Monday, August 31, 2009

Words from a Profit

Posted by Jack

Hoooray!!!!! It's time for us to celebrate. Our banks are making billions of dollars again!

In what major news outlets are calling a record windfall, banks who received taxpayer bailout money just months ago have reported a huge increase in profits. Citigroup reported a second quarter profit of $4.3 billion. Bank of America reported a profit of $2.4 billion. Goldman Sachs raked in $3.44 billion, and JP Morgan-Chase went home with a comfortable $2.7 billion.

While many would consider this a victory, banking on the idea that a prosperous Wall Street will translate to a prosperous populace, the truth of the matter is far different.

It turns out, the banks have climbed to their lofty heights by stepping on the backs of the down-trodden.

Even though the Federal Government has lowered their interest rates to near zero (to make it easier on them), banks have jacked their fees up to obscene rates. This translates to higher overdraft fees (and other charges) for the “consumer.” Revenue from these fees has nearly doubled since 2000 when banks collected $20 billion in fees. This year, banks will collect $38.5 billion (Source: Moebs Services, here).

A consumer who overdraws an account by $20, repays the bank in two weeks and pays a $27 fee would be charged the equivalent of a 3,520 percent annual interest rate, according to a study released last year by the Federal Deposit Insurance Corp (Source: Moebs Services, here).

Who exactly is padding the banks' pockets? Reports indicate that just under 10 percent of customers pay about 90 percent of the bank-feeding fees. The lower their credit score, “the greater the tendency to incur overdraft fees,” Moebs says.

Banks are getting their money cheaper, are jacking up the prices for “consumers,” and are raking in more and more money from the least-of-those they “serve.”

You know, when they did that in my neighborhood, it was known as loan-sharking. In similar fashion, fast cash businesses and payday lenders were actively devouring families; recent legislation put a cap on their interest rates to keep them from utterly destroying all those they came in contact with.

“There is a kind of man whose teeth are like swords and his jaw teeth like knives, to devour the afflicted from the earth and the needy from among men.” Proverbs 30:14

We put up some roadblocks for the payday lenders, and there was also some recent legislation to protect folks from exorbitant credit card fees. When I heard about the new legislation, I cheered our victories on that front; we had stopped certain private institutions from raping us. Apparently, though, there were some bigger rapists on the block. This time, they brought friends.

Appearing in an article by Moebs Services: “Fee abuse hasn’t disappeared in banking with the credit- card legislation,” said Tony Plath, a finance professor at the University of North Carolina Charlotte. “It’s just migrated to checking accounts,” he said, referring to the legislation signed in May to protect cardholders from excessive fees and last-minute contract changes.

Charges related to overdrawn U.S. accounts may rise to $38.5 billion this year from $36.7 billion in 2008, according to data compiled by research firm Moebs Services Inc. in Lake Bluff, Illinois.

“By extracting these fees, banks are walking across the battlefield and shooting the wounded,” Plath said (Source: Moebs Research, here).

Commenting on the situation, comedian Jon Stewart exercised more insight than most: “The banks aren’t making money despite the fact their customers are broke; they’re making because their customers are broke.” (You can see the darkly humorous clip here.)

I think I know someone else who quipped about the powerful making money at the expense of the powerless… you know, those who seek to gain off another’s loss…

"He who oppresses the poor to increase his wealth and he who gives gifts to the rich -- both come to poverty." Proverbs 22:16

"Do not exploit the poor because they are poor and do not crush the needy in court." Proverbs 22:22

"The people of the land practice extortion and commit robbery; they oppress the poor and needy and mistreat the alien, denying them justice." Ezekiel 22:29

"This is what the LORD says: For three sins of Israel, even for four, I will not turn back [my wrath]. They sell the righteous for silver, and the needy for a pair of sandals. They trample on the heads of the poor as upon the dust of the ground and deny justice to the oppressed. Father and son use the same girl and so profane my holy name.'" Amos 2:6-7

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