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Sunday, July 20, 2008

Bring back federal laws against usury

So says this commentator, in the course of making several must-read points about what's happened to the U.S. financial markets.

Comments (21)

But it requires people - this is the hard part - to get out of their sort of passive resignation to, "Well, we follow the Democrats" or "we follow the Republicans" or "we let this group or that group tell us how to think" and engage among themselves in a much more serious role as citizens...to get a place in the debate.

Equally important, I think, is the emphasis put on citizen involvement. We can't just rely on "experts" we've got to be engaged, knowledgable, and part of the process ourselves.

Ahh those progressive Dimmos repealing the usury laws of Oregon. Of course they know another tax or upt-fees will take care of everything.
As the man says: Both of these parties are despicable for the mess we are in. The life in Washington D C removes reality from the law-makers minds and decisions. So id the life in Salem, however so brief, be fantasy land, too? And than is Portland the Mecca of fantasy of all fantasies.

Correct me if I am wrong, but as I recall Ron Wyden was a point man on the repealing of our usury laws.

We all need baby-sitters. Isn't that what our government is here for, I think it's in the constitution.

I saw that Bill Moyers episode and thought it gave a good explanation of the state of our current mess and "The Dismal Science" today. Maybe a little TOO good at explaining it all...watch for the Bush machine to try to kick Bill Moyers off of this PBS show too.

Sometimes I feel like I'm living Orwell's ANIMAL FARM. I remember that there were laws against war profiteering, monopolies and usury . . . anti-trust laws that were enforced . . . a communications regulations regarding equal time for candidate and measure advertising during elections.

When I go to check the sign on the side of the barn and see if those safeguards are still painted there, I find a lot of stuff painted over and a greedy, drunk pig with a paintbrush lying on the ground.

Now don't disgrace a fine animal like a pig. lol
Just say corporate whiners and it's chief whiner Phil Graham, the shill of wall street.

The lenders did this because they could.

30 yrs of the mantra "Government Bad, Regulations Bad" set the table for this mess. We shall see if a Dem. President and Congress will be able to de-program the U.S. public over the next 8 yrs.

Not only are their nations, their state, and their cities and towns in debt but they themselves as
individuals and as family units also find themselves going deeper and deeper in debt to finance
their present lifestyle. Most now have and use a credit card from their bank which allows them
to purchase their nations goods and services without using cash or the money in their bank
account at the time of purchase. The Credit Card Industry is now the most profitable sector in
American banking. In 2004 it generated nearly 30 billion dollars in net revenue. The standard
industry interest rate on any outstanding unpaid balance is 18%.
The average household credit card debt has tripled since 1990 - from $2,500 to $7,500. Last
year, penalty fees alone generated $12 billion in revenue.
Four Urgent Telephone Calls From New York
In 1980 Usury Laws were still on the majority of State Law Books. These State Usury Laws
held 12% as the maximum interest limit a bank could charge for consumer loans - any thing
more than 12% was subject to these usury laws and the penalties that attended the law.
In 1980 one of America’s largest banks, based in New York, was being squeezed between New
York State’s Usury Laws and national double-digit inflation rates. The bank employed 3,000
people in its Long Island credit card unit, a fact that the bank used to entice New York State to
offer relief from their Usury Laws. The state’s answer to this proposal was negative.
These N.Y. bankers were aware that The Marquette Bank Opinion permitted national banks to
export interest rates on consumer loans from the state where the credit decisions were made to
borrowers nationwide.
At that time South Dakota’s economy was in financial distress - “we are in the poor house” said
the Governor. The price of wheat had fallen sharply and greatly impacted the states economy.
The president of the New York Bank, hearing of South Dakota’s dire economic needs and
mindful of his own bank’s interest rate predicament with the several million cards they had
distributed, thought of a proposal he would make to the Governor who needed money and
people to save his economy. That day the Banker called the Governor four times and in effect
told him that if South Dakota would amend their State Usury Laws the bank would move its
credit card business unit to South Dakota, bringing hundreds of high-paying jobs to the State.
The Governor agreed to the proposal and South Dakota changed their Usury Laws to suit the
needs of the bank. Those four 1980 telephone calls were a pivotal moment in the ascendancy of
the American credit card industry. Other states soon followed suit allowing bank to operate in
their states without any Usury Laws to worry about.

Many States have set limits on the amounts of interest that can be charged, but banks have separate rules. In
fact in 1980, the federal government passed a special law which allowed national banks (the ones that have the word
"national" or the term "N.A." in their name, and savings banks that are federally chartered) to ignore state usury limits and pegged the rate of interest at a certain number of points above the federal reserve discount rate. In addition, specially chartered organizations like small
loan companies and installment plan sellers (like car financing companies) have their own rules. Loopholes galore for predators!

New Mexico, Vermont and South Dakota have the highest legal rate of interest.

In Oregon the legal rate is 9%, the judgment rate is 9% or the contract rate, if lawful, whichever is higher. The general usury rate for loans below $ 50,000 is 12% or 5% above the discount rate for commercial paper.

In Washington the legal rate is 12%. The general usury limit is 12%, or four points above the average T-Bill rate for the past 26 weeks, whichever is greater. (The maximum rate is announced by the State Treasurer.) Judgments bear interest at the rate of 12% or the lawful
contract rate, whichever is higher.

Credit card rates are reg'd by the state where the card is issued so all are issued from states with lax regulations (Delaware, S.D.) thanks to the 1978 supreme ct decison Marquette v First Omaha Services.

Dept store cards (sears) are reg'd by the state where the cardholder lives; when you apply for one there is a chart indicating what your rate will be based on what state you live in.

I shudder at the damage Obama and a democratic Congress (most of whom are painfully ignorant of business or economics) will do to economic activity in this country. When our always competent and benevolent government (I'm being sarcastic here) limits the rate of interest lenders can charge, the effect is to make it impossible for many people to get credit. You may think you are protecting the weak (these ideas usually start with good intentions), but what you really will be doing is (1) making it impossible for those on the low end of the economic scale to get any credit at all, (2) making it more difficult for sophisticated people who need credit but present risk that requires a higher risk premium to get credit, (3) creating another mess when market forces require all interest rates to increase (as happens from time to time), but a government-imposed cap that will make any reasonable lending illegal (a problem we had to some extent in the early '80s) and (4) creating work for clever lawyers and others to craft ways around your rules. (Interest is illegal under Islamic law, for example, but lending occurs under other names.) This is a really dumb idea.

Y'all should read what Ezra Pound had to say about Usury and the main practitioners of it during his time...this got him called the "N" word, among other things...

I'm just sayin'.

Maybe credit shouldn't be extended to those who do not have the means to repay? Yes, it will make credit unavailable to some people ... those people who can't afford the credit in the first place.

You know, kinda like how everything else is unavailable to people who can't afford them.

Wow, Senator Obama and Democratic electeds are ignorant -- Bob W. says so. Who'd a'thunk it? Who knew? What phonies those Democratic electeds and the presumptive President are! The observant dude in the second row just pointed out to us -- and that proves it is honest-to-gawd Liars-Rush TRUE, sworn on a stack of empty oxycontin bottles -- what everyone totally missed seeing.

Indeed, there might be a different prophylaxis than usury laws, to prevent the spread of mental disease among cheating minds who fantasize that they can 'get ahead' and 'make it big' being unethical enough to swindle a free lunch for themselves, from some disadvantaged downcast who they are so cleverly smarter than. Instead of prohibiting usury, lawlessly permit any terms of lending and record every loan in open public view, so everyone knows who the greedy gougers are, the names who set themselves ahead of everyone else. Public knowledge of unethical individuals -- like a registered greed offender list -- might 'fix their wagon' with social 'peer' pressure, as good as, or better than, trying to enact (usury) laws to instill the good moral character their parents were too trashy to teach.

So, yeah, loan or borrow however much you like on any terms, expecting everyone is going to see film of it on the 11 o'clock news.

Or, y'know, you can obey usury laws and keep your bank accounts private.

Geezer remembers ... The 1973 OPEC-blamed oil crisis 'gas shortage' drove prices from 39 cents to $1.29, approximately overnight. Personally, I went in to work (computer programmer) the next day and was told I was 'laid off' and the reason given me was "because of the price of oil." I said, "what price of oil?" The media said exorbitant fuel prices would raise the price of all goods transported by truck. Soon, everything cost double, or much more -- a 10-cent (soda) pop was 25 cents, a 5-cent candy bar was 15, then 20, then 25 cents. Inflation swelled up. Nixon proposed, and signed into law, wage and price controls, (or 'caps'). Ford ran for '76 election with W.I.N. buttons -- Whip Inflation Now. When Carter got elected, the financial world was already on fire: inflation above 14%, and climbing, as Geezer remembers. About then, '76, or maybe later, Oregon repealed its State usury prohibition, set at 6 or was it 7 percent, some enacted number they said they got from the Bible.

And inflation sort of 'leveled off' around 18 or 20 percent about 1980 when Reagan came in, and climbed 2 or 3 percentage points more before it started down. In 1980 the total debt was $1 trillion, (accumulated since Andrew Jackson, the first Democratic President had balanced the books and paid the debt down to zero); and after Reagan the debt was $4 trillion, and Clinton got elected when the economy stupidity had reached $6 trillion, (and left office with it paid down under $5 trillion, and diminishing). Meanwhile, (1980-92), the Savings & Loan manufactured 'crisis' was the pretense for Freddie Mac and Fannie Mae to fascist-seize all the mortgage money in the country.

One single guy was in the center of the action that whole way. In '76, he was King of the CIA, (Headquarters Bldg has his name on it); in '80-88 he was defacto President hidden behind the Reagan cardboard cutout; in '88-92 he stood in public view where we could read his lips move; and the last 8 years in hiding, again, he is defacto President two more terms (5, count 'em 5 terms; plus, same guy owns 5 Supreme Court Justices), pushing levers and pulling strings as Junior Howdy-Doody spastic jerks and jaws like a brain-damaged dumbass.

(The guy used to pilot bombers, before there was the Air Force, or the Pentagon; and funniest thing of all is, someone in The White House in 1983 ordered Army Special Forces stationed in Germany to 'war game' a 'mock exercise' study spelling out how to defend against some rogue group hijacking commercial airplanes and crashing them into the Twin Towers. Isn't that hilarious!!)

Usury laws and flaws is one small puzzle piece mentioned in the big global picture freshly explained here: Inflation and the Specter of World Revolution, by James Petras, 20-Jul-08.

It may take five minutes to read the whole piece, if you judge for yourself in the first minute that it has worthwhile news to you.

I don't know, though, this Petras dude could also be a painful ignoramus about "business or economics," even with his Ph.D. fancy-shmancy paperwork and awards and all like that there, so maybe he needs to be checked out and vetted, too, here:


Bob W: "I shudder at the damage Obama and a democratic Congress (most of whom are painfully ignorant of business or economics) will do to economic activity in this country."

And who was at the switch while this current mess was brewing? Conservatives are still daydreaming about the economics acumen of the very people who are busy "loaning" your tax money to failing investment banks, in return for "collateral" of worthess mortgage securities.

If the last seven years has taught us anything it's that as long as it's Republicans chucking our country down the toilet its A-OK with conservatives.

The existence or nonexistence of usury laws has nothing whatsoever to do with Fannie Mae/Freddy Mac and Bear Stearns. But since some of you long for a paternalistic society where the government (which many of you have a pretty strong distrust of, so it's kind of ironic that you want to give them more power) can decide who should be allowed to borrow and who should not, let's put in place some other government protections of the poor: 1) it seems foolish for the poor to buy $200 Nikes, so the government should ban their sale in poor areas; 2) cell phone plans are a huge rip-off (which they are), and Jack was dumb enough to pay $44 for a long distance call to Australia, so we should re-impose a telecom monopoly, to protect the poor (and Jack); 3) the poor tend to be the biggest users of Pay Per View, so let's make sure Comcast can't sell that anymore (or have the government subsidize it maybe); 4) the poor tend to eat more often at fast food establishments, whih have questionable nutritional content, so let's ban them, and expensive lattes too; and 5) my wife and I have quit drinking, finding that it has saved us several thousand dollars a year; since we're so virtuous, everyone else should be too, so let's reimpose prohibition and save the poor lots of money on booze; and let's ban cigarettes too! Or maybe we should just let everyone run their own lives and make their own mistakes, and quit being so smug and know-it-all and paternalistic.

"Or maybe we should just let everyone run their own lives and make their own mistakes, and quit being so smug and know-it-all and paternalistic."

I work very hard in my own field of knowledge, and then go home and take care of my family. I can't become an expert in high finance, insurance, mortgages and forty other subjects. In those cases, I don't consider it "paternalistic" for regulators who are familiar with these industries to create basic rules to keep companies from ripping me off.

If you think that these unregulated financial companies haven't been yanking extra b.s. fees out of you for the benefit of their shareholders, you're a fool.

The main thing about regulation is -- not punishment, not reward -- rather, is to put the 'companies' accounting in the public record, for public oversight. Not everyone looks at the bookkeeping, representatives do -- but anyone may, and can. Such as reporters.

Then the tax revenue in the books is known.
And the advertising and lobbying slush fund is known.
And exorbitant profiteering is known.
And more ...

Without 'forcing' the 'companies' in their business one way or another, yet if collective action is taken, (though not necessarily retaliation), then everyone has the same facts to form their individual opinions from.

And where 'everyone' (the 'public interest') confers a monopoly or oligopoly 'captive market' to few 'companies', which have zero risk of failure (at least, no competition), then the action of 'everyone' can impose caps on profit margin. Such as: libraries, performing arts theatres, athletic arts arenas, schools, hospitals, public works, Post Office, military and other civil service, police, fire fighters, water, sewer, electricity, mass media, banking, and many more -- else don't bar entry into the 'market' ... for example, let anyone set up and broadcast on Liars Larson's frequency ... and have radiowave anarchy ... but no-o-o-o, that frequency is an allocated monopoly in the 'public interest' so make public oversight of that bookkeeping, showing its financial effect in the community economy.

Again, not saying how they have to do business.
Just saying ... show us the money, a vital part of it is our money.

two things this worthless government needs to do. Limit-cap credit card debt at 5% so people can get out from under. Oh, but wait---banks and lenders wouldn't be able to unload and sell the junk in their trunk to China or Japan. Second thing, by-by hybrid cars. What a joke---lets get everyone out of a gasfd burner and put them in a food burner---still one person per vehicle driving their daily morning commute. Still clogging and congesting all arteries. Build the light electric rail that we were promised in the 50's. Build it nationwide and city-wide. Let suburbanites and city people get on local electric rail for a relaxing short-or-long distance commute or leisure travel. They started it in the Northeas corridor. Why is it that you can park your butt on a rail line and get to NYC from Conn. but no where else in this country? Amtrak is ok---but we need to demand that the lid be ripped wide open. Can you imagine the jobs, the improved tourism, and no need for traffic cops ticketing speeders, or shrinks treating road rage. Thats all. It has to be done by the people demanding change. No more dems and repubs....just lawmaker in Washington and in our states willing to do the job they were hired to do---or throw their butts out. Dont need no more career cronies running this country. People need access to media and a forum.

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