The only problem with that analysis is it places too much of the blame for the current situation on the lenders, and not nearly enough on the borrowers.
Yes, there have been some predatory lending practices going on. But the majority of lending practices have not been predatory, and it is the BIG picture, not a small minority of lending (and borrowing) practices that has yielded the current debt crisis.
For decades now we have been an entire society based on the principle of immediate gratification. This goes way beyond fast food and microwave snack cakes. In a period extending less than 100 years we, as a society, have gone from an expectation that most people who buy a HOUSE save for it BEFORE buying, to a society that most people can't even wait long enough to save for their television. The change has been relatively gradual, but has been accelerating in a very constant gravitation toward a debit based economy.
First came the idea that ownership of a house could no longer wait for a family to save toward. This was partially due to a sudden bump in housing prices after WWI, and partly due to a "keep up with the Joneses" attitude that came out of the "roaring 20s". So the banking market took up the cause, and started issuing long term mortgages that allowed people to get themselves their own house early in life. So people started buying houses on credit.
Next we decided we could no longer wait to buy that new car. And things went rapidly down hill from there. Today many households hardly buy anything without using credit. TVs, stereos, cameras, furniture, even the clothes we wear. Far too few people seem to account for the increased cost of items purchased through credit.
And that is where predatory lending started to rear its ugly head. Like anything else, increasing demand led to the opening of new markets to meet the demand. And one such market has been the practice of high risk lending. High risk lending came about because lower income brackets wanted to keep up with the Joneses, too. But lower income brackets have less ability to pay back the loans. As such, the increased cost of high risk loans resulted in extremely high interest loans coupled with very tight lending practices that instilled the high risk rates and penalties at the first hint of trouble.
One thing to remember in all this, though, is the regulations which allowed interest rates high enough to make high risk lending a profitable market. And those regulation came about, not in response to a demand for high risk credit, but rather during the economic crisis we faced in the late 70s when interest rates were, by necessity, given high ranges to compensate for double digit inflation.
Now one can complain about the morality of lending institutions marketing credit to people they knew had a high chance of defaulting. One can complain about sub-prime lending practices aimed at people who would otherwise have to wait, possibly half their lives or more, to buy their first house.
But without the DEMAND for such types of credit lines such lending practices would not have been marketed. The fact that people are no longer willing to wait for the things they want is the BASE reason we are in the current economic crisis. The fact that people wanted that 4 bedroom house, instead of settling for a much more affordable 2 bedroom house is why we are looking at a housing crisis. The fact that we, as a society, have been in a deficit spending economy for 60+ years is where we need to REALLY focus.
There are some real scum out there who made a lot of money screwing people with predatory lending. And those people need to be dealt with, and laws emplaced to prevent future practices. we need laws that keep interest rates reasonable, and quit allowing interest rates to exceed what used to be considered loan sharking.
But if we want to FIX what is going wrong with our economy - as opposed to putting a band-aid over a deep seated infection - we need to rid ourselves as much as possible from the habits of deficit spending and the need for immediate material gratification.
