Friday, June 1, 2012

Bank On It

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

Is not this the fast that I choose: to loose the bonds of wickedness, to undo the straps of the yoke, to let the oppressed go free, and to break every yoke?
Isaiah 58:6

I must start by pointing out that three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that’s wrong.
Charles Ferguson, receiving his Academy Award for best documentary in 2011

Since the apocalyptic days of 2008, the curtain has been pulled back and big banks have been exposed for the kinds of predatory, fraudulent and/or risky "activities" they participated in to beef up profits. Banks are supposed to provide vital services for households and businesses: loans, savings accounts, ATMs, etc. And banks, of course, should have an opportunity to make a profit for making life more convenient for the American public.

When banks, however, creatively engage in trading complex derivatives and credit-default swaps that no one really understands it creates a massive risk to the American economy. The same practices that led to the financial crisis of 08 continue. Obama's attempt at financial reform (Dodd-Frank legislation) has been strategically esmasculated by the banks (and their puppet politicians) over the course of the past 3 years through lobbying and litigation.


In addition, banks are finding new ways to make profits by teaming up with colleges and universities. Banks now provide the plastic cards loaded with financial aid for students. Universities save money because they do not need to print out checks and send them in the mail and banks win because they charge for things like "lack of documentation fee" and for using a PIN instead of signing at a retail store. Consider that total college debt in the US has now exceeded $1 trillion. A recent study by the US Public Interest Research Group's Education Fund found that more than 40% of college students are affected by this (about 9 million) and the median annual fee per student is $49. Do the math. And this is the tip of the iceberg.

Banking is ought to be a seriously prioritized issue for those of rooted in a faith tradition and all "people of conscience," especially in an election season which has already (isn't the general election still 5 months away?) shattered records on campaign contributions in the aftermath of the disastrous 2010 Supreme Court Citizens United ruling. As Democratic Senator Dick Durbin (D) famously said, referring to Congress:

...the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.

No matter how hard we try, we simply cannot find any place in the biblical narrative to justify a bank charging interest (usury) on a loan. There's a reason for this: historically, there's been an epidemic of rich and powerful people who get richer and more powerful by giving oppressive loans with monstrous interest to poor people who cannot pay them back and have to foreclose on what they own. This is the real meaning/context behind the story of the rich man's rejection of discipleship in Mark 10:

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.

We've slid down a slippery slope in Western Civilization on this issue over the past 500 years. And we keep on sliding. Because we are called to be lobbyists for "the least of these" (Matthew 25) and because we are committed to prophetically following Jesus into the Temple to overturn their tables of the unjust bankers (Mark 11:15-19), we must be vigilant in our quest to protect the most vulnerable among us from the captialist predatory strategies of banks and financial institutions.

Indeed, there are some very simple action steps for us to take. At the same time that Bank of America seeks to foreclose on 10,000 homes per day, we can transfer our money from big banks to credit unions. We can cut back on using our debit and credit cards--these services charge retail stores EVERY time we purchase something. The more we use cash, the more we can cut into banks profits.

But we must fight for structural change too. Remember, not only did President Bush and Congress combine to bailout these financial institutions with $700 billion in taxpayers' money, but the Federal Reserve secretly gave out $16 trillion in no-interest loans to these same banks (only a congressional audit exposed this fact). Do you know how much profit we would make if we had access to billions of no-interest loans?

These "authorities" could have used this massive load of cash to bailout homeowners and business owners who have lost trillions of dollars since the 2008 crisis. These "authorities" could have brought charges on bank executives who participated in fraudulent behavior that was against the law. These "authorities" could have attached strict regulations to their bailout money so that our economic system would be protected (like it was from the 1930s through 1970s before deregulation became sexy). These "authorities" have made these decisions for a reason: they are given millions in campaign contributions from these same banks and finacial institutions. These "authorities" can only be held accountable if a movement of millions demands change through the ballot box.

Jesus was forced to take up the cross after he confronted these "authorities." Those who claim to follow Jesus are called to take up the cross too.
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Epilogue:
Here's what the securities and investment industry has given in campaign contributions over the past decade. This is a bipartisan bust:


Here's what Salon's Glenn Greenwald recently wrote:

And then there’s the always-annoying fact that Wall Street poured far more of its money into President Obama’s 2008 campaign than it did into John McCain’s, then placed large numbers of its former lobbyists and officials in key administration positions beyond just Summers and Tim Geithner, then received full-scale protection for the crimes leading to the 2008 financial crisis. Thus far, the banking industry — angered by Obama’s tepid anti-oligarch rhetoric and symbolic Election Year populist proposals, and excited to elect one of their own — has donated substantially more to Romney than Obama. It remains to be seen if that trend continues, but whatever else is true, the Democratic Party has been the recipient of ample amounts of Wall Street largesse for two decades now, and with good reason.


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