WASHINGTON (CBS.MW) -- It's a rare day when a central banker has a sunnier disposition than the average citizen.
But such was the case Monday when Federal Reserve board chairman Alan Greenspan delivered an upbeat assessment about the state of U.S. household finances.
In a speech to a credit union trade association, Greenspan said consumers could handle their higher debt levels.
"Overall, the household sector seems to be in good shape," Greenspan said.
In fact, many financial experts portray U.S. household finances as a mess, with consumers stretched too thin without the financial smarts to successfully plot their financial futures.
Credit cards, which are supposed to give consumers access to the financial superhighway, have instead trapped many in a perpetual bumper car ride of repeated minimum monthly payments, they say.
"Middle-class, hard-working, play-by-the-rules families are in terrible financial trouble," said Elizabeth Warren, a professor at Harvard Law School.
A key bone of contention is the sharp rise in personal bankruptcies, which have more than tripled in the past 17 years to a record 1.6 million in 2003.
"Personal bankruptcies keep increasing -- even through business cycles. It has to have as its root cause something besides the business cycle," said Lewis Mandell, professor of finance at the University at Buffalo School of Management.
In his speech, Greenspan said bankruptcy rates were not a reliable measure of the overall health of the household sector, because they may be impacted by outside factors like changes in laws.
"Greenspan is like the wizard saying don't look behind the curtain at bankruptcy, home mortgage foreclosure, credit card default, car repossessions," said Warren, the author of the new book "Two-Income Trap."
Credit card delinquencies rose to a record seasonally adjusted 4.09 percent in the third quarter, the latest data available, according to the American Bankers Association.†
Some academics say the bankruptcy statistics show the stark reality of the new U.S. economy.
"The Fed is desperate to say that there is not a serious debt capacity problem," said Robert Manning, a sociology professor at the Rochester Institute of Technology, who wrote "Credit Card Nation."
"Why is it that we have unprecedented numbers of people declaring bankruptcy during the longest economic expansion in history in the late 1990s through today?" Manning said.
Manning argued that in the new economy, a lot of people are moving back and forth between jobs and rely on credit cards when they are unemployed. Fed statistics are not capturing, and government officials are not addressing, this fragile economic existence for many Americans, he said.
Many experts say Americans do not understand credit cards and other complicated financial instruments.
"There is a huge void of financial literacy in this country," said Howard Dvorkin, president of Consolidated Credit Counseling Services Inc., which specializes in helping people get out of credit card disasters
"There are some horror stories out there," he said.
Stephen Brobeck, executive director of the Consumer Federation of America, said Greenspan's speech raised his concern that any rate hike by the central bank would "dramatically increase consumer debt burdens."
Brobeck said the Consumer Federation was also "very concerned about young renters with large credit card and student loan debts and no home equity or other savings to tap."
In his speech, Greenspan did note that renters were having a harder time paying their bills and said the trend "might be worrisome if it indicates greater difficulties in becoming financially established."
This story ran on CNN on February 23, 2004.