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

If we're fortunate enough not to be one of them, we see these people in the grocery line as they pick through their wallets, searching for one more dollar, or maybe swiping this card then that one, trying to find one that will accept another charge. Their faces are worn with exhaustion from working one too many jobs and worrying about where next month's rent is coming from.Regardless of your politics and where you stand on today's state of the economy, many people struggle when inflation is low, employment is high, and rents are stable. Those people have hit on hard times: an unexpected health crisis, a job loss, a family emergency, maybe even a natural disaster for which they weren't entirely insured.Not their fault.Yet there they are: standing at the counter of the payday loan office, agreeing to pay exorbitant fees just to borrow a few hundred dollars for groceries or to keep the lights on.Could be any one of us.Sign here. Initial there. Thanks, here's your money.Wait... can't pay this month? That's going to cost you extra. More fees. Higher price on the loan next time -- because you *will* have to borrow again to cover the cost of the first loan you couldn't repay.No problem. Refinance. Re-mortgage the house.Gary Rivlin introduces us to many of these people. Hard-working, often minority individuals who end up owing six figures on a $18,000 original loan. Fees and Adjustable Prime Rates (APRs) of 300% or more. No kidding. How is that possible?!?!And entirely legal.If you don't believe me, read this book. Hand it out to any young person you know who might be thinking of taking out a car title loan or a payday loan, or getting an advance on their income tax refund, or pawning an item or two, just to tie themselves over (AKA a "bridge" loan) till times are better.Businesses making billions of dollars on the backs of those who can barely afford to cover their own expenses (or they wouldn't need these services in the first place) might be legal, but they sure aren't ethical.Like I said, read the book. You won't see your neighborhood Jackson Hewitt or Cash-N-Go the same way again.

Wall Street and Legalized Loan SharksI don't give a damn about my bad reputation-Joan JettIn my childhood, Northern Kentucky was a hot spot for organized crime. In a town full of hustlers, prostitutes and gamblers, the profession they looked down on was loan sharking.Loan sharks preyed on the poor and most desperate. The sharks charged high rates of interest for short term loans. The practice was illegal and, often, dangerous.It wasn't unusual for a loan shark to wind up floating in the Ohio River. One of the biggest names in the business, Frank "Screw" Andrews, (who is a central character in Hank Messick's book, Syndicate Wife) "accidentally fell" out of a 4th floor window.If Screw was in business today, he would be a captain of industry. Loan sharking is now legalized. Today, we call the loan sharks "payday lenders."The stock of payday lenders is traded on the New York Stock Exchange and NASDAQ. Many payday lending companies do business with Wall Street's biggest banks.As Gary Rivlin notes in his book, Broke USA, "the working poor have become big business."Rivlan's book is a must read. It's a riveting piece of work by a first-rate writer.As far as flow and writing style, it reminds of Joe Nocera's 1994 classic history of personal finance in America, A Piece of the Action.A good idea would be to read Rivlin's book immediately after reading Nocera's book.A Piece of the Action shows how we went from a nation without credit cards to where they are so important in many people's lives. Broke USA shows how the decades of easy credit and loose regulation has created a new business category called the "Poverty Industry."You wouldn't think that poor people would be a growth market, but businesses make big money off people who live paycheck to paycheck.Rivlin's book had a personal connection for me. Much of his narrative takes place in Dayton, Ohio, a city I know well. Don Donoher, the longtime basketball coach at the University of Dayton, was best man in my parents' wedding and I am named for him.Frank "Screw" Andrews "fell" out of the window in 1973. He never dreamed that nearly 40 years later, his business would be operating legally in almost every city in the country.Screw knew how to bribe local officials with cash payments. He didn't live to the see such bribery legalized in the form of lobbying and political fundraising.Broke USA makes it clear that the public and those in the media don't care for payday lenders much.It also makes it clear how many friends the Poverty Industry has made by paying big dollars to lobbyists and giving huge contributions to lawmakers.They are also funded by Wall Street.Until I read Broke USA, I didn't realize what a big hand the "too big to fail" banks have in creating the Poverty Industry.Citigroup, JP Morgan Chase and Bank of America are just some of the big banks that make huge profits, directly or indirectly, from the Poverty Industry.They have another common bond. They received bailout money from the American taxpayers in 2008.They are directly or indirectly in the Poverty Industry. Since we bailed them out, that makes us directly or indirectly in the Poverty Industry, too.Rivlin's book paints a depressing picture of America.Entrepreneurs who want to be rich and don't care how they do it are matched with people who don't handle money well.The people peddling poverty products have figured out the there is a strain of Americans who are the financial equivalent of drug addicts. They will pay any price, fee, or interest rate as long as they can get an immediate fix. They don't care about tomorrow. They just want money today.Just like a heroin addict, a financial junkie will usually die before the addiction runs out.The uplifting side of Rivlin's book is that a great deal of it is devoted to reformers.He writes extensively about people like Martin Eakes of North Carolina, who has developed a poverty financing model at reasonable interest rates, and to Bill Faith, an Ohio activist who got that state to pass a restrictive cap on payday lenders' interest rates.Those who want to fight the Poverty Industry can look at what Eakes and Faith have done and follow their road map.It's not an easy battle. The Poverty Industry has tons of lobbyists, lawyers, legislatures and "too big to fail" financial institutions backing them up.Poor people don't have well-paid lobbyists. But as Rivlin's book makes clear, focused and committed lobbyists can make up the difference.Congress is putting the finishing touches on financial reform legislation and the "too big to fail" banks are fighting tool and nail to prevent a separate consumer protection agency, like the one Elizabeth Warren has been pushing, from seeing the light of day.If Broke USA did anything, it convinced me why a separate agency is needed.Without regulation, there are people and businesses who will find new ways to make money off poor people and don't give a damn about their bad reputations.Don McNay, CLU, ChFC, MSFS, CSSC is an award winning financial columnist and Huffington Post Contributor.You can read more about Don at [..]McNay has Master's Degrees from Vanderbilt and the American College and is in the Eastern Kentucky University Hall of Distinguished Alumni.McNay has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The LotteryMcNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.

When I flicked through the book at the airport, I really enjoyed the few pages I read. But reading the book now, its a fairly tedious affair quite repetitive and could be a lot shorter. I persist trying to read it from time to time, but I look forward to getting to the end.