beginning to hit. It's only going to get worse. By the way, how did we treat the problem? With a hair of the dog that bit us - the government borrowed more money to lend to people who had been borrowing and lending irresponsibly in the first place. This doesn't mean the bailout/rescue/whatever plan was not necessary, and the jury's still out on if this particular solution (which looks increasingly thoughtless) will address the ailments or add to them. But it's more evidence that debt extends all the way up the pyramid: the have-nots are in hock to the haves, who are in hock to the have-mores, who are in hock to China. It's a completely unstable structure.

Maxed Out takes place in a world sixteen months in the past, which already feels like ancient history. Its predictions have begun to come true and those blank half-smiles have become all too familiar. This is a thoroughly comprehensive documentary, slickly and entertainingly made, which tackles all aspects of the problem. It begins with a woman who arrogantly speaks of living in a gated community, ensuring that no trailers come in to spoil the real estate value. To the cue of "Under Pressure" we see images of a society suffering from the same sickness at every level: the desire to have more than we could afford, the actual need to survive from credit to credit thus building up debt, the predators who makes loans to people who can't afford them, the collectors who converge like sharks on those who can't pay, and the government who is not just in the pocket of the credit card companies but also in massive debt of their own. Ever seen those posters with a series of increasingly large fish swimming up behind one another, ready to eat the next in line but oblivious that they themselves are going to be eaten? That's this movie.

Though not airtight (its final montage goes on too long and then ends with a whimper), this is a relatively smooth package given all its disparate parts. Among other approaches, it employs the now-ubiquitous technique of comic found footage: the most outrageously hilarious being an old TV show where the bank is out of funds and a cowboy saunters up to the counter and insists, "We must be able to find money somehow!" The cowboy? Ronald Reagan himself, yet another way in which life imitates art. We get a look at the infamous debt clock, ticking off the trillions that our government owes, are informed that our personal share is $90,000 and reminded that Bush has doubled the National Debt in his eight years in office.

But much of the movie is focused on the bottom end of the spectrum: those who are suckered into credit cards and home loans which they cannot pay off, until they're hit with fees worth more than the original purchases. Sometimes this leads to suicide, as in the case of two college students who got in over their heads and the older woman who was frightened enough by her debts to drive her car into the lake. We get a peek at smug debt collectors who badger the debtors, boasting about how they enjoy the "competition" of harassing their victims. Revealingly, they also speak of living the good life on their earnings, revealing an inclination to spend spend spend which will probably lead them into debt as well. The victimizer becomes the victimized, and so on.

Apparently some have found Maxed Out to be too focused on the evils of predatory lending, without paying attention to the those who are irresponsible with credit. Funny, that was not my impression at all. Yes, the movie rightfully focuses on those who abuse their power and reminds us that the big companies make most of their money off of customers who are addicted to easy credit - that, as one investigative reporter points out, the worst offenders are not local loan sharks but the big banks. But that's just it - the movie is focused on irresponsibility; except it reveals that those on top are as, indeed more, irresponsible than those at the bottom. The fundamental point is that no one was at the wheel, and the Titanic's sinking. While Maxed Out's makers warned of the iceberg ahead of time, and could justifiably crow about their presience, I somehow doubt that their prophecy is providing them much consolation.


Tony D'Ambra said...

Wow! You certainly are prolific.

The financial crisis can be looked at in this way:

1. The ups and downs of the trade cycle are inevitable to a certain extent.

2. The role of legislators and regulators is to moderate the excesses.

3. Bankers NEVER learn from past mistakes. Each new generation of hot-shots has no real experience and only look as far as their next bonus, and their bosses have been promoted on marketing achievements. The sober people in risk assessment never get to the top, and the boards are fed BS. Take it from me - I worked in banking for 20 years.

4. The severity of the current melt-down is in my mind due to a rare collective failure of responsibility at all levels. Let me paraphrase a post I made elsewhere: the true origin of the current financial melt-down lies in the unwillingness to take responsibility. From the real estate brokers who did not look beyond their brokerage check when pushing people into taking on debt that they could never repay, and the bankers who traded the complex financial instruments with no regard for the quality of the underlying assets, to the regulators and politicians who neglected to properly regulate financial markets.

Disturbingly, neither Obama or Cain seem to have a clue on how to deal with the mess...

Joel Bocko said...

Yes, I've got some spare time this week (which I definitely won't next) so I'm trying to cram the movies and posts ahead of time, though they will continue to appear over the weekend up to Election Day.

What are your thoughts on the "bailout" - either U.S. and/or elsewhere? I don't have much groundings in economics and have (with a lot of other people) really been absorbing this information rapid-fire in the past month, esp. that 2-week period in Sept. where everything was happening at once (I promise you I could not have told you a thing about "commercial paper" or what exactly was in those "toxic assets" prior). It seems like every day we're hearing a new function of the bill, which seems to have been conceived without any real idea how it would be executed.

I suspect & fear - though this is based on little else than guesswork and speculation - that the bailout was essential as symbolism to get the market going again, but as the government essentially wings it and the financial sectors gathers around the trough like little piggies, it could end up making things worse. Particularly since it itself is based on more debt.

(Thanks for your comment on the oil movie too - I didn't respond there because I don't have much to add on the subject, but again your observations were interesting.)

Tony D'Ambra said...

I agree that the govt, the regulators, and the Fed are all winging it. The turmoil is unprecedented, with a 24 hour global market with instant trades and a complex web of cross-border exposures, making informed decisions is virtually impossible. The critical thing is banks won't lend to each other, as there is no information on the size and quality of off-balance sheet 'assets' (I use term advisedly).

The first really big mistake was to let Lehman Bros go under - it wiped out confidence. The Fed in desperation is cutting rates, but it is credit quality that is the issue not the cost of credit.

The bail-out was necessary, but the terms are too open-ended. The US tax-payer should be getting equity and a measure of control.

This article is essential reading for a deeper understanding of what has happened and what is happening: http://www.nybooks.com/articles/21934

Joel Bocko said...

Thanks; I will check it out.

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