At The Top of the List: Financial Reform — Lottery Capitalism Has to GO!

For those of you who have just started reading this series
of columns, I am discussing the “lottery capitalist” mentality that has gripped
our economy and threatens to strangle it if we don’t wake up and fight it off.
I call this phony strain of capitalism “lottery capitalism” because it benefits a very
small number of people – the jackpot winners – and leaves the bulk of us to
split the rest of the money.

A healthy economy is one in which everyone is on essentially
equal footing and has an equal opportunity to generate the wealth needed to live freely
and comfortably. In a lottery capitalist economy, wealth is based almost solely
on luck; the ability to make a living is completely dependent on someone else –
the lottery winner – and whether or not they do the right thing from a business

Think about it. Even during "good times," Americans are one pink slip away from
total disaster at any given time. Whether or not we continue to get a paycheck
is dependent on whether someone else wants to hire us for a job, and is willing
to pay us a reasonable wage.  Virtually
all employment is now at-will, which means that, absent a contract, an employer can
fire you for any reason, or no reason at all. Want to form a union? The
Republicans have successfully taken that right away from you, as well, for all intents
and purposes.

In short, lottery capitalism favors a very small number of
people, with the vast majority of us forced to cross our fingers and hope for
the best, which is why it should come as no surprise to anyone that our
financial system is failing. It's rigged in favor of the jackpot winners and against the rest
of us. Such economic systems always fail, especially in a supposedly democratic system. 

As a consequence of this lottery capitalist mentality, we
have been taught to believe that responsibility is a one-way concept; that we
have to be responsible when we borrow money or use a credit card, but the
lender has no responsibility at all. Hence, the system is horribly
broken, and seems to collapse on a fairly regular basis. We’ve been
taught to rejoice during economic bubbles and to take the blame when they
inevitably burst. We accept constant,  unrelenting and debilitating penalties as part of our responsibility as a consumer, even as those  entrusted with caring for our money
suffer seem to feel entitled to bonuses even as they
lose our money.

It used to be, when someone needed an emergency loan, he’d
go to “the guy” around the corner, who’d hand him $500 and order him to pay
back $600 in a couple of weeks. If he didn’t pay, another, much larger, guy would be sent
around to break the borrower’s legs. We used to call them “loan sharks,” and police used to arrest them for breaking the law.

Unfortunately, they no longer seem to be breaking the law.
They operate as “legitimate” businesses and they no longer have to break your
legs, because they can now take you to court and ruin you by attaching everything you own. The underground financial services economy now operates
openly and above board, and it’s shameful. A few people are getting rich
royally screwing the rest of us and the government is not only doing nothing
about it; they seem to be facilitating it.

Let’s start with banks. Place your money into a bank right
now, and a passbook account will pay you a whopping 0.2%, if you’re lucky. Buy
a 6-month CD and that baby might soar to a whopping 1.2%, if you can find one
that’ll go that high. Let them use your money
for five years, and they’ll pay you 3-5%, but only if you have a minimum of
$10,000-50,000 to deposit. When they borrow
money from the Federal Reserve – you know, the Federal Reserve that belongs to
us — they pay between 0.50% and 1.0%. The taxpayer money they received from the bailouts out was lent to them at 0%.

In short, banks pay little to nothing for the money they use.

But they will then turn around and lend that money on a home
for 30 years at somewhere around 4.5-5%. If someone takes out a home equity
loan, they’ll charge 6% if someone’s “credit score” (one of the greatest
rackets of all time) is really high. Want to buy a car? The same bank will
charge you 5-6% with perfect credit and 10-18% if not.  Want a credit card? That’ll be 15-20%.

Then there are the fees. Accidentally overdraw your account?
That’ll be $25-40 per item, and they will always debit your account from
largest to smallest item, and call that a “courtesy.” Some “courtesy;” by debiting
largest items first, they maximize the number of items considered overdrawn. Do
you need cash and forced to use another bank’s ATM? Not only will you have to
pay the ATM owner $1-$3, which is fair, but you’ll also likely pay your bank a
buck or two as well. Are you at an ATM in a foreign country? You’ll not only
pay a fee for that, you’ll also pay a fee for the conversion. And that
published conversion rate? Forget it. You’ll get a few dollars less than that. Do you have a savings account? Don’t withdraw “too often.” Yes,
that’s right; in return for handing you that handsome 0.13% passbook rate (you
weren’t lucky), the bank only allows you one or two of withdrawals per month. You’ll
pay a fee for any more than that.

And about that loan; are you a day late with a payment? That’ll
be $25. Late with two payments within a year? They might double the
interest rate on the loan, because you’re now considered a “high risk.” Makes
sense, doesn’t it? Someone’s having difficulty making the payments, so the logical solution is to make
the payments even higher and more difficult to pay.Good call.

Need we mention credit cards? The 15% average interest rate
isn’t enough for them, apparently. Keep in mind, most of the money they’re using
to pay your purchases was obtained  at 1% or less, so that’s a hell of a
return already. But if you’re late with even one payment, it’s not unheard of
for banks to up the rate to 24%; some banks go as high as 30%. If you
lose your job and can’t pay your bill, the bank will come after you, and due to
obscene interest rates and penalties, $1000 in purchased goods and services will
become $5000 by the time you get to court. And the sick part of that is, the
judge will just accept that amount and will likely rule against you, because of
“the contract,” despite the fact that the contract you now find yourself under
is not the one you signed, and there is a strong likelihood you haven’t seen
the revision

And I know it’s trendy to pick on the “too big to fail”
banks, to the point that there’s now a pus,h led by Arianna Huffington, to
move money from big banks to community banks. But I’ve been doing the research,
and they all do the same things. In fact, Bank of America recently changed its
overdraft policies to limit fees in certain circumstances and I’m waiting for a
local community bank to do the same. ALL banks do this stuff, and many of us
don’t qualify to belong to a credit union. The problem is with the industry, not any
particular sector of the industry, and a complete lack of regulation, and a
lack of a sense of responsibility on the part of one side of the equation. The government
has stopped overseeing banks, and they have given up their regulatory role
almost completely.And if we have learned nothing else from a millennium or two of capitalism, it's that rich business interests will only be responsible when forced to do so.

Banks used to be a safe place to put our money so that we
would have it when we needed it. Now, they're increasingly turning working people into debt
slaves. For example, the far right has gutted the federal college financial aid
system to the point that most students walk out of college with a crippling
debt, due to the huge student loans needed to pay for the
basics. The money is guaranteed to the banks
by the federal government, and the banks take virtually no risk and make a ton of money from it. While they’re raking in
the bucks from student loans, they’re also handing college students credit
cards, despite the fact that many of them have little or no income outside of a
part time job and student loan money. Basically, we've created a generation
that will never experience life without a mountain of debt.

The bottom line on banks; they rely on us for cheap money
and demand their version of “responsibility” from us and penalize us greatly if
we don’t meet that demand. But they seem to have no responsibility at all in
this equation.

But as bad as the banks are, there are worse elements
out there.

The lottery capitalist economy, and our lemming-like obedience
to silliness like “credit scores” has made it all but mandatory for people to
carry at least one credit card. Banks refuse to locate branches in “certain
areas” — you know, areas that might contain poor people. They won’t allow just anyone to open a
checking account. And a lot of people are living so close to the vest, they
have no money to put into a bank.

So, to fill the gaps, credit card companies
started popping up that were only peripherally tied to a bank. The terms are
custom-made for desperate people who have fallen on hard times, and they might
as well be called the “Predator Visa.” They offer a guaranteed
credit card with a $250 credit limit, and then proceed to take up that limit
with fees. When the unwitting consumer gets their shiny new card in the mail,
they will find a balance of between $150-200 on it, so they effectively have a
card with a $50 balance. And if that’s not bad enough, they will be charged
18-24% interest on those fees until they’re paid, and they will also be charged a “maintenance
fee” of about $7-8 a month on top of the interest. In what economic universe is
that okay? I know these assholes will whine and cry about “risk,” but really, since
they’re pretty much getting their money up front, where’s the risk in issuing these

Basically, banks and other financial
institutions can do pretty much whatever they want to make themselves money and
screw us out of ours. And we’re supposed to take it. Essentially, the government
has taken the position that anything that makes a rich person or company more
money is okay, while anything that impacts their “bottom line” is not.  

For example, if you have $50,000 in the bank, did you know
you could put up a web site and make “payday” loans of $500 each to 100 people, get access to their Social Security numbers and bank account information and debit upwards of $100 from that account every couple of weeks, and no one will
care? You don’t need a special license and you can charge whatever you want. No shit.

I actually received a spam e-mail on one of my accounts a
few months ago for “Christian” payday loans, complete with a very nice watercolor of
an empty cross sitting on what was probably supposed to be Calvary. Wasn’t that
sweet? They offered loans of up to $1500, and according to their rate chart,
they “only” charge $15 a week for every $100 they allow you to borrow.
Think about that a minute. If you have $50,000 and you lend it all out one
week, within a couple of months, you will have doubled your money. And it’s
legal most places. Some states have cracked down a little, but for some
reason these places are thriving. Apparently, usury is no longer against God’s
law. Wonder when that changed?

But these predators aren’t only found online, and they don’t
all work anonymously. Many of them operate in the open, from storefronts in
relatively poor areas.

If you aren’t aware of how this predatory practice works, let
me explain.

Your car breaks down and will cost $500 to repair. You’re
not one of the jackpot winners in the lottery capitalist economy, so you don’t
have $500 lying around. But because the right has been starving public
transportation systems for the last 30 years, you need your car to go to work.
So you drive by a storefront offering “payday loans.” You go in and fill out an
application, including all of your personal information. They check your
employment and approve you, so you write them a check for $600, and they hand you
$500 cash with a promise not to cash the check for at least two weeks. Of
course, if you don’t have the money two weeks hence, no problem; just pay them
$100 cash, and they’ll hold another check for another payday. Two weeks later,
another $100, another hold.  You get the
idea. Within a couple of months, the payday loan company has its $500 back, and
your check for $600 as well. Usually, after five paydays, they require you to
start paying down the principle, so every payday you have to come up with
$150. Ten paydays later, you’ve paid it all off and they give you back your
$600 check. Which is good, because you don’t have anything close to $600 in the
account, anyway. In the meantime, the payday loan company has made more than
$2000 from its initial $500 investment in less than six months.

But that’s how lottery capitalism works, isn’t it? Someone
gets backed into a corner financially and someone with money gets to bail him
out for every dollar he can get his hands on. That’s how Don Corleone made his
fortune; what’s wrong with that, right?

This situation has gotten so bad, I’ve actually heard commercials
on the radio for companies whose business it is to actually CONSOLIDATE multiple
payday loans into those dreaded “affordable monthly payments.” How sick is

It’s the lottery capitalist mentality, folks. Look at
everything in our financial system. Those with the least money actually pay the
most for everything. Those with the most money don’t pay those fees, and
they get better interest rates on the money they do have in the bank. Yes, that’s
right; people who work and make their employers rich get socked with all sorts
of penalties for not being rich, while the rich are rewarded for having money.That's the opposite of a progressive system.

It’s time we cleaned up the system completely. I’m not
saying you shouldn’t pay a penalty for being late with a payment; the bank is incurring costs sending reminders and trying to collect what they are rightfully owed. I’m not
saying there should be no penalty for overdrawing your checking account; you
should know how much money you have and try not to go over that amount in your
spending. But $30 for a $5 overdraft is excessive, and $150 for five overdrafts
totaling less than $50 is obscene. A 15% credit card rate at a time when banks
are paying less than 1% for that money is excessive, and jacking that up to 30%
for missing one $25 minimum payment is obscene. And why should a bank EVER
charge us for accessing money in OUR account? I understand why another bank
would charge me to access my money through their ATM, but why does my bank have to
charge me as well?

We have to remind ourselves, they’re using OUR money. Every
dollar in the economy comes from the Federal Reserve, which you and I own. If we’re
going to be held to a reasonable standard of responsibility in handling our
money, then those whose business it is to handle our money should be held to a
reasonable standard, as well. Think of all we’ve done to protect banks; we guarantee
deposits, so that people will feel their money is safe and put their money
there in the first place. We insure and buy up mortgages, so banks have more
money to lend, and more income. We give them a discount on interest rates, to
encourage them to lend and make more money. We guarantee student loans so they
can help kids go to college with minimal risk.

In short, we give banks and other financial institutions every
opportunity to mitigate risk and make money, and what do we get in return? We get screwed, and
not in a good way. I don’t know about you, but I’m sick of it. We need serious
financial reform in this country, and recreate the system so that the
consumer/taxpayer is in charge. We don’t owe banks for keeping our money for
us; they owe us for letting them use our money to make their living.

Lottery capitalism has to become history, folks. It's time for progressives to start taking charge, and demanding change to the entire system. Switching our money to smaller banks won't solve the problem, because the problem is systemic. We should break up the big banks, to be sure. But smaller banks doing the same things is not a solution. And predatory lending practices, whether by banks or anyone else, have to be regulated and oversight must be set up. The concept of payday loans really isn't much different than the concept of pawn shops; sometimes, there is a necessity there. But to simply leave a system like that unregulated is unconscionable.

It will take a lot of
focus, but we can change the system…

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