By Peter Galuszka

Regulation is the perpetual bug-a-boo among Baconauts, Boomergeddons and Blowhards of many ilk. Drop back to 2008 when our economy nearly crashed and the banking system all but collapsed. These folk will blame Fannie Mae and Freddie
Mac for giving out home mortgages to unqualified “under class” types.

They conveniently forget that a lot of it also had to do with the shameless lack of regulation and oversight into the hedge fund market  and its mysterious Credit Default Swaps and Collateralized Debt Obligations and  loaded banks up with billions in debt and no one knew why. The rocket  scientists who created all of this couldn’t explain it.

So, we end up with Dodd-Frank which really doesn’t do much  other than wrist-slap to the powerful financial industry that hands out tons of  dough to political candidates.

Now, four years later, there’s still plenty of evidence why  the money bags people need watching by people with big sticks. Consider:

  • Feel ripped off when you use your credit card, although the technology freaks (who dot this Blog like summer mosquitos) insist that it is the only way to go? Visa, Mastercard and major banks have agreed to pay $6 billion to settle a long-running lawsuit that accused them of colluding to set fees. That’s an anti-trust matter. It means that retailers who allow customers to swipe cards have no choice and no “free market” when they pay  fees. They tend to be stuck at about 3.75 percent, costing them about one  dollar on every $100 worth of sales. Excuse me, did I say free market? That’s where you get to choose among competing vendors, unless, of course, they  conspire to keep their fees at an artificially high level. Then it is not free  market, it is robbery.
  • While we’re muttering about those dark-skinned people not paying on their mortgages they did not deserve, consider some of the  recent bank settlements. Wells Fargo, which took over the venerable but then  troubled Wachovia, has announced it will pay $175 million, following SunTrust  ($21 million) and Countrywide ($335 million) to make amends with  African-Americans and Latinos who were ripped off when they got mortgages. In  all three cases, the mortgage companies charged minority borrowers more in  interest rates costing them thousands more for their mortgages. This wasn’t exactly Fannie Mae. The borrowers were all well qualified. It was out-and-out racism, something the Baconauts don’t like hearing and won’t be able to  deflect.
  • There’s been funny business in London over how the LIBOR (London Inter Offered Bank Rate) has been set. It’s not just a U.K., LIBOR is a very important stick of data. My second mortgage is pegged to it.
  • And while we’re at it, let’s not forget that a  year ago, Bank of America, which bought Countrywide and Merrill Lynch, agreed to pay $8.5 billion in investors who got screwed when they got dishonest  information about the bad real estate loans they were stuck with.

Can anyone spell “F R E E  M A R K E T?” How about you, Jim?

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  1. Wow, Peter, you whipped that straw man’s butt. You whacked him right upside the head so hard that all his straw brains came spilling out!

    Go back and read Adam Smith, one of whose most famous quotes goes like this: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

    Yes, unfettered capitalism is vulnerable to monopoly. That’s why we have anti-trust laws. You don’t hear conservatives or free marketers complaining about this lawsuit. If the credit card companies colluded to engage in monopolistic pricing, they deserve what’s coming to them.

    Regarding Countryside, that company was a classic rent seeker. I’m surprised you didn’t cite the article from a couple of weeks ago about how the company handed out cheap mortgages to Congressmen and Capital Hill staffers like candy. Sounds like it was a borderline criminal enterprise. Believe it or not, though, conservatives do not defend fraud. You see, Peter, conservatives and free marketeers believe that one of the few legitimate powers exercised by government is to administer laws, including commercial laws that protect people from getting ripped off. Funny thing, though, I don’t recall anyone at Countryside getting charged or convicted of anything. I wonder why Angelo Mozilo never got the Bernie Ebbers or Kenneth Lay treatment….. Could it be he had the goods on too many powerful politicians… like Chris Dodd, one of his cheap-mortgage beneficiaries? Just asking.

    As for the Wachovia and SunTrust legal settlements, I don’t know enough to comment, so I shall mostly refrain. I’ll observe only that there’s probably more to the story than recounted by the press — there almost always is. It wouldn’t be the first time a corporation was shaken down by race hustlers. That’s how Jesse Jackson made his living. Let me repeat, however, I do NOT know enough about this case to suggest that that was the case in this instance. I only express my skepticism that we’re hearing the full story.

  2. Peter Galuszka Avatar
    Peter Galuszka

    You express “skepticism” you are hearing the full story? About Wachovia (Wells Fargo) and Suntrust? If you want, I can email you the U.S. DOJ’s court record . How much skepticism can there be? SunTrust was tagged on this by the Fed and entered into an agreement. End of story. Ditto the others.

    This does not need some kind of faux magnanimous skepticism. Ain’t nothing to be skeptical about there, Big Bacon! Kinda nutsy on your part.

  3. larryg Avatar

    U.S. Is Building Criminal Cases in Rate-Fixing

    as each domino topples over, the “deniers” fall back and establish a new “denial” type position.

    if the facts array against them, then they’ll accuse those of reporting or enforcing of “partisan” behavior.

    what’s coming out now is proving that the free market does not necessarily produce the right/best outcomes if the participants are crooked and dishonest.

    the essential question is – is it govt’s job to attack crooked and dishonest behavior in the financial sector ?

    we have some arguing that the govt should not be involving itself in the financial sectors because: A – the financial sector will always outsmart the regulators, B. – the free market is ‘self-righting’ and C. it’s none of the dang Govt’s business to start with.

    If someone walked up and took your wallet and took money out of – even if they gave it back to you with some money left in it – you’d call the cops.

    but if your banker or broker or other person casting themselves as “your” banker, broker or adviser does that to you, it’s said to be your fault for not paying closer attention or some other reason why you are at fault and the folks who have fleeced you are not.

    This seems to be the basic philosophy of the GOP these days. Throw the petty thief in jail…..but blame the victim if it’s theft by bankers.

  4. […] Zeitgeist watch: “LIBOR is a very important stick of data. My second mortgage is pegged to it. Can anyone spell “F R E E M A R K E T?” A […]

  5. Richard Avatar

    Some of us (Jim) are missing the point, and talking at cross purposes.

    The financial system blew up in 2008, and nearly took us all down with it, and yet the free-marketeers and their political cronies want things to go back to the way they were. Dodd Frank is characterized not as the safety brake/regulation on overheated speculation by banks and other financial firms that perhaps will prevent it from happening again, but as intrusive government that will make it harder for job-creators and entrepeneurs to create jobs.

    For an example of how all this worked pre-2008 I recommend this article from Bloomberg on our benevolent job-creators at Bain Capital.

    It explains how a soon-to-be Presidential nominee amassed a fortune of $250 million (probably much more if trust funds and spouse’s accounts were disclosed), including a $20 to $100 million (big range !!) IRA (the absolute maximum amount he could have contributed was about $2 million) in a roughly 15 (to 18?)-year business career.

    On the IRA, as one whose career has been spent in pension plans and retirement issues, it would be interesting to see how this was done, but it’s a secret.

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