February 28, 2009
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How’s it going?
Like everyone else, I’ve been watching with great interest the goings on with Washington and Wall Street. I’ve been amazed by some of the hysterical things said and pleasantly surprised by some of the straight-level discussion about what’s going on.
On a personal level, I’ve been inundated with work at the bank as we have sought to comply with new requirements (and I’m pleased to tell you that the excellent team I work with has more than met the deadlines we were given.) Just in case I’m under any illusion that only the people who made “bad decisions” are being hurt by the current fall from grace the American economy is experiencing, all I have to do is go to work to see that we are ALL paying for what a few people did.
I have a friend who becomes red in the face with fury over the very idea that his tax money might be used to “bail out” home-owners who took mortgages they can’t afford. Well, I understand his frustration, but I also know that a foreclosure on your street lowers the value of your property an average of 9% (in some markets it can be over 15%). So regardless of how you look at it, we are all paying for the mistakes of a few.
So where do we go from here?
Many of you have kindly read my blogs on economics and offered positive responses to what I’ve been saying. Well, today Liz Pulliam Weston, a columnist with MSN Money, has an article that calls for the kind of action I hope we can all get behind. She describes how it is that even economically savy consumers get soaked by anti-consumer practices. I had to read it twice and think about what she was saying because I think of myself as frugal and money smart, but she’s right. Some of the abuses she describes are things that I’ve been frustrated by and unable to find a remedy for. She’s asking readers to log into the President’s website and request specific changes that will help consumers avoid victimization by unscrupulous companies.
Here’s the link to her article: How consumerism hurts consumers
For those who don’t want to read the article but prefer to get to the bottom line, here’s the message she’s asking us to send to President Obama at The White House Contact Form. (At the bottom of that form is a mailing address for those who feel that letters are paid more attention than email.)
Mr. President, a healthy economy needs healthy consumers who are informed and protected. No economic reform will truly be complete until we:
- impose interest-rate caps. An 18% rate cap on any consumer loan would give banks enough leeway to lend to those with past credit problems while stopping them from cranking up credit card interest rates to 30% and beyond with little notice or justification. It would get rid of payday lenders too.
- End mandatory binding arbitration. Mandatory binding arbitration renders consumers virtually powerless and encourages businesses to adopt outrageous clauses in their contracts because they know they won’t have to defend them in court.
- Add a Cabinet-level position for a consumer advocate. There’s no one to tell the President how bailouts or stimulus packages or anything else will affect the consumer. A Secretary of Consumer affairs would be a long-overdue addition to the lineup.
- Create a consumer bill of rights. All the costs of a transaction should be apparent. Any conflicts of interest should be disclosed. If something goes wrong you should have the right of redress. And you should have access to information that’s being kept on you.
- Give the Federal Trade Commission some teeth. The ability to file only civil charges cripples this agency. Give it the ability to file criminal charges or devote Justice Department resources.
- Protect States’ rights. The federal government has been pre-empting state consumer-protection laws for years. If my state legislature wants to better protect its citizens, it should have that right.
Liz makes another point that I want to stress (because I’ve already heard from my Dentist friend that my ideas make me one of those God Damned Socialists). Companies who engage in dishonest practices are bad for capitalism. The theory has always been that the best companies make it to the top, but in and environment of gutted consumer protections, it’s not the best companies, it’s the best liars who reap the reward. That’s just UnAmerican.
Comments (20)
Excellent points. I appreciate this article so much. I am sure others will too. Nice to hear from you. Judi
my abq house has dropped in value another $18k… it finally rented (as of today) or we were going to have to sell before we took a total loss on it. with even the rental market soft, it’s tough for homeowners- even those who didn’t buy too much house. anyway- how are the boys?
Glad you posted this but I can hardly read it because of the color of the font….it’s the orange on the white that is causing eyestrain for me. (Goodness, I sound like an old lady! haha)If you would be willing to change the font to a different color then I could fully appreciate the post.
Good points made indeed. Why is it that all the bail out money went to paying for peoples bonuses when their businesses were failing. Did you ever get a million dollar bonus when your business was failing??? Makes absolutely no sense to me. Like treason or robbery more likely..and why are these people not facing jail time for it. If I showed up at your bank and robbed it with a hidden cucumber I would get more time for what little I could get there than any of these people do with a computer and a foreign bank to hide it in. Sorry but it makes me mad to even think what these people did to us in eight years time. And we have not even gotten into the god awful war costs and robbery. Treason is what happened and they all should be held accountable.
This is wonderful. I love reading you. You explain things to clearly. I do not always agree (and who cares?) but I am always enlightend when I read here.
“The theory has always been that the best companies make it to the top,
but in an environment of gutted consumer protections, it’s not the best
companies, it’s the best liars who reap the reward. That’s just
UnAmerican. “
In my view, after the Bush administration years, that statement is, unfortunately, Very American.
Thank you for your caring and smart info and thoughts.
@mammaquiet - you can hilight it with your mouse and it is more readable.
Thanks so much for posting this. An excellent article
I am old enough to remember when states had caps on interest rates and they were followed. I think you old home state was one of the few that keep a cap rate of 10 to 12 per cent and somehow they managed just fine. It seems that most states were afraid that their banks would lose out if they didn’t increase caps or in essence do away with them. I am all for an addition to the cabinet too.
For some reason the link to the article didn’t work for me. Not sure why. It seems others have been able to read it.
sad subject but great post. Thanks for the information.
@mammaquiet - I had trouble with the font and back ground because I copied and pasted that bit from Liz’s article. I’ve retyped it and I hope I’ve made it more legible. My apologies for the earlier version.
Thank you! I wanted to make sure we all got the benefit of this!
As always I like what you have to say and I’m glad that you posted finally!!
Terrific blog post!
Socialism is not new in the US. Public schools, federalized post office, police, & firefighter systems.
Ask your dentist friend if we should get rid of the 9/11 hero rescue workers… US Fire & police are not capitalist.
Oh wait, you mean some socialism is okay??
I moved to Alberta in 2007 & found privatized post offices, foster care, driver’s license offices, schools, while medicine was socialized.
There is nothing wrong with a mixed system.
Great Post! You make some excellent points.
I think a few of those ideas would be too costly to outweigh the advantages they offer.
I’m not sure what benefits a consumer bill of rights what add but it would seem to increase litigation in our already litigious society.
Allowing all 50 states to set different policies increases costs on the economy to comply with 50 different laws.
Mandatory binding arbitration policies often are not enforced anyways b/c they are unconscionable “adhesion” contracts.
Never thought of an 18% cap which is MORE than adequate…but what you seem to be missing is that all these outrageous rates and un-Christian rumblings about mortgage bailouts are being circulated by the noveau riche like Limbaugh and other white-trash millionaires
@EminemsRevenge - Oh I didn’t miss that the people whining about redistribution of wealth are the same ones that saw no problem at all with the system when it was redistributing the wealth in their direction. I haven’t heard any of them complaining about the laws that enable them t ofile bankruptcy and keep their vacation homes and rental properties even though the same laws prevent struggling families from keeping their homes. No, I haven’t missed it at all.
@ElDuderinoCA - You raise good points here. I’d like to address just one of them, when you ask why we need a consumer bill of rights. Because it’s such and easy and cheap shot, I’d like to demonstrate how a consumer bill of rights including mandatory disclosure of transaction costs might play out in a mortgage deal.
If you knew that your mortgage broker was being paid up to 2% of the principal amount of your loan by the lender, would that make a difference in whether you trusted that broker to have chosen the lender with the product that was best for you, or would you suspect that you were being sold a loan that was the best deal for the broker?
Would you sue? Or would you go with a broker who had an upfront – no surprises – fee schedule that included no remuneration from lenders?
I think that American consumers have been handed a horrible deal over the past 20 years as we’ve been sold increasingly expensive and complicated products with no disclosure about who was making money from us and no remedy to prevent it. Too many people have wagged their finger at us and said, “Ah, but you were foolish to get into a deal you didn’t understand.” I’ve noticed that those same people are screaming to high heaven about the unfairness of their losses from the collapse of the stock market due in large part to complicated financial instruments that they …didn’t understand.
What makes me furious are the people who bitch about “bailing people out” whose homes were foreclosed on. How about we bitch about all of our tax dollars going to “bailing out” banks and insurance companies whose CEOs and Corporate employees go on multi-thousand dollar weekend getaways the weekend after they receive bailout money. Now that is bullshit! My fiance’s family had their own business, a security business. Business was great! They got most of their work from home builders such as DR Horton and Paydus (out of Florida). They were making good money. Not great, they weren’t rich by any means but for the first time in their lives they could afford a nice 4 bedroom, 3 bath house and could afford all of the extras such as cable, internet, a few cars, all of that. They weren’t by any definition of the word “rich”. Keep in mind, they owned their own business for 22 years. Then the economy starts to decline, builders stop building houses, they start losing the majority of their business and therefore rely solely on side jobs and my fiance’s mom has to go to work for Lowes to help make ends meet. They lose their cable, internet, and lucky for them their cars are paid off. They blow through $23,000 in savings trying to keep afloat, trying to keep their house after the builders they work for keep telling them “Business will pick up in 3, 6, 9 months. It’ll pick up in a year.” and so on. They supported themselves, 3 sons, a grandson and 2 girlfriends of 2 of their boys. It was a full house and a lot of mouths to feed. Soon, all work is gone, the business goes under, there are no jobs to be found, all money in savings in gone and suddenly they are relying on his mom’s income from her cashier job at Lowes. Next thing that happens? They house is foreclosed on.
There are tons of situations like this. You tell me it’s their fault that they lost the house? No! Because they could afford it! But suddenly all income disappears, then what do you do? Don’t get angry at these people who are just trying to survive now. (They are still jobless and living with their own parents). Get angry and the millionaires and billionaires who are getting their businesses bailed out and still living “the good life”. These people aren’t feeling the effects of the economy. But thousands of others are.
. But the part about your friend getting red in the face over this subject made me red in the face. Of course I had to give you my two cents 
.
Sorry for the rant.
It was a good post and I’m now a subscriber
It is not just corporations who are rewarded for being the best liars: its the individual too.
recently had an employee steal money.. the police asked if they did it and they said no, so while they will file a report, it is doubtful there will ever be an arrest