George W. Bush, Usury & Our Economy
Let’s take a moment for a brief history of usury, then take a look at what has happened recently that has made the situation so bad for so many in our country. George W. Bush has not been a friend to the people of this country, specifically the poor and middle-class, and what has occured with bankruptcy laws is just one indication of that.
When the history of the early 21st century is written, one series of events (none of which seem to be garnering a great deal of serious attention at the moment) likely will come to the fore. Specifically they are these three correlative policies strongly supported, endorsed and advanced by President George W. Bush:
1. The enactment of legislation allegedly designed to reform the bankruptcy system in the United States;
2. The lack of legislation to curtail the manner in which consumer credit cards are marked; and,
3. The lack of legislation designed to better regulate the interest rates that are charged on consumer credit card accounts.
Information about these Bush era changes can be found through such resources as the U.S. Federal Courts (including the duly enumerated changes to the Bankruptcy Code, a citation to this documentation is provided below for a reader’s convenience), and have discussed at length by both The Nation and The Boston Globe, again citations below.
Throughout the history of the past 2,000 years, charging interest on loans in most of Western society was a condemned practice. All of that changed during the tumultuous reign of England’s Henry VIII. Between dispatching wives and embarking on ill-fated military conquests, the King enacted what is considered to be the first law permitting the charging of interest on loans, a statutory scheme interestingly pegged with the moniker of “An Act in Restraint of Usury.” Prior to that point in history, any interest charged on a loan was considered usury. (Weir, Alison. Henry VIII: The King and His Court. Ballantine Books, 2001.)
Henry the VIII’s legislation permitting the charging of interest on loans was truly significant, and went against the values and mores of the time. For example, the Old Testament, the New Testament and the Koran all rally against the sinfulness of charging interest. Given the strength that churches and religious leaders had in their communities during this time, Henry’s promulgation was daring, and counter to the belief systems of the age.
The leading theologian in much of Western history is considered to be Thomas Aquinas. Aquinas argued that usury was much like selling a person a piece of cake, charging him for the cake itself and then charging him again to eat the cake. In Dante’s Divine Comedy a circle in Hell, below that occupied by individuals who committed suicide (the most grievous of all sins), was reserved for people who charged interest on loans. That’s how serious a crime usury was considered (oh how times have changed!).
As mentioned, the actions of England’s infamous Henry VIII marked a seminal change in the manner in which money was lent to consumers in his realm. In considering major changes in the way in which consumers are able to access financing, the actions of George W. Bush during his terms as President of the United States may be regarded, in time, as being as ominous and as stridently against the interests of “common folk” as was Henry’s Act permitting interest to be charged in the first instance.
The King and the President have found themselves to be striking bedfellows on many levels. For example, while Henry is best known for domestic misadventures concerning his six wives, the two leaders share other domestic misadventures in the form of economic and monetary policy. And, of course, both the King and the President were said to have set off on utterly ill-conceived military adventures during their time in office. But that’s a whole other issue.
Consumer Bankruptcy Law “Reform”
Early during his first term in office, President Bush strongly advocated for the enactment of legislation that was said to be designed to prevent abuses in consumer bankruptcies in the United States. The argument was made by the President and his cohorts that consumers regularly abused the Bankruptcy Code by racking up significant debts – particularly debts on credit cards – and then were heading off to the local Bankruptcy Courthouse with revolving door regularity. These protestations by the Bush Administration paid no never-mind to the reality that at the root of many consumer bankruptcy petitions were two commonly shared financial problems: 1. a sudden and unexpected loss of employment; and, 2. significant and equally unexpected medical bills and expenses. Yes, consumers were seeking discharge of credit card debt in many bankruptcy actions. But, bankruptcy relief was sought by these financially troubled consumers, in the vast majority of cases, because of loss of employment, mounting medical bills and (in many, many cases) both circumstances.
While in office, President Bill Clinton vetoed legislation similar to what President Bush eagerly signed. President Clinton and his Administration took the position that the proposed revision of the Bankruptcy Code was inherently unfair to everyday consumers. In fact, the changes in the Bankruptcy Code advocated by and signed into law by President Bush gives credit card companies the same cache in bankruptcy proceedings that are enjoyed by a divorced parent trying to collect child support. Credit card companies have been extended the same rights and privileges in bankruptcy proceedings that were created to protect the welfare of children in this country. (The Nation, April 2, 2001)
In the end, the Bush amendments to the Bankruptcy Code precluded consumers from obtaining a discharge of many different types of debts, including credit card debts. In other words, even though an unexpected lack of employment or unsurmountable medical bills drove consumers to bankruptcy in the first instance, these same destitute consumers were still going to be seemingly forever saddled with credit card debt.
In the Alice in Wonderland style of thinking that arguably is commonplace in the Bush Administration, medical and health care expenses were wiped away in bankruptcy court while credit card debt remains. So the already fragile health care system in the United States continues to have to deal with patients not being able to pay their bills, while the credit card mills, who are enjoying record profits, continue to grip consumers who cannot pay basic life expenses, like those same medical bills, rent, or even groceries. The Bush Administration chose to protect the booming credit card industry, increasing their profits even further, while adding even more burdens to the health care industry and especially to everyday consumers.
The question has to be asked. Why, when someone reaches a point of no-return with their debt, is the only one coming out unscathed the credit card companies? Consumers (and we’re not suggesting this shouldn’t be the case) emerge with highly damaged credit ratings and will be lucky to acquire a loan for a period of time, hospitals and doctors do not get paid for any services rendered, but credit card companies continue to collect payments for purchases along with their high interest rates. Why the special treatment of the lenders over the medical field? Why were credit card companies singled out for this benefit? And singled out over both the well-being of struggling consumers, and the hemorrhaging health care system?
In the end, the barn door was slammed shut on consumers, leaving them locked in with credit card companies and similar types of consumer lending organizations that were given even greater latitude to charge what historically would have been considered usurious interest rates.
The Really Free Market: The Merchandising of Credit Cards
In the United States each and every year billions of credit card solicitations are sent to consumers across the country. In fact, the typical consumer in the country receives more credit card solicitations during the course of a given year than they do advertisements for any other product or service, including food or even cars. (The Nation, April 2, 2001)
Generally speaking there’s absolutely no significant oversight whatsoever pertaining to the way in which credit card companies market their wares. These financial behemoths make the story of David and Goliath seem oddly quaint. The difference when it comes to the modern day Goliath of mammoth credit card companies versus the tiny consumer of Anytown, U.S.A., Goliath gains a stranglehold the moment a consumer responds to an ad, a grip that not even the Bankruptcy Court, thanks to Bush era “reforms”, can pry apart.
When it comes to the marketing of credit cards, the credit card companies specifically target young people and other vulnerable citizens. For example, there are companies that create advertisements to be sent to the recently divorced or the newly widowed.
Of course, the most common marketing practice utilized by credit card companies in business today is to offer consumers neat and tidy low introductory interest rates on these cards. Naturally, “introductory” is the operative word although it oftentimes is not well defined in the application documentation, and certainly not in the initial solicitations sent to consumers.
Moreover, it can be incredibly difficult to find information in the credit card application (let alone within the initial solicitation) that adequately explains how significantly the interest rate will increase after the “introductory” term expires.
Another ruse commonly perpetrated as part of the overall marketing schemes by credit card companies involves “checks” sent to consumer. Included with monthly statements sent to consumers will be “checks” that are said to be special bonuses or rebates. If a consumer actually executes such a check, he or she will in fact be obliging his or her self to some other type of expensive service offered by the credit card company but not likely wanted by the consumer. In other words, the consumer will cash the $10 bonus check and end up being billed through a charge on his or her credit card account $100 for some sort of “service” that is neither necessary nor desired.
Up, Up, Up … Interest Rates Post Bush
Many governmental leaders in numerous individual states began to seriously look at the tremendously high interest rates that were being charged to consumers in relationship to their credit cards. Some legislators began to take steps to reign in what they considered to be usurious lending practices in their home states.
However, before they could really undertake any meaningful initiatives, the Bush Administration’s Treasury Department took the heretofore unprecedented step of preempting any state action when it came to stopping abusive lending practices. The Treasury Department maintained that preventing such abuse was its responsibility. The Treasury Department has done nothing to reign in unbridled interest rates since its historic preemption. (www.treas.gov/regs)
During the Bush Administration, and since the seizure of authority by Bush’s Treasury Department, the number of consumers who have experienced dramatic increases in the interest rates associated with their credit cards has climbed astronomically. For example, it is very common for a consumer to experience a twenty percent increase in his or her credit card interest rate after one payment is made slightly late.
Another truly insidious and little known practice has given rise during the Bush Administration: Universal default. Most consumers have not heard of universal default – let alone even have a basic understanding of what universal default is all about.
An illustrative example is helpful in coming to terms (so to speak) with the concept of universal default. If you have a credit card and you diligently make all of your credit card payments on time, you imagine that your credit card interest rates are going to remain constant. Assume for the moment that you made a $40 phone payment a few days late the prior month.
Many credit card companies are now able to track all of your recurring payments. And, these credit card companies are applying what they call the universal default concept. In other words, because you were late in paying your phone bill, your credit card interest rate is going to skyrocket – even though you have always made timely payments on that account. Indeed, some consumers are seeing their credit card interest rates jump as high as forty five percent through the application of universal default.
Tying the Knot: The Bush Administration and the Credit Card Industry
Except for the aptly named Military Industrial Complex, and the many enterprises involved in making wartime weaponry and the like, no other single industry has been more supportive of President George W. Bush than has been credit card lenders. The biggest supporter of George W. Bush’s electoral ambitions has been the nation’s largest independent credit card issuing company: MBNA.
Financial institutions, led by the credit card lending industry, sopped upwards to $25,000,000 into the Bush re-election coffers in 2004. While Bush raised a record of over $350 million during the 2004 election cycle, seven percent of the cash pouring into the Bush re-election account came from credit card companies and their compatriots (Federal Election Commission, www.fec.gov/disclosure.shtml). In other words, by 2004 companies that in another era would have been considering engaging in usurious lending practiced not only were protected but were shilling out a portion of their gains to the chieftain who provided them with that protection.
So here we are, at a place where many citizens are between a rock and a hard place. The sub-prime lending market has crashed and caused financial ripples throughout Wall Street. Many of today’s homeowners can no longer afford their mortgages with interest rates that have grown to usurious levels, and bankruptcy is not much of an option because it just doesn’t help any longer. With home foreclosures increasing dramatically, is there any relief in sight? Is the 2008 election an opportunity for change in economic law? Let’s hope and work. Call your state representatives and vote your conscience.