Friday, March 6, 2009

Lenders and Borrowers

Taking out a loan is generally an adversarial relationship.The saying goes that banks only lend to people who don't need the money and that has generally been the way of it until recently. Bankers are also well aware of the saying that if you owe the bank ten million you own the bank, but if you owe the bank ten thousand the bank owns you. These axioms have held true in the West since banking as we know it reared it's head when traders were trading in Babylon and Peking. The thing is these truths that seemed self evident fell apart during the early part of this century and the results have been spectacular.
.
There are voices in the US today who want to blame the poor for the banking crisis that has led to the implosion of our financial system, Certainly it is a politically inspired position as it renders more palatable the notion that it wasn't the Republican Administration that was at the helm when the credit crisis made itself known, it was poor people taking out excessive loans that precipitated the crisis. This is weird, and because it is white right wingers propagating the blame on unqualified lenders (through Fannie Mae and Freddie Mac), it sets the stage of targeting the poor when the economic situation calls for blaming scapegoats who can promptly face lynching.
.
The idea that banksters made loans to people without proof of assets or income without being aware of the consequences is ludicrous. The idea that first time home buyers should be smart enough to reject a loan when that symbol of propriety, a bank ferchrissakes!- offers them money at an affordable rate; that these people should be wiser than the banks throwing the money at them, is just bizarre. Marketing is what America used to be all about and if one looks around with no great effort one will see the effects of marketing everywhere. It is irresistible, even for those of us who think we are better able than most to resist the blandishments of the advertisers. Their great skill is the ability to sell and they employed that skill to deadly effect with banks and bank customers.
.
The other reason why the poor aren't to be scapegoated for this crisis is because this isn't simply a mortgage or housing crisis, as bad as that is. This is a credit crisis and credit is evaporating in front of a nation addicted to easy and widely available credit. Industry and business need credit and it's gone. Trust has vanished and poverty is upon us. And the noisy angry hordes think the poor caused this cataclysm? I see marketing at work still, and very effective it is too.
.
At every turn President Obama's financial advisers make moves to help banks and banksters, and the wealthy. The new investment vehicles to get private capital involved in the need to rebuild credit has private hedge funds getting a nine times multiplier effect from government (taxpayer) backing, and if the fund makes a profit keeps it. If it makes a loss the government ( the rest of us) take the fall. All this in an effort to get the credit system functioning.
.
Once again the rewards go to the people and institutions that created this very crisis. And the weird thing is, there is a vocal segment in this country that still insists on blaming the poor for our problems. These are the same people who clamored for Republican economic policies in the belief they would become wealthy like the people the policies were designed to benefit. They haven't yet learned their lesson and thanks to effective marketing I doubt they will ever learn to think for themselves.

1 comment:

idahorider said...

I worked my way to your blog through Up in Alaska. I was going to poke a little fun, because anyone that thinks frostbite is "old fashioned" obviously doesn't live in a cold climate, but after reading Lenders and Borrowers, I will give you no crap. Great stuff!