Big Gov-Big Banks – and the Little Guy
The Federal Reserve (The Fed) has spent the last year or so massively hiking interest rates.
In a thus-far-unsuccessful attempt to reduce the massive inflation Big Government created by rapidly printing trillions of dollars.
That’s even more exceedingly awful news for the Little Guy looking to borrow money for his life, home or business.
The exceedingly awful publication Politico today had this….
Ready to Pounce on (Fed Chair Jerome) Powell:
“The big banks have launched a blitz on Capitol Hill in recent weeks ahead of what they fear will be a serious increase in the amount of funding they’d be forced to keep on hand to absorb losses during economic downturns.”
Whether or not you agree with increasing the required on-hand capital – is not the point of this exercise.
The point is: Nothing happens in DC – unless Big Business wants it to happen.
So the Big Banks flooding the zone for weeks with lobbyists – will almost certainly prevent the increase in required on-hand capital.
Big Banks have been getting whatever they want from Big Gov – for a very long time.
We’ll pick it up in the very early 1990s. When Big Banks began spending the next twenty-or-so years thereafter working with Big Gov – to issue millions of home loans to people everyone knew couldn’t pay them back.
Big Banks paid themselves obscene fees for issuing the ridiculous likes of NINJA loans.
Big Gov then used Freddie Mac and Fannie Mae to immediately off-load these awful loans from the Big Banks’ balance sheets.
Then in 2007-2008 – shocker: The whole housing market of cards came crashing down.
Big Gov then gave Big Banks trillions in bailout money. The Big Banks used it to pay themselves billions in bonuses.
Then, to further benefit the Big Banks, Big Gov wrote the idiotic Dodd-Frank law. Which made Big Banks MUCH bigger – while murdering thousands of their small competitors.
It has, in fact, been an exceedingly awful half-century-plus for Little Guy lenders. And therefore for Little Guy borrowers.
Big Gov owing $31+ trillion – and counting – means Big Gov continues to borrow more and more money. Leaving less and less for the private sector.
And Big Gov’s laws and regulations have ensured that nigh all of that private lending – will be done by Big Banks.
And Big Banks much prefer to lend the dwindling amount of available money – to Big Billionaires.
Banks Are Giving the Ultra-Rich Cheap Loans to Fund Their Lifestyle:
“Investment banks boosting loans to their richest customers. Everything from penthouses to paintings used as collateral.”
Well that seems exceedingly fair to the rest of us.
Where does the Little Guy go to get a loan? Now that Big Gov and Big Banks have colluded to murder the Little Guy banks that used to lend to him?
Banking and Poverty: Why the Poor Turn to Alternative Financial Services:
“(I)n 2017, a survey conducted by the FDIC found that the number of unbanked households in the United States was 8.4 million, with an additional 24.2 million underbanked households, households that are not participating or have limited participation in traditional financial institutions….
“(T)he banking system is not designed with low and middle class households in mind….(O)verdraft fees, debit card swipe fees, ATM withdrawal fees, wire transfer charges, among other charges and fees are imposed.
“These charges that appear around every corner of the banking system create a significant burden and barrier of entry for low and middle income individuals. To make matters worse, these costs for low to moderate income individuals are difficult to avoid.
“Overdraft fees are particularly unavoidable for people who live hand to mouth. While banks will deposit funds into accounts only on business days, withdrawals can be made anytime of the week.
“Banks will also often take time to show the true balance of someone’s checking account leading to monthly overdraft fees of up to $34. Banks can make up to three monthly overdraft charges, which places an incredible cost on people who live paycheck to paycheck.
“As a result, while banks hunt for ways to maximize their profits, low income families are burdened with an excess of fees.”
Big Banks are cutting Big Billionaires sweetheart deals. While Big Banks are incessantly screwing the Little Guy.
So the Little Guy is going to payday lenders…:
“(C)heck cashers and other financial alternatives become the less costly option. While overdraft fees and payday loans are not exactly the same, there are some parallels between the two.
“An individual that has charges exceeding their available balance is essentially borrowing that money from the bank and then being charged a fee for it. Payday loans operate the same way and are repaid in a similar time frame as overdraft fees.”
Except the payday loans – are a MUCH better deal…:
“(T)he annual percentage rates for payday loans are between 300 and 600%.
“If overdraft fees were treated as a payday loan that is repaid within three days, the APR would be 1700%.”
Payday lending became a thing – because Big Gov and the Big Banks killed Little Guy Banks.
So, of course, Big Gov and the Big Banks – have long been looking to end payday lending.
DC Destroys the Economy – Then Bans Loans for Poor People – March 2022
DC Is Ensuring Only Billionaires Can Get a Loan – In the Name of ‘Helping the Little Guy’ – August 2021
Congress Is Stepping Up Its Efforts To Kill Payday Loans – June, 2020
CFPB Payday Rule: A Ban or a Blueprint for the Future of Short-Term Consumer Lending? – October 2017
Hint: It’s both. A blueprint – for a ban.
Consumer Financial Protection Bureau Proposes Rule to End Payday Debt – June 2016
Little Guy President Donald Trump lessened the Big Gov assault on payday lenders.
So guess what happened after he….<clears throat> “lost” reelection?
If you said “Big Gov re-ramped up the regs” – you’re right….
Congress Overturns Trump-Era Regulations on Payday Lenders:
“Congress on Thursday overturned a set of regulations enacted in the final days of the Trump administration that effectively allowed payday lenders to avoid state laws capping interest rates.”
Trump allowed payday lenders to avoid government price caps – because government price caps are idiotic. In no small part because they murder the capped items:
“Government price fixers don’t understand markets. And they pay no price for not understanding markets. So putting them in charge of pricing markets – is REALLY stupid.
“We had government-price-fixed-induced gasoline shortages and LONG lines at the pump in the 1970s – because the government price caps didn’t remotely reflect market reality.”
So post-Trump, Big Gov is fully back to working with Big Banks to murder Little Guy payday lenders.
Because why should the Little Guy have a cheaper alternative to Big Banks incessantly ripping them off?