Are the Wall St Protestors Right……or wrong??
by Richard DiMaggio
1. Why the Fed Enacted TARP in the First Place
First, to be fair, let’s look at why TARP was brought about: Banks were failing, and we “had to”–a term we’ll explore–keep them liquid.
Ben Bernanke was heavily schooled in the Great Depression, and it’s causes. The Great Depression was caused by a number of man made problems, part of which was the federal failure to keep banks flush with cash after the stock market crash. In addition, the Fed raised interest rates when it should have lowered them. You raise interest rates, people don’t borrow; you lower interest rates, people borrow. The Fed raised rates, and no one borrowed at a time we desperately needed productivity.
Millions of businesses work off lines of credit, which they get from banks. If you’re self employed, money doesn’t arrive every pay day like it does for employees. To keep pay days coming, businesses tap into lines of credit, which they get from banks, and then pay them down when receivables come in.
Had banks become insolvent, all the lines of credit would have closed and millions of businesses would have been shut down. Tens of millions would have been unemployed. Catastrophe was right around the corner.
Now put this in perspective: During the Great Depression, unemployment in America reached 25%. Although today unemployment is considered “9%”, when you take underemployment –people packing bags somewhere because it’s the only job they can find–into consideration, the amount of unemployed and underemployed is about 17%…..
But true, banks today are not lending. Our economy is severely broken. Job creation is stagnant. I was recently talking to a mortgage broker and he said 1) “Don’t even try to get a mortgage for less than $100,000 2) don’t be self employed 3) Forget about buying a condo.” I am going to say condos are risky, because so many people live in one building, the enterprise may be “at risk”. If enough of your neighbors lose a job, can the others kick in the difference for maintenance, dues, insurance etc?
Banks right now are so overwhelmed with servicing failures and foreclosures, writing new loans is not paramount, yet alone risky ones.
With 10%, if not more, of homes 90 days or later on a mortgage, and faced with class actions, do banks have the liquidity to keep lending? When they do foreclose, who do you think pays all the taxes and legal fees on that property?
Let’s face it, bank stocks are in the gutter, not exactly a sign of corporate health. Despite the trillions doled out, banks are stressed, `and we haven’t even turned the corner on the housing crisis.
2. But Here is Why People Are Furious
It comes down to “Where is our bailout??”
The government could have forgiven trillions of our debt, and instead it gave trillions of our dollars–which we don’t have right now–to fuel a system many of us see as a system of financial suppression that keeps us in a form of financial slavery.
At the same time, government passed a series of laws which were extremely anti-consumer: student loans follow us to the grave, and bankruptcy laws tightened and limited. Congress actually passed the Bankruptcy Reform Act making it harder for consumers to file bankruptcy, and then turns around and bails out banks with trillions of dollars. We were told filing bankruptcy was “immoral” and we had a moral duty to pay our bills–and the same voices bailed out banks, car companies and others.
I spent twenty years as a bankruptcy lawyer. I never represented one client who was greedy and out to abuse the system. I did represent the elderly, the disabled, the unemployed, the uninsured, the divorced, who ran for cover at the lowest point of ther lives. Those were my clients.
American consumers want their bailout, and we’re mad as well.
I said it.
There is a glass ceiling in place, and chains are wrapped around our ankles the moment we get out of college and accept our first paycheck.
This isn’t necessarily a banking issue. It is a systemic issue. The same congressman who voted to make student loans forever collectable and make our lives hell with them is the same one who voted to save banks and car companies that made crap for generations.
There is a double standard here, and we’re fed up with it. The same rules that apply to us should apply to them, and the same breaks given them should be given to us. The government not only gave banks our money to help them pay for their debts, they actually made it so we can’t get rid of our own debts–even through Bankruptcy. What a slap in the face.
That is what the real issue should be behind the Wall Street protestors. While Congress limited bankruptcy rules, it enforced arbitration agreements in favor of corrupt credit card companies, and allowed those companies to charge 30 plus percent interest rates; it allows debt collectors to operate under a cloak of secrecy and allows credit reporting companies to damage us without regard over and over and over again.
Banks loan us the money, but debt collectors, some extremely abusive, collect on it. Credit Reporting Agencies–private companies who make billions buying and selling information about us, much of it wrong–put information on our credit report.
You can have a perfectly good excuse for not paying a bill, right down to medical malpractice, but that non payment will stay on your credit report and damn you, with no mention of the wrong leg they cut off.
If you paid cash your whole life, by the way, your FICO score would be “zero”. The more you borrow and become indebted, the more you’re rewarded with a higher FICO score. Tell me that’s not messed up.
Student loans, another example: No statute of limitations to sue on, non dischargeable in bankruptcy, and is debt that you will take to your grave. WHO CAME UP WITH THAT ONE?
Why did Congress make it so they can chase us to the day we die with student loans?
We Want Equal Treatment
All people want, Wall St protester or not, is EQUAL treatment. If the banks get a bailout, the consumer should, too.
If corporate debts are forgiven, consumer debt should be forgiven.
Don’t forgive corporate debts, then make it allowable for a credit card company to charge us 30% interest and make it harder to file bankruptcy.
That’s called unfair, and it’s called supression.
If the government actually gave us our homes, we’d be out buying second homes and cars and consumer goods and we’d be flush with cash. If the government forgave trillions of useless consumer debt, we would have been a healthier nation right now.
Loosen up bankruptcy reform. Allow us access to our stocks to pay our bills without penalty. Limit student loan collection activity, and reign in the 30% credit cards companies charge us.
Make us feel as if we count, too, just because we’re not special interests in Congress.
We have a right to be angry. I’m just not sure at who.