It seems to be a characteristic of our capitalist system that the people least able to pay the tariff of daily living are the ones saddled with additional bank charges, high interest rates, late fees, penalties, etc. The institutions levying these charges say that poor people are a greater risk than those who can more easily pay their bills, but my own feeling that banks and others charge these fees simply because they know they’ve got the poor over a barrel and charge confiscatory fees because they can get away with the practice.
It is ironic that institutions that assume no risks whatsoever in acquiring deposits that are in turn loaned out charge extra for “risk.” It is doubly ironic that a big portion for the 2008 financial crisis is attributable to the financial industry purposely extending such risky loans as so-called “liar’s loans” to people without the capacity to repay them, supported by inflated and fraudulent appraisals of property values, etc.
The banking crisis cost the economy eleven trillion dollars and ten million lost jobs; the only people who benefited from it were banking CEOs who were responsible for the greatest theft in history. According to former bank regulator William Black, these CEOs followed a recipe for what he terms “control fraud”:
1. Grow like crazy
2. By making and buying crappy loans at a premium yield
3. While employing extreme leverage, and
4. Providing only trivial reserves
Bank executives who follow this recipe, says Black, are mathematically guaranteed to have three things occur. First, their banks will post record profits. Second, the CEO will immediately be made incredibly wealthy by modern executive compensation practices. Third, farther down the road the bank will suffer catastrophic losses and will have to be bailed out by government or fail.
Despite unambiguous warnings years before the crisis, government did nothing to prevent the fraud. Despite clear evidence of financial crimes on a grand scale, the government has not held even one banking executive responsible. Instead, it stands by while the banks continue making their ill-gotten profits off on the little guy.
The same thing is being done by Big Oil, which is also an extractive industry. Gas prices in Terlingua have topped $4.05 per gallon, and the cost of gas in Alpine (65 miles away) is $3.60. I no longer drive, but this summer I have been buying a lot of fuel to run internal combustion generators while my solar electrical system is inoperable and awaiting repair.
Last December when I saw that my electrical plant was on the way out, I got a quote for a new system. However, it was $3,300 and I could not raise this level of funding for this purpose. Instead, another supplier quoted me $700 to repair my existing system, but it involved much more time. The old system finally gave out two months ago, and I was forced to turn to gas-powered generation in order to stay on the air. We have purchased new batteries and the system repair is only awaiting delivery of a new charge controller. But I am reaching the limits of my ability to purchase gasoline.
When I came out to West Texas, I destroyed my credit cards and swore to live within my means and without debt. I resolved to live more as a little guy. But being little means being taken advantage of by somebody big, if not a bank then an oil company or some other entity.
Choose your poison. The only hope is to minimize the damage. It’s capitalism.
Groove of the Day