We have been sitting here, reading once again about the plight of the typical credit card holder. We read about folks who have somehow managed to amass credit card debt of $20,000, $50,000, $120,000, and who are now sinking under this mountain of debt. We are also reading about the rate of interest which has precluded these borrowers from escaping the debt-trap in which they have become hopelessly ensnared. Those who have borrowed for the privilege of using plastic as the ENABLER of their impulse buying, of their advertising-induced compulsion to possess all the latest gadgets, the fashionable clothing, meals out, boats, expensive cars, what have you have been paying 22%, 24%, 30% to their friendly credit card issuer. In many cases, the issuer is one of the great, ultra blue chip American banks, which are themselves now in acute financial distress.
These household name lenders seem to us to be usurers. What else can one call lending at 22%, 24%, 30% in an environment where inflation is running at 2% or 3%? This systematic gouging is permitted, if not sanctified, by a Congress filled with lawyers, a president, and regulators supposedly acting as guardian of the economic welfare of the American people.
Nor do we think it inappropriate to ask what these "blue chip" banks, which have battened off of these obscenely high interest rates, have been doing with their unconscionably extracted profits. The answer, nebulous until recently, has now become crystal clear. They have been making a plethora of sub-prime mortgage loans, option ARMS, and other such loans at rates which might seem extortionate. Additionally, they have been accumulating staggering quantities of high-yiedling, high risk loans, both on their own balance sheets and on off-balance sheet vehicles, whose imminent collapse has forced the banks to take these securitized loans too onto their books.
It seems to little 'ol us that the banks have been behaving like loan sharks, who then proceed to take their ill-gotten gains to the track, where they proceed to lose it all. This, it seems to us, is an apt metaphor for the full cycle encompassed in the "sub-prime" crisis.
And the regulators? They are like the three blind monkeys. They see no evil, hear no evil, speak no evil.
This, in the supposedly most sophisticated financial system in the world.
