Tag: predatory lenders

The myth of a strong economy heralded by the Bush administration unraveled in a series of Wall Street financial earthquakes. $11 trillion of America's net worth dissolved; 8.5 million jobs were lost in the resulting recession. People's homes weren't worth what they paid for them. College graduates moved home.

"The real story of this financial crisis is not so much whether the bailout was the right thing or the wrong thing to do. The real question is: How did it come to be?" - Phil Angelides, Chair, Financial Crisis Inquiry Committee

This beginning of a PBS Frontline documentary depicts the dramatic succession of events that led to and through the financial cataclysm that altered the economic landscape. In the first installment, events leading up to the 2008 crisis are brought into focus. Some of the key players are introduced. Most important is the development of a financial layman's understanding of the complex machinations involved.

It didn't begin with credit default obligations (CDOs) but that is as good a place as any to start explaining this mess. A group of innovators at JP Morgan developed the concept of a derivative to trade loan risks in the early 1990s. That is where the Frontline documentary begins the journey through a sorry tale of a failed economic credo and its victims.  

The Treasury Department is embarking on an initiative designed to guide low and moderate income households toward a more informed financial future. Some 30 million households are either unbanked or underbanked. While a lofty goal, there is no certainty the benefits will outweigh the potential deleterious unintended financial consequences.

There are an estimated 9 million households without bank accounts. Another 21 million households are underbanked, meaning that they have a bank account, but these accounts do not fully meet their needs, and they still rely on high-cost check cashing services or other costly financial service providers.
- Federal Deposit Insurance Corporation's 2009 National Survey of Unbanked and Underbanked Households

Americans without bank accounts regularly deal with loan sharks disguised as corner store financiers. Often the "businesses" offering these services are also the same ones providing payday and other predatory loan products. They and many other more reputable firms also sell prepaid debit cards that, while convenient, erode the purchasing power of the consumer's earnings by charging exorbitant set-up and transaction fees, effectively lending customers their own money at rates that far exceed legal payday loan rates.