Collateral Damaged: The Marketing of Consumer Debt to America

John Wiley & Sons

Sometime in the 1970s and 1980s, the use of credit cards, which had begun as a convenience, began to grow into an addiction. Collateral Damaged: The Marketing of Consumer Debt to America explains how a nation of savers became a nation of consumers and how Wall Street used consumers' addiction to spending to create the "toxic securities" that threaten to bring about the collapse of the global economy.

Geisst looks at the policy implications of the credit crisis and describes how the United States can get its fiscal house in order:

  • Debt must be brought back onto the issuer's balance sheet.
  • Investors must have the assurance of recourse to the debt issuer's own funds, rather than the empty promise of a valueless document.
  • Regulators must be educated to know at least as much about financial engineering as the structured finance instruments' architects do.

This book connects the dots from consumer spending to credit cards to home-equity loans and back to credit cards.

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About the author

Charles Geisst is the author of seventeen books, including Undue Influence: How the Wall Street Elite Put the Financial System at Risk (John Wiley, 2004), Deals of the Century: Wall Street, Mergers, & the Making of Modern America (John Wiley, 2003), Wheels of Fortune: The History of Speculation from Scandal to Respectability (John Wiley, 2002), The Last Partnerships: Inside the Great Wall Street Money Dynasties (McGraw Hill, 2001), Monopolies in America: Empire Builders and Their Enemies from Jay Gould to Bill Gates (Oxford University Press, 2000), 100 Years of Wall Street (an illustrated history, McGraw-Hill, 1999), and Wall Street: A History (Oxford University Press, 1997). He also is the editor and principal contributor to the Encyclopedia of American Business History, published by Facts On File in December 2005. He also writes a column on financial affairs for Global Entrepreneur, the Chinese business magazine.
The Last Partnerships was named one of Booklist's Top Ten Business Books for 2001 and has been translated into Chinese as have Wheels of Fortune and Monopolies in America. Wall Street: A History was on the New York Times Business Bestseller List for three months and was a selection of the History Book Club and the Book of the Month Club International. It was also on the Toronto Globe & Mail Business Bestseller List and has been translated into German, Japanese, Bulgarian, Chinese, Hebrew, and Russian. 100 Years of Wall Street was on the Wall Street Journal Business Bestseller List, Asian Wall Street Journal Business Bestseller List, and the Business Week Business Bestseller List as well as on the bestseller list in India. It has also been translated into Russian, Korean, and Chinese. A previous text, Investment Banking in the Financial System, was translated into Chinese and was a standard business school text in Beijing. His books have been translated 16 times.
Geisst was born in New Jersey in 1946. He attended the University of Richmond (BA, 1968), the New School for Social Research (MA, 1970) and the London School of Economics & Political Science (PhD, 1972) and did post-doctoral study as a Visiting Scholar at the Yale Law School in law and history, and at Balliol College, Oxford University in finance. He has been a frequent guest on radio and television talk shows, including Frontline, ABC Evening News, ABC Nightline, CBS Evening News, WCBS TV, CNN, CNBC, Bloomberg TV and radio, Nippon Television, NPR, A & E, Radio New Zealand, BBC, Australian Broadcasting, TechTV, A & E, The History Channel, and the CBC. He has spoken about his work at the New York Public Library, the New York Historical Association, and the 92 Street Y among others.
From 1972-75 he taught political science in an open admissions environment at the City University of New York before taking a job on Wall Street. Subsequently, he worked as a capital markets analyst and investment banker at several investment banks in the City of London. Since 1985, he has taught finance at Manhattan College, and he was named the college's first Louis F. Capalbo Chair in Business in 1993. In 2009, he was named to the Ambassador Charles A. Gargano Chair in Global Economics. Consulting assignments in financial markets have been with Cazenove & Co., S.G. Warburg & Co., the Hudson Institute, and J.P. Morgan & Co. Listed in Who's Who, he has published professional and trade articles in magazines and journals such as the Wall Street Journal, International Herald Tribune, Neue Zurcher Zeitung, Newsday, and Euromoney. He lives with his wife in Oradell, New Jersey.
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Additional Information

Publisher
John Wiley & Sons
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Published on
May 20, 2010
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Pages
288
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ISBN
9780470883402
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Features
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Language
English
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Genres
Business & Economics / General
Business & Economics / Investments & Securities / General
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Content Protection
This content is DRM protected.
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Charles R. Geisst
Charles R. Geisst
Predatory lending: A problem rooted in the past that continues today.

Looking for an investment return that could exceed 500 percent annually; maybe even twice that much?

Private, unregulated lending to high-risk borrowers is the answer, or at least it was in the United States for much of the period from the Civil War to the onset of the early decades of the twentieth century. Newspapers called the practice “loan sharking” because lenders employed the same ruthlessness as the great predators in the ocean. Slowly state and federal governments adopted laws and regulations curtailing the practice, but organized crime continued to operate much of the business. In the end, lending to high-margin investors contributed directly to the Wall Street crash of 1929.

Loan Sharks is the first history of predatory lending in the United States. It traces the origins of modern consumer lending to such older practices as salary buying and hidden interest charges. Yet, as Geisst shows, no-holds barred loan sharking is not a thing of the past. Many current lending practices employed today by credit card companies, payday lenders, and providers of consumer loans would have been easily recognizable at the end of the nineteenth century. Geisst demonstrates the still prevalent custom of lenders charging high interest rates, especially to risky borrowers, despite attempts to control the practice by individual states. Usury and loan sharking have not disappeared a century and a half after the predatory practices first raised public concern.
Charles R. Geisst
The practice of charging interest on loans has been controversial since it was first mentioned in early recorded history. Lending is a powerful economic tool, vital to the development of society but it can also lead to disaster if left unregulated. Prohibitions against excessive interest, or usury, have been found in almost all societies since antiquity. Whether loans were made in kind or in cash, creditors often were accused of beggar-thy-neighbor exploitation when their lending terms put borrowers at risk of ruin. While the concept of usury reflects transcendent notions of fairness, its definition has varied over time and place: Roman law distinguished between simple and compound interest, the medieval church banned interest altogether, and even Adam Smith favored a ceiling on interest. But in spite of these limits, the advantages and temptations of lending prompted financial innovations from margin investing and adjustable-rate mortgages to credit cards and microlending.

In Beggar Thy Neighbor, financial historian Charles R. Geisst tracks the changing perceptions of usury and debt from the time of Cicero to the most recent financial crises. This comprehensive economic history looks at humanity's attempts to curb the abuse of debt while reaping the benefits of credit. Beggar Thy Neighbor examines the major debt revolutions of the past, demonstrating that extensive leverage and debt were behind most financial market crashes from the Renaissance to the present day. Geisst argues that usury prohibitions, as part of the natural law tradition in Western and Islamic societies, continue to play a key role in banking regulation despite modern advances in finance. From the Roman Empire to the recent Dodd-Frank financial reforms, usury ceilings still occupy a central place in notions of free markets and economic justice.

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