A History of Financial Panics in the U.S.

As you can imagine, repo men like my father saw people at their worst. He told me that central Florida was full of deadbeats — people who borrowed and borrowed, then lied, hid from their debts, pretended they were solvent, until the guy in bell-bottoms arrived.

My dad was not inclined to be generous about how people got to this place. His own career in repossession began in late 1973, after the first oil shock brought minor financial catastrophe to central Florida. Dad, in fact, had lost a very good job as a regional sales manager at Kimberly-Clark. Repo man was a sudden and severe step down, but there were debts to pay. At the end of 1973, many central Florida families were drowning in consumer debt they had contracted when times were brighter. In this downturn these people certainly had “skin in the game,” and it was my dad who did the skinning.

In a certain sense, the story of my dad, Woolco’s debtors, and the debts he collected is the story of American history. Americans settled this nation by borrowing goods, land, and more abstract representations of those goods — land warrants, deeds, patents, concessions, and equities. They borrowed with the most optimistic assumptions about their capacity to pay. But when it became clear that Americans were not paying, banks began to doubt wholesalers and called in loans; wholesalers demanded settlement from retailers; retailers sent my dad and thousands like him out into the countryside to recall some portion of their property. Times got hard.

Pundits will tell you that the economic turmoil the nation experienced in 2008-2009 was the first “consumer debt” crash, built on junk consumer debt. These debts were in turn packed into “collateralized debt obligations,” or CDOs, paper representations of debt that could be bought and sold as financial instruments. CDOs, we are told, weakened the overall economy by dressing up bad loans as good ones. In 2005 or so, a banker who dealt in junk debt allegedly said: “Give me shit, a blender, and lots of sugar and I will make you a chocolate mousse.” In 2008, banks began to figure out just what was in these CDOs. A banking crisis began that brought down multibillion-dollar banking giants like Bear Stearns and Lehman Brothers, as well as causing devastating financial shocks for the thousands of midsized banks and pension funds around the world that held this toxic debt. The federal government, the European Central Bank, and other international government agencies paid for a bailout that has so far cost more than $3 trillion.

The trunk of my father’s Dodge Dart suggests that this story of bad debts was not new. In fact, America has seen numerous periods of similar financial decline, and in most cases consumer debt lay at the heart of it. My dad understood consumer debt intimately; tucked back in his trunk was an accordion file filled with photocopies of signed loan agreements for everyday items such as toaster ovens and stereos. These agreements had allowed Woolworth, the parent company of Woolco, to borrow cash repeatedly. Consumer debt had been the source of Woolworth’s equity — the basis for Woolworth stocks, for its bonds, for the credit that stereo manufacturers and cosmetics companies provided, and for Woolworth’s numerous bank credit lines. All of it rested on documents like the agreements in Dad’s trunk, and most of those debts, he said, were good for nothing.