Earlier this week, that wishful thinking turned into bargaining amongst lawmakers for a history-changing $700 billion-plus bailout for the investment banks on Wall Street–the very ones accountable for the nefarious lending practices that created the now-worthless mortgage-backed securities that are, according to Treasury Secretary Henry Pauslon, wreaking havoc on the market. Now, at least for many Americans on Main Street, they’ve finally hit the next stage of serious anger.

Darryl Dahlheimer

“What’s really upsetting about the current proposals this week is it’s a huge power grab with very little proposed oversight. It’s kind of like prescribing more of the illness to get better,” says Darryl Dahlheimer, a project manager at Lutheran Social Service financial counseling in Minneapolis. The organization counseled more than 10,000 people last year free of charge as foreclosure issues, bad refinances, and credit-card debt have bloomed nationwide. Dahlheimer has seen his workload double since the crisis began in 2006.

Dahlheimer points to one reason for the financial collapse: financial markets that went into a feeding frenzy as regulations fell away. “We’ve been fetishizing free markets for the last 15 years to the detriment of the consumer and families and stable communities,” he says. “We have favored capital over labor, we’ve favored credit over debting, and we’ve allowed the inflation to happen in the financial system with our full blessing with companies based on fundamentally unsound lending practices.”

Dahlheimer sees those unsound lending practices play out into reality every day. He sees people living on the the edge or upside-down in loans for homes that have become more than they’re worth. He sees people stuck with new subprime products, like H&R Block’s refund anticipation loans, payday title loans, and paycheck-advance loans that often come with hundreds of percent in interest. Here in Minneapolis, new payday lending stores are popping up on street corners every month.

“We have allowed financial structures to create all this jeopardy,” Dahlheimer says. “But it plays right into the financial culture of never saying no to ourselves and having no responsible leadership over thrift, stewardship, and sacrifice.” Indeed, in the current administration, the national debt has doubled. Eight years ago it was $200 billion; today it’s more than $400 billion.

Now, as the Bush administration asks taxpayers to pay for the Wall Street bailout, consumers are starting to fight back. Lawmakers report receiving hundreds of emails a day asking them to vote against the bailout. A group of people in New York are planning to, literally, dump their junk on Wall Street in protest today as lawmakers meet and try to swiftly get a bill through with little time for real consideration as Bush touts “panic” as a reason to act now. And here in the Twin Cities, a group has scheduled a protest in Lowertown St. Paul this afternoon and another plans to gather in front of the Federal Reserve Bank on Hennepin in Minneapolis.

“It’s not so much that it’s $700 billion big,” Dahlheimer says of the bailout package. “It’s not so much the size of it, but the fact that no accountability is being asked for. That’s the real problem here. And until that happens, nothing will change.”

How we got here and the politicizing of the free market

As the last eight years have brought more government control over individual freedoms like a woman’s right to choose, same-sex marriage, and privacy issues, a deafening “less-government” rallying cry has been the trademark of this administration and its supporters. And while the deficit and spending have actually increased, the government-get-out-of-my-pocketbook concept has taken form in the politicization of government regulation of the market place.

And it was the lack of regulation and freewheeling grab-and-go greed that opened up the market for fraud and failure. In 1999, the Glass-Steagall Act was repealed and replaced by the Gramm-Leach-Bliley Act, which was signed by President Clinton. The act replaced a New Deal law that prevented commercial banks from blending with investment banking because that very lending was the main source of the great crash of 1929 and the resulting Depression.

What’s more, mortgage brokers were specifically written out of the law for fidiciary duty of care, a law that creates standards of equity and consumer rights and ensures, say, agents for products like insurance do not sell grossly inappropriate packages to someone. Yet mortgage brokers were able to wiggle out of that responsibility, and in 2003, at the height of subprime lending, were selling no-doc loans, balloon loans, and liar loans at rapid speed. Last year, Minnesota passed an anti-predatory lending law that required stricter requirements for brokers. And many of them fled.

Dahlheimer says it’s the politicization of the free market that helped to create the crisis, and in keeping it unregulated the market will continue to serve the wealthy and hurt consumers. In other words, it’s that kind of backward, zero-regulation thinking that will socialize debt and privatize wealth.

“Free-market capitalism must be seen for what it is: a wealth-creating engine which, without regulation, chews up and spits out consumers and people and families,” Dahlheimer says. “With regulation, it’s the best wealth-creating engine invented. To me, free market is an interesting concept in balance with the moral prohibition against usury and ruin. Which is why we have regulation as oil in the great engine so the engine doesn’t seize up and blow up.”

Dahlheimer says the problems today are not about a “free” market, but an unregulated market. “In essence, you know the doors that slam shut in commercial hotels so the whole place won’t burn down if there’s a fire? We took away all of those doors that slam shut in the ideology of a completely unbridled market. And the whole house is on fire.”

Going debt-free? Consumers fight back

Marne Gerdes has been working two jobs in the last two months to make ends meet. She’s a single woman, and doesn’t have a ballooning or subprime mortgage, but with food and gas prices increasing and a job in the western suburbs–a 20-minute drive from her Minneapolis apartment– paying her student loans, credit cards, and car payment has become more of a burden. Gerdes says thinking about using any of that money to pay for the bailout angers her to no end.

“It’s not the taxpayers’ responsibility to fix that problem,” she says. Not only is she worried about her tax dollars paying CEO salaries, but news of the bailout has also made her rethink how much she gives the lenders in the form of interest payments. “It makes me think differently about debt and my own spending and credit balances,” she says. “My mentality is to try and move towards paying in cash and not using credit as much as possible.”

Her friend Courtney McLean agrees. She’s been on a credit-payoff plan for two years. “I live without most of the time,” she says. But for McLean, it’s better than the alternative. “To me, debt is systemic slavery. And I don’t know if I’ll ever feel differently about that.”

They aren’t alone. For the last few years, anti-debt and mass consumption movements like Simple Living and anti-“affluenza”--an affliction of debt caused by an obsession with material goods and keeping up with the Joneses– have grown, spawning best-sellers and groups nationwide. The Simple Living movment has a monthly simplicity meeting in Rochester, Minn. every third Monday. Issues such as permaculture (using less of the Earth’s resources), living green, and living debt-free are explored.

McLean says her experience with debt in the last few years and ubiquitous Wall Street greed has made her an adopter of the Simple Living lifestyle. “I love money as much as the next guy,” she says, “but the weight and importance we put on it and its related subcultures, such as consumerism, allows for people to become trapped. We are not taught as a culture to understand and respect the fluidity of money. Our nation is built on the very weak foundation of debt; and like parent, like child, many citizens of our nation are personally in debt as well because we have to have this or that and ‘everyone’s in debt.’ Debt that is allowed to accumulate, as opposed to credit that is paid of promptly, is good for no one except for the companies collecting on that interest and the parties associated.”

Dahlheimer says he counsels consumers on similar issues of living debt-free. And because of the cycle that  bred debt and corruption, he says it’s time lawmakers start relying on moral principals as True North, and that any sort of  bailout also involve economic justice for those consumers. “There were certain common moral principles that Judeo Christian and Islamic beliefs have in common, and that’s the prohibition of usary,” he says. “And the way I heard it phrased was that people of great wealth must not be allowed to use great wealth to ruin others who lack that same advantage.”

Of course, the last decade or so of unchecked markets and imprudent lending practices flies in the face of cardinal rules of “moral values” and instead speaks to the free-market fundamentalism that privatizes profits for the very wealthy and socializes debt for the rest.

Yet Dahlheimer hopes the crisis has a silver lining. He hopes the resentment spurs a cultural shift similar to one that happened during the Great Depression. “It means legislators agreeing to balance budgets each year instead of create debt to pass it on for a generation or two or ten. It means individuals accepting limits and redefining patriotism from the most spending I can do, to living with in my means. And it also means at a larger level creating protective structures so that greed cannot exert a winning force in the market place.”

Having it any other way, he says, is like bailing out the drunk again and again. Now is the time, he says, to enact change. “Minnesota is the home of chemical dependent treatment,” he says. “One of the concepts out of the Johnson Institute was the concept of enabling. Enabling is when you inadvertently keep bailing out the alcoholic in a way that continues their alcoholism because they never hit bottom. And that’s exactly what we’re proposing with a zero oversight nationalized bailout of wealthy investment firms.”

He add: “Basically, it’s like saying, I can’t let Uncle Joe go to treatment because I need him to drink and drive me to work. And that’s not really a winning formula.”

But some relief could be on the way.

Last week, the House held a hearing on Rep. Carol Maloney’s  (D-N.Y.) proposed Credit Cardholders’ Bill of Rights. In December, Barack Obama introduced the five-star rating system, which would rank cards based on their features, and he proposes a complete do-over in credit-card rules similar to Maloney’s. Hillary Clinton has proposed a Products Safety Commission and caps on interest rates, though the “cap” is 30 percent.

And McCain? Well, he has nothing, other than a record of voting against requiring credit-card companies to disclose to consumers the consequences of making only the minimum monthly payment. In other words, it should be a secret that such a policy only serves to force consumers into the deep end of the debt pool.

So what does this all mean to consumers?

Continued: Click “Read more.” The fact is, we’re not just submerged in debt; it’s become our watery grave.

Credit-card debt increased more than 315 percent from 1989 to 2006. We have a collective debt of around $800 billion, which means that every man, woman and child is carrying a debt of around $2,900. The American Bankruptcy Institute reports that filings in February were up by 15 percent over January, despite the stricter requirements. 

And the debt burden is only increasing, thanks to a lack of consumer rights. Major credit card companies have been juggling their due dates recently — thereby making those with automatic payments go into default — and they’re ratcheting up rates for even those with zero payment blemishes. That’s because as the mortgage crisis continues, banks are looking for any way to make a profit. And they’re squeezing everyone.

Adam Levitin over at Credit Slips has done an excellent job of parsing out the details of Maloney’s bill. Included it in are provisions that would protect consumers against the arbitrary rate hikes we’re seeing today and prevent credit-card companies from charging retroactive interest on existing balances.

And while Levitin says the bill is the most significant credit-card legislation since the Truth in Lending Act, he does note the omissions in the fine print, like the fact that it doesn’t address the problems with reward programs or merchant fees.

Still, if passed, the bill would prevent credit-card companies from using the revenue schemes they’ve enacted of late, like increasing interest rates for millions of consumers with good credit; not including corporate contact info such as a phone number on statements; and charging hidden fees that often are the dominoes for defaults, yet money in the banks’ pockets. 

A Minneapolis-based documentary photographer, Brogunier was living in Brooklyn five years ago when, saddled by five-digits worth of business-related credit card debt, he filed for bankruptcy. As he worked to rebuild his financial life, he pondered the psychology of lenders who kept extending him credit, even as his ability to pay diminished. Creditland, a chronicle of the practices and effects of America’s credit-card companies, is the repository of some of his findings.
The inaugural issue, which hit the streets March 30, includes transcripts of personal stories about debt, a glossary of economic terms used by lenders and short fiction. The design of the four-page publication, like the theme it addresses, seems maxed out: Text is everywhere, jammed to the margins, with little breathing room offered via white space. Brogunier said the design matches the economy of the subject: “Paper is valuable.” But much of the content is rich, especially the cover story, an interview Brogunier conducted with “Maxed Out” director Scurlock. (Full disclosure: I first met Brogunier at a February forum on predatory lending, and my recording of the event is the basis for the transcript of state Rep. Jim Davnie’s talk at that event, which appears in Creditland).

The next issue will focus on the rebuilding of New Orleans and the struggles of African-American homeowners in the hurricane-struck region. He also hopes to begin collecting first-person narratives on debt (and welcomes “Debtor of the Month” columnists) and verbatim transcripts of phone calls with representatives from credit-card companies.

Brogunier hopes the publication will reach people affected by credit-card debt — whether they are the visible urban poor or the seemingly well-to-do but secretly over-extended borrowers in wealthier suburbs — and demonstrate the shared effects of the “mindless consumption binge” he says America has been on for 25 years.

“Some people do well in that system,” he said. “They make enough money that they can buy things and it works and the global economy keeps going, and that’s great. Other people aspire to do that, and if they’re aspiring to do that and they don’t have the cash, credit cards come in as a stopgap measure. In an ownership society