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So when Congress gets back in September, I want to move quickly on things that will help the economy create jobs right now –- extending the payroll tax credit to put $1,000 in the pocket of the average worker - President Barrack Obama, Aug. 5, 2011

I must admit to being appalled when the Bush tax cuts were extended in full.  That was very frustrating for all of us.  But what was more disturbing to me was learning that President Obama was doubling down on supply-side theory by including a "temporary" payroll tax cut.  I had hoped for change.  (Insert the sound of GboGbo's heading slamming against the desk here.)

My critiques were as follows:

  • We've tried the supply-side / tax cut experiment for nearly a decade now and it has been a miserable failure at creating jobs.  There is no reason to believe that more tax cuts will change anything, in fact, we haven't seen any growth in job production since the FICA cuts were enacted.
  • An employer knows precisely what the demand/supply point is for a worker:  just look at the take home pay.  That is what a worker is willing to accept in return for performing a job.  If you cut taxes (payroll or income), then the worker has a bigger take home pay and the balance is disrupted.  Employers will either slow-ball the raise packages over time until inflation re-establishes the balance, or they will lay the worker off and rehire at a lower gross salary.  Real wages have been virtually flat since the Bush tax cuts were enacted
  • Tax cuts don't pay for themselves.  They simply exacerbate the debt problem.
  • Perhaps the most important problem is that "temporary" tax cuts seldom remain temporary.  Here we have the President himself calling for "temporary" tax cuts to be extended.  And given the hostage taking nature of the Norquist-driven Republican party there is no reason to believe they will ever expire.  The dedicated funding stream for Social Security has now been handed over to John Boehner and Mitch McConnell as a hostage and for virtually no economic gain.

Okay, I could just give up, or I can try to come up with alternative policies.  So what's an alternative?

How about re-establishing the Federal Usury Law?  For those of you too old to recall the late 70's, you are forgiven for the blank looks on your faces.  It's not a word that ordinary folks throw around much.

Usury is the act of loaning money while charging interest.  Prohibitions against usury date to biblical times, and laws against usury or controlling it have existed throughout the ages and trace their provenance from the Bible, Torah, and Koran.

The U.S. had a Federal Usury Law that capped the maximum interest that could be charged on loans, but this was repealed at the very end of the Carter administration during a time of out of control inflation.  That inflationary period is long over, but we never reinstated the law.  Today we are surrounded by payday loan shops, car title loan swindlers and outrageous credit card rates and fees.  The American middle class has been parasitized by practices that used to exist only in the shadowy world of the mafia.  Why not reestablish the Federal Usury Law and cap interest rates like before?

Why would capping interest rates be better than the FICA tax cut?  Well, a Federal Usury Law would:

  • Help both workers and the unemployed.  A line of credit can be a lifeline to the unemployed, and today's Mafia-like interest rates are cruel beyond reason.
  • Put more money in people's pockets than a payroll tax cut.  Household credit/debit card statistics indicate that Americans would see far more benefit from a Usury law than a FICA tax cut.  Add in the benefits from taming payday loans impact is much greater.
  • Help small businesses since they use credit cards too.
  • Not decrease Federal revenues.
  • Not put the Social Security funding stream at risk.
  • Stop shifting wealth from the lower and middle classes to the banksters.
  • Take us back to bedrock American principles.
  • Allow the Democrats to shift to a populist footing that would be a political win-win. (If they are willing to buck their corporate overlords!).
  • Help Obama establish Sharia Law!  (Yes, Sharia Law includes usury provisions, so you just know this will be a line of attack from the wacky right.)

If you have alternative ideas, let's hear them.  There just has to be a better way.

4:11 PM PT: Just wanted to say a quick thanks for the rescue!  Also, I've noticed that the poll has been trending towards higher percentages for "Reestablishing a Federal Usury Law" all day long.

Originally posted to GboGbo on Fri Aug 19, 2011 at 08:11 AM PDT.

Also republished by Community Spotlight.


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Comment Preferences

  •  Amazing (5+ / 0-)

    Amazing that those Xtian Dominionists haven't picked up on this line of thinking.

    Oh, wait...

    •  it makes darn good sense (4+ / 0-)

      there's  your answer

      It's not a fake orgasm; it's a real yawn.

      by sayitaintso on Fri Aug 19, 2011 at 08:25:44 AM PDT

      [ Parent ]

    •  They are all about usury. They are using all of (10+ / 0-)

      us and the Federal government to push their ideology.  There was never a faith-based initiative in this country until George Bush started one, and Obama keeps it going.

      The Bible has laws regarding usury, that is why the Jews did all the lending for centuries and were roundly hated for it.  Sharia Law is an extention of then existing rules.

      States had usury laws, too.  I lived in Washington and we had a 12% cap on loans.  In order to break that cap, the big money people simply refused to loan money in our state and shifted to stated with higher caps.  Within a few years the whole system blew up, state and Federal which was the plan all along.

      The banks and credit card companies put the loan sharks out of business, or more accurately the loan sharks bought the banks and went legit.  

    •  more likely to forbid usury against fundies only (3+ / 0-)
      Recommended by:
      Amber6541, DRo, PrahaPartizan

      The biblical passages against interest come from the Old Testament, but many Christian fundamentalists (especially Christian Reconstructionists and dominionists) believe that these Bronze Age laws followed by Jews are no less binding on 21st Century Christians.  The Bible forbade Jews to charge interest on other Jews (Lev. 25:37), but allowed interest to be charged against Gentiles (Deut. 23:21).  The Bible forbade Jews to demand repayment from Jews (Ex. 22:24), but not from Gentiles (Deut. 15:3).

      Dominionists would likely argue along a similar line: that laws against interest are only meant to protect dominionist Christians, who would be free to not only charge interest to non-Christians but to be frankly exploitative about it on the grounds that "the wealth of the wicked is stored up for the righteous".  :

      •  I remember when folks knew the (0+ / 0-)

        bible admonition "neither a borrower nor lender be."  

        Sabbatical years and Jubilee years freed slaves and forgave loans, no matter their faith.  Thus no lifelong debt slaves.

        Theory includes that you must have skin in the game to put money in a business --  makes you more likely to not make stupid loans which you expect to fail.  

        De fund + de bunk = de EXIT--->>>>>

        by Neon Mama on Fri Aug 19, 2011 at 05:44:42 PM PDT

        [ Parent ]

        •  Isn't that Polonius? (4+ / 0-)
          Recommended by:
          Neon Mama, Kurt Sperry, Zydekos, jhop7

          Okay, the Government says you MUST abort your child. NOW do you get it?

          by Catskill Julie on Fri Aug 19, 2011 at 06:43:16 PM PDT

          [ Parent ]

          •  Once again my mom's misquotes (1+ / 0-)
            Recommended by:

            from my childhood -- led me slightly astray.

            The form of wording I used is indeed attributed to Shakespeare,another of her favorite pithy quote sources.

            The background concept came from Bible admonitions against charging interest.  

            Thanks to you and google, I stand corrected.  Thanks.

            At least I know that only getting precisely one pound of flesh, as per contract, is Merchant of Venice rather than biblical.   The Bard had an obvious dislike of moneylenders.

            At almost seventy I should be glad I don't have oldtimers or Alzheimers yet.  

            De fund + de bunk = de EXIT--->>>>>

            by Neon Mama on Fri Aug 19, 2011 at 08:06:52 PM PDT

            [ Parent ]

  •  Just make sure the new Usury law (13+ / 0-)

    covers payday loan sharks and auto title lenders.  (I'm really sick of seeing "And we even let you keep your car" Ads from Title lenders in Texas I could scream.  Those are secured loans, folks! I feel for the poor slobs who are victims of that unfairness.

    Actually, I'd like to see them closed down.  But I'd settle for stiff regulation.

    Note Gov. Rick Perry appointed to chair the Texas Finance Commission William White a "Senior Executive" of the state's largest payday loan and pawnshop chain CashAmerica.

    Be the change you want to see in the world. -Gandhi

    by DRo on Fri Aug 19, 2011 at 08:48:34 AM PDT

  •  Banning usury, as a public service would be (3+ / 0-)
    Recommended by:
    Odysseus, KenBee, TexasTom

    good and would garner some approval from the populace. As a stimulus, it needs to be examined.

    Once an outgoing President left the incoming President with a tiny recession. Since the new guy knew he didn't have any plan to fix the economy and would probably hurt it more, ht and his cronies pushed a borrowing based economy. Everybody was encouraged directly by exhortation and indirectly by keeping interest rates preposterously low to go borrow and spend.

    The two Presidents were Clinton and GW Bush. Does anybody recall how that worked out? IIRC, the "stimulus" wasn't all that viable.

    That, in its essence, is fascism--ownership of government by an individual, by a group, or by any other controlling private power. -- Franklin D. Roosevelt --

    by enhydra lutris on Fri Aug 19, 2011 at 02:09:51 PM PDT

    •  Agreed (2+ / 0-)
      Recommended by:
      DRo, enhydra lutris

      While there are many good reasons to support bringing back usury laws, economic stimulus now is not amongst those reasons.

      The problem is that with many households already overleveraged and lenders not anxious to make a lot of new loans right now, there wouldn't be a whole lot of new loans being originated at the lower interest rates.  I suspect that there would be legal issues with trying to make those laws retroactive to existing debt, which means it wouldn't be real helpful to those who are currently struggling to support their existing debt, either.

      On the other hand, there is much good to say about putting such laws in place now -- because that way, when households have brought down their existing debt and lenders are willing to lend again, new debt that is created will be on more reasonable terms.  That might help the next recovery be a stronger one than we've seen in a while -- even though it's not likely to make that recovery happen any sooner.

      Political Compass: -6.75, -3.08

      by TexasTom on Fri Aug 19, 2011 at 10:11:29 PM PDT

      [ Parent ]

  •  So, no interest or capped interest? (2+ / 0-)
    Recommended by:
    Odysseus, ManhattanMan

    Doesn't seem like you note that.

    You lost me here, though:

    A line of credit can be a lifeline to the unemployed

    Helping the unemployed get through a period of downtimes should be a societal benefit, not charity from private entities, which is what loaning money who cannot demonstrably pay it back is.

    "However, I don't think that critiquing one precludes praising the other" - The Troubador

    by GoGoGoEverton on Fri Aug 19, 2011 at 02:11:04 PM PDT

    •  I don't know the appropriate rate... (2+ / 0-)
      Recommended by:
      DRo, Catskill Julie

      I'm not enough of an historian or economist to know the appropriate rate.  I am not advocating zero interest, rather, I am advocating against today's rates, which are sometimes two orders of magnitude beyond what has been legally been charged in the past (some payday loans charge rates approaching 1000% per annum).

      •  Oh the payday loans are absolute usury abuse. (2+ / 0-)
        Recommended by:
        debedb, DRo

        The problem with understanding everything is that the "usury" word literally means how you defined it, but in practice is defined as interest rate abuse.

        "However, I don't think that critiquing one precludes praising the other" - The Troubador

        by GoGoGoEverton on Fri Aug 19, 2011 at 02:47:43 PM PDT

        [ Parent ]

        •  Not True... (0+ / 0-)

          Usury covers any interest regardless of the rate.

          That is why "Sharia" credit cards charge zero interest.  But, the way they make a profit is they actually buy the product from the store and resell it to the card holder at a higher price.

      •  Take a look at Muslim banking (2+ / 0-)
        Recommended by:
        Odysseus, DRo

        As Muslims have a strict no-usury policy (strict meaning NO lending for ANY profit) they have had to invent systems that allow them to essentially charge interest without calling it interest.

        Being interested in an end to usury as you are, my research led me to look at the Islamic banking system. Sharia law prohibits usury, as did Christian law until fairly recently. But bankers will be bankers, and so the Muslims have found all kinds of ways to cover the opportunity cost and risk of lending without calling it interest. Anyone looking to end unfair lending practices should take a look at the Islamic system and its unintended consequences.

        •  Makes me wonder if all this absurd outrage (0+ / 0-)

          about Sharia Law coming to the US isn't just a cynical ploy by the higher ups in the GOP apparatus to end run a possible usury law.  Certainly if it were proposed you can bet they would pull the Sharia card.

          I refuse to represent my political beliefs using numbers. It isn't accurate, nor is it helpful. But I'm around a -10 on both scales.

          by AoT on Fri Aug 19, 2011 at 03:21:52 PM PDT

          [ Parent ]

          •  They have an out either way. (0+ / 0-)

            If Moslems can get around Sharia, there's no reason why our loan sharks would fail.

            The anti-usury law would have to be written in such an air tight way that Republicans would cry that it was too long and too complicated.

        •  The lengths people will go to "fool" their own (1+ / 0-)
          Recommended by:

          religions. Makes me shake my head.

          Okay, the Government says you MUST abort your child. NOW do you get it?

          by Catskill Julie on Fri Aug 19, 2011 at 06:46:56 PM PDT

          [ Parent ]

        •  I should qualify that (0+ / 0-)

          That mention of unintended consequences made it seem like I was disrespecting the Islamic system. By and large, lending is more fair in that system than in ours. The fact that lenders have found ways around the technically absolute prohibition on lending for profit does not mean that charging exorbitant rates is going to be common place in a society that condemns it from a religious perspective.

    •  I don't see unemployed (1+ / 0-)
      Recommended by:

      as the main focus.  If you're unemployed you can't usually get new credit.  

      Usury should apply to all credit.  It did before banks started moving charters and getting states to eliminate them from their laws for the promise of "We'll move to be with you". Then they set about changing/eliminating additional banking laws that had held the system in check. The laws have had major changes in recent history, always to the benefit of banks.

      They also have won via technology.  Years ago a check took quite a journey with many many stops between where it (Paper)
      was written to get back to the writer's bank and then on to the writer's mailbox. Fast forward to today, it will hit the account in a nanosecond without moving the paper.

      Be the change you want to see in the world. -Gandhi

      by DRo on Fri Aug 19, 2011 at 02:36:16 PM PDT

      [ Parent ]

      •  Yeah but you mean the common definition (1+ / 0-)
        Recommended by:

        not the literal definition, right?

        And how fast checks clear has nothing to do with usury or interest rates....obviously you aren't in a financial place to be writing a particular check if you're counting on said check not to clear for x number of days.  

        "However, I don't think that critiquing one precludes praising the other" - The Troubador

        by GoGoGoEverton on Fri Aug 19, 2011 at 02:55:10 PM PDT

        [ Parent ]

        •  Justification for high interest = infrastructure. (2+ / 0-)
          Recommended by:
          DRo, debedb

          Paying people to schlep checks around, write all of those numbers into ledgers, etc, costs money.

          With technology, the costs are quite a bit less, but the savings are not passed on to consumers.  Businesses are real fond of their moats.

          -7.75 -4.67

          "Freedom's just another word for nothing left to lose."

          There are no Christians in foxholes.

          by Odysseus on Fri Aug 19, 2011 at 03:26:50 PM PDT

          [ Parent ]

        •  ?? (0+ / 0-)

          I'm not sure that I understand your question, 'not the literal definition, right?'  Did you mean for "usury"?-

          'And how fast checks clear has nothing to do with usury or interest rates.'

          Correct that usury has nothing to do with check clearing but it has everything to do with interest rates. Usury laws limit how much interest can be charged before it is considered usurious or unlawful. We used to have much stronger laws but they have been removed.

          'you aren't in a financial place to be writing a particular check if you're counting on said check not to clear for x number of days'

          Perhaps I shouldn't have brought check possessing up as it seems to be confusing here. (People use cards today mostly, anyway, not checks.)  I was making an additional little "banking" comment, as it is the banks that have become what many consider to be usurious.

          What I was trying to say is that both changes in laws and advances in technology have worked to favor banks over people.  That's why some of us call them Banksters. And we think we should bring back the old-fashioned usury laws instead of allowing them to charge exorbitant rates, hurting people.

          'There should be a law against that' is another way of thinking about it.

          I hope this helps. :0)

          Be the change you want to see in the world. -Gandhi

          by DRo on Fri Aug 19, 2011 at 05:07:36 PM PDT

          [ Parent ]

  •  Usury Laws (11+ / 0-)

    were a good and moral idea with a sound economic footing. High interest charges kill purchasing power and thus demand and contribute nothing productive to the economy. Usury caps would be stimulative and reduce a huge needless parasitic drag on economic activity.  

  •  I'm upset about extending the payroll tax (2+ / 0-)
    Recommended by:
    YucatanMan, Catskill Julie

    cuts.  We had tons of diaries about this.  I'm reading Bernie Sander's The Speech the words he said during his filibuster over extending the tax cuts. He says over and over this was a bad idea and that now it will not end because it will be called a tax increase.  It is the end of SS.  So if you aren't upset too then you are willing to give up SS.

    As for Usury Laws, well duh.  Interest is the big sucking sound you hear on our economy.  It should be criminal, it used to be criminal.  It was called loan sharking.  Now we admire and bow down to the financial criminals in our country and let them buy our political system.  Corruption runs deep.

    I am the fellow citizen of every being that thinks; my country is Truth. ~Alphonse de Lamartine, "Marseillaise of Peace," 1841

    by notdarkyet on Fri Aug 19, 2011 at 02:16:10 PM PDT

    •  I'm a few years from SS and willing (0+ / 0-)

      I'm willing to give up SS.  It was a bad idea back then and it is a bad idea today.

      I agree with you on the interest rates charged.  With the Fed Fund Rate at a historically low rate, credit rates should be much lower.  The current rates are obscene.  Although I don't mind my 3.5% home equity and my highest unsecured rate is 8.5%.   It is hard to believe people are paying 20 and 30 percent on unsecured credit.  Wow!

      •  You're in for a pie fight (1+ / 0-)
        Recommended by:

        from people who aren't as lucky as you, and people who know that there are people who aren't as lucky as you.

        If you took away my Social Security I would have nothing. I am too old and too disabled to work full-time, I have nowhere near enough savings to cannibalize, I have no prospects now or ever of any inheritance, and if you had your way you would leave me naked and starving in a ditch. Fuck that shit.

        If it's
        Not your body
        Then it's
        Not your choice
        AND it's
        None of your damn business!

        by TheOtherMaven on Fri Aug 19, 2011 at 11:36:48 PM PDT

        [ Parent ]

  •  Facts need work (4+ / 0-)

    The US didn't really have a federal usury law—or nothing that much affected credit cards. The courts had held for years that states could do what they wanted with interest rates and that one state couldn't prohibit its citizens from borrowing wherever they wished.

    This worked to the advantage of the cc companies when they realized they could set up in a no-interest-cap state. The advantage, so to speak, to consumers was that the banks were now willing to give cards to less creditworthy customers. They paid for that privilege with those higher interest rates.

    It is likely that the consequence of capping interest rates (if it could really be done) would be the tightening of credit and many fewer cards available to those lower down the income chain. So they will perforce have to get along with less convenience (e.g. not so much buying things online), higher prices (thrown back on local dealers with less competition),  and less stuff (much more limited credit lines; fewer consumer goods if they can't finance the purchases over time).

  •  usury (3+ / 0-)
    Recommended by:
    Odysseus, DRo, debedb

    I am a conservative tea-partier, but I also object to the temporary suspension of the FICA tax.  FICA pays for Social Security.  Its much like a pension contribution.  Eliminate the contribution and you eventually eliminate the pension.

    I suspect it was done because it hits almost everybody, even those who won't pay income taxes.  Half the population won't pay income taxes, so a reduction of income taxes wouldn't have as widespread an effect.   And of course whiney liberal types like yourself would complain that it was only a tax-break for the middle class.  Thus we end up with the crazy FICA reduction at a time when Social Security is looking a little wobbly.

    I also find common ground with you on the usury laws.  Predatory is an understatement, especially with regard to penalties.  I suspect at least a few bankruptcies resulted from otherwise conscientious borrowers feeling like turnabout was fair play.  If they are going to screw me, then I will just walk away from the whole debt.  I also suspect its often a case of lenders allowing outrageous charges to double or triple the debt so that when they settle in bankruptcy their share of the settle ment will be larger. can't repeal economics.  When you limit interest you will also limit the availability of credit to the poorest and the riskiest.  It will keep them from getting financially raped, but it will also force them to live austerely.  Perhaps that is a good thing, but I suspect when it happens this blogger will complain about redlining and discrimination.

    Oh, I apologize for calling you whiney.  Its a reflex thing.  It just seems to naturally want to precede the word liberal.

    •  Bankruptcy effects not what you think. (4+ / 0-)
      Recommended by:
      DRo, Catskill Julie, Nailbanger, jhop7

      Wealthy more likely to walk away from mortgage

      More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

      By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

      Credit is what credit is, but delinquencies do not tell a story that supports whiny banks when they say that poor people are deadbeats.

      -7.75 -4.67

      "Freedom's just another word for nothing left to lose."

      There are no Christians in foxholes.

      by Odysseus on Fri Aug 19, 2011 at 03:32:11 PM PDT

      [ Parent ]

    •  I agree with you on the FICA..... (0+ / 0-)

      It's a crazy way to find stimulus.

      Be the change you want to see in the world. -Gandhi

      by DRo on Fri Aug 19, 2011 at 05:40:19 PM PDT

      [ Parent ]

  •  Excellent idea!!!!!~! (0+ / 0-)

    Remember the Pelicans

    by Irons33 on Fri Aug 19, 2011 at 02:57:21 PM PDT

  •  Another possible answer (0+ / 0-)

    One of the main sources of government debt is that all deficit spending is paid for by money borrowed at interest.  While I'm certainly not a deficit hawk, it does make sense that the more the gov't has to borrow, the more it's going to have to pay back, and when you add the Miracle of Compound Interest...

    So why not bring back the Greenback?  Have the government pay its bills with money that isn't accruing interest.

    Interest represents risk.  There is no risk in loaning money to the United States Government, because in the event of an actual total default, getting your money back will be the least of your problems... so why are banks being gifted with our future taxes for loaning money to the government when we could use the solution used by the First Republican™?

    "... willingness to take a moral stand, to accept risk and ridicule, [is] the cost of the moral life." -- Chris Hedges

    by eponymouse on Fri Aug 19, 2011 at 02:57:35 PM PDT

  •  Usury laws are a Really Bad Idea. (0+ / 0-)

    If you set a maximum interest rate, you will make it impossible for poor people to get credit.

    Poor people are bad credit risks. The only reason people loan them money is because they can charge a high interest rate.

    I am not one of those Free Market Fundamentalists who thinks that "the market" compensates for everything (or even most things). But credit markets are pretty competitive. If you are getting charged 18% and you are actually a lower-risk, there will be another bank to offer you 15%.

    Credit card companies aren't particularly profitable. If you would like to make unsecured loans to total strangers feel free to do so. You will find that it is not as easy as you think.

    •  Then they need to be implemented along with (2+ / 0-)
      Recommended by:
      DRo, Zaphkiel

      programs to insure a solid safety net for the poor and credit reform laws to eliminate undue discrimination based on credit scores.

      But overall, Usury laws are beneficial to society by eliminating the excessive drain going to the financial sector only, which reduces demand.

      "Credit card companies are not particularly profitable?"  
      Really?  Even with 30% interest rates on a 0% Fed Rate?  Big Elaine Benes "Get out!" to you!  :-)

      It is actually very hard to get lower rates as banks are merging and the apparent similarity in rates lends the impression they are colluding (or rate matching) to maintain their incomes at a high level.  Plus the fees are through the roof on top of interest rates.

      I've gone to paying cash.  Just avoid credit cards, period.  But Usury Laws are a great idea. Along with all sorts of other reforms.

      Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better. -- Harry S Truman

      by YucatanMan on Fri Aug 19, 2011 at 03:25:07 PM PDT

      [ Parent ]

      •  What is wrong with... (0+ / 0-)

        ..."discrimination" based on credit scores?

        When I judge you based on you FICO, I am not judging your race, sex, or religion. I am not judging who you are. I am judging what you did.

        Did you pay on time? Or 30 days late? Or did you not pay at all?

        If we cannot judge people on their actions, on what basis should we make decisions?

        •  It's about predatory lending... (2+ / 0-)
          Recommended by:
          DRo, YucatanMan

          If the person taking the credit is not savy, then the practices are abusive and should be regulated.

        •  That's not all that goes into a bad score. (0+ / 0-)

          Example:  History = length of time any credit has been granted. Discriminates against the young.

          And I didn't say "all," I said, "undue" discrimination.

          Like using credit scores for employment, for insurance or other reasons.

          Also, people who have a medical emergency can have their credit destroyed by that one event.  That needs to be avoided. They could have paid well all their lives, but gone bankrupt due to an accident or illness.

          You are not judging ONLY by what the person DID, you are also judging by age - yes you are! - and you are judging by race - yes you are! (Why is White unemployment only 8%, but black unemployment 25%?) - and you are judging by the Things In Life that Happen.  NOT just by what the person does. The person does not control the bus that hits them while standing on the sidewalk.  The person does not control the tornado that leaves them homeless or destroys their job and leave them unemployed.

          If you really believe that FICO is the person and only the person, then you may be missing a lot of information about how life works.  You're leaving out a lot of life that is far beyond a person's control, yet affects their credit, their ability to open bank accounts, their ability to be employed, their ability to recover from disasters not of their making.

          FICO is not much more than .... rubbish, really.   Why did all those people with excellent FICO scores end up underwater on their Mortgages?  Wow... a flaw in the system: their net worth vanished overnight.

          Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better. -- Harry S Truman

          by YucatanMan on Fri Aug 19, 2011 at 09:38:56 PM PDT

          [ Parent ]

          •  It also discriminates VICIOUSLY against (2+ / 0-)
            Recommended by:
            DRo, YucatanMan

            the best risks of all: people who do not use credit. If you have no record in the system of having borrowed and repaid, you have no credit rating and are a "worse risk" than the most egregious deadbeat (who at least HAS a credit rating, even if it sucks).

            This. is. CRAZY.

            If it's
            Not your body
            Then it's
            Not your choice
            AND it's
            None of your damn business!

            by TheOtherMaven on Fri Aug 19, 2011 at 11:41:57 PM PDT

            [ Parent ]

            •  Then please answer my question... (0+ / 0-)
              "If we cannot judge people on their actions, on what basis should we make decisions?"

              You don't know me. All you have is my address, phone number, and photo ID. I claim to have a job. Will you loan me $10,000 at 8% interest? Pretty please?

              I didn't think so.

              Credit reports are a great advance. People forget that credit decisions used to be made by humans -- humans full of prejudices, stereotypes and muddy thinking.

              That was why, for 100 years, only White Males could get bank loans. It was all done on Gut Feelings, and "Joe seems like a Good Guy, he's solid. His uncle banks here.".

              Credit reporting removes a lot of subjective BS from the system. This has made those who benefit from subjective BS unhappy. I don't shed any tears for them.

              •  Oh bullshit (1+ / 0-)
                Recommended by:

                Thanks to the wonders of modern technology, you can find out anything you need to know about ANYONE in a very short time at a nominal cost. You can find out that this person who has always paid cash whenever possible is a retired union electrician with a good pension, owns a condo, has two or three bank accounts, has never been hassled by creditors (because he has none), and is basically a steady reliable person.

                But they'd rather believe their bogus fairytale calculations and loan to someone who is juggling a case full of financial eggs and has already broken some of them.

                If it's
                Not your body
                Then it's
                Not your choice
                AND it's
                None of your damn business!

                by TheOtherMaven on Sat Aug 20, 2011 at 10:12:40 AM PDT

                [ Parent ]

          •  I use credit reports... (0+ / 0-)

   screen tenants.

            (Credit "reports", not "scores". The report shows what the person actually did.)

            True -- many things are beyond your control. You got sick, your boss is racist, you were born in 1988 instead of 1958. It is not your fault. But you are still a bad risk because of these things.

            Why must I eat your risk?

            Remember it is not a moral judgement. Because you had high medical bills does not mean you are a bad person. It just means that you now have less money in the bank to pay me my rent. And my family needs that rent.

            We need universal healthcare. We need to hunt down the racists. We need more opportunities for young people. Credit reports document the damage we suffer from these problems.

            Attacking FICO is just shooting the messenger.

            •  It is a false messenger. And you truly write (0+ / 0-)

              from the perspective of someone who has plenty of income.

              Yes, it is a moral judgement when you do not let a person rent a place, regardless of what happened to them 5 years ago.  It is, rather, immoral.

              Your "use" of these reports is a judgement call on your part. And perhaps you never have a problem because you toss the rejects aside. But think about it for a freaking moment:

              What are those people to do?  Not have a place to live? How do they escape a past unemployment problem or medical problem.

              You clearly admit that credit reports document the problems suffered by people EXTERNAL to their own behavior, yet you go ahead and judge them anyway.  That is truly disgusting.

              You got sick, your boss is racist, you were born in 1988 instead of 1958. It is not your fault. But you are still a bad risk because of these things.

              Are you? Are you a bad risk because a person got sick? Because a person's boss was racist?  Or were you simply SCREWED by external events?   Is it THAT person's responsibility to avoid racist bosses?  To avoid bacteria?  What a crazy argument.

              In fact, the "risk" is not disclosed by that at all.   OH, someone is AT Risk?  Because they are Black?  Because they have Cancer or HIV?  Nice.  St. Peter's swinging the gates open for that one.

              The Cognitive Dissonance is very strong here.

              Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better. -- Harry S Truman

              by YucatanMan on Sat Aug 20, 2011 at 05:25:16 PM PDT

              [ Parent ]

    •  Credit Card Charge Off rates (1+ / 0-)
      Recommended by:

      Federal Reserve: Charge off Rates

      Yes, unsecured loans carry significant risk.  Charge off rates are debt forgiven as uncollectible.  (Usually sold to collection agencies at a discount)  For 2H09 and 1H10, more than 10% of CC debt was being charged off.

      Take that 17% CC rate and dump 10%, and you wind up with 7% profit...  Not exactly the road to riches.  Better than the 1% that your bank CDs are paying, but that's why the Banks take the risk.

      -7.75 -4.67

      "Freedom's just another word for nothing left to lose."

      There are no Christians in foxholes.

      by Odysseus on Fri Aug 19, 2011 at 03:39:09 PM PDT

      [ Parent ]

      •  Are you kidding? @ 7% initial investment (2+ / 0-)
        Recommended by:
        DRo, jhop7

        is doubled in less than 10 years. That is the superhighway to riches, paved in gold.

        We have been very successfully conditioned to accept these absurd (and unsustainable) notions of what a  "good" return is. All of the modern world was built on much smaller ROI.

        "Those who can make you believe absurdities can make you commit atrocities." - Voltaire

        by Greyhound on Fri Aug 19, 2011 at 03:56:51 PM PDT

        [ Parent ]

        •  You don't actually get the 7% (1+ / 0-)
          Recommended by:

          You must pay to run your business, for computer systems, etc.

          Like others in this Diary have said, if you think it's such a good deal, start making unsecured loans to total strangers.

          Anybody can do it.

          Let me know how it works out for you...

          •  That's not what Odysseus or I said, but then you (1+ / 0-)
            Recommended by:

            already know that. Usury is not in any way necessary to the function of currency within an economy. It is only necessary to allow a tiny minority to live by taking from others while producing nothing.

            "Those who can make you believe absurdities can make you commit atrocities." - Voltaire

            by Greyhound on Fri Aug 19, 2011 at 07:41:51 PM PDT

            [ Parent ]

            •  Nobody is "taking" anything. (0+ / 0-)

              This is not healthcare, food, housing, or utility bills.  These are not the necessities of life.

              Get a grip, this is f'n consumer credit. It is money used to buy crap you don't need made by Chinese who can't vote. If you do not want to give money to the "tiny minority" then don't get a Visa card. Just don't.

              If folks actually need a credit card to pay for necessities, that only shows that we have systematic economic problems. These problems are bad, but it is not the bank's job to solve them.

              Raise corporate taxes. Treat cap gains as ordinary income. Cut corporate welfare. Have a big jobs program. There are many solutions that would work.  But capping interest rates is not one of them.

              •  I'm guessing that you make your living (0+ / 0-)

                from within the system of usury?

                Banks are not like any other business. They are granted the very special license by the state to create money from nothing thereby ensuring sufficient quantities of currency to keep the economy working. However, there is no mandate that this unique industry must be financed by means of usury and that is where the system can be fixed.

                "Those who can make you believe absurdities can make you commit atrocities." - Voltaire

                by Greyhound on Sat Aug 20, 2011 at 09:03:02 PM PDT

                [ Parent ]

          •  You must remember (0+ / 0-)

            You must remember these are DK posts and normally originate from an irrational thought pattern.  The post didn't even know that usury was a State(s) matter.

            I often find that posts on DK are like my students homework.  They read something someplace and extrapolate on that idea into unrelated areas.

            Yep, let him give unsecured loans to strangers and see how long it is until he has empty pockets.

          •  I have to build buildings to get that kind (2+ / 0-)
            Recommended by:
            DRo, jhop7

            of return, with huge risk and a hell of a lot of work.   Much more work that pushing 1s and 0s around

    •  "Credit card companies aren't particularly... (3+ / 0-)
      Recommended by:
      DRo, jhop7, Greyhound

      "Credit card companies aren't particularly profitable"

      LULZ... what color is the sky in your world?

  •  While it is not a revenue source (0+ / 0-)

    creating some kind of Consumer Finance Protection Bureau, or something like that, could at least make people aware of how bad the rates are on some credit cards and payday loans, and help get rid of hidden fees...

    "All things are not equally true. It is time to face reality." -Al Gore

    by Geek of all trades on Fri Aug 19, 2011 at 03:54:25 PM PDT

  •  I'm for both but (1+ / 0-)
    Recommended by:

    Been a while since I visited and I see that misinformation is still the venue.

    I think usury laws should be brought back and the FICA cuts remain.

    Your little rant about usury "usury is the act of loaning money while charging interest. "  Maybe 2000 years ago but the modern usury laws meant you could not charge an interest rate higher than the maximum allowed in a given State.  

    Your link attached to had a Federal Usury Law seems to be a link to deregulation of laws.  The only thing in your link was about mortgage usury for Section 527 housing.  Didn't see a thing about Federal usury law on consumer loans that existed before 1980.

    If you want the Usury law of each State -

    In Marquette vs. First Omaha Service Corp., the Supreme Court ruled that a national bank could charge the highest interest rate allowed in their home state to customers living anywhere in the United States, including states with restrictive interest caps.

    "It's whatever is agreed to in the contract," says Michael Donovan, a consumer attorney and partner at Donovan Searles in Philadelphia.

    "They can export rates to other states and override state law limits."

    There are still usury laws but most major credit card issuers are based in states without usury laws and without interest rate caps on credit cards.  

    Normal DK confusion is still on the menu at the DK.

    But I do agree that State Usury laws need to have teeth but the courts must reverse the Marquette decision first.

  •  Absolutely. n/t (0+ / 0-)

    Barack Obama: So morally bankrupt that he thinks people who tortured other people to death should get a pass. Likes to prosecute whistleblowers, though.

    by expatjourno on Sun Aug 21, 2011 at 10:24:26 AM PDT

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