Greedy Bankers Fuel Public Outrage
Editor’s Note: Though benefiting from trillion-dollar federal bailouts, major American banks continue to infuriate the public with practices that punish consumers (such as credit-card rate increases) and that remain tightfisted about lending.
To many Americans, it looks like Wall Street is far more concerned about letting the big-bonus party roll on than in helping the country climb out of a punishing recession, a situation that is politically dangerous for the White House and Congress, as Brent Budowsky notes in this guest essay:
"Bank Lending Keeps Dropping," went the Monday headline in The Wall Street Journal. As Congress returns, bailout backlash will become road rage unless the President and Congress take action that is strong and credible.
As credit card CEOs visit the White House on Thursday, President Barack Obama and Congress should push reforms that reverse recent interest rate increases and other abuses that were done to beat Congress and the Fed to the punch.
Otherwise, actions will be seen as faux reform. … Trillions of dollars were provided to firms to increase lending to consumers and business. Yet after trillions of dollars were provided, bank lending has declined, credit card interest rates have risen, credit lines have been slashed, some borrowers are forced to pay rates of 25 percent or more, and banks have begun a new wave of foreclosures.
These are direct attacks against the very reason these monies were provided.
Trillions of dollars spent to provide more lending has led to less lending. These trillions of dollars have created conditions that many taxpayers, from the right to the left, consider the moral equivalent of a war against them by those who took their money.
The big losers are those who make the most sacrifice: taxpayers, workers and consumers who are forced to pay for these bailouts three times:
Taxpayers paid for these bailouts when trillions of their dollars were provided to banks and the purpose of increasing lending was dishonored by banks.
Taxpayers are paying a second time in higher interest rates, new fees, lower credit lines and skyrocketing foreclosures by banks.
Taxpayers will pay a third time through future tax increases, spending cuts and inflationary impact that will devalue their future salaries and further devalue their retirement funds and savings.
Meanwhile, the chairman of the Senate Banking Committee [Connecticut Democrat Christopher Dodd] and many members of both parties spent the first quarter of 2009 raking in huge campaign monies from banks, Wall Street firms, mortgage companies and hedge funds.
This tone-deaf fiasco will only heighten public cynicism as these numbers are reported and bank rage rises.
Even a recent president of Harvard, now the president’s chief economic adviser [Larry Summers], moonlighted to make hedge fund money. What message does this send to students at the Harvard Business School, the Harvard Law School and Americans looking to Washington to protect them from financial abuses?
As the President convenes a meeting at the White House to discuss credit card practices, and Congress returns well aware of growing rage from constituents, will voters see real reform or faux reform that keeps in place recent abuses, fools nobody back home and escalates public anger?
Brent Budowsky was an aide to former Sen. Lloyd Bentsen and Bill Alexander, then chief deputy majority whip of the House. He holds an LL.M. degree in international financial law from the London School of Economics. He is a columnist for The Hill newspaper where this article first appeared. He can be e-mailed at firstname.lastname@example.org.
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