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View Diary: Obama vs. Usury?  Why Not? (Updated) (251 comments)

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  •  how is this different? (4+ / 0-)

    The Business Week article says, essentially, that home and car loans are 'structured' as leases and that credit cards charge service fees to make up for the interest they aren't charging.  It even notes that some Islamic scholars disapprove, because they are charging interest in everything but name.

    So, it's a loan, but everyone involved just closes their eyes and pretends really hard that it's not? (ie, how it is substantively different from a loan?)  Why is it ok to charge rent for borrowing most things (apartments, cars), but not money?  This isn't a snark--I'm completely serious when I ask this.  

    •  Overall Costs to the Home Buyer are Less. (0+ / 0-)

      Here is how a Sharia compliant home acquisition program or a replacement plan is structured in California.

      The bank becomes an equity share partner, whom you buy out. The bank's profits are profit-shared with depositors. For example, a one year FDIC insured CD earns anywhere from 3 to 4 percent per year, depending on the bank's earnings.

      •  Maybe I just don't get it... (3+ / 0-)
        Recommended by:
        Sparhawk, Pluto, Justanothernyer

        Ok, so if I understand the linked page properly, there are two options:

        1. Tell the bank which house you want to buy, they buy it, then sell it to you for a higher price and let you make installment payments.
        1. Tell the bank which house you want to buy, they buy it, then rent it to you at an above-market price, and give you the house after you've made enough payments.

        I really don't see how the first option is in any way different from a traditional, fixed-rate mortgage.  Sure, there are some financial shenanigans regarding how the title to the property is processed, but, in my view, that doesn't change what's actually going on.

        The second option doesn't feel like an honest rental arrangement--the "landlord" is buying the property the tenant chooses, and gives the property to the tenant when the lease expires.  The terms aren't given on the linked page, but I wonder if the tenant has the option of walking away from the rental after just a few years, the way a tenant normally could.

        In both cases, the bank is charging you money to borrow money.  Why can't we just call it what it is, interest?  If paying money to borrow money is objectionable, I just don't see how this helps.  

        •  It's Elaborate, but Highly Ethical. (1+ / 0-)
          Recommended by:
          remingtonsteele

          I don't wish to get into too many details here, but the underlying principle is "kindness" and the arangements are "forgiven" the loans are non-recourse, and actually, there are three ways to buy and all of them allow you ownership interest and profits anytime you wish to sell.

          The current global crisis has brought Islamic finance forward, as it is widely considered the safest form of banking. You will find recent discussions in Forbes, Business Week, and The Economist. Last week, the Vatican Came Out in Support of Islamic Finance as a new global standard. Harvard Law School's Islamic Finance Project has helped to move it forward, along with a number of think tanks devoted to the model.

          Islamic finance is offered throughout the world. I ran into my first experience at HSBC in Mexico. The link I gave you is to one particular US bank, however, most large banks in the US offer Sharia Mortgages, if you ask. They are used by ordinary, non-muslim consumers. In the US, I do business with Guidance Residential.

          In banking circles in the US and throughout the world, ethical banking is on the rise. Such banks do not engage in the type of speculation that just caused the global depression that we are now experiencing. It is impossible.

          While we fret about regulation in Washington (as if we had the moral compass to regulate anything) -- Islamic banking will surge to the global standard. It is designed to protect the least among us. And that is a very good thing.

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