This article was written by Glenn Young. Glenn Young, MPA is a long term activist in the disabilities movement, and presently a historian. This article is being submitted by myself on behalf of the author
The world economy stands on the brink of collapse, the US government is about to step in with (when this is all over) up to a trillion dollars of "infusion" to rescue companies overloaded with debt and on the verge of collapse, with seemingly endless ripple effects of one big business going under and then another and then another...
But while I contemplate all the potential manifestations of the financial crisis what I keep seeing in my head is the scenes from the movie "Goodfellas" where the mob was "talked" into taking over a restaurant, then sold everything it bought "legally" on credit, out the back door for cash at 100% profit (since the mobsters had no risk and no intention of paying the creditors). And, when they couldn’t squeeze another nickel out of the joint, the mobsters torched the place and collected the insurance.
In my view, we are seeing the same thing happening right now with this financial crisis: the "mobsters" took over the mortgage industry in America, made any and every loan they could, with every crazy loan gimmick they could think of, often not requiring any security, and took the profit in the "lending fee" in "selling" the mortgage to the banking industry and passing the risk on to the government.
They could make any loan, because, like the mobsters in "Goodfellas," they had no intention of keeping the load or taking any risk for themselves, and now that they’ve taken every nickel they could, they have "torched" the place. And like in the movie, the "insurance" will pay off again. And like in the movie, almost everyone gets screwed except the gangsters. And, again like in the movie, they were asked into the deal.
How were they asked in? Government wanted more revenue through more money flowing via credit. In order to make this happen, the government loosened the controls on the credit industries and by doing this allowed the "old school" gangsters to come back into the field, with little or no controls ... The government asked the mobsters to help them run the restaurant so the government could make more money.
The truth is that none of this chaos could have taken place if the regulations and oversight that had been in place to control the mortgage industry had not been removed by the "deregulators" in the Government over the last 20 years or so. Just as the gangsters controlled the local cops and judges, the modern gangsters of the mortgage industry bought influence with Congress and the President, and definitely got their money’s worth.
OK, now wait a minute, am I comparing the "respectable" industry of mortgages to gambling? Absolutely, yes. In fact I’m just going along with what Eddie Murphy said in the classic movie "Trading Places" -- when talking to the Duke Brothers commodity exchangers, he said "you all are a bunch of bookies." I would expand that to say, that the mortgage industry as well as the credit card people are really more like the old fashioned section of "organized crime" referred to as "loan sharks." They are very successful and wealthy loan sharks, and legal , but they operate under the same general principles as the old local thug who’d break your knees if the payments were late. But these modern loan sharks don’t have to break anything: they just take your home.
For a long time in the US, access to money was deliberately tightly controlled by banks, which limited the access to the wealthy with "good collateral." Therefore, when the "need" for money arose, the only source for most people was the organized crime "alternative" to the bank, the loan shark And since there was little competition to the loan shark other then the pawn broker, they could and did provide loans to people in need with high interest rates
More recently, the state realized that there were revenues to be made in competing with the loan shark in providing money to people (as well as great benefit to the state through the expansion of sales with the use of credit, which also led to more state revenue through sales taxes, etc.) Therefore, with the help of the state, we have created a massive "sin-based" credit system, where almost everyone today has access to a state supported and state-promoted instant loan shark in their pocket, the credit card. And people get endless solicitation to use more "sin" though the almost daily offers for new cards in their mail or on TV. And despite the come-on rates offered, credit card companies are actually charging rates that would often make the old loan shark blush. Some cards companies are charging as much as 30% interest on cash advances.
People don’t talk about VISA or Master Card as a competition with organized crime. But this credit card version of loan sharking is just that; a "legal" and "protected" and "regulated" form of loan sharking. The credit card industry, with its great profits and revenues for governments, has pretty much put the old "loan shark" out of business. And this legal version of loan sharking operates on all levels including the "money stores" that cash checks for 15-30% fees, and mortgage companies that get people into the "gimmick loans." But, at least this competition to organized crime had regulations and controls and government oversight to offer some protection to the borrower and the lender; That is, until recently.
Never mind the change in the bankruptcy laws, which have made it much easier for credit card companies to legally, but metaphorically, "whack" people, with the regulations and regulators all but gone. The mega mortgage company Countrywide became perhaps one of the biggest organized loan sharking ventures in history, and all legal. In the credit industry, and the home loan industry, the regulators were mostly gone, and the old ways of the "organize crime" syndicates with no rules and controls except to take what they want, returned on scales unimaginable by the likes of even Meyer Lansky or Bugsy Segal, And on this incredible scale and level, which we are now witnessing, is one of the greatest successes of "organized crime" ever. Through companies like Countrywide, the modern day gangsters have basically "hijacked" a good part of the world’s property and money. And like the gangsters in Goodfellas they could rip it off right in broad daylight with little fear of any interventions and now are getting the "insurance" company to "pay off" after they have "torched the building." This is Goodfellas on steroids, or worse.
Why should we pay for the "insurance fraud" these "loan sharks" are pulling on us? Because, in the words of the "Godfather," they are making us an offer we can’t refuse. We either pay them off, and let them off completely free, or watch the whole world crash into a depression far greater than the 1930’s, with all of its geopolitical ramifications.
Where are Elliot Ness and the Untouchables now that we need them again? What can we do, besides putting the regulations back in place? Get the bad guys for tax evasion? That seems puny, but at this point, I keep getting visions of so many gangster movies where the bad guys keep saying, "Forgettaboutit!"