"Americans are not going broke over lattes!"

Can you talk about why mortgage payments become such an enormous part of families' budgets?

Over the past generation mortgage costs have increased 70 times faster than a man's wages. Think about that. That means for many families in metropolitan areas throughout the U.S. the only way to buy a home is if both parents go into the workplace.

And you're not just talking about San Francisco and New York here?

In 75 percent of the metropolitan areas across America, a police officer cannot buy a house on one income. The same is true for a teacher or a firefighter. In other words, a one-income family in most of the United States cannot afford to be middle-class homeowners.

This is not about spa bathrooms and granite countertops. The average family in the U.S. today lives in a house that is 6.1 rooms. That's larger than the average family in the early 1970s -- they lived in a house that was 5.7 rooms -- but today's family has hardly rocketed into McMansion status.

So, we're not living that much larger than we were in the 1970s? The plague of American hyperconsumerism in recent generations is just a myth?

The overconsumption myth is just that -- a myth. It's a story that we tell ourselves. And it's a story that every credit card company that wants to press Congress to give it even more beneficial laws raises: the story of consumers who are wildly spending, and who need to be reined in. The credit card companies need protection from these wild overspenders.

When, in fact, those are the people that the credit card companies make all their money on?

When, in fact, that's exactly where they make all their profits.

I think that the reason that the story has been so tenacious is that we want to believe that it's true. If the only people who get into real financial trouble are the overspenders, then those of us who buy in bulk at Costco, and wouldn't dream of spending $200 on sneakers, surely we're safe.

And you're saying that the actual danger is the fact that people have 75 percent of two incomes locked up on fixed costs, like their mortgages?

In other words, the whole overconsumption story is a distraction. It has families focused on nickels, when it's the thousand-dollar commitments that are sinking the family economically. It gets families looking in the wrong place.

And there's a whole school of very popular financial planning built around this idea that if you don't have that latte ...

Americans are not going broke over lattes! Americans are going broke over home mortgages and health insurance. To claim that it is lattes is first to blame the families for something that is not their fault. And secondly, it removes all pressure to focus on political changes that need to be made. In the early 1980s, with no debate, Congress quietly deregulated the home mortgage-lending industry and the credit card industry.

With deregulation, a monster was born, and the monster is sub-prime lending -- that is, lending to a family once they get into financial troubles.

How big a business is that?

Nobody actually has the numbers on it, not even the Federal Reserve. Their best estimate is that it is many tens of billions of dollars. There's a whole industry that's grown up around this. And even Alan Greenspan says that it is the fastest growing part of the lending industry, this sub-prime element.

The notion is that the credit card company offers you a credit card at 6 percent interest, but if you lose your job and miss a payment, then the interest jumps to 29 percent. And once that happens a family gets its feet tangled up, and can't get out of debt.

Or, you have a mortgage at 5-1/2 percent, and when you miss a mortgage payment, there's an industry that descends on the homeowner offering to refinance to give some cash to the strapped family, but doubling or even tripling the interest rate on the payments.

Don't try to borrow your way out of debt. It never works. A family in financial trouble should never, underline never, take out a second mortgage or refinance the mortgage on their home. Companies are making billions in profits by talking families into putting their homes on a roulette wheel, and the companies come out the winner. Home mortgage foreclosures are up more than 300 percent over the past 22 years. It's really scary.

So, all these seemingly respectable financial institutions have become like loan sharks?

They have! They're making profits that would make Jimmy the Leg Breaker drool. In the early '80s, these mortgage-lending tactics and credit-card rates would have been illegal. The executives would have gone to prison for having sold these financial products.

It's time for Congress to reinstitute interest-rate caps. Virtually every civilized nation on earth has caps on interest that can be charged to consumers, except the United States. I believe in personal responsibility, but I also believe in a fair fight, and today, the typical middle-class family is no match for a mortgage company and a credit card company out to steal from them.

With sub-prime mortgages, at what rate are people then paying their mortgages?

In 2001, when standard mortgage loans were in the 6.5 percent range, Citibank's average mortgage rate was 15.6 percent.

Average! Average! So, half of them were above that on a home mortgage. That's an extra $420,000 on an average $175,000 home. In some sense, you just laugh and shake your head. I do. But some part of me is furious over this. Hardworking middle-class families are being cheated out of their retirement, out of the opportunity to send their kids to college, out of the very roof over their heads by rapacious lenders, whose only notion is more profits, more profits, more profits.

In the U.S. today, you cannot buy a toaster that has a 1 in 12 chance of burning down your house. It's not legal according to the Consumer Products Safety Commission. But you can buy a home mortgage that has a 1 in 12 chance of costing you your house. Either way the family is out on the street. The mortgage industry needs to be regulated at least as aggressively as the toaster industry.

I may need a food taster if you print that, somebody to start my car, but that's OK with me.

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