I don’t know why we worry so much, when American ingenuity has always risen to the occasion, every single time, to snatch victory from the jaws of success. Once again, American financial engineers have analyzed the problem — the central problem of the American economy — and after having a couple of beers have come up with the solution. Brilliant. Prosperity is at hand.
These particular engineers are employed by Fair Isaac, who is not a handsome English squire, but the oddly named company that assigns the credit scores upon which 90% of all personal lending decisions — from credit cards to car loans to rental contracts — are based. They have come to understand that the core problem of the American economy in the 21st Century, as pungently stated by retail-sales guru Howard Davidowitz, is that consumers don’t have “any fucking money.”
Astute readers of retail history will remember that this problem first surfaced in 1959, prompting the invention of the credit card. That fix lasted until 1999, which was the year every credit card in existence reached its limit. Only briefly perplexed, the financial engineers immediately introduced the house-as-ATM business model, and taught Americans how to refinance their homes every 90 days to pay off maxed-out credit cards and get cash for necessities, such as personal watercraft and all-terrain vehicles. Which worked until 2009, when the market answered the question: “What could go wrong?”
Now consumers are stuck in houses that are under water, slowly paying down credit-card and school-loan debt, and cannot do their patriotic duty for the larger economy by shopping, because they don’t have, in Mr. Davidowitz’s deathless phrase, AFM.
So what to do? We can’t pay workers more money, because that would harm the luxury personal jet and high-end vacation villa industries, and besides it would send the wrong message. We’ve had a pretty good run lending them money for cars. By offering anyone with a credit score higher than his shoe size a no-money down, 100%, six-year loan to buy a Hummer, we have made the auto industry a standout achiever in our otherwise lackluster economy. But we’re running out of people with small shoes.
Who cares about low credit scores? Hardly anybody, because the people who make the loans don’t care if they are ever repaid because they own the paper for about 15 minutes before they cash out and let someone else worry about it. However, in order for them to take bunches of subprime loans and sell them as AAA investments, some rating agency has to stamp them AAA. And as willing as the rating agencies are to destroy modern civilization for a fee — they came really close in 2009 — they don’t want to be visited by mobs of investors bearing pitchforks and torches, so the agencies get hinky when they see credit scores in their loan packages that are in negative territory.
That’s the problem brilliant engineers at Fair Isaac have solved. They are rolling out a new FICO credit score for underachievers, one that will give you a satisfyingly high number if you have managed to keep the lights turned on in your house, and that ignores sticky-wicket issues such as repossessed stuff and delinquency nonsense.
(I am not making this up. Although I did delay writing about it for two weeks in the expectation that it would be revealed as an April Fools joke.)
So there you have it. Let the consuming resume, and never think for a moment that American ingenuity will ever stop catering to our greed, bolstering our self-esteem and helping us blow up the world.