Tuesday, April 01, 2008

Spilling Over the Banks

For more than thirty years, for the entirety of my
adult life, I have been listening to so-called
conservatives tout the wonders of "deregulation,"
which it has been said would release the mighty engine
of commerce from socialistic constraints and produce a
rising tide that would raise all boats, to the benefit
of everyone. Now that rising tide is about to swamp
us all, and this administration -- of all people -- is
saying that some regulation of some aspects of the
financial services industries, some "constructive
reform," just might be unfortunately necessary. They
are referring to their proposals as "comprehensive,"
though they are hardly that.

Whether conservatives will go along with any of this,
despite their many years' commitment to the ideology
of deregulation, remains to be seen. Also remaining
to be seen is whether such limited limit setting can
be contrived and implemented in time to stave off an
enormous economic catastrophe. The proposed
restructuring, which amounts to redrawing the flow
charts and giving more appearance of authority to the
Federal Reserve, is only being trial ballooned because
a significant segment of the general public has
noticed that Adam Smith's "invisible hand" has always
been in the business of systematically picking their
pockets. For years I have been telling people that
the institutions of the financial services industry
are criminal conspiracies, that the only reason the
senior executives aren't being perp walked is that
they're rich enough to buy off the lawmakers and law
enforcers. Once in awhile they find it necessary to
single out one of their own and allow the book to be
thrown at him (or her, though it's usually a him) to
stave off bad publicity. When this happens the guilty
party invariably gets huffy and indignant, denying to
the very end that he had done or even could do
anything even remotely wrong (think Charles Keating).

Recently I went to my bank -- I will not name which
one specifically because they're all in cahoots -- to
renegotiate a "Time Account" (they used to be called
Certificates of Deposit) which had matured. Last time
it matured it was paying 4.65 percent interest; this
time the return on investment was a pathetic
percentage of 2.90. They have the nerve to lower the
interest rate they charge their borrowers (the "vig,"
as that other organized crime syndicate calls it), and
lower further the chump change earned by people trying
to save, then lecture us about being poor, unwilling
savers. They put it out there that they're doing us a
great, almost holy service by letting them use our
money to lend out for single digit pennies on the
dollar.

Years ago I accidentally became a "yuppie" and worked
at the world headquarters of one of the largest
banking corporations. As I clawed my way to the
middle of the corporate heap (I was actually
scrambling, trying to escape), I had a unique vantage
point to see what a crazy crock the whole thing was.
I was involved in the yearly preparation of the state,
national, and global economic forecasts, and could
compare what was said to what had been said the
previous year. There was little resemblance, either
to the previous year's forecasts or what actually had
happened economically. The predictions were
essentially political spin, designed by increase the
bank's efforts to nickel and dime its way to continued
profitability. And they were proud of this, as though
their conniving served a high, noble purpose. Anyone
anywhere who criticized them or did anything to thwart
their money grubbing in any was was characterized as a
dangerous socialist malcontent, deserving of severe
sanctions up to and including termination.

When a "temporary downturn" led them to "eliminate my
position" -- lay me off (they called in "enhanced
redeployment") I learned this. The "enhancement" was
a buy out consisting of one month's pay for each year
I had worked. But since my "date of separation" was
in the eleventh month of the year, I was paid nothing
for that last year. If I had been informed of this
rule before my "outprocessing" began, I might have
been able to lobby to stay on for a couple weeks, but
I was not informed of either that or some of the other
conditions of my departure that enabled them to limit
they amount of actual cash money they were giving me.
That's the way financial services institutions work.
They structure their dealings so that they can appear
fair and reasonable while keeping hold of every penny
possible, which they can get away with because of
their generous "campaign contributions."

They also have entire departments devoted to creating
language that helps them run their cons. The term
"subprime" is a prime (if you'll pardon the pun)
example. The real "prime" interest rate is the amount
set by the Federal Reserve for money it lends banks
and banks lend each other. Loans to customers are
structured as "prime plus one, prime plus two" and so
on. Calling a loan transaction "subprime" cleverly
implies that one is getting a loan below the prime
interest rate, below wholesale, a bargain. But how
many loan officers explained this to those who were
taking out mortgages they really couldn't afford? If
the "financial advisers" had explained this, they
would surely have experienced redeployment without the
enhancement. Of course the banking racket is so
entrenched that, even if their language department
inadvertently gives the game away, the banks are not
hindered. Didn't anyone think that a product called a
"junk bond" might be exactly what its name described?

What can be done about this? Tough question. We
can't boycott money, at least not without living a
complicated, difficult, insecure life. But knowledge
is power, or so I'm told. That's why I try to explain
what banks are and how they work whenever I have a
chance. Perhaps more people may be getting the
picture now that the house of cards is collapsing, the
big Ponzi scheme is unravelling, now that more and
more everyday people are losing more and more homes
and money due to the depredations of the "financial
sector."

So until meaningful reforms can be enacted (I'm not
holding my breath), read the fine print, don't take on
debt, and expect to be lied to in well crafted
language.

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2 Comments:

Anonymous Malcolm Lockridge said...

You say that no one ever sends you a comment. Here's one, just to show you there's intelligent life out here! :-) I hear ya, bro.

1:01 PM  
Blogger Nader Enthusiast said...

Interesting. I hate going to my bank because they are so snotty to anyone who doesn't look prosperous. Like your blog (found through Common Dreams comments).

7:35 AM  

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