13
Jun
09

The American Dream up for Resale

I am not a fan of TARP. I am not a fan of the bailouts. I am not a fan of an ineffective but over-priced stimulus package. I am not a fan of a banking system that exploited consumers to the point of exhaustion, then went to the government begging for alms. With a democrat in office and a democratic congress, I would have hoped that government payouts would ultimately have helped the consumers, not simply the behemoth sized banks.

The truth is, the middle class is being squeezed dry. Now that they can’t give anymore, the juicers have gone to the government to DEMAND more. It is unfair on a new level and we Americans should be outraged. We should be afraid. We should make it stop. This is still a representative government that is ultimately responsible to us.

Here is my nutshell version of the financial crisis, complicated by great legislation like the fair housing act: In the 90’s, adjustments were made to reserve requirements, freeing up A LOT of money to lend. In the beginning of the 21st century, right off the bat, our financial sector was attacked. Businesses were dealt a physical blow that they could not overcome and Americans were frightened. To combat a financial meltdown, rates were reduced to historic lows. It was all harmless until greed walked in. With rates so low, it was no longer profitable to lend money – and there was all that new money just waiting to be loaned out… Banks had to find new ways to generate income. Standard fees were increased, but it wasn’t enough.

This is when it became sinister…Banks had to go one step further and find new sources for fee income. This is where the average consumer got involved with the financial crisis. Now banks figured out that the lower middle class may not have a lot of money individually, but as a collective, it was a great cash cow. Even more lucrative was the less savvy lower class. Banks could offer them exactly what they wanted – easy credit, overdraft protection, increased services – all for a fee. Studies were done, numbers were crunched, and the “UNBANKED” demographic became highly sought out. In the eyes of the banking industry, this demographic was practically willing to sign over their government checks for just a little more purchasing power that would soon run out.

And run out it did. When this increased purchasing power ran out, so did the increased fees. And the losses started coming in. The charge-offs, the write-offs, all began to add up and banks were about to experience a day of reckoning for what they had done.

Thank goodness for TARP or those banks would have really suffered!

But what did TARP do for these exploited customers? Credit card rates for risky customers still hover around 30%. The once-manageable rate on the adjustable second mortgage is now out of reach so homeowners can barely make an interest payment. Overdraft policies have not relaxed in the least (actually, that is a little untrue. I JUST read this morning that B of A is tiering based on the size of the overdraft). Overdraft protection that further entrenches consumers by paying offending items and drawing account balances VERY negative has become an industry standard.

And the ultimate, cruelest irony? These very squeezed consumers are paying for TARP. They are feeding their captors whose only lifestyle adjustments involve laying middle-class people off.

OMG – THIS IS WRONG!!! We were pacified by passage of the most ineffective banking reform bill of all time when really we should be rioting in the streets. I am a capitalist through and through and I love to see successful business. But greed and corruption will defile any capitalist system and that is what we are living right now. We are at risk – grave risk – of losing our way of life to this. It is imperative that we stand up for what is right. Write to congress. Tell your friends. Tell your neighbors. And for goodness sake, be vigilant. This happened as people slept, offering their financial independence as a sacrifice to an American banking system that promised an American dream that was not theirs to give. All the banking system has to offer us Americans is begged, borrowed, or stolen.

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2 Responses to “The American Dream up for Resale”


  1. June 13, 2009 at 5:19 pm

    I think you were extremely succinct in your explanation but I can’t help wondering…do you really understand what happened in all of its complexity? How can we go about fixing it now? The reason money has been pored into saving the financial institutions is because we cannot overhaul our system overnight. What exactly would you want our legislators to do right now? It is true that one way to fix our problem is to put money back into the system. Yes, it seems risky. It also seems unfair. But we have a global problem and I am not enough of an expert to say that what we have done so far is absolutely wrong. We’re feeling the pinch but we could have it so much worse. I think it’s important to study these issues from an economical standpoint and not a political one.

    • 2 aimiesuzyj
      June 14, 2009 at 5:23 am

      Yeah. I feel like I have a pretty solid understanding of the situation. In this post it is completely oversimplified and I really just addressed one tiny aspect of it, but my main point is that wealth has been concentrated and continues to be. As long as the government enables this, we will not recover. In order to recover, there needs to be a change in behavior. People need to accept responsibility for what is theirs so the government doesn’t have a reason to take it on. Corporations have to be responsible enough to be sustainable. And you are correct that this is a global problem, but the root cause is similar – lack of oversight and greed, whether on behalf of corporations or government, or even NGO’s. Governments that control wealth are very destructive and dangerous.


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