79% INTEREST ?!!!

Since the early 1990's... there has been a new lending strategy adopted by some in the finance industry to target low income Americans as their business model. Where once certain types of people had been seen as unfinanceable under traditional lending, "creative financing" paved the way for poorer Americans to have the opportunity to get lines of credit... lines that proved far more lucrative for lenders than the industry had ever imagined.



There was a time when such things would have only been needed by a small invisible portion of the population. Back when people felt comfortable saying things like... "you're only poor because you want to be" or "noone looking to help themselves goes without." But who... among those who have seen economic statistical trends in America... can say that with a straight face today? Wages in America have been virtually unchanged in America for 35 years. Working people are finding it harder and harder to pay bills and relying more on credit cards and other loans to make ends meet. Ask yourself why there has not been a SIGNIFICANT increase in household income, even though SIGNIFICANTLY more women work today, compared to 1965.


This is what you get with "conservatism." Government stays out of the way, lets business do what it feels it must... and we all live with the results. My personal opinion... I think Republicans want this kind of society: that this is the natural order of economics and (idealistic) liberals should stop trying to intercede. Indeed, world history does not provide a long list of nations with large robust middle classes (usually just small upper and large lower class), so, there may be some truth to that... and I fear that truth is coming nearer to our shores.



Over the last 18 months, I've been astonished as storefront businesses have closed and been replaced by small payday and car title loan companies. Has the market boomed this much? Are there that many Americans hurting to the point of needing these high interest loans to survive day to day? Nothing... and I mean... nothing happens in the business world without reason. They wouldn't keep cropping up if they wasn't a market, and they wouldn't stay open (AND FILLED WITH PEOPLE) if they weren't turning a large profit.



Next time you're near one of these places, even if you dont need their services. Check out their interest rates. They make so much money, because people have a hard time paying off these loans. For those that finally do, the (real) interest on the principle is staggering. DID YOU KNOW PAYDAY LOANS ARE ILLEGAL IN 15 STATES... PREDATORY? USURIOUS? What is happening to America?

• Arkansas

• Connecticut

• Georgia

• Maine

• Maryland

• Massachusetts

• New Hampshire

• New Jersey

• New York

• North Carolina

• Ohio

• Oregon

• Pennsylvania

• Vermont

• West Virginia

And now reports of a credit card with a 79.9% interest rate (click here). You may be surprised (like me) to know that there are no limits on the interest rate a credit card company can charge. Though the word usury is part of the American vocabulary, powerful banking lobbyists have fought hard on Capital Hill to make sure that it never becomes part of the credit card industry's lexicon. There have been attempts to put a cap on interest rates, but they are fought hard in Congress. God bless the markets... left on their own, look how they work for the good of the American people.



The bold interest rate is in response to the new credit card law going into effect on February 22nd, limiting the amount of upfront fees that can be charged to a new card holder. In essence, a cost shift. Big business does not believe in taking on new cost... once they get use to eating, they will merely find a new way to partake. So, instead of getting the fees upfront, they will get it on the backend with higher interest rates.



Its hard for me to fathom that people out there would need a credit card with a $300 limit... which means that, for that person... there are payments that need to be made, I'm presuming... REGULARLY... and they can't make them without a loan. Not only that... but, there are ENOUGH people living this way, as to have an extremely lucrative multi-million dollar industry. The idea that there are more than just 10,000 people interested in credit cards that max out at less than $500... let alone more than a million people... what is the state of the American dream? Is that phrase antiquated?



The fact that there are states that don't allow payday loans should tell you that there is something going terribly wrong. More and more people who can't get by... saving face only by relying on credit. And people wonder why there have been so many foreclosures. Considering that the top 10% of Americans own 72% of all the wealth (not income)... consider that one fifth of Americans make 22k/yr or less. That's one in five households. What is one fifth of 300 million? And that is the rationale the credit card companies give. These people are risky. They are soooooo risky... that they need to give interest rates high enough to show they will turn a profit.


Beware that loan shark!!! Dont shake his hand! He is not your friend! He will bite you!

Corporatocracy Redux: Banking Reform

A year and a half after the 2nd most devastating financial calamity in the history of the United States... we are still waiting on a first piece of legislation as a response to prevent it from happening again. Especially when considering populist anger at the bailouts of big banks and the ensuing doubling of the unemployment rate in America... what seemed like a sure thing as swift and effectual reform has been unable to get out of the Senate Banking Committee.


Friday, Reuters reported (click here) that Banking Committee chair Chris Dodd (see above) said that financial reform legislation is currently at an impasse. This isn't a bill being debated on the floor of the Senate... they have yet to get out of committee! Last August... a year after the financial crash, Democrat Senator Dick Durbin... frustrated with a lack of progress on reform... when referring to the Congress, said that the banks "frankly own the place." Behind the scenes, the same banks that caused the chaos and needed government intervention are now heavily lobbying Congress to block reform or keep "teeth" out of anything passed. If we study the history of the Great Depression, we know that a lot of legislative reforms emanated from it. Not sure what the future holds on the subject of reform for this crisis... but we are off to a dubious start.



In the meantime... the bank fat cats... continue to roll around in the money.