As she often does, Gretchen Morgenson of the New York Times has yet another story explaining how the banking system has gone awry, and now the economy itself is suffering. Her story in Sunday's paper explains how banks no longer merely earn money from reasonable interest, but instead have developed perpetual interest practices magnified by punitive fees to drive Americans deeper into debt. It's backfired as her story Given a Shovel, Digging Deeper Into Debt explains:

While the circumstances surrounding these downfalls vary, one element is identical: the lucrative lending practices of America’s merchants of debt have led millions of Americans — young and old, native and immigrant, affluent and poor — to the brink. More and more, Americans can identify with miners of old: in debt to the company store with little chance of paying up. It is not just individuals but the entire economy that is now suffering. Practices that produced record profits for many banks have shaken the nation’s financial system to its foundation. As a growing number of Americans default, banks are recording hundreds of billions in losses, devastating their shareholders.

Lenders have found new ways to squeeze more profit from borrowers. Though prevailing interest rates have fallen to the low single digits in recent years, for example, the rates that credit card issuers routinely charge even borrowers with good credit records have risen, to 19.1 percent last year from 17.7 percent in 2005 — a difference that adds billions of dollars in interest charges annually to credit card bills.

Average late fees rose to $35 in 2007 from less than $13 in 1994, and fees charged when customers exceed their credit limits more than doubled to $26 a month from $11, according to CardWeb, an online publisher of information on payment and credit cards. Mortgage lenders similarly added or raised fees associated with borrowing to buy a home — like $75 e-mail charges, $100 document preparation costs and $70 courier fees — bringing the average to $700 a mortgage, according to the Department of Housing and Urban Development. These “junk fees” have risen 50 percent in recent years, said Michael A. Kratzer, president of FeeDisclosure.com, a Web site intended to help consumers reduce fees on mortgages.

"Today the focus for lenders is not so much on consumer loans being repaid, but on the loan as a perpetual earning asset," said Julie L. Williams, chief counsel of the Comptroller of the Currency, in a March 2005 speech that received little notice at the time.