One reason the progressive movement has been largely stalled for the last 30-40 years is because the average person simply doesn’t understand what our movement is supposed to be about. That's entirely our fault. The loudest component of the progressive movement, the “professional left,” as it were, likes to speak broadly about issues, at the same time they obsess over minutiae that really has no basis in reality. If you look at the liberal press, especially the blogs, you see mostly broad negatives, very few positives and quite a few unhealthy obsessions.
Their latest unhealthy obsession seems to be with banks, specifically "big banks," whatever the hell they are. I suppose it's one of those "you know them when you see them" things, right? Big banks are the root of all evil, as the professional left sees it. If we just get rid of those "big banks," our economy will be fixed, all poor people will become rich, angels will once again dance on the heads of pins, and no police officer will ever again stop a black man for walking through the “wrong neighborhood.”
Okay, that was a slight exaggeration, but only slight.
Look, folks, I’m not crazy about big banks myself, but it's for the same reason no corporation should be allowed to become dominant in any market segment. I actually think Wal-Mart is worse for our economy than Bank of America. While it's true that, if Bank of America fails, the hit to the economy would be worse because they're responsible for more of our cash. But when it comes to day-to-day operation, Wal-Mart’s policies have been far more destructive to the economy over the years than Bank of America’s.
I know this will make the heads of a few pro lefties explode, but big banks were NOT the cause of the Great Recession. They weren't the disease so much as a symptom. They did contribute to it, but they were not the cause. The cause was the repeal of Glass-Steagall and the negligence of the Republican Congress to honor its mandate to “regulate commerce,” as outlined in the Constitution. A mortgage securities market that had once been purposely limited to Fannie Mae and Freddie Mac and heavily regulated to keep it solvent was opened up by Congress and pretty much completely deregulated. At the same time, a number of very questionable financial instruments were allowed to be created, despite the fact that no one even understood what the hell they were.
Basically, what Congress created and then neglected was an industry in which pretty much anyone could be a “mortgage broker,” and offer up mortgages through a number of “creative financing” schemes, through which people who were paying $700 a month rent could suddenly own a nice, new home for $500 a month. “Brokers” were doing anything they could to get these loans through, including faking paperwork. Banks should have been more diligent in approving the mortgages, but they didn’t have to be, because they didn’t have to deal with the mortgages for long, thanks to the mortgage aftermarket that had built up, thanks to Congress’ and the Bush Administration’s negligence.
ALL banks were approving mortgages they probably shouldn’t have, not just the big ones. ALL banks were dumping their mortgages into the aftermarket, then turning around and investing in the mortgage securities and the derivatives that shouldn’t have even existed, if Congress and the Bush Administration had been doing their Constitutionally mandated jobs. Not just big banks, but ALL banks were doing this. Hundreds of smaller banks went under, because they were doing exactly the same damn thing those wretched "big banks" were. Fannie and Freddie were forced into problems, because the pressure to compete was so strong, even they started to invest in this crap.
If you’re a lefty, and you have an obsession with the "big banks," and try to blame everything bad on them, you’re kind of missing the point. The reason our economy is in bad shape is because of 32 years of neocon economic policies. Corporations are naturally greedy; that’s their job, actually; they’re supposed to use whatever they can to maximize profits. That’s where the government comes in; it’s the government’s job to keep them honest.
The root cause of the economic crisis was large corporations doing what they’re supposed to do, and the government (run by Republicans at the time) not doing their constitutionally mandated job at all. It wasn’t "big banks," it was all banks. But while the banks were negligent, it was small brokers and speculators who really screwed the system. And the problems banks had weren't because they were banks, but because they were corporations with a shareholder mandate to maximize profits.
We do have other problems with our financial system, including a number of problems that have little to nothing to do with banks, big or small. One of the biggest, in my view, is the predatory short-term loan industry. These are often called “payday loans,” although some folks may put up their car’s title or even a deed to their home to get these loans. These places usually pop up in neighborhoods and areas with many poor or working class folks who have limited access to legitimate banks.
These companies are predatory, they are largely unregulated, and they cause huge financial problems for families. They do fill a financial need, unfortunately, because some people need a little short-term cash to meet expenses, and banks are actually unable to make such risky loans. But they should be regulated, to make sure their lending practices are fair.
The short-term loan problem has nothing to do with the "big banks." So, imagine my surprise when a link to the following article appeared in my Twitter feed this morning, from ThinkProgress. The general sloppiness of this article surprised me, because it’s relatively atypical for them.
Let's start with the implication of that headline. It's crap, first of all. It's meaningless, but it's also not factual. They don't necessarily finance the lending, anymore than it could be said the loan given to your auto mechanic financed your car repairs. Such a concept is simple-minded on its face, and it's worthy of a Fox News anchor than a reputable progressive "news source."
(By the way, as I was researching this column, I found this same article in roughly the same form other places, so it's not even particularly original.)
This article is a prime example of how we need to stop engaging in Fox News-style BS on the issues and stick to facts and the truth. Just as importantly, we have to get a handle on a little thing called “perspective.” Here are the “shocking stats” posed by the article that supposedly proves their assumption. I’m going to comment on each of these:
– Major banks provide over $1.5 Billion in credit available to fund major payday lending companies.
– The major banks funding payday lending include Wells Fargo, Bank of America, US Bank, JP Morgan Bank, and National City (PNC Financial Services Group).
One reason we have a hard time communicating with the average voter, and why the average voter can't relate to us is because we use imprecise terms, and assume they know what we're talking about.
What are “the major banks”?
And is there evidence that no payday lenders get credit from “minor banks”? In order for this statement to have significance, the author would have to prove two things; that, somehow, providing credit to these folks was somehow against the law, and that only “major banks” were doing it. I would also point out that many payday loan companies are owned by minorities and immigrants; can anyone else besides me imagine a huge uproar if they started denying loans to these folks? I would also point out that $1.5 billion isn’t much credit for an industry that lent more than $45 billion last year. But if it was used for start-up costs, to pay for employees (yes, these companies do provide jobs), buildings, phones, computers and other overhead, they're not really lending that money, so the implication is meaningless.
– All together, the major banks directly finance the loans and operations of (at minimum) 38% of the entire payday lending industry, based on store locations.
There it is again; what is "the major banks," exactly?
By the way, it almost doesn't matter, because this is an outright falsehood. Banks are subject to very strict controls regarding how they use their money, and it would actually be illegal for them to finance the loans “directly.” And again I ask; how is it illegal for a bank to loan money to a legitimate business operation? You may not like payday loan operations, but they are currently legal.
– The major banks indirectly fund approximately 450,000 payday loans per year totaling $16.4 Billion in short-term payday loans.
Here is another outright falsehood. There is no such thing as “indirect funding” of payday loans, and the citation of such ridiculous statistics should never be accepted by anyone without a citation. Unless payday lenders are funding the payday loans in cash from a mattress they keep in their offices, I would assume that all of their money touches a bank at some time or another. In fact, most payday loans are deposited directly into the receiver’s bank account from a lender's bank account, so technically, all loans come through two banks. But attributing a specific number to “major banks” is misleading, and impossible to determine, since individual financial transactions are still private.
But the statement above is bullshit on its face anyway, as anyone with a calculator should know. Do yourself a favor and divide $16.4 billion by 450,000 payday loans. Are we to believe that the banks are lending an average of $36,444 per loan?
Hey lefties; if you're going to repeat statistics you heard from someone, do a bit of a sniff test, and see if they're ripe.
– Wells Fargo is a major financier of payday lending and is involved with financing companies that operate one third (32%) of the entire payday lending industry, based on store locations.
– All of these above mentioned banks received TARP bailout funds in 2008-09 and have benefited from accessing capital at exceptionally low interest rates from the Federal Reserve.
I hate this kind of sophistry when it comes from the right wing. It makes me livid when it comes from our side of the aisle. What does any of the above mean, anyway? The implications are all over the place, they’re imprecise, and frankly, they smack of innuendo. There isn’t one actual fact in any of the above, except the generalized statement that the banks they mentioned probably received TARP funds. And it’s possible Wells Fargo is the preferred bank of people who set up these shops. But again; it’s a legitimate business, whether we like it or not. It should be more heavily regulated than it is, but as of right now, if you have $50,000 you’d like to lend to high-risk borrowers and make 400% or more on the money, there’s nothing stopping you. And if you have the credit score that would allow you to borrow a $100,000 from a “major bank” and open such a shop, the bank certainly has no right to stop you.
Facts have a liberal bias, people. There are all sorts of things to hate about big banks and payday lenders. there is absolutely no need to make shit up about either, and it actually hurts the cause to conflate the two into one problem. They're not.