by Gary Rivlin
exorbitant fees and penalties in, 11–12, 15, 41–42, 44, 49, 50, 52, 107–8, 111, 115, 139, 141, 155, 206
failures in, 322–23
financial crisis of 2008 and, 29, 30
insurance policies in, 12–13, 17, 52, 57, 108, 115, 136, 139, 150, 152, 156, 162, 164–65
interest-only, 302
interest rates in, 12, 41–42, 44, 48, 49, 50, 107, 111, 115, 141, 154, 156, 272–73, 321
lobbying on behalf of, 207–8, 222
marketing of, 32–33, 48
middle class and, 295
NINJA (no documentation) loans in, 298, 299
in Ohio, 245–48
pass-through companies and, 43
regulation of, 14, 15–16, 112–15, 318, 319–20
responsible, 326–28
revenues generated by, 30
secondary market of, see mortgage-backed securities
second wave in, 57
spike in volume in, 229–30
student loans and, 330
third wave in, 295, 296–304
underlying logic of, 328
warnings about, 30, 36–38, 58, 87, 229–30, 304
working poor as targets for, 4, 14–15, 29–30, 32, 35, 40, 162, 295
worst offenders in, 298–99
see also predatory lending; specific banks and companies
Subway, 181
Success Group, The, 241
sucker pricing, 7
Suddes, Thomas, 315
Summers, Larry, 137
Supreme Court, U.S., 217
Susan (payday borrower), 195
Sweden, 25
Taber, Clay, 330–31
Taft, Bob, 240, 250
Talent, Jim, 229
Talley, Ernie, 26
TARP, 304
tax preparation services, 27–28, 265, 271, 294
see also refund anticipation loans; specific companies
Taylor, Frederick Winslow, 81
Taylorism, 82
Tearing Down the Walls (Langley), 145
Tennessee, 53, 69, 73, 80, 332
Tennessee, University of, 67
Texas, 138, 310–11
Theis, Sandy, 276, 283, 284
This American Life, 30–34
Thomas, Tim, 262–66
Thompson & DeVeny, 304–6
Thorpe, Gloria, 133–34
Time, 236
title companies, 141
Toledo, OH, 239–40
Toman, Mike, 241
Too Much Month at the End of the Paycheck (Skillern et al.), 159
Transamerica Commercial Finance, 74, 76
Travelers Corporation, 148
Travelers Group, 148
Treasury Department, U.S., 156
Trotwood, OH, 289
Truth in Lending Act (1968), 123
unbanked population, 272, 280
Union Mortgage, 48–49
Union Neighborhood Assistance Corporation, 46
United Nations, 97
University Row, 308
unsecured installment loans, 4
up-selling, 193, 197
used car dealers, 331
used car finance business, 24, 28, 31, 222
usury, 45, 73, 78, 80, 129, 223, 253, 260
Vanderbilt, George, 79
Veterans Administration, 107
Virginia, University of, 118
Wachovia Corporation, 27, 101–2, 120, 202, 235, 238, 325
wages, 52, 123, 129, 321
Wall Street Journal, 5, 7, 11, 37, 55, 75, 104, 121, 123, 162, 207, 296, 300, 324
Wall Street Reform and Consumer Protection Act, 321
Walmart, 34, 81, 83, 123, 179, 272, 292
Walton, Sam, 81
warehouse lines, 296
Warren, Elizabeth, 294, 320
Warren County, Ohio, 295
Washington, 123, 231
Washington, D.C., 122, 220
Washington Mutual, 135–36, 214, 303, 322
Washington Post, 45, 220, 222
Waste Management, 118
Webster, William M., II, 117
Webster, William M., III, 117
Webster, William M., IV, 31, 117–22, 124–26, 127, 128, 160–62, 188, 223–24, 225–26, 254, 282, 290, 313–14, 330
Weill, Sandy, 143, 144–49, 151, 153, 154, 157–58, 163, 323
Wells Fargo, 25, 27, 120, 204, 214, 225, 235, 247, 303, 322, 323
West Carrollton, OH, 291
Western Union, 23, 28, 264, 270–71
Westinghouse, 187
West Palm Beach, FL, 3
Widener, Chris, 257, 259, 260, 261
Widenhouse, Gordon, 89, 91
Wilson, Richard, 243
Winston-Salem Journal, 97
wire transfers, 23, 28, 264, 268, 270–71
Wisconsin, 231–32
WMC, 303–4
Woodrow Wilson School, 92
Woodstock Institute, 231
worker-owned cooperatives, 94, 95–96
working poor, 4, 14–15, 29–30, 32, 35, 88, 162, 272, 293–94, 295
World Savings Bank, 166, 235–37
Wright, Bonnie, 87, 88, 91–92, 95, 234
Wright-Patterson Air Force Base, 293
Wu, Chi Chi, 183, 185
Yachting, 72
Yale Law School, 92, 95
yield spread premiums, 49, 206, 300, 318
Young, Andrew, 39
Youngstown, OH, 250–51
Acknowledgments
This project began with a conversation about the pioneers of subprime: What are the various ways they have devised to make money off those of modest means? So first and foremost I want to thank Hollis Heimbouch for broaching the topic, planting a seed, and then standing back as I ventured to make the idea my own.
I was fortunate to have worked on this book with two talented and committed editors, Hollis and Bill Strachan. This is my third book with Bill, and he more than earned his keep on this go-round. He read a thicker version of this work and then patiently helped me forge through what belongs inside these covers and what was better lost to the recycling bin. Once that was settled, he gave the slimmed-down manuscript I handed in a good buffing. I couldn’t imagine doing a book without Elizabeth Kaplan, my longtime agent and friend. She’s a source of support and good counsel and, not incidentally, keeps me in business. Tom Pitoniak belongs to that unsung breed known as the copy editor, who double-checks and fixes while adding that final coat of polish, and thanks again to my mother, Naomi Rivlin, proofreader extraordinaire. I also want to thank Cristina Maldonado and Stephanie Atlan, who both provided research help.
My friend and editor, John Raeside, read early chapters and late ones; his ideas and suggestions can be found throughout these pages. I married into a theater family and finally found the term for the role he plays in my writing life: John is my dramaturge.
Others read this book in various forms and I owe them my deep gratitude: Randy Stross, Peter Goodman, Mike Buchman, Alissa Quart, Sue Matteucci, Mike Loftin, and Mike Kelly.
This book might have been born during an expensive breakfast in midtown Manhattan but it was shaped in Wellfleet, Cape Cod, and then birthed there during an intense final five weeks. So thank you Aylette Jenness, for your hospitality on the front end of this project, and Dina Harris, my mother-in-law, on the back end. I also want to thank Kevin Morison, Ellen Leander, and Carl for their hospitality during my trips to Washington, D.C., and Sonia Resika for a special assist.
I’m indebted to the scores of people I spent time with in this investigation into the poverty industry. Many people were generous with their time and their knowledge yet their names don’t appear within the covers of this book. Others gave me hours of their time—and then end up with only a quote or two. That’s not to say the time I spent was any less important as it proved invaluable to my immersion in this world.
Which brings me last, but hardly least, to Daisy and Oliver. I was a new husband at the start of this project and then, ten months later (TMI?),
a new father. There’s nothing like a newborn to keep a person focused and disciplined, at least when he’s not feeling cross-eyed from a lack of sleep. So often did Oliver Daniel see his father sitting in front of a computer that in one picture he seems to be posing his hands, as if at work at a keyboard. And, finally, Daisy Walker, my wife and companion, she of the big heart and kind soul and the sweet smile who never grew weary from this book even long after I had. She was a great sounding board when I received conflicting advice and a patient listener when I needed propping up. I’ll never be able to thank her enough, though I look forward to trying.
About the Author
GARY RIVLIN is the award-winning author of Fire on the Prairie; Drive By (a New York Times Notable Book of the Year); and The Plot to Get Bill Gates. A two-time Gerald Loeb Award winner, he has worked as a writer and reporter for the New York Times, Industry Standard, East Bay Express, and the Chicago Reader, and his articles have appeared in the New York Times Magazine, GQ, Salon, Newsweek, and Wired, among other publications.
WWW.GARYRIVLIN.COM
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ALSO BY GARY RIVLIN
Drive-By
Fire on the Prairie
The Godfather of Silicon Valley
The Plot to Get Bill Gates
Credits
Jacket photograph © Visions of America, LLC/Alamy
Jacket design by Jarrod Taylor
Copyright
BROKE, USA. Copyright © 2010 by Gary Rivlin. All rights reserved under International and Pan-American Copyright Conventions. By payment of the required fees, you have been granted the non-exclusive, non-transferable right to access and read the text of this e-book on-screen. No part of this text may be reproduced, transmitted, down-loaded, decompiled, reverse engineered, or stored in or introduced into any information storage and retrieval system, in any form or by any means, whether electronic or mechanical, now known or hereinafter invented, without the express written permission of HarperCollins e-books.
FIRST EDITION
Library of Congress Cataloging-in-Publication Data
Rivlin, Gary.
Broke, USA: from pawnshops to Poverty, Inc.: how the working poor became big business / by Gary Rivlin.—1st ed.
p. cm.
Summary: “A unique and riveting exploration of one of America’s largest and fastest-growing industries—the business of poverty”—Provided by publisher.
ISBN 978-0-06-173321-5 (hardback)
1. Working poor—United States. 2. Poverty—United States. 3. United States—Economic conditions—21st century. I. Title.
HD8072.5.R58 2010
339.4'60973—dc22
2010002874
EPub Edition © May 2010 ISBN: 978-0-06-199794-5
10 9 8 7 6 5 4 3 2 1
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