Bailout or power grab?

I've been swimming 2-3 times per week, trying to get back in shape. I love exercising but it doesn't happen unless I have an easy to maintain routine and for the moment I've found it. Lunchtime lap swim at the community pool. It takes me about an hour to go, swim and come back and I love swimming, I grew up swimming. One of the other joys is listening to NPR there and on the way back, even though I plan to someday ride my bike (it's about two miles). I was thinking last week about what an exciting time we're living in. For better or worse, this is truly an exciting millennium so far. It's easy to get dismayed by the widening gap in ideology, lifestyle and economic status between Americans, but at the same time, these are the conditions from which great change can come.

Every day, driving to the pool, there's someone on the radio talking about the current economic situation. Every single person has a different piece of the puzzle. There is honest-to-god debate going on. The war in Iraq has been reduced, over the years, to a couple of soundbites and a position of either being for the war, okay with torture and willing to forgo civil liberties or being against the war, not okay with torture and unwilling to forgo civil liberties. But this current crisis is fresh and this time people and are not falling for the alarm bells and just handing over the keys to the store. This morning in the New York Times, there was a graphic of the Dow falling and a headline about yet another big bank consolidation. Then, this afternoon, the Dow falls even more and is blamed on the house not passing the bailout bill.

Now I understand that the banks want this to sound confusing so that we don't really understand what's happening. It's funny because I've been watching episodes of Hercule Poirot (from BBC) every day since landing at my mom's house and I now figure out the mysteries in the first few minutes. Let's look at the facts the way Poirot would:
1) The current disaster was predicted by many people over the last several years which means that the stage was being set for a certain disaster and we can only assume, either intentionally set or intentionally not averted.
2) Several big banks fail because of years of high-risk practices that have made many people in the industry very wealthy, leaving homeowners and taxpayers, high and dry.
3) The former CEO of one of the failed banks works with the Federal Reserve (a central bank created with precisely this kind of situation in mind) to devise a plan in which the federal government bails out these failed banks. They predict a massive collapse if that does not happen.
4) Nothing is done to help or protect homeowners that are losing their homes.
4) Republicans vote against the bill and the stock market crashes at precisely that moment.

There are a couple of things about this situation that are very suspicious. Hercule Poirot, a fictional character, could himself arrive from the 1930's and ask these questions:

First, if the current disaster was predicted, why was nothing done about it? The Republicans favor deregulation and do not support government run businesses. This explains why they are voting against the bail out bill and it explains why no regulations were put in place. Their policy is to allow business to operate in a free market which means if a business fails - and that includes banks - it is not the government's job to bail them out. Poirot might speculate that nothing was done to allow certain people to get very rich. In his world, almost all crime is motivated by money.

Second, the fact that it is big banks failing – banks that indulged in risky practices – instead of an overall economic collapse seems to indicate that in fact the economy is not failing, it is just these banks that are failing. But what has their demise produced? A massive consolidation of banks, increasing their financial power. The bail out plan would further empower these banks by wiping out their bad debt and giving them a superior advantage over all the other banks that acted responsibly. And who devised this plan? The former CEO of one of these failed banks. Poirot would definitely be interviewing Henry Paulson right now.

Third, the government already bailed out several institutions, promising each time that it would stop the bleeding, but it didn't. So what are the chances that Wall Street would hang on, even performing well last week and wait until this day to crash, perfectly coinciding with the rejection of the bill? It would be easy to wonder if perhaps there are people who can pull strings to make things happen, kind of like how the gas prices rise and fall to perfectly coincide with certain political movements in this country. And if that is the case, then who is to say that this entire event isn't the product of certain strings being pulled so that it will happen this way? We all know that Bush's Iraq invasion was planned and on the table shortly after he took office. He only needed an inciting incident to put the plan in place. Couldn't it be argued that this collapse is merely an inciting incident to allow a massive consolidation of power by the banking industry?

Someone commented on the article about the Citigroup acquisition that bigger, fewer banks would be easier to regulate. Is that why it was so easy to regulate them to avoid this disaster? Let me repeat a story of how I was robbed by Bank of America. Although only $1,300, it perfectly illustrates how powerless the "little man" becomes against a big bank. In a nutshell, the money was taken from my account and BofA claimed no responsibility for it, nor did they show any interest in figuring out how it was stolen. I relentlessly campaigned to get it back and eventually did, immediately moving my account to a small credit union. In the end, it really isn't about regulation, it's about power. These banks are already incredibly powerful and have more power over our money than we do. A friend of mine wrote a very interesting blog post looking at the situation not from an economic standpoint but for what it is really is, a power grab. What do you think?

Virtual theft is very real

A friend of mine recently deposited a check for some editing work. The check cleared and he paid his bills. Then, the check bounced and he racked up some $400 in overdraft charges. Several days after his account was overdrawn, the bank was still allowing him to make purchases. When he got on the phone with them, he was irate. Why, he asked, would they allow that? Why can't they let him know? The answer was "we don't do that."

The answer should have been "because we make a lot of money that way." A new report shows that banks make an average of 217% on in-store purchases with a debit card that overdrafts.

"What banks are calling 'bounce protection' is starting to look more like a 'protection racket,'" said Eric Halperin, director of the Center for Responsible Lending's Washington office and a co-author of the report.

Sounds like racketeering to me. A couple of years ago, unknown persons accessed my bank account via non-bank ATMs and withdrew $1,300. These withdrawals occurred twice per day for three days in a row, $200-$300 per withdrawal. Even when my account was overdrawn, the bank kept paying out. By the time I discovered the fraudulent activity, I was $700 in the hole and had racked up hundreds of dollars in fees. I found a blog post detailing a similar experience but you can Google "Bank of America" fraud and find countless similar stories.

I was told by a representative that "this happens all the time" and read an article on MSN about mass ATM fraud but the bank insisted that I must have been frivolous with my PIN number and someone I knew stole the money from me. I was robbed and the bank was trying to extort even more from me. After six months of diligent calling and letter-writing, I got my money back and all the fees refunded. I immediately took my money out of Bank of America and put it into a smaller credit union.

This is what I learned about how to protect myself. Protect your credit cards. ALWAYS use your debit card as credit card by choosing "credit" when you make purchases. NEVER enter your PIN number anywhere except a bank ATM machine. Don't get cash back at the grocery store. (It's ridiculous, I know. Why would we be given the convenience if it wasn't safe?) ALWAYS shred documents with your personal information: Social Security number, driver's license number, birth date. Protect your Social Security number. Use CASH.

Rep. Carolyn Maloney (D-NY) is expected to re-introduce a bill that requires banks to report the overdraft APR to consumers, get their written consent to put them on "bounce protection" programs and give them overdraft warnings at the ATM. If you've been coerced into paying exorbitant overdraft fees, call or write your representatives and tell them to support this bill.