Rage Against the Financial Machine
Few realize what a huge political, social and economic shift the cash has caused, and banks are at the center of it. Not that they were the only ones who got on the ‘borrow like there’s no tomorrow’ bandwagon – both consumers and banks partied (and borrowed) like it was 1999. But when it all came crashing down, it ended badly for everyone – everyone, that it, except the banks.
Leave it to the “too-big-to-fail” bailed out banks turn a bunch of otherwise happy 21st century folks into 1969 urbanized radicals:
We are a leaderless resistance movement with people of many colors, genders and political persuasions. The one thing we all have in common is that We Are The 99% that will no longer tolerate the greed and corruption of the 1%. (“Occupy Wall Street”).
As of late September 2011, the Wall Street protest have begun to turn violent and on a cold and rainy October Saturday over 700 protesters were arrested on the Brooklyn bridge. You can follow the carnage at #OccupyWallSt.
We Hate the Banks But They Still Heart Us (Well, OK, the Fees They Charge Us)
Congress designed the recent banking regulations, in part, to protect debt card holders from excessive fees — so excessive in fact says “Naked Capitalism’s” Yves Smith, “[that] you can drive a truck between the cost of providing the service and what banks charge.”
Unfortunately for debt card holders, the banks have reacted to recent regulation by getting badly needed fees in other ways.
Bank of America recently announced that in 2012 (when the economy is suppose to suck even more) it will start charging its victims customers $5 per month if they use their card even once. Customers can avoid the fee by simply maintaining average checking account balance of only $20,000 per month.
Citibank thought this was such a great idea that they announced that their victims customers will have to maintain minimum checking account balances of $15,000 instead of $10,000 if they still want to get free checking.
Worse, at least in the case of debt card fees regulation, it may be the best thing that could have happened to the banks. Yves Smith suggests that the $5 fee not only compensates for the lost revenue that banks charge merchants for your debt card use, it probably brings in even more revenue that the original merchant fees – and you’re paying for it!
How’s All That Pro-Consumer Regulation Working Out For Ya?
Not very it seems. But why? Why pass all these regulations just to have the banks make an end run around them?
Simon Johnson, chief economist for the IMF in 2007 & 2008 makes the disturbing argument that the banks & Wall Street effectively own our government:
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time. (The Quiet Coup).
Peer to Peer Lending Is One of the Few Bright Spots
It’s not hard to see that all this, in a very real and significant way, spells the beginning of the end of what Johnson calls the U.S. “financial oligarchy,” and it’s anyone’s guess about how it’s all going to finally end up. So far, however, the oligarchy seems to be still firmly in place.
The one bright spot in all this is Peer to peer lenders. In P2P lending, personal and business loans are funded not by traditional banks but by individuals. Over the past few years, the social, or peer-to-peer, lending industry has been growing by leaps and bounds and this growth has been helped by banking regulation that’s hurt smaller banks (the larger banks, like BOA can seemingly raise your fees at will).
Will P2P lenders be the last bank standing after it’s all over? Only time will tell.