Tuesday, March 2, 2010

We Want Our Democracy Back

Why are the most risky loan products sold to the least sophisticated borrowers? The question answers itself — the least sophisticated borrowers are probably duped into taking these products.
Edward Gramlich, the late Federal Reserve official who tried in vain to get Alan Greenspan to act against predatory lending

Jesus, looking at him, loved him and said, ‘You lack one thing; go, sell what you own, and give the money to the poor, and you will have treasure in heaven; then come, follow me.’ When he heard this, he was shocked and went away grieving, for he had many properties.
Mark 10:21-22

Over at TomsDispatch, Jo Comerford, the Executive Director of the National Priorities Projects, provides some helpful analysis on our budgetary priorities. She points out that Congress included $2.5 billion for Boeing C-17s that the Pentagon did not even request. She writes:

Keep in mind that $2.5 billion is a lot of money, especially when cuts to domestic spending are threatened. It could, for instance, provide an estimated 141,681 children and adults with health care for one year and pay the salaries of 6,138 public safety officers, 4,649 music and art teachers, and 4,568 elementary school teachers for that same year. Having done that, it could still fund 22,610 scholarships for university students, provide 46,130 students the maximum Pell Grant of $5,550 for the college of their choice, allow for the building of 1,877 affordable housing units, and provide 382,879 homes with renewable electricity -- again for that same year -- and enough money would be left over to carve out 29,630 free Head Start places for kids. That’s for ten giant transport planes that the military isn’t even asking for.

Are our priorities with the military-industrial complex or with the people-industrial complex? Do we seriously want to continue using tax-payer money to buy military toys we do not need while education, housing and health care are becoming less and less available?

Paul Krugman's weekly column weighs the current financial regulation legislation (or lack thereof) pending in the Senate. He claims the reform legislation is vastly watered-down. It's been a year and a half since our national government bailed out the big banks...still, no strings attached. There are plenty of reports out there that the banks continue the same risky behavior that caused the global economy to collapse (practices that no one--except the rich young man--really understands: credit default swaps, mortgage-backed securities, etc). And meanwhile, they are handing out billions of bonus dollars to upper management, pouring millions into lobbying against the legislation, while neglecting the real mission of banks: actually giving out loans to families and small busineses that desperately need them. Krugman advocates for a Consumer Financial Protection Agency, reasoning:

Is it important that this protection be provided by an independent agency? It must be, or lobbyists wouldn’t be campaigning so hard to prevent that agency’s creation.

And it’s not hard to see why. Some have argued that the job of protecting consumers can and should be done either by the Fed or — as in one compromise that at this point seems unlikely — by a unit within the Treasury Department. But remember, not that long ago Mr. Greenspan was Fed chairman and John Snow was Treasury secretary. Case closed. The only way consumers will be protected under future antiregulation administrations — and believe me, given the power of the financial lobby, there will be such administrations — is if there’s an agency whose whole reason for being is to police bank abuses.

The Senate GOP fights against this "bureaucratic" mentality, calling for more "market discipline" (no more federal bailouts if the banks fail). But of course the banks are "too big to fail" and, really, should anything be too big to fail?

Michael Lind presents some out-of-the-box proposals in his Salon.com article Why Republicans Want Gridlock. He posits that the GOP is blocking anything and everything Obama and the Democratic Congress propose, not out of conviction, but out of gamesmanship. They can't win elections without this kind of strategy because of the demise of the white working class. Lind proposes an end to the Senate filibuster or dividing large states like CA, FL, NY and TX so that there are 75 states instead of 50. This would give more democratic power in the Senate to states with uber-populations. He also calls for an increase in House representatives to give citizens a better opportunity to know their leaders (the current number in the House is capped at 435), an end to the electoral college and an independent commission to redraw congressional lines every 10 years (it is currently a political game dominated by the majority party in each state legislature). Lind's proposals should draw bipartisan support but won't because the GOP wants to stall everything until they are back in power.

The story in Mark 10 is usually interpreted in the wealthy US as a call for us to change our inner attitudes about money and possessions. Perhaps we "treasure" the things we own too much to really care about following Jesus. It focuses on our individual symptoms. But Jesus' emphasis was more systemic than that. Jesus confronted the rich man who had defrauded those on the margins, those barely surviving, burdened by debt. He called the man to give up his wealth that was, incidentally, earned on the backs of these poor. He became wealthy by making others poor. The growing divide between rich and poor was the consequence of a structure that allowed this kind of activity to go on. Those who were most vulnerable in 1st century Palestine were being taken advantage of by predatory lenders. Things haven't changed much.

EasyYolk doesn't understand how so many Americans can be so angry with the corporations and big banks while, at the same time, insist that the government should do nothing to regulate them. Corporations and big banks play by the rules (most of the time) which incentivize them to make a lot of money for upper management and stockholders while lower income workers suffer. Again, the problem is systemic. Not only should American citizens demand that corporations, unions and other lobbyists be severely limited, but we should call out our political leaders to create a Constitutional Amendment overturning last month's terrible Supreme Court decision which gives corporations more power than individuals during the election cycle.

--Theological Autopilot

1 comment:

  1. There's a lot in this post! Let's talk about predatory lending (since it's the first topic).

    First of all, I love the term "least sophisticated borrowers." Are we hurting somebody's feelings if we don't use a euphemism to refer to people who are bad at managing their finances?

    As far as predatory lending is concerned, I assume Mr. Gramlich's quotation refers to either payday loans or other credit-related products such as home loans, credit cards, etc.

    Is it really true that people who take loans from payday loan shops are duped? If those who advocate limits on predatory lending (e.g. caps on interest rates) believe it is possible to run a payday loan business with lower interest rates, why don't they set up their own payday loan shops and put the predatory lenders out of business by offering customers a better deal?