permaculture

[Wesley Roe and Santa Barbara Permaculture Network <lakinroe@silcom.com>]

Broke, USA
From Pawnshops to Poverty, Inc.-How the Working Poor Became Big Business
By Gary Rivlin


From the author of the New York Times Notable Book of the Year Drive 
By comes a unique and riveting exploration of one of America's 
largest and fastest-growing industries-the business of poverty. 
Broke, USA is a Fast Food Nation for the "poverty industry" that will 
also appeal to readers of Barbara Ehrenreich (Nickel and Dimed) and 
David Shipler (The Working Poor).


Book Description

For most people, the Great Crash of 2008 has meant troubling times. 
Not so for those in the flourishing poverty industry, for whom the 
economic woes spell an opportunity to expand and grow. These 
mercenary entrepreneurs have taken advantage of an era of 
deregulation to devise high-priced products to sell to the 
credit-hungry working poor, including the instant tax refund and the 
payday loan. In the process they've created an industry larger than 
the casino business and have proved that pawnbrokers and check 
cashers, if they dream big enough, can grow very rich off those with 
thin wallets.

Broke, USA is Gary Rivlin's riveting report from the economic 
fringes. From the annual meeting of the national check cashers 
association in Las Vegas to a tour of the foreclosure-riddled 
neighborhoods of Dayton, Ohio, here is a subprime
Fast Food Nation featuring an unforgettable cast of characters and 
memorable scenes. Rivlin profiles players like a former small-town 
Tennessee debt collector whose business offering cash advances to the 
working poor has earned him a net worth in the hundreds of millions, 
and legendary Wall Street dealmaker Sandy Weill, who rode a subprime 
loan business into control of the nation's largest bank. Rivlin 
parallels their stories with the tale of those committed souls 
fighting back against the major corporations, chain franchises, and 
newly hatched enterprises that fleece the country's hardworking 
waitresses, warehouse workers, and mall clerks.

Timely, shocking, and powerful, Broke, USA offers a much-needed look 
at why our country is in a financial mess and gives a voice to the 
millions of ordinary Americans left devastated in the wake of the 
economic collapse.


Author Extras

		Visit Gary Rivlin's Web Site 
http://garyrivlin.com



Critical Praise for Broke, USA

"This is a powerful analysis, detailing how the financial sector has 
come to its current state of crisis and including personal stories of 
some among the millions of working Americans who have been exploited 
along the way."
- -BOOKLIST (STARRED REVIEW)
                View more
ISBN: 9780061997945; ISBN10: 0061997943; Imprint: HarperCollins 
e-books ; On Sale: 6/8/2010; Format: E-Book; Trimsize: ; Pages: 0; 
$20.99; Ages: 18 and Up

Turning Poverty Into A Multibillion-Dollar Industry

Listen to the Story
http://www.npr.org/templates/story/story.php?storyId=127236038
        *



Broke, USA: From Pawnshops to Poverty, Inc. - How the Working Poor 
Became Big Business

By Gary Rivlin
Hardcover, 368 pages
HarperBusiness
List price: $26
Read An Excerpt

text size A A A
June 7, 2010
Payday lending operations have grown rapidly in the United States 
since the early 1990s. At the industry's peak a few years ago, there 
were more payday lenders in the United States than McDonald's and 
Burger King stores - combined.
"The payday lender is kind of the emergency banker for the working 
poor," explains journalist Gary Rivlin. "The idea is that you have 
some bills that you have to pay today - your check isn't coming for a 
couple weeks, and you can take a loan out against that upcoming 
check."

In return, a person agrees to pay interest on the loan - which can be 
up to "200 percent interest or more on their money," Rivlin says. 
"It's a bridge loan to cover a gap, but the problem is, the gap keeps 
getting wider and wider."
Rivlin goes behind the scenes of the payday lending industry in his 
new book Broke, USA, which examines the $33 billion-a-year "poverty 
industry." Rivlin, who attended an annual conference of check cashers 
to learn industry tips, says he decided to write about the industry 
because of its rapid growth in recent years.
"I was intrigued by how big these companies had become," he says. "It 
used to be that you could drive a Cadillac and have a nice big home 
through check-cashing or as a pawnbroker. But now people are making 
tens of millions, if not hundreds of millions, off of these 
businesses. I wanted to explore a world that seemed upside down to me 
- where people with little money in their pockets was good for 
business."


Interview Highlights
On why payday loan operations exist in poorer neighborhoods
"[Payday loan operations] are there because banks have fled certain 
neighborhoods - it's working-class neighborhoods, inner-city 
neighborhoods, some rural neighborhoods. Where can you get your loan? 
You go to a payday lender, you go to a consumer finance shop [or] you 
go to a pawnbroker. To me, the real reason payday has grown like it 
has is more of an economic reason than a geographic reason. There's 
been stagnating wages among the lowest 40 percent [of wage earners] 
in this country, and so they're not earning anymore real dollars. At 
the same time, rent is going up, health care is going up [and] other 
expenses are going up, and it just becomes harder and harder and 
harder for these people who are making $20,000 [or] $25,000 [or] 
$30,000 a year to make ends meet. And the pay lenders are really 
convenient. Between going home from work and going shopping, you can 
stop at one of these stores and get instant cash in five minutes."
On how the payday lenders, pawnbrokers and check cashers see themselves
"They tend to cast themselves as noble. You know, 'We're in 
neighborhoods doing business where others don't go.' It's almost 
heroic because they're brave enough to be doing business - they cast 
themselves as providing an essential service for the person who 
otherwise would be trapped. What do you do if your car breaks down 
and you owe a few hundred dollars, or you need to pay the auto 
mechanic a few hundred dollars and you don't have a rich uncle to hit 
up [or] a credit card? The credit lenders claim that they play an 
essential role in helping these folks."
On how the payday lenders, pawnbrokers and check cashers see banks
"They were using the banks as a convenient whipping boy. [They were 
saying] 'consumer advocates were on our case about the check-cashing 
fees we charge or about charging $15 for every $100 for a payday 
loan. Meanwhile hundreds of thousands of dollars were being lent in 
these subprime loans, and it virtually blew up the global economy.' 
So it was a very handy whipping boy, but the banks have been the best 
thing happening for the payday lenders and check cashers. They fled 
these communities, creating the opportunity. But more than that, it's 
the big banks - the main banks, from Goldman Sachs to Wells Fargo to 
Wachovia to Bank of America and Citibank - that funded these 
industries. Whether it's the subprime credit card industry, the 
payday lenders - they provided the funding and eventually helped 
bring some of these companies public."
On the profit margins in the payday loan industry
"Until recently, they were making profit margins of 20 percent to 25 
percent a year. I used to write about Silicon Valley for The New York 
Times. You would get noticed in Silicon Valley if you were making 
profits of 20 percent [or] 25 percent a year - and at the same time 
growing in double digits year after year. To me, the moral point is: 
Sure, there's nothing wrong with doing business in the inner city or 
working-class community in a rusted-out Midwestern town; it's just 
that you're making so much more profit off the working poor than you 
are over the more prosperous customer. That, to me, is where we get 
into morally questionable behavior where there's a profit 
opportunity."
On rent-for-loan operations
"You need a bedroom set. You want a flat-screen TV. You just can't 
put it on your credit card the way a lot of people could do it. But 
you want the item. And so you rent it by the week or the month, and 
after a certain amount of time, typically 1.5 years, it's then yours, 
assuming you made every payment along the way. The genius there is 
[rent-for-loan operators] have figured out how to sell a $500 
television set for $1,200. And their customers tend to be happy - 
they want the TV, there's no other alternative that they can figure 
out to buy it, so they rent it by the week and if there's a happy 
ending - if they made all the payments - then they get to keep it."
Excerpt: 'Broke, USA'
by GARY RIVLIN


Broke, USA: From Pawnshops to Poverty, Inc. - How the Working Poor 
Became Big Business
By Gary Rivlin
Hardcover, 368 pages
HarperBusiness
List price: $26


Chapter One:
A Greater Share of Wallet
Las Vegas, 2008
The stomping piano chords and tambourine slaps blaring over the 
loudspeaker are at once familiar. They are the opening notes to the 
early Motown hit, "Money (That's What I Want)." The nation's check 
cashers and payday lenders have a dangerously low sense of irony, I 
mused. We are a respectable business, their leaders have been saying 
since the founding of the National Check Cashers Association in the 
late 1980s. Sure, we cater to a hard-pressed, down-market clientele 
but we are not the money grubbers the popular culture makes us out to 
be. We provide a useful service critical to the working of the U.S. 
economy. Our products are heavily regulated and fairly priced. Yet 
here they were kicking off their 20th annual gathering in October of 
2008 with a musical production based on a song whose lyrics repeat, 
more than thirty times, that what the singer wants, more than love 
and more than happiness, is lots of money.
The convention was being held in Las Vegas. The women dancing across 
the stage were young and buxom and dressed in skimpy sequined 
outfits. The men were buff and tan and similarly underdressed. We 
could have been sitting in any show room on the Strip except the 
lyrics had been rewritten for the occasion. Instead of an unconscious 
self-parody the skit was actually aimed at a handy target in those 
dark and unsettling days in the fall of 2008: the country's bankers. 
If not for the behavior or the banks, their industry would not be 
nearly so robust. The banks abandoned lower income neighborhoods 
starting thirty years ago, creating the vacuum that the country's 
check cashers filled. The steep fees the banks charge on a bounced 
check or overdue credit card fuels a lot of the demand for payday 
advances and other quick cash loans. The big Wall Street banks had 
stepped in and provided money critical to the expansion plans of many 
in the room, but never mind: These entrepreneurs selling their 
financial services to the country's hard-pressed sub-prime citizenry 
are nothing if not opportunistic. The nation's narrative, they 
argued, was theirs. The banks, who were booed lustily throughout the 
two-day conclave, would serve as the poverty industry's new boogieman.
"I get my money (when I want), I get my money (when I want)," the 
troupe sang as they danced and pantomimed various financial 
transactions. Those playing the part of bankers (picture a tie over 
an otherwise naked male torso) were emphatically shaking their heads 
"no" ("At the bank I feel like I'm on trial; I'd rather get fast 
service and a smile"), but when those in the role of customers knock 
on the door of their local "financial center," they are greeted by 
friendly people who are only too glad to cash their checks or to loan 
them cash until their next paycheck. Apparently salvation is sweet. 
Suddenly a dozen or so very good looking young people are dancing 
through a blizzard of fake twenty-dollar bills while singing, "I got 
my money (and it works for me)." The extravaganza brought down the 
house.

There's no single gathering place that routinely brings together more 
of the many strands of the poverty business than this one, held this 
year in a cavernous hall in the bowels of the Mandalay Bay convention 
center. Those who pioneered the payday advance industry in the 
mid-1990s started showing up at meetings of the National Check 
Cashers Association because they didn't know where else to go and, 
over time, other parts of this subculture of low-income finance - the 
pawn brokers, Western Union and Moneygram, the country's largest 
collection agencies - followed. Eventually the check cashers hired an 
outside consulting firm to give them a new name andince 2000, their 
organization has been called the Financial Service Centers of 
America, Inc., a rebranding at once more respectable and opaque. When 
expressed as an acronym, FiSCA, the name sounds quasi-official, like 
Fanny Mae, Freddie Mac, or some other agency playing a mysterious but 
vital role in the U.S. economy.
Business remained good in the poverty industry, despite hard economic 
times and also because of them. People struggling to get by, after 
all, is often good news for those catering to the working poor and 
others at the bottom of the economic pyramid. Everywhere I looked 
there were people flying their corporate colors. Competing battalions 
were dressed in look-alike pants and pullover shirts bearing a 
company logo, each representing another big chain booking hundreds of 
millions of dollars in revenues each year, if not billions.

Yet despite flush times, the weekend felt like one extended, 
oversized group therapy session for an industry suffering from an 
esteem deficit disorder. The CEO of one of the industry's biggest 
chains, ACE Cash Express, even brought a video created for the 
occasion aimed at bucking everyone's spirits. A montage of warm 
black-and-white photographs flashed on a screen hovering above the 
stage as an ethereal cover of the song, "Somewhere Over the Rainbow" 
played and a narrator intoned, "They need to pay their rent. They 
need to feed their family. They need someone who understands them." 
Joseph Coleman, the group's chairman, had offered similar 
self-affirmations in his welcoming remarks. Virtually every person in 
the room made his or her living catering to subprime customers with 
tarnished credit. So Coleman opened by assuring them that they were 
not to blame for the financial hurricane that was leaving the global 
economy in tatters. Feel proud of what you do, Joseph Coleman told an 
audience of around 800 people. "While consumer advocates were 
organizing against us for charging $15 on a two-week loan," Coleman 
said, and while well-meaning community activists and pinhead 
bureaucrats were wringing their hands over those choosing to pay a 
fee to a check casher rather than establishing a checking account, 
"the big boys were selling toxic six-figure mortgages that threatened 
to bring down the worldwide financial system."
"No one matches the service we give our customers," Coleman, who runs 
a small chain of check cashing stores in the Bronx, reassured his 
cohorts. "No bank matches our hours. Our products fit our customers' 
lifestyle." Look at any member of the easy-credit landscape, whether 
the used auto dealer offering financing to those who could not 
otherwise secure a loan or those who saw the fat profits that could 
be made pitching faster IRS refunds to the working poor. We're 
ubiquitous in the very neighborhoods where businesses tend to be 
scarce, Coleman said. We're willing to serve these people who 
otherwise would do without. And yet - here a picture of Rodney 
Dangerfield appeared on the giant overhead screen - "we don't get no 
respect." With that the room erupted in appreciative applause.

From Broke USA by Gary Rivlin. Copyright 2010 by Gary Rivlin. 
Excerpted by permission of HarperCollins. All rights reserved.