Dave Ramsey on bailouts, foreclosures, and how the recession can save America

Demographically, I should hate Dave Ramsey.

I'm a gay, Jewish liberal from New England, and he's a Bible quoting family values type from Tennessee.

Still: He's one of my favorite financial gurus. He offers sensible financial advice with no shortcuts: 15-year fixed rate mortgages with large down payments, stay out of credit card debt, live below your means, and save for the future.

And while you might not like his possibly condescending delivery, he reaches a demographic that probably wouldn't pay much attention to Suze Orman or David Bach. Dollar for dollar, there are probably few people who can claim to have helped as many people turn around their financial lives as Dave Ramsey has.

Plus, his delivery is funny and his book "The Total Money Makeover: A Proven Plan For Financial Fitness" should be sent to every single American who has credit card debt.

I had a chance to interview him via e-mail about the recession, bailouts, and what it all means for the future.

WalletPop: You're a big advocate of personal responsibility on your show. Do programs like TARP and Making Home Affordable bother you? Are we veering off course in terms of what America is supposed to be about?

David Ramsey: I think these programs are doing a great disservice to our country and it's people. We've forgotten that the whole idea of the American dream is that every individual has the power to do something great. You don't have to rely on anybody else, and you shouldn't rely on anybody else. You are in control of your financial destiny. The only person that can bail you out is YOU!Banks should not have been making loans to people who can't afford to pay them back. Companies that were operating irresponsibly should not have been bailed out with a big check from the government.Don't underestimate the power of failure. It's good for us. Failure brings about clarity and learning. With failure as an option, you are forced to run towards excellence.

WP: People who followed your advice would have avoided a huge amount of pain over the past couple years -- especially with respect to your insistence on 15-year fixed rate mortgages with significant down payments. Are people more receptive to your teachings now than when the economy was golden and homes could be used as ATMs?

: Imagine going through this past year with no debt. No monthly payments except perhaps your mortgage. When you're not paying out every dime towards debt, you have a lot of wiggle room and peace. If you had no debt and lost your job this past year, you'd be stressed out....but it would be a lot easier to make ends meet during the lean times. Our financial advice works in a good economy and a down economy. For many people, the last year has been a big wakeup call to change their behavior.

WP: One of my favorite lines from your books/show is "where the paid off home mortgage has replaced the BMW as the status symbol of choice." Is the increase in savings and the decline in consumption a temporary thing, or is there a chance that we're seeing the beginning of a long-term trend toward financial responsibility? Has America changed its ways, or will we be right back too much debt, too much consumption, and not enough savings once the economy turns around? How can we prevent that from happening?

Ramsey: My hope is that this past year will go down in the history books as this generation's "Great Depression." If you're under 40 years old, you've never worked in a down market. My hope is that those who were not being intentional with their money up until now will get a clue and start budgeting. It doesn't matter how much money you make, you've got to have a written plan. You've got to live on less than you make. You've got to get out of debt and stay out of debt. These things are the only keys to building wealth.

WP: You're a critic of irresponsible spending and borrowing, but you've also been very critical of predatory lending practices like the payday loan industry. How much of the subprime mess should be blamed on the banks and how much should be blamed on the borrowers?

Ramsey: Both sides are to blame. The banks should not be making loans to people who can't afford to pay them back. People who are not financially fit should have never applied for a loan to begin with.

WP: Is there a silver lining to the mess we're in? When we look back at in ten years, will we be able to say "This is something that came out of it that is good"?

The silver lining is for the first time in decades, the savings rate is climbing! Bargain shopping is cool! Cheap is in! For once, many people are starting to pay attention to their finances and take personal responsibility for their households. There is always a lesson to be learned from a fall.
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