Broadcasting the Future

Manifesto

Japan is home to a profusion of quasi-sadistic game shows, the French have a laissez-faire attitude about sex and nudity, and Britain’s quirky sense of humor has found a global following. It’s always interesting to look at another culture’s taste in television and contemplate what it says about the people that watch it. America’s exploding real estate market has spawned both "Flip This House" and “FlipThat House ” - two shows that follow average people as they start down the road to easy money by buying a house and quickly reselling it at a profit. Arguably it’s questionable financial wizardry telling everyone how to make a fortune a few years too late, from a trend well past its prime.

Perhaps the Style network is ahead of the next big trend in the American economy with their new release: "Maxed Out". The stars of “Maxed Out” spend their time being observed by a financial coach who implements a strict budget and helps the “cash-stressed gal” (I guess they'll all be women) learn concepts like “debt reduction, savings, and investment.” The first guest:

Meet Aurora--she's 21 and already $80,000 in debt. Can she put the manicures on hold and give herself a fresh financial start?

I haven’t seen the show, but let’s give Aurora the benefit of the doubt; hopefully she’s sitting on college debt writing checks to Sallie Mae at 4% and not Visa at 22%. If not, she could be in the same spot as an increasing number of Americans. The Wall Street Journal ran a story($) this week about the growing number of sub-prime mortgages that are more than 60 days past due—doubling in the last 12 months, while the number of people finding themselves behind on these mortgages within the first several months after they close is also rising. Sub prime mortgages didn’t exist until recent years, and are made to people with low credit scores or those who can not provide the requisite documentation. Arguably the less financially savvy among us. Common features include lower introductory (“teaser”) interest rates that index to higher rates when the period is over, as well as fees and penalties often glossed over in the documentation.

As for the risk associated with the loans, banks bundle them into securities, and sell them - passing the risk on to someone else. One Merrill Lynch Analyst quoted in the article predicted delinquency rates could rise to be “in the 6% to 8% range" if home prices are flat next year and the "double digits" if home prices fall by 5%. Sub-prime mortgages account for 10 to 12 percent of the $10 trillion US mortgage market, so a few percentage points could add up.