Why Americans are sunk in debt

The average household’s credit card debt: $8,565 (up almost 15 percent from 2000)
Typical interest rate: 19.1 percent (up 1.5 percent since 2005)
Becoming a nation of debtors: priceless

How did this happen?  In three ways, the banking industry has created a debtor nation.  First, by undermining the American value of thrift:

Eliminating negative feelings about indebtedness was the idea behind MasterCard’s “Priceless” campaign, the work of McCann-Erickson Worldwide Advertising, which came out in 1997. “One of the tricks in the credit card business is that people have an inherent guilt with spending,” Jonathan B. Cranin, executive vice president and deputy creative director at the agency, said when the commercials began. “What you want is to have people feel good about their purchases.” 

Thrift is less important, because banks now make the lion's share of their profit on fees and interest, not on repaid debt.  In other words, banks make money when people fail to repay their loans.

 “Today the focus for lenders is not so much on consumer loans being repaid, but on the loan as a perpetual earning asset,”

The lenders set up this system, first by lobbying for weaker lending regulations in 2003 and then by loosening SEC regulations of their investments in 2004.  The lax regulation allowed banks to gamble and lose.  And who pays?  We do, in a government bailout of the failed banks.

While we're paying them for making bad loans, the financial industry keeps the screws on us by pouring their profits into lobbying.  The 2005 bankruptcy law made it harder for Americans to escape from bad debt, such as loans made to people without any hope of repaying.  

Since 2005, when the bankruptcy law was changed, the credit card industry has increased its earnings 25 percent...even though sponsors of the bankruptcy bill promised that consumers would benefit from lower borrowing costs as delinquent borrowers were held more accountable, the cost of borrowing from credit card companies has actually increased anywhere from 5 percent to 17 percent.

Here's a nice year-after look at the impact of the bankruptcy law.  Summary: we got screwed.

Barack Obama plans to reform the 2005 bankruptcy bill to make it easier for consumers to escape bad debt.  You have a chance to make a difference in November.