Posts Tagged ‘Banks’

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“Dead Man” Talking

January 18, 2010

Glenroy Allen of Brevard County, Florida wanted to buy a new truck.  He shopped around and found a beautiful Dodge Ram with all the extras, near perfect for his needs.  He agreed on a price and started the paperwork.  That’s when his problems started – Mr. Allen is dead.  At least that is what his credit reports say.  Fortunately, for Mr. Allen, each breath he draws proves the reports wrong.  While at first glance such an error seemed amusing, it lost all humor when he could not finance the truck.  He is unable to get virtually all credit and there is little anyone can do about it.

The problem is traced to an entry on Mr. Allen’s credit report by Nationwide Bank.  The three major credit-reporting services carry the entry “Consumer Deceased.”  While a mistake is understandable, the lack of ability for the consumer to resolve it is not.  Nationwide Bank is of  no help, they made the mistake, seems they should be the ones to fix it.  Of course, that is not how the system works.  It is up to Mr. Allen to fix a problem created by a bank.  It seems financial institutions are efficient at creating is problems someone else has to fix.

Just about any business is able to post a negative entry on a person’s credit report, even if it’s untrue.  The system is easy to use by businesses and the financial institutions.  It also has built-in hurdles to prevent removal of erroneous data.  We hear phrases like “check your credit, and check it often” or “it is up to the individual to ensure their credit report is accurate,” but when the time comes to correct it, useful catch phrases are of little help.  Consumer protection agencies, rights groups, even Congress have little control or influence over the credit reporting services.

The basic recourse available consumers is to dispute the claim with the credit reporting service, they in turn, ask the source of the item in question to verify the information.  Inevitably, this simply creates a cycle of circular motion that has no end and rarely provides the consumer with relief.  The bank or business will claim they corrected it, the reporting service will claim they have not.

At the very least Mr. Allen, and others in the same situation, have a valid claim at libel.  A common definition of libel state: “libel is the communication of a statement that makes a claim, expressly stated or implied to be factual, that may give an individual, business, product, group, government, or nation a negative image.”  What could give a worse opinion of credit worthiness than a false claim of death?   Of course, financial lobbyists covered this base with the ironically named Fair Credit Reporting Act.  It limits action against reporting agencies to state attorney generals.

Again, financial institutions have created a system that benefits only them and costs the individual dearly.  The system allows for easy entry of negative data, thus making the consumer “high risk.”  High risk means they hit you with a higher interest rate.  They lobbied Congress to make it near impossible to hold them accountable for anything.  It is a system ripe for abuse.  If ever a system needed reform, this is it.

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Big Bonuses, Round 2

January 11, 2010

It’s bonus time again on Wall Street and, true to form, they will be record high this year.  According to ABC News, the amount will be north of $112 billion for just six of the larger banks.  That is a staggering amount of money but in the end, it is only symptom of a systemic problem with the way banks conduct business.

The banks that plan on paying them are quick to point out they have paid back the bailout money (the Troubled Asset Relief Program or TARP) which is true.  TARP funds are only half of the issue though.  What they don’t talk about is the ability of banks to saddle up to the Federal Reserve for extremely low-interest or even no-interest loans.  The amount of money involved in this action dwarfs the $700 billion bailout.

Many economists state both the bailout and loans kept the economy solvent.  Assuming that is true, it fails to address two key points – the irresponsible action by the banks and Wall Street that created this mess and that they continue to act irresponsibly with the bailout and discount money borrowed.  Rather than reduce so-called “toxic assets,” the reason for TARP, banks used the money to ride out the storm an in some cases, make investments (such as buying other banks).  In effect, the bailout money lined the pockets of investors rather than freeing up credit to consumers and small businesses.

Approximately 7,450 businesses now file for bankruptcy protection each month.  The majority point to lower sales and lack of credit as the two primary reasons.  Logic dictates that money loaned to banks to shore up the economy be used by banks to do just that.  Instead, banks used it to shore up investors.  For banks to pay bonuses in this environment  is a slap in the face of every hard-working American.  Banks fully expect to go back to business as usual and make money hand over fist.  It seems Congress is primed to let them do just that.  Here is another way to look at the bank bonuses, there are around 154 million working Americans this month.  The bonus paid by only these few banks equals about $750 per worker.

Now to really make you mad, I’ll simplify what is going on:  banks make huge amounts of money taking risks, risks fail, banks get bailout to cover losses, banks borrow money at no interest and invest it rather than make loans.  The other shoe is banks entice consumers with low-interest rate credit cards, issue them to anyone with a pulse, set very high limits, wait until the financed amount is high, then jack up the interest rate to a point people can’t pay, force them into default, and drive consumers into bankruptcy.  We loan banks money at little to no interest only to have them loan it back to us with huge interest rates.  Are we really that stupid?  The answer must be “YES!”

We cannot do anything about the bailout now, other than learn from it.  What we can do is regulate the banks to prevent the behaviors that take advantage of both, the system and us.  We learned this lesson after the Great Depression, and then Congress changed the rules allowing Americans to get screwed.  Banks were all to willing to do just that.  We have a right to regulate banks, they only exists because we bailed them out.  Our economy does not belong to banks either; it belongs to us, the American people.  It is time we take it back from Congress and all the special interests that now hold it hostage.  2010 is an election year, we need to make sure Congress remembers that.  You can bet Wall Street used some of that bailout money to see that they don’t.

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