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WORD
COUNT
592
JUNE 4, 2008
CREDIT CROOKS ARE STILL GOING STRONG – by William A. Collins
Got my
credit
Card to
thank;
Financially,
I’m in
the tank.
Telling
big banks to stop chiseling their borrowers is like telling cats to stop
chasing birds. They can’t. It’s what they do. They’re designed that way.
Put
another way, the business of America, as we’ve long been told, is
business. No, that doesn’t mean making goods or providing services. It
means manipulating the finances of making goods and providing services.
General Motors reaps more profit from making car loans than from making
cars. In fact, it no longer reaps any profit at all from making cars.
But
whether you’re making cars or loans, the temptation is strong to go for
the short-term profit and let the long term look out for itself.
American automakers, historically, have famously contrived to force us
into SUVs and other bloated vehicles because these offer the best profit
margin per unit. But that suicidal path has allowed foreign makers to
slip in with smaller cars that are now eating Detroit’s lunch.
Similarly banks, investment houses, and hedge funds found great
short-term profit in selling unpayable mortgages, packaging them into
unsustainable securities, trading them in unregulated markets, and
unloading them before the bubble burst.
While
it lasted, all that conniving was great for dollar-drenched Connecticut.
Those tainted profits flooded us with BMWs and McMansions, some now
selling at a pleasing discount. But finally, that short-term
profit-taking has ended and the painful long-term debt-repaying part has
begun. Our state must now refocus on a more sustainable, socially
productive industry, like…say…gambling.
But
just because home mortgages have taken the pipe doesn’t mean that the
lending industry has donned sackcloth and ashes. Hardly. It’s still
high-pressuring us with credit cards, sending out billions of
solicitations per year. College freshmen remain a juicy special target.
We forced our own departing granddaughter to sign in blood that she
wouldn’t take one. We’ll see how that works.
Perhaps
the most perverse aspect of credit cards though, is that the issuers are
not even looking for good risks. Good risks pay up on time. Bankers
prefer BAD risks. They pay late, thus incurring unconscionable fees and
interest rates. Such debtors used to repent ultimately in bankruptcy
court. No more. The finance industry eventually persuaded the Republican
Congress to make bankruptcy terribly stern (not a hard sell). Now
debtors have to keep paying for the rest of their lives, and lenders
still cheerfully pre-approve any new borrower who has both feet out of
the grave. Or maybe just one.
Naturally, these recent revelations of pernicious behavior by the
banking industry came as a complete shock to those government agencies
responsible for regulating it. Who would ever have dreamed that bankers
might behave that way? Certainly not the Federal Reserve Board, the
Controller of the Currency, the Office of Thrift Supervision, or the
U.S. Congress.
Each of
those noble institutions was shocked…shocked…to learn of the industry’s
rapacious behavior. Our own Sen. Chris Dodd, chief of the congressional
sleeping watchdogs, is finally proposing reforms, at least until the
heat is off.
But no
matter how stringent the coming reforms may be, you won’t have to worry
about the welfare of lenders (I know you were worried sick). None will
be arrested or go bankrupt. They’re too big for us to let that happen.
Only borrowers go bankrupt. Banks get bailed out. Sure, some lower level
employees may get laid off and many small investors may get skunked, but
the big guys keep on truckin’. They’re what make America great. As a
nation, it’s what we’re all about.
--
Columnist William A. Collins is a former state representative and a
former mayor of Norwalk, Connecticut. A photo of Bill Collins is
available at:
www.minutemanmedia.org
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