As fallout from the subprime lending crisis continues, a number of remedies have been proposed to deal with it. One is legislation to curtail predatory lending, which is generally thought to be a factor behind the issuing of so many subprime loans to borrowers with poor credit. What qualifies as predatory lending? And what are the conditions that make it flourish? Wharton finance professors David Musto, Philip Bond and Bilge Yilmaz analyze predatory lending in a new paper titled, "Predatory Lending in a Rational World."
The subprime lending problem, just a faint blip on the radar a year ago, has snowballed into a full-blown crisis and is the subject of many proposed remedies. Those include legislation to curtail predatory lending, which is generally thought to be one of the factors that led to the issuing of so many subprime loans to borrowers with poor credit.
But loans that are bad for some borrowers can be appropriate for others. The payday loan might be a sensible choice for a worker in a short-term cash crunch who will pay the debt off quickly and prefers a high interest rate for a short time over the paperwork and delay of a more conventional loan from a bank or credit union. The negative amortization mortgage might make sense for a knowledgeable, disciplined borrower whose income is irregular, such as someone who lives on commissions or relies on a year-end bonus for a big part of his pay.
Therefore, it is not clear how many subprime borrowers were truly victimized by predatory lenders and how many simply had bad luck with risky loans they took on with open eyes. After short-term interest rates rose dramatically, starting in the summer of 2004, subprime loans reset with much larger payments. Meanwhile, the housing bubble burst and home prices began to fall, making it hard for subprime borrowers to refinance to better loans or sell their properties. Foreclosures have spiked.
Musto and his colleagues did not attempt to look at predatory lending arising from fraud, such as cases in which lenders or mortgage brokers deceived borrowers about the terms of their loans. Such cases could be addressed with borrower education and clearer loan documents, they note.
The Equal Credit Opportunity Act of 1976 can also backfire in some circumstances, Musto and his colleagues write. This act prohibits loan discrimination on the basis of race, color, religion, sex, marital status, age and other criteria, making it harder for lenders to identify borrowers at high risk of default. It therefore means loans are offered to people who otherwise would be denied, and lenders compensate by pushing products with high interest rates and other terms associated with predatory loans.
This may seem obvious, but do not overlook the security agreement. Even though business people typically do not focus on the security agreement, there may be a myriad of issues hidden in an ABL security agreement. Oftentimes, lenders bury notice requirements and different, more burdensome covenants in the security agreement, especially related to receivables. For instance, a security agreement may prohibit the borrower from adjusting, forgiving, or amending any receivables. For many borrowers, that standard is too strict to work for their business. To increase compliance success, move all of the reporting requirements to the notice section in the credit agreement and ensure that the documents work together.
Both The Borrowers and Front Desk deal with questions of Agency and privilege. When the boy, starts bringing the Clock family things from the dollhouse, they lose their agency as borrowers, even though they have gained material privilege and apparent wealth. The boy seems to be the one with the most agency and privilege in the story of The Borrowers.
How the tiny protagonists in Norton's texts reflect contemporary Western assumptions about the state of childhood is a subject broached by Perry Nodelman. Remarking that miniaturized figures ("toys, dolls, and other small things") are an important part of the children's literature repertoire, Nodelman suggests some of the ideological motivations at work in such stories as The Borrowers : "books about miniature creatures tend to focus on the ways in which children, in their likeness to toys, are inherently weaker, more prone to give into their weaknesses, more in need of resolve and energy than adults" (153). Norton's representation of her diminutive protagonists certainly reinscribes notions of the child's otherness from the adult. The fact that the borrowers are a distinctly subaltern and separate race, quietly eking out an existence on the castoffs and detritus of the dominant civilization of "human beans" (as they call us), makes further, and parallel, implications about the otherness of the lower classes. That the characters in Norton's series find themselves in a relationship to humans that mirrors the child's dependence on and awe of the adult, implies parallels between a "natural," paternalistic family hierarchy, and an organic and fixed class structure as well.5
The gradual disappearance of the borrowers and their way of life mirrors that of ancient plebeian culture, and the paternalism that was supposed to have sustained it before the onset of the industrial revolution. Laments over this lost or vanishing way of life bear a great deal of resemblance to nostalgic recollections of lost childhood, and often the two impulses occupy the same ideological and textual space. When Wordsworth, for example, mourns the passing of his youth in Book V of The Prelude, he mourns at the same time the disappearance of a simpler, rustic, and pre-industrial mode of being. Folklorists and antiquarians of the eighteenth and nineteenth centuries, who set about collecting for posterity the traditional oral stories and cultural practices of plebeians, attributed their disappearance to the death of ancient ways in the face of progress, reason, and an inevitable modernity.
In exchange for the subsistence with which humans graciously yet unwittingly supply borrowers, borrowers fulfill their end of the bargain by remaining mostly invisible and unobtrusive (neither seen nor heard), and by giving their awe and deference to their providers. It is Pod's custom to go, on occasion, to Great-Aunt Sophy's room to pay his respects to the mistress of the house (to whom the whole family always reverentially refer as "Her"). He patiently waits while she sips her Fine Old Madeira and recounts to him stories of her youth (she believes Pod to be a bottle-induced hallucination). Arrietty's constant desire to make contact with and to gain the notice of big people also speaks to this obligation and desire to please her superiors:
There is, of course, a lengthy discursive history of configuring common people as physically smaller, less significant, and less visible than members of the more privileged ranks of society, and this history makes Norton's characterization of the borrowers seem quite natural. John Brand, the noted antiquarian and documenter of British plebeian customs in the late eighteenth century, sought to render visible the mysterious and hidden traditions of the common people: "[n]othing can be foreign to our inquiry, much less beneath our notice, that concerns the smallest of the vulgar; of those little ones who occupy the lowest place, though by no means of the least importance, in the practical arrangement of human beings" (I:xviii). The 1836 Report on the State of the Irish Poor in Great Britain uses a spatial metaphor that could easily be applied to the Clocks' position in Great-Aunt Sophy's manor house to describe the subordinate nature of the Irish diasporic underclass: "[t]he Irish emigration into Britain is an example of a less civilized population spreading themselves, as a kind of substratum, beneath a more civilized community" (cited in Thompson, The Making of the English Working Class 476).
I recognize that relying so heavily on comparisons of Norton's novels to representations used in the late eighteenth and early nineteenth centuries may seem somewhat anachronistic, considering the Edwardian dress of the characters and setting of the story, and the mid-to-late-twentieth-century publication dates of the texts. Despite the narrative's historical markers, the Clocks are clearly not a working-class family of the age of manufacture. Pod's trade (shoemaker) is an ancient one, and he practices it in the traditional manner and in his own home. Despite their dependence on the big people who unwittingly sustain them, the Clocks enjoy the relative freedom of those who are not subject to the artificial rhythms of the factory, and who do not subsist by the sale of their labor. In fact, the borrowers exist outside of a capital-driven and currency-based economy, managing instead by barter and borrowing. Perhaps the fullest example of this simpler and more primitive economy is Spiller, the "wild" borrower who lives outdoors, hunts, traps, and trades his meat to other borrowers for such necessaries as clothing. Norton avoids the potential class antagonisms associated with an industrial-age working class by configuring the borrowers more as preindustrial plebeians who, in the conservative model of paternalism imagined by the series, exist in a relative state of harmony.
In the eighteenth century, none were more subject to the contempt and suspicion of such transgressive forms of emulation than domestic servants, especially women, who were imagined to have a particularly irrational attraction to the fineries of their mistresses.12 Their proximity to the lifestyles enjoyed by their masters meant that emulation was much easier and more common. Norton's borrowers (who, like domestics in a privileged home, live below and out of sight) suffer from the same tendencies, and it is only after their calamitous discovery by the cook Mrs. Driver that the dangers of their aspirations become evident.
In conservative versions of history, such small-scale misappropriations of the lord's or owner's property were gently tolerated, as they insured the loyalty and deference that confirmed and validated his authority and maintained the social hierarchy. The reverence with which borrowers treat Great-Aunt Sophy (the lady of the manor, as it were), and the awe in which they hold human beings generally, speaks to this conservative notion of a proper deference for one's superiors. What is absent from this equation, and what cultural historians such as E. P. Thompson have attempted to reintroduce into it, is the perception of this economy from below. 041b061a72