Many High Risk Consumers Continue to Borrow Money

As reported on the website of the American Bankruptcy Institute, quoting the Wall Street Journal, in recent years Americans have gone on an unprecedented borrowing binge to purchase everything from stocks to vacations to groceries to federal income taxes. A record $4.5 trillion in debt has been accumulated by U.S. non-financial corporations, which is up 67% in the past 5 years. Household borrowing has risen nearly 60%, to $6.5 trillion.

More debt has helped companies to expand and boosted consumer demand, which has helped fuel economic growth. But many say they are alarmed that consumers who may be the least able to afford more debt have been adding the most to their borrowings, and many low income consumers and those with bad credit histories have been finding it easier to borrow money.”We’ve expanded our access to debt in dramatic ways, which is wonderful for the country, and it’s helped the economy,” said Diane Swonk, Chief economist at Bank One Corp. in Chicago. “But there’s no free lunch. The riskiest borrowers seem to be piling on debt, and we may be building a house of cards.” “The real debt problem is lower-income people, who have been adding debt,” said James Paulsen, chief investment officer at Wells Fargo Corp.’s Wells Capital Management unit. “That’s what’s scary to me.”