According to a recent report by the Federal Reserve, in recent years there has been a shift in financial sector, consumer, and government debt. The report, published by the New York Times, shows that financial sector and consumer borrowing, instead of increasing, now is falling, while government borrowing, instead of borrowing at a slower rate than any other sector, now is doing it so at a faster rate. “A Shift in the Balance of Debt Obligations”, The New York Times, Saturday, March 19, 2011.
For the past 20 years the financial sector debt grew faster than any other sector. One explanation for the increase is the fact that the financial sector put many mortgages into a securitization. However, the homeowner’s problems with mortgage debt affected not only lenders but also many securities. In the past two years, financial sector borrowing went down 9 percent, for a total reduction of $2.9 trillion.
For three consecutive years household debt decreased. One explanation is that many debts have been written off. Also consumers are choosing to borrow less.
On the other hand, government debt has increased by $3 trillion. The government intervention in the financial sector crisis contributed considerably for this increase.
Total outstanding debt in 2010 for the federal government is $9.4 trillion, $13.4 for household debt, and $14.2 for the financial sector.
We at the Law Offices of Lutzky and Labayen are following closely all issues related to debt, especially consumer debt. If you are having problems with debt and you are in need of legal advice, please call us or visit us for a free initial consultation.
