The Reverend Jesse Jackson came to New Haven Saturday to talk about the evils of banking and how the financial sector needs to be restructured in order to become more equitable to homeowners, students with loans and individuals with credit card debt.
He is kidding, right?
Jackson suggested to an audience that banks should have a mission, beyond making money, to serve the good of the American public.
He IS kidding, right?
He told a group of assembled ministers and elected officials, accrding to one account (in the Connecticut Post) “This is the new face of poverty. People who play by the rules and yet they are facing the stark face of eviction. This has to stop.”
He is partially right, but his solution is no answer.
There are, at a minimum, two significantly disparate issues and one possible fix about banking in the United States that should be addressed.
The first has to do with home foreclosures. It would seem there is a significant difference between individuals who took out loans they could never afford to pay back after the initial “teaser” rate went up to the “real” rate and those who lost jobs or became ill and can no longer afford to pay the mortgage.
The reality is that there is not much banks or the federal government can do for the first group. Greedy bankers and mortgage companies sold loans to people who couldn’t afford them.
Understanding the terms and conditions of the mortgage they were signing was their responsibility. Not yours, mine, the mortgage broker or anyone else. It doesn’t take a rocket scientist to figure out that if you pay less every month than it costs to “service” the loan, sooner or later you have to pay more. Ultimately most of these folks are going to lose their homes even as they continue to claim they didn’t understand the terms of their mortgage.
This miserable combination of greedy bankers and irresponsible buyers helped bring the United States to the brink of economic collapse. I have little use or sympathy for either.
There are those who genuinely deserve a lifeline. Those for whom life is not working out right now. The recession killed their job. Or maybe it was a family illness, or more than one. They’ve paid their mortgage and taxes for years, didn’t take out second or third mortgages, but right now they are in trouble.
Thirty years ago you could go to the bank in your hometown that wrote your mortgage and talk to someone who would help you work out a temporary solution. It was not unheard of for bankers to let homeowners pay the interest only, or even a fraction of the interest for a few months.
And for those folks, here is where government can step in and do something at little cost that makes sense. Make ‘em prove they really need it, but for a few months, maybe the answer is for government to help subsidize the mortgage payment for a homeowner who just needs that “breather” because of family illness or unemployment.
Not forever, just a few months. Compared to the current collection of costly programs that don’t seem to be working this would be simple, predictable and relatively easy to understand.
As for credit cards, I think everyone should have one. Credit card companies should be required to post payments the day they arrive. Beyond that I think consumers can do a terrific job of regulating credit card companies by voting with their feet. If your credit card company charges confiscatory rates and fees go find another credit card. If we all stopped doing business with banks that treated us like their personal ATM they would either get better or go under.
Which brings me to my third point. There is a fledgling but growing “local banking” movement. Simply put, the organizers suggest you move your money from banks that pay their CEOs and others millions for helping to foul up the economy to local banks and credit unions that still invest locally. JP Morgan/Chase, Citi, Wells Fargo, and Bank of America may be “too big to fail” — but they are not too big to feel the impact of hundreds of thousands of people picking up their checking, savings and IRA accounts and moving them.
You can read more about it here, including a great piece done on ABC’s World News with Diane Sawyer, and find a local community bank using their “zip code” locator:
I did.