Wednesday, December 7, 2011

The Poverty Industry


People in poverty are further impoverished by predatory lenders and other financial parasites that feed on those without sufficient access to capital to protect against predation.

Poor people pay more in  interest rates than wealthy borrowers do and they also pay more for banking services and in banking fees.

Michael W. Hudson's book examines this type of predation upon the poor:

The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America--and Spawned a Global Crisis (2011). http://www.amazon.com/Monster-Predatory-Lenders-Bankers-America--/dp/031261053X/ref=sr_1_2?ie=UTF8&qid=1323266692&sr=8-2

Joshua Holland has also written about this type of corporate predation.
5 Ways Corporate Scavengers Are Making Big Money Off Our Economic Pain: Big business has found a number of ways to profit from the economic suffering on 'Main Street.' February 12, 2011  http://www.alternet.org/story/149892/5_ways_corporate_scavengers_are_making_big_money_off_our_economic_pain/

Holland describes credit cards with interest rates of 79.9%! 

Most recently, Pat Garofalo describes the bitter double-standard that applies to lending in our country. Big banks received almost 8 trillion in assets from the US Federal Reserve at little to no interest.

Some of these big banks are now using these assets as reserves for predatory lending.

Big Banks Finance Billions in Predatory Payday Lending byy Pat Garofalo, ThinkProgress 06 December 11

[excerpted] "One of the more pernicious forms of predatory lending is payday lending, which involves firms giving usually low-income workers very short-term, high-interest loans in order to help them pay for necessities until they receive their next paycheck. While this may sound like a valuable service, the interest rates on the loans are so high that many borrowers get caught in a cycle in which they're constantly taking out new loans to cover the new bills that they can no longer afford, due to having paid back the last loan.

"In fact, the Center for Responsible Lending has found 76 percent of payday loan volume (and $3.5 billion in annual fees) is due to "churning," which is repeat borrowing by customers who paid off their loan, but because of the interest, require another loan before their next paycheck. And according to Credit Slips' Nathalie Martin, a professor at the University of New Mexico, the nation's biggest banks are, in a big way, financing this predatory lending:

"- Major banks provide over $1.5 Billion in credit available to fund major payday lending companies. -The major banks funding payday lending include Wells Fargo, Bank of America, US Bank, JP Morgan Bank, and National City (PNC Financial Services Group)…

…lf of these above mentioned banks received TARP bailout funds in 2008-09 and have benefited from accessing capital at exceptionally low interest rates from the Federal Reserve...."

 Majia Here: Just another reason why the US is a plutonomy, rather than a democracy.



 

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