Tags: Vague | private | debt | crisis

Analyst Vague: Private Debt Crisis Worse Than Government's

By    |   Sunday, 30 March 2014 03:56 PM

A lot has been made of the U.S. government's growing debt burden in recent years, but private debt woes are actually worse, says Richard Vague, chairman of the Governor’s Woods Foundation, a private, not-for-profit philanthropic organization based in Philadelphia.

American consumers are now shackled with $11.52 trillion in debt, up 1.6 percent from a year ago, according to Yahoo. Adding corporations, the private sector has a debt obligation of $28 trillion. 

The federal government's debt totals $17.4 trillion.

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The private-sector debt could spell trouble for the economy, Vague told Yahoo. "Every major crisis of our lifetime has been caused by a rapid increase of our private debt. They all were a function of runaway private lending."

Loan restructuring may be the answer, according to Vague.

"There are reputed to be 10 million mortgages that are still underwater,” he said. “There are perhaps $500 billion to $750 billion in second-lien loans that haven't been dealt with. Those to us are logical candidates for restructuring programs."

Allowing banks to spread the losses over 30 years would give them more incentive to restructure, Vague said. "They would get rid of a problem."

One part of private sector debt that is proving particularly onerous is the $1 trillion in student-loan debt.

"We let debt hinder a whole generation of people from beginning to accumulate wealth soon after graduating college," William Elliott, director of the Assets and Education Initiative at the University of Kansas, told The Associated Press.

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A lot has been made of the U.S. government's growing debt burden in recent years, but private debt woes are actually worse, says Richard Vague, chairman of the Governor's Woods Foundation, a private, not-for-profit philanthropic organization based in Philadelphia.
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2014-56-30
Sunday, 30 March 2014 03:56 PM
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