Streams

Looting & the Usury Economy

Tuesday, March 17, 2009

Have you found yourself wondering latley "who or what destroyed the economy?" Well, New York Times columnist David Leonhardt and labor lawyer Thomas Geoghegan have a simple answer to that question: we've been robbed. In his article "Infinite Debt" for the April issue of Harpers Geoghegan theorizes that the legalization of usury created perverse incentives for investors that led to a flight of capital. Leonhardt takes the theory a step further in his Times article by suggesting that investors knowingly looted money from the government in the form of bailouts.

Guests:

Thomas Geoghegan and David Leonhardt

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Comments [28]

Bill Northen from Richmond, Va

In our state Car Title lenders are charging up to 30 percent per month or 360 percent per year. I am ashamed to say.

Jul. 29 2009 11:19 AM
James B from NYC

It doesn't help poor or working (or even some middle class) folk to tell them that the last 20+ years of increasing credit abuse is all the fault of banks & financial institutions scheming to 'trick' them into mortagages & credit with 'usurious' interest rates. The fact is, there has never been a lack of people trying to 'trick' people into parting with their money. What has changed is ordinary people's increasing sense of 'entitlement' to a certain level of consumption whether or not their income could sustain it. People need to learn the simple lesson that living within one's means, indeed, living BELOW one's means (so as to be able to save & invest for the inevitable prospects of sickness, bad luck, old age &/or economic uncertainty). When folks at the kind of income levels enjoyed by radio talk show hosts cannot manage their financial affairs anymore wisely than the least financially literate, the world is upside down!

Mar. 17 2009 01:11 PM
Gene

Leonard, you may not want to cancel all your credit cards. Your credit rating is based partly on how long you've had credit.

So you might cancel all but your _oldest_ card.

You can choose new cards or read articles on the issues at Cardratings.com.

(I've pared down to 2 cards, my beloved Discover, and a Visa. That's just fine, and MUCH less harassing than previously.)

Mar. 17 2009 12:48 PM
David A from Manhattan

[1] Is everyone ignoring the question: Why did the housing market collapse? Isn't it because of all the bad loans and the resulting forclosures -- leaving a glut of empty homes?

[2] Re the overall state of the economy and usury that resulted from the deregualtion in the Reagan era: There has been a complete ignorance of two laws of physics -- The conservation of engergy and the conservation mass. i.e. there can be a transfer of mass and energy, but not a creration of it.

Mar. 17 2009 12:47 PM
Jim Dette from Weehawken, NJ

We as a nation have been looting developing world economies since WWII, loans that disappeared into the hands of the corrupt and interest that they are still paying off. Now some of these countries, like Ecuador, are not paying, not because they can't, but because they now know they wwere had.

Mar. 17 2009 12:43 PM
Joel Hubbard from long island

Could it be possible that since the bail out is being paid for by America’s future, that if the companies taking the funds were told that they must provide the F.B.I. with all in house “business intelligence” so that forensic accounting models could be made to stop this holocaust from ever happening again.

Mar. 17 2009 12:39 PM
Louis from Long Branch

Why doesn't the Fed lower their rate to small Businessmen to a -1%. Paid me to take out a loan.

Mar. 17 2009 12:39 PM
B Marx from Downtown

Why doesn't the government take 10 % of the money they've stuck in the banking hole and open a bank that will loan money responsibly, so that this economy can get moving again. "We're" saving the thieves and letting the people suffer. How much drugs do you give to an addict before you can't afford dinner?

Mar. 17 2009 12:38 PM
j from nyc

#2 - the title of the article is "the looting of america's coffers" that you can do a search on at the times website.
and deregulation just seems like a lack of a better business plan.
i never hear the basic quality control question - How much is enough? President Obama is right, big and small are irrelevant issues. We can't just use quantitative arguments for the political and the economic anymore. They just don't work, and never did, but a lot of people bought it, and i've never understood that. I saw Tom DeLay making a speech in 1996 when he first became House Leader, and right there and then, from what he was saying, i knew it was a raid on the American taxpayer.

Mar. 17 2009 12:38 PM
mc from Brooklyn

Did anyone listen to the excellent "This American Life" episode on the economy? The most sobering part was the end, when this guy was saying that we collectively owe the amount of our whole economy. We are totally hocked. I agree with the labor lawyer that the reason for this is that a middle class existence (higher education, health care and housing) is unaffordable at today's salaries.

What do we do now?

Mar. 17 2009 12:35 PM
the truth from Atlanta/New York

Pay day loans are no longer legal in the state of Georgia. They have shut them down!

Mar. 17 2009 12:32 PM
Hugh from Brookyn

Regarding the 'five-point type', Congress won't even support legislation that would mandate that credit card agreements actually be legible, that they state _up front_ what a consumer is agreeing to. Again, Joe Biden has been a big part of the problem here.

Mar. 17 2009 12:31 PM
ads

The more companies like AIG win at playing chicken w Obama the quicker our kleptocrisy will recover.

Last monday I invested in C and a few others. Based on my cynicism I JUST DOUBLED MY KID'S COLLEGE FUND!!

Mar. 17 2009 12:28 PM
stephen s from rockland county

I am a life long liberal, and "assume" the republicans caused our economic troubles. I wonder however that I never hear about the liberal concerns and prohibitions against"RED-LINING". I don't know if there is a connection, but I'm curious.

Also, I believe charging interest is contrary to Islam. I wondered how Islamic banks worked. I was told, they charged a service fee.

Mar. 17 2009 12:26 PM
David from Manhattan

The focus on usury ceilings is totally misplaced. The most common ceiling was 18% and the only type of borrowing that that mattered for was credit cards (not even auto loans had such high yields).

Credit cards are NOT the reason for our problem -- mortgages are!

As long ago as 1974, the national average mortgage rate reached 10% and the only (major) state encumbered by a usury ceiling was New York (8%).

Meanwhile, the entire breakdown in the system in recent years originated in artificially LOW mortgage rates that were temporary and the elimination of the need for down payments to buy a house. People put up zero down and could pay as little as 5% or 6% for the first couple of years. This is what promoted a huge house-price bubble -- and when that burst we ended with the current crisis.

Leonhardt was right when he noted that the fact that the lenders were "off-loading" these loans (in the securities markets) let them not really care whether the loans went bust or not.

David

Mar. 17 2009 12:24 PM
Hugh from Brookyn

Contrary to the claim David Leonhardt makes, the crisis has been in the making for 30 years.

- Thirty years of heavily promoted increases in credit card dependence.

- Thirty years of deregulation (beginning with Reagan and continuing through Clinton and Bush 2).

- Thirty years of an increasingly speculative frame of mind on Wall Street (which speculation is still well underway).

Does any country in the world encourage as much indebtedness as the US?

Mar. 17 2009 12:21 PM
MichaelB from Morningside Heights

The usury laws may have been repealed 30 years ago, but cultural habits kept people from borronw so much. As time went by, and as the credit card industry marketed more and more to people who were susceptble, the problem snowballed to its ineveitable calamity.

Mar. 17 2009 12:20 PM
the truth from Atlanta/New York

Imagine...people pay $10, $15 and up to pay by their bill by phone...ridiculous, there should be a law against this!

Mar. 17 2009 12:20 PM
the truth from Atlanta/New York

Just received a letter from Capitol One, they are increasing my interest rate by 9%. Not due to anything I have done but, because of the current state of the "economy".

Highway robbery!

Mar. 17 2009 12:19 PM
MichaelB from Morningside Heights

In the past, 9% interest would have traditionally been considered a very healthy rate of return, Leonard.

Mar. 17 2009 12:19 PM
ads

credit cards are allowed to charge up to 90%

blah blah -- solution?

Mar. 17 2009 12:18 PM
MichaelB from Morningside Heights

Not only high interest rates, but also ridiculously high fees, whereas the electronic transactions should cost pennies. Yes, the banks are entitled to a profit, but these margins are ridiculous.

As I like to ask, Why don't they just get a gun and mask and at least be "honest" about their treachery?

Mar. 17 2009 12:15 PM
Hugh from Brookyn

Today, exorbitant interest rates (20, 30 percent and worse) are usurious. (If I remember right, classically (meaning, 1000 years ago or so), usury was lending at interest, period.

Delaware is a key state in this, especially now with former Delaware Senator Joe Biden as VP.

Mar. 17 2009 12:13 PM
Mike from Brooklyn

One of the major problems is the pressure applied to executives by ignorant shareholders. This pressure may have lead to insane business deals. I remember when I was at BONY about 5 years ago, the blogs were going wild to fire the BONY CEO because he was not in the CDO business. They kept pointing to the fees generated by Bear, UBS, Merrill etc as the reason why BONY was a dinosaur.

Mar. 17 2009 12:12 PM
superf88

It's easy to blame Bush and his setting the tone of smug righteousness, and the science of zero sum economics.

But can you address the role of Joe Biden in enabling usury?

Mar. 17 2009 12:12 PM
Sue from Long Island City, NY

All too true. BUT The real issue is whether or not there are cures and solutions available to us plain old wage slaves. I wish I didn't believe it, but I think the fix is in, intrenched. The people running the Usurious States of America are not threatened when we talk about it and are in fact laughung all the way to the bank.
Say it is proven...what we get next are Hearings and after that....nuthin'.

Mar. 17 2009 11:55 AM
RC

Where is the link to the Times article?

Mar. 17 2009 10:27 AM
superf88

Hey, Giuliani promised to get the crooks off NYC mean streets and that he did! When's the last time you got your car stereo pinched?

Nah -- the saturation of MBA certificates throughout the petty criminal class certainly has given new meaning to "robbing a house."

Mar. 17 2009 06:18 AM

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