BIG BANKS NOW IN THE PAYDAY LOAN BUSINESS–Look Out!

BIG BANKS NOW IN THE PAYDAY LOAN BUSINESS

This article by Michael Snyder is very disturbing.

Payday loans are not a good option on meeting your bills and debt obligations.  All you are just doing is increasing your debt load and exchanging one lender for another and at higher interest.

Ask yourself:  Is this being a wise steward of what blessings you have been given?  Would you be better off to contact the business or governmental entity and trying to work out a delayed payment plan?  Many entities will do this.  Why?  Because in a challenged economy they know two things:  (1) If they cut your services off, then it is unlikely you will pay restoration fees and remain their customer; and (2) If they send your debt to a credit reporting agency, they are unlikely to get payment.  I know if I have a disputed debt, someone turns me in to a credit reporting agency, then it will be a cold day in Hades before they get one cent.  If they want payment over a disputed issue, then they will negotiate with me.  I will not support credit reporting abuse.

Should you learn to be a cash paying person and avoid debt so your credit report is not used as a hammer on your head?  Going cash or using debit cards at first is hard but in the end it is very liberating.  I recall Dave Ramsey, who gives advice on personal finance and planning, saying that he has no credit cards, only will use debit cards, will not take out loans, etc.  He said that despite him having multi-million assets (meaning 8 figures) he has credit score of zero.

I know that many of you if you own a home need to have a mortgage.  But should you really have any credit beyond this?  (And in the interim, work on paying off that mortgage.)  If you don’t have the money for anything that you want to purchase, then is that a sign just to wait a few weeks until you get the funds to pay cash? 

I understand the concept of having credit cards and paying the bill off when it comes due.  But this is risky business because at times some “emergency” comes up that robs us from paying that credit card in full.

If you are going to pay the bill off anyway within 20 days, then why not just have that money in your checking account and using your debit card?  That way you eliminate the risk of the “emergency” robbing you of a paying the monthly bill off in full.

Another reason to eliminate the credit cards and use debit cards is that credit cards are another way of funding the “Too Big to Fail Banks”.  Do you want to fund their arguably socially irresponsible conduct with the derivatives, liar loans and credit default swaps transactions?

WHO ARE PAYDAY LOAN CUSTOMERS?

You’d be surprised to know who payday loan customers are:  your neighbors.  Yes, from what I’ve learned it is the middle class:  teachers, law-enforcement personnel, and even highly educated professionals, i.e., lawyers.

In the early 2000’s I crossed paths with an owner whose family owned 50+ payday loan stores.  I was surprised what he told me about who their customers were.  Many of the loans, became multiple loans and higher interest, before and if the loans got paid off.

I could not understand why individuals would allow this to happen to them.  He said their primary reason they do this is to save their credit score.  If it was me, and I was in a bad bind and could not work out extensions, then I would let that credit score decrease before I would waste monies when my budget is economically challenged.  If I am having that much difficulty then I do not need to be pouring gasoline on the fire.

NOW TOO BIG TO FAIL BANKS ARE GETTING IN THE ACT

As you can see I have ethical concerns about Payday loans.

It’s evident that the economy is getting more challenged when the “To Big To Fail” banks are getting in the Payday Loan business.  Do you think that with all they did to contribute to the 2008 housing crisis with their liar loans, necessitating the 2008 Wall Street Bailout,  that their venture into this area reflects their piranha, man eating mentality?  They can argue that it is legal, high profits.  But think about the morality and ethics of this.  Are they are a major contributor to our economic problems?  Should they get more profits for conduct in which they arguably have some social, economic, political and ethical responsibility?

You don’t have to be a Christian to appreciate the wisdom and saying of King Solomon (in history he was the richest man to have lived on earth) contained in the Book of Proverbs (Chapter 22, Verse 7):

The Rich rules over the poor,

And the Borrower becomes the lender’s slave.

Think about it!–No name attorney

Shut Them Down! – Payday Loan Companies Are Making Billions Preying On The Misery Of The Poor

By Michael, on May 12th, 2013

Payday Loan Companies Are Making Billions Preying On The Misery Of The Poor - Photo by Vinceesq

Would you take out a loan that has an annual percentage rate of 391 percent?  Yes, I know that sounds absolutely crazy, but millions of Americans do it every single year.  The typical payday loan requires borrowers to pay about 15 dollars for every $100 that they borrow for two weeks.  That comes out to a yearly rate of about 391 percent.  And the payday loan companies know exactly who to target.  They have set up thousands of shops in the poorest communities all over the nation over the last several decades.  Each year, approximately 12 million Americans take out payday loans and they pay approximately 7.4 billion dollars in interest and fees on those loans.  Sadly, once you get hooked on payday loans they are very hard to stop.  In fact, one study found that only 13 percent of payday borrowers get two loans or less per year.  All other borrowers take out more loans than that.  In fact, more than a third of all payday borrowers take out between 11 and 19 loans during the course of a single year.  And as was mentioned earlier, the interest rates on these loans are beyond exorbitant.  Payday loans are estimated to be about  20 times more expensive than bank loans, with annual interest rates that are sometimes as high as 500 percent.  The payday loan companies circle the poor like vultures, because they know that the poor are the only ones desperate enough to agree to such terms.  This is why we need to shut them down.  The payday loan companies are making billions preying on the misery of the poor and it needs to be stopped.

And it just isn’t small, disreputable banks that are involved in these practices.  The truth is that some of the largest banks in America are now making payday loans…

Some, including U.S. Bank, Fifth Third Bank and Wells Fargo, offer payday loans under names such as Ready Advance, Fast Loan and Early Access, according to the Center for Responsible Lending (CRL). They can carry interest rates averaging between 225 and 300 percent, CRL said.

Others major banks not making such loans directly, but instead they are investing millions of dollars in the companies that do make the loans.  Bank of New York Mellon Corp., JPMorgan Chase and Bank of America are just some of the major banks that have invested large amounts of money in the payday loan industry.

Read More…

 

 

 

 

 

Wall Street Bailout: Were We Lied To, Robbed And Misled?

The Iconic Bull Symbol of Wall Street

 Wall Street Bailout:  Were We Lied To, Robbed And Misled?

I appreciate this interview by Chris Martenson of Peak Prosperity doing this interview of David Stockman.  Stockman is someone who understands our economy and how government functions.  Listen to his analysis of the Wall Street Bailout.

There’s a saying when someone wrongs you:  Shame on them the first time they do the wrongdoing.  The second time they commit the wrongdoing, shame on you (or me).

Do you think that this is applicable?  And what do you think should be done?   Share your thoughts and possible solutions.

Think about it!  –No Name Attorney

David Stockman: We’ve Been Lied To, Robbed, And Misled

From PeakProsperity.Com

And we’re still at risk of it happening all over again

by Adam Taggart

Saturday, March 30, 2013, 12:42 PM

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Then, when the Fed’s fire hoses started spraying an elephant soup of liquidity injections in every direction and its balance sheet grew by $1.3 trillion in just thirteen weeks compared to $850 billion during its first ninety-four years, I became convinced that the Fed was flying by the seat of its pants, making it up as it went along. It was evident that its aim was to stop the hissy fit on Wall Street and that the thread of a Great Depression 2.0 was just a cover story for a panicked spree of money printing that exceeded any other episode in recorded human history.

David Stockman, The Great Deformation

David Stockman, former director of the OMB under President Reagan, former US Representative, and veteran financier is an insider’s insider. Few people understand the ways in which both Washington DC and Wall Street work and intersect better than he does.

In his upcoming book, The Great Deformation: The Corruption of Capitalism in America, Stockman lays out how we have devolved from a free market economy into a managed one that operates for the benefit of a privileged few. And when trouble arises, these few are bailed out at the expense of the public good.

By manipulating the price of money through sustained and historically low interest rates, Greenspan and Bernanke created an era of asset mis-pricing that inevitably would need to correct.  And when market forces attempted to do so in 2008, Paulson et al hoodwinked the world into believing the repercussions would be so calamitous for all that the institutions responsible for the bad actions that instigated the problem needed to be rescued — in full — at all costs.

Of course, history shows that our markets and economy would have been better off had the system been allowed to correct. Most of the “too big to fail” institutions would have survived or been broken into smaller, more resilient, entities. For those that would have failed, smaller, more responsible banks would have stepped up to replace them – as happens as part of the natural course of a free market system:

Essentially there was a cleansing run on the wholesale funding market in the canyons of Wall Street going on. It would have worked its will, just like JP Morgan allowed it to happen in 1907 when we did not have the Fed getting in the way. Because they stopped it in its tracks after the AIG bailout and then all the alphabet soup of different lines that the Fed threw out, and then the enactment of TARP, the last two investment banks standing were rescued, Goldman and Morgan [Stanley], and they should not have been. As a result of being rescued and having the cleansing liquidation of rotten balance sheets stopped, within a few weeks and certainly months they were back to the same old games, such that Goldman Sachs got $10 billion dollars for the fiscal year that started three months later after that check went out, which was October 2008. For the fiscal 2009 year, Goldman Sachs generated what I call a $29 billion surplus – $13 billion of net income after tax, and on top of that $16 billion of salaries and bonuses, 95% of it which was bonuses.

Therefore, the idea that they were on death’s door does not stack up. Even if they had been, it would not make any difference to the health of the financial system. These firms are supposed to come and go, and if people make really bad bets, if they have a trillion dollar balance sheet with six, seven, eight hundred billion dollars worth of hot-money short-term funding, then they ought to take their just reward, because it would create lessons, it would create discipline. So all the new firms that would have been formed out of the remnants of Goldman Sachs where everybody lost their stock values – which for most of these partners is tens of millions, hundreds of millions – when they formed a new firm, I doubt whether they would have gone back to the old game. What happened was the Fed stopped everything in its tracks, kept Goldman Sachs intact, the reckless Goldman Sachs and the reckless Morgan Stanley, everyone quickly recovered their stock value and the game continues. This is one of the evils that comes from this kind of deep intervention in the capital and money markets.

Stockman’s anger at the unnecessary and unfair capital transfer from taxpayer to TBTF bank is matched only by his concern that, even with those bailouts, the banking system is still unacceptably vulnerable to a repeat of the same crime:

The banks quickly worked out their solvency issues because the Fed basically took it out of the hides of Main Street savers and depositors throughout America. When the Fed panicked, it basically destroyed the free-market interest rate – you cannot have capitalism, you cannot have healthy financial markets without an interest rate, which is the price of money, the price of capital that can freely measure and reflect risk and true economic prospects.

Well, once you basically unplug the pricing mechanism of a capital market and make it entirely an administered rate by the Fed, you are going to cause all kinds of deformations as I call them, or mal-investments as some of the Austrians used to call them, that basically pollutes and corrupts the system. Look at the deposit rate right now, it is 50 basis points, maybe 40, for six months. As a result of that, probably $400-500 billion a year is being transferred as a fiscal maneuver by the Fed from savers to the banks. They are collecting the spread, they’ve then booked the profits, they’ve rebuilt their book net worth, and they paid back the TARP basically out of what was thieved from the savers of America.

Now they go down and pound the table and whine and pout like JP Morgan and the rest of them, you have to let us do stock buy backs, you have to let us pay out dividends so we can ramp our stock and collect our stock option winnings. It is outrageous that the authorities, after the so-called “near death experience” of 2008 and this massive fiscal safety net and monetary safety net was put out there, is allowing them to pay dividends and to go into the market and buy back their stock. They should be under house arrest in a sense that every dime they are making from this artificial yield group being delivered by the Fed out of the hides of savers should be put on their balance sheet to build up retained earnings, to build up a cushion. I do not care whether it is fifteen or twenty or twenty-five percent common equity and retained earnings-to-assets or not, that is what we should be doing if we are going to protect the system from another raid by these people the next time we get a meltdown, which can happen at any time.

You can see why I talk about corruption, why crony capitalism is so bad. I mean, the Basel capital standards, they are a joke. We are just allowing the banks to go back into the same old game they were playing before. Everybody said the banks in late 2007 were the greatest thing since sliced bread. The market cap of the ten largest banks in America, including from Bear Stearns all the way to Citibank and JP Morgan and Goldman and so forth, was $1.25 trillion. That was up thirty times from where the predecessors of those institutions had been. Only in 1987, when Greenspan took over and began the era of bubble finance – slowly at first then rapidly, eventually, to have the market cap grow thirty times – and then on the eve of the great meltdown see the $1.25 trillion to market cap disappear, vanish, vaporize in panic in September 2008. Only a few months later, $1 trillion of that market cap disappeared in to the abyss and panic, and Bear Stearns is going down, and all the rest.

This tells you the system is dramatically unstable. In a healthy financial system and a free capital market, if I can put it that way, you are not going to have stuff going from nowhere to @1.2 trillion and then back to a trillion practically at the drop of a hat. That is instability; that is a case of a medicated market that is essentially very dangerous and is one of the many adverse consequences and deformations that result from the central-bank dominated, corrupt monetary system that has slowly built up ever since Nixon closed the gold window, but really as I say in my book, going back to 1933 in April when Roosevelt took all the private gold. So we are in a big dead-end trap, and they are digging deeper every time you get a new maneuver.

Click the play button below to listen to Chris’ interview with David Stockman (56m:33s):

Also link to David Stockman Interview.

Transcript

Chris Martenson: Welcome to another Peak Prosperity Podcast. I am your host, of course, Chris Martenson. Today we are speaking with a guest that I am especially keen to have on to interview today, Mr. David Stockman, economic policy maker, politician, and financier.

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