Soldier's Debt

by Alexander Cockburn

The president went to Camp Pendleton, togged up in his nice, new USMC tanker jacket with "Commander in Chief" sewn on the front. He got a gentler reception than his defense secretary received the same day a few thousand miles further east, in Camp Buehring, Kuwait.

As reported by AP's Robert Burns, Army Spc. Thomas Wilson of the 278th Regimental Combat Team (which is mostly made up of people from the Tennessee Army National Guard), asked Rumsfeld why "do we soldiers have to dig through local landfills for pieces of scrapmetal and compromised ballistic glass to uparmor our vehicles?" The question got an ovation from the approximately 2,300 soldiers mustered for Rumsfeld's visit.

Flustered, the Defense Secretary got Wilson to repeat his question, then answered, "You go to war with the Army you have," and "You can have all the armor in the world on a tank, and it can (still) be blown up."

No one in Camp Pendleton belabored the commander in chief with so sharp a query as he thanked soldiers and families separated during the holidays. But there's no shortage of reports about the anger over long deployments, as well as the steady toll of dead and wounded. To date, 269 of the Marines based at Camp Pendleton have been killed in Iraq and many more wounded.

Bush lauded groups aiding families at the base, including a Camp Pendleton nurse, Karen Gunther, who, with other Marine families, started the Injured Marine Semper Fi Fund to raise cash for families in financial trouble. He urged Americans to go to the Web site AmericaSupportsYou.mil to offer support and donations.

Charity's not going to solve a problem that jumps straight out of the pork barrel priorities of the defense budget. Money sluices into the treasuries of defense contractors making those poorly armored tanks. Meanwhile, an E-2 level Marine gets $1,337.70 a month. Married, this Marine gets a monthly housing allowance of $460.50 a month, unmarried, $289.20.

I was down in Oceanside, Calif., the town just south of Camp Pendleton, earlier this year, and as I pointed out then, you don't have to drive more than a couple of blocks through Oceanside's main drag before the economic realities underlying military upkeep of the American Empire become apparent. On the south side of the 4000 block on Pacific Coast Highway is a colorful storefront with two big signs shouting "We Support Our Troops" and "Welcome Home Heroes." But the biggest sign of all says "PAYDAY ADVANCE." On the other side of the road there's a pawnshop, one of several in Oceanside, and there are several other storefronts offering advance loans for Marines who can't make it to the end of the month.

"Being poor in America," I wrote, " a reality for millions who might once have called themselves middle class, means having to face debts each month, without any decent financial services and hence dealing with interest rates of around 20 percent."

Not long after, I got a politely instructive note from Carol Hammerstein of the Center for Responsible Lending. It's not a matter of 20 percent interest rates, Ms. Hammerstein pointed out. "While this may be true of predatory mortgage lending, the rates are actually much, much higher for small consumer loans. For instance, payday lenders actually charge fees of about $15 to $20 per $100 borrowed. Because their loan terms are very short, usually two weeks, and they generally do not accept partial payments (by design), their annual interest rates actually start at about 400 percent and can exceed 1,000 percent."

Payday borrowers mostly have no idea what they're getting into. On the customer disclosure form the annual interest rate won't carry a percentage sign. Just a number, like 805. A payday lending business plan, cited by Ms. Hammerstein, advises: "Remember, in your response to clients' questions regarding your fees [say], 'We charge $15 per $100 advanced.' Sounds like 15 percent, but in reality, since it is an eight-day loan, the true annual percentage is 805 percent."

So the borrowers get caught, paying fees for no new money, week after week. Ms. Hammerstein says her Center has found that payday lending is almost never for that one emergency stopgap loan. The payday lending business model is based on developing these lethal borrowing patterns. Ninety percent of all payday loans go to borrowers with five or more loans in a single year.

The Armed Forces recruiters target poor neighborhoods. The payday lenders target the Armed Forces. At Fort Bliss in Texas, Paul Fain wrote earlier this year in Military Money, the Army Emergency Relief office estimated nearly one-tenth of the 10,000 active duty troops stationed there have had to undergo credit counseling because of payday loans and other debt problems." Young soldiers and sailors, Fain went on, "are the perfect marks for payday lenders for reasons beyond financial naivete. Though they often live paycheck to paycheck, military personnel are paid regularly, never get laid off and face penalties for failing to repay debts."

Back to Oceanside. The enlisted servicemen and women hock stuff in the pawnshops and borrow against payday. The generals and the contractors buy up beach property and own stock in the institutions that bankroll the pawnshops. The military coming home from the war face rotten prospects in the service economy. The president was smart to make it a quick visit to Camp Pendleton. If, like Henry V in Shakespeare's play, he'd moved among the Marines in disguise and listened to their worries, he'd have had a rude surprise. But in the fake world of TV news PR, "heroes" aren't racked with worries like an 805 percent annual interest rate.

Footnote: Just so you know, Military Money calculated that if you borrow $200 for two weeks from the bank under your overdraft protection, you probably pay $235, which translates into an annual rate of 456 percent, 65 percent more than the payday loan rate for the same sum. Payday lenders aren't the only sharks in the water, and sometimes they're the only sharks prepared to lend to the small fry.