Ready, Set, Auction! Money in Politics Strikes Again

John Bonifaz joins the show today to discuss getting money out of politics. With the exciting news that New York City has passed its own resolution declaring that corporations are not people, are we seeing the beginning of what may very well be the final push to get money out of politics?

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At Fort Sill, High-Interest Lenders Circle The Gates

The following story has been reposted in partnership with The Dylan Ratigan Show’s week long “No Way To Live” series on the financial crisis and its impact on ordinary Americans, and in collaboration with, which is hosting HuffPost Mortgage Modification Madness Meetups across the country, where homeowners can meet others who’ve had similar difficulties with lenders.

LAWTON, Okla. – Just outside the front gates of the sprawling Fort Sill military installation, in a scrubby corner of the windswept Great Plains, a panorama of “military loan” brokers, pawn shops and car stereo dealers awaits.

In this landscape of high-interest, easy credit, Mike, a U.S. Army Private First Class from Kansas, began a downward spiral into debt — one that has left him sleeping in his friend’s garage, surviving on only $148 every month.

Recently he was reprimanded for not getting his required military haircut. He just didn’t have the money, he said.

“I was actually debt-free my entire life, until I joined the Army,” said Mike, who, like most soldiers at Fort Sill, spoke on the condition that he be identified only by first name because he is not allowed to speak to the media without clearance from superiors.

When President Obama offers his State of the Union address Tuesday night, he plans to discuss the welfare of the nation’s troops returning home from conflict overseas. But also of significant concern are the conditions facing American soldiers right here in the U.S.

Most American military posts are encircled by an array of questionable lending operations that many consumer advocates describe as being predatory. The issue has received greater attention this month with the announcement that Holly Petraeus, wife of Army General and top Afghanistan commander David Petraeus, will lead a newly created division of the Consumer Financial Protection Agency aimed at curbing such practices directed toward military service members.

A street near the main entrance to Fort Sill

Outside seemingly every military post across the country, scenes such as in Lawton are familiar: car dealerships, cash advance businesses, furniture stores and electronics dealers all offer a tantalizing array of buy now-pay later options, marketed in particular to young soldiers who have little in the way of savings and either bad or non-existent credit histories.

“The thing with the military is the paychecks aren’t large, but they’re absolutely guaranteed twice a month,” Petraeus told HuffPost. “And the military has a culture that says, ‘You will pay your bills.’ Definitely troops are well-aware of that, and they’re afraid of the consequences if they don’t. So that gives real leverage to lenders who will sometimes threaten them, or take advantage of their fear of getting in trouble with their units.”

In addition, lenders are able to rope soldiers into firm commitments to pay obligations through a system known as an “allotment,” where the payments are directly drafted to lenders from the government before ever reaching the soldiers’ bank accounts.

For additional security, most lenders require soldiers to provide contact information for a drill sergeant or battery commander, in the event that a payment doesn’t go through or a soldier defaults.

“Army guys — it’s the best bet,” said Bailey, a first-year private who was surveying the lot at Patriot Auto Sales, just outside the post entrance on Fort Sill Boulevard, on a recent Friday afternoon. “That’s a guaranteed paycheck that’s not going down. If you could get $400 a month, guaranteed, why wouldn’t you go after us?”

Predatory lending and high-interest financing targeting the military have been elusive problems for years. Consumer advocacy groups for years have sounded the alarms calling for greater protections. At the behest of Congress, the Department of Defense released a report in 2006 that documented how high-interest lenders set up shop outside of military towns, leading many soldiers into debts they could not handle.

The report noted that predatory lending “undermines military readiness, harms the morale of troops and their families, and adds to the cost of fielding an all-volunteer fighting force.”

For soldiers who fall prey, the consequences extend beyond financial hardships. Outstanding debts or bad credit can lead to a revocation of security clearances, because a service member could be viewed as susceptible to bribes from foreign governments. According to the 2006 Defense Department report, there were 17 times as many denied security clearances due to financial problems in 2005 as there were five years earlier in the Navy and Marine Corps.

After the report, Congress eventually passed legislation that capped yearly interest rates for certain types of loans at 36 percent. But the rules only covered a portion of the lending methods available to military personnel — payday loans, auto title loans and refund anticipation loans, which are high-interest loans based on the expected proceeds from an income tax return. Outside non-profit groups who assist service members say that many lenders have simply changed the terms of the loans, such as extending the repayment deadlines, to not fall under the new rules.

In a letter to the Treasury Department last year, a senior Defense Department official, Clifford L. Stanley, wrote that worries about finances were “second only behind work and career concerns and ahead of deployments, health, life events, family relationships and war/hostilities.”

In many ways members of the military — particularly young enlisted personnel who lack formal college education — are similar to other low-income populations who fall victim to the temptations of risky financial obligations.

“It’s not a lot different from public benefits recipients, who also are attractive targets to these lenders because they have that check coming in regularly, but have a hard time making ends meet,” said Lauren Saunders, an attorney at the National Consumer Law Center who has followed military issues for years.

Although all branches of the military have stepped up financial education for soldiers in recent years, some complain the classes often come in the midst of a dizzying and exhausting training regimen.

Younger soldiers fresh out of basic training find themselves on their own without supervision for the first time in their lives. Flush with what may be the biggest paycheck they’ve ever seen, soldiers are tempted to spend. But lacking any credit history, installment loans at high interest rates are often the only option.

In Lawton, nestled in a rugged corner of southwest Oklahoma at the base of the Wichita Mountains, the options abound.

Situated 90 miles away from Oklahoma City and more than a three-hour drive from Dallas, Lawton sits in a vast expanse of yellow prairie pockmarked with the occasional cedar or oak tree. Fort Sill is among the nation’s oldest military installations, originally built as an outpost to protect remote settlements in Texas, Oklahoma and Kansas during the Indian Wars of the late 1800s.

Lawton is a truly remote place, giving its lenders a hold on the military families and veterans who populate the area.

In contrast to the uniformity and order on post at Fort Sill, where red Spanish tile roofs and white stucco buildings line the roadways, outside the gates is a dowdy collection of car lots and strip shopping centers filled with payday loan shops and cash advance businesses.

It’s a town where everything is designed on installment plans, from rent-to-own furniture stores to two-year financing plans for TVs and Xboxes.

Signs boast of “Easy Car Credit,” “Special Financing,” “Magic Credit” and “Military Loans.”

At Cache Road Credit Auto, a lot perched along Lawton’s main commercial strip, a sign simply reads “Approved,” with a check mark beside it.

In the section of town closest to Fort Sill, the number of cash advance, payday loan and installment lenders easily doubles the number of traditional banks. Only churches appear with more frequency.

It remains chiefly a military town. More than 20 percent of the city’s workforce is in the Armed Services, and the reach of former and current military members is evident. Look no further than the influence of female Korean business owners, for example, many of whom run the town’s bars, restaurants and businesses after returning home with soldiers who deployed to Korea, beginning with the Korean War and continuing through the decades afterward.

Lawton is home to large populations of soldiers going through basic training, and it also serves as the main training ground for Army and Marine Field Artillery units, bringing a fresh crop of hundreds of new soldiers through each year.

Private First Class Mike was one of those new faces when he first arrived at Fort Sill in 2008.

The product of a foster home in Kansas for most of his childhood, he was looking for steadier pay and some professional grounding. Most of his teen years were spent working at a Sonic fast-food restaurant and a meat processing plant, inspecting cuts of beef as they traveled along conveyor belts.

By early 2009, after he’d completed training, Mike was deployed to South Korea. There, he mostly conducted field artillery training exercises, firing cannons, rockets and missiles into remote mountain areas.

Upon his return to Oklahoma at the end of 2009, he decided to marry his girlfriend of three years. Having relatively few obligations overseas in Korea, he decided to take on the obligations that come with domestic life: he took out a loan for a new Toyota Corolla, found an $800 per month apartment and financed a set of bedroom furniture from a local store specializing in monthly installment payments.

Though his past credit history was spotty, each business was happy to put him on an installment plan — as long as he promised to put them on the allotment system that would transfer the money directly to the businesses each month. Each of the interest rates was high: the car, nearly 20 percent; the furniture, 25 percent each year.

Then the unexpected struck. Mike found out his wife had been cheating on him while he was in South Korea, and had continued to do so. They separated; she took the car and furniture, leaving him with the payments. And because he was still married, nearly a third of his paycheck — about $600 — had to be allotted to his wife, per Army regulations.

Quickly he was underwater. His wife wasn’t pitching in on any of the costs, so he had to take out a cash advance loan at more than 20 percent interest to cover rent until his landlord could find another tenant. That required another allotment, cutting deeper into any discretionary funds to put food on his table — and making it even tougher to afford feeding his dog.

Subtracting all the money that goes to his debts, he’s left with $148 each month for food.

Just last month, he got reprimanded for not having his hair cut to the required length. Other costs got the best of him, he said.

“Sometimes other things pop up randomly,” he said. “I might need to get more razors one week, or a new stick of deodorant.”

Because he was technically still married, on-post housing wasn’t an option, so he ended up moving in with his friend, Dave, a specialist, one rank higher than him. Since last fall, Mike has been sleeping in a bunk bed in Dave’s garage, next to where the barbecue grill is stored.

Mike’s bed

There’s a space heater for milder nights, but during a recent spate of single-digit temperature nights Mike has ventured back inside to the couch. Once his first cash advance loan is paid off, he’ll take out another to pay for the divorce proceedings, which he said will end up easing the burden by requiring his wife to pay off a portion of the car and furniture payments.

Still, he decided to re-enlist for another two years, through 2013 — a decision made more out of necessity than desire.

“I really don’t have a choice in the matter,” Mike said. “I have to basically ride it out, just wait until all the payments are paid.”

Mike’s friend-turned-landlord, Dave, ran into similar problems last year when he decided to purchase a 46-inch Sanyo TV in the mall from a store called SmartBuy. The salesman told him he could easily put it on an allotment and break up the payments.

What he wasn’t told was that he would be charged an exorbitant interest rate of nearly 300 percent, forcing him to pay $3,200 over two years for a TV that could be purchased for $800 at retail price. SmartBuy was eventually placed on Fort Sill’s list of “off-limits” businesses for soldiers, and the New York Attorney General’s Office is suing the company and its affiliates for deceptive marketing practices.

An employee listed at the phone number for SmartBuy and its affiliates in Fayetteville, N.C., said the company declined to comment on the allegations.

The company had stores stationed outside of numerous military posts across the country, including outside of Fort Bragg in North Carolina, Fort Hood in Texas, Camp Pendleton in California and Fort Carson in Colorado. The store in Lawton, and several other locations across the country, have closed since the Attorney General’s investigation was announced.

Dave has continued to pay off the charges, worried that the store would call his drill sergeant if he failed to pay the debt.

“If the company calls him and says you’re in debt, you’re going to get yelled at,” Dave said. “And the number one goal in the Army is not getting yelled at.”

Several of the companies in Lawton are stores that have cropped up around installations across the country. USA Discounters, a furniture store that sets up installment payments averaging about 24 percent annual interest, has locations in malls and strip shopping centers exclusively outside of military posts. An advertisement on their website reads, “If you have had past credit problems of past bankruptcy, USA Discounters is here to help you. Military and Civil Service employees automatically approved.”

A spokesman for USA Discounters did not return a phone call and e-mail seeking comment.

Harris Jewelry, which has a store at the Central Mall in Lawton, stresses that the store “strives to be the premier jeweler for Active-Duty Military Personnel worldwide.” The website features images of soldiers in uniform kissing wives and girlfriends, and boasts that military members are “entitled to purchase quality jewelry on credit terms specifically created for their needs.”

On a recent Saturday afternoon at Lawton’s Central Mall, employees for the jewelry store were stopping anyone with buzz cuts who walked past the door. Austin, a second-year private who was smoking a cigarette outside the mall entrance, said a salesman for the jewelry store was driving him hard to buy a diamond necklace for his mother. “They told me it was a way to build credit,” he said.

He worked out the math and realized he would be paying nearly $1,000 in interest over four years – $64 per month over the course of the repayment.

Despite the advertisements linking the store to the military, Harris Jewelry store manager James Jirtle maintained that the military was just one of many markets the store was targeting.

“We’ve got a mixture of people who have no credit, to the people who invented credit,” Jirtle said. “Anyone that walks past the front of our store is our target market.”

Managers at the cash advance and installment loan businesses around Lawton also defended business with the military, saying that allotments are often the only way to ensure they can get paid by transient soldiers who may get moved or deployed.

“Nobody’s a sure bet,” said DeDe Welch, a manager at Sooner Finance, which is within blocks of the main entrance to Fort Sill. “They’re not any different from civilians. And no one forces you to walk in here. I’m not holding dollar bills and waving them in the street. You have to make the decision to come into this parking lot.”

Maryann Casiano of Ardmore Finance Corporation, one of three loan shops in the five-store Cache Road Plaza, added: “If they could get a loan elsewhere from a bank, they would.”

All branches of the military have stepped up financial training for young soldiers in recent years, often requiring lengthy classes warning soldiers of the pitfalls of certain obligations. There are also relief societies that have been set up to front soldiers smaller, no-interest loans to relieve them of higher-interest entanglements.

Many of the more than two-dozen soldiers interviewed around Fort Sill said they had taken the lessons to heart. Bryant, a second-year private who was shopping at the mall recently, said many of his superiors have advised going two to three towns away when looking to finance any major purchases, such as a car.

“For any financial stuff, I just don’t even deal with anyone in town,” he said.

But he and others noted that the Army is often slow to respond to problems, declaring businesses off-limits only after there have been a slew of soldiers that have been caught up in a scam.

A public affairs officer for Fort Sill did not make financial training personnel at the post available for comment after requests over the past two weeks.

Youth and inexperience are significant factors. Dave, who got caught up in the television scam from SmartBuy, said no amount of coursework can overcome the rush of a first paycheck.

“If you’re a 17-year-old and you get a $2,000 bonus, and your commander says, ‘Don’t go buy a car, you can’t afford it.’ What’s a 17-year-old going to do?” he asked.

Patrick, a field artillery officer who has overseen scores of young trainees over the years — and also scores of financial woes — said that failure is a difficult thing for many soldiers admit.

“The Army is very strict when it comes to indebtedness,” Patrick said. “It’s a values-based organization. We have a very strict sense of personal responsibility. And these places prey on those same values.

“It’s very difficult to go up to your boss and say, ‘Hey, I messed up.'”

White House Allies Push Bank Lobby Line On Government Mortgage Reform

The following is produced in partnership with The Dylan Ratigan Show’s weeklong “No Way To Live” series on the financial crisis and its impact on ordinary Americans.

WASHINGTON — Quiet discussions are going on between Washington and New York’s financial elite circles to chart a course forward for the mortgage market and the federal government’s role in it.

The loan-guarantee structure built during the Great Depression, which created the 30-year mortgage, spiraled out of control over the past decade as banks took advantage of the government backing to dump garbage loans on the taxpayer. The housing collapse led to the seizure of Fannie Mae and Freddie Mac, which the government now holds in limbo as banks continue to back up garbage trucks and deposit the waste of the past decade.

How to reform this system while maintaining continuity of the availability of affordable, 30-year mortgages is the question facing policymakers. How to make billions of dollars while doing it is the question facing banks.

Now, a leading liberal think tank has put forward a reform agenda similar to that of the banks. Last week, the Center for American Progress rolled out its plan to reform the government-owned mortgage giants currently propping up the U.S. housing market. Progressive critics have been quick to cry foul.

The U.S. government currently backs 90 percent of all new mortgages, with Fannie Mae and Freddie Mac the biggest players. The firms buy mortgages from banks, package them into securities and sell them to investors. If loans in the securities default, Fannie and Freddie take losses, rather than investors.

From 1968 to 2008, the companies, known as government-sponsored enterprises (GSEs), were officially private, for-profit firms, but an implied government guarantee led investors to believe they would be bailed out in the event of a crisis, a belief which proved true in the summer of 2008. That view distorted market incentives, encouraging the entities to take on big risks in order to score big profits.

The government took control of the mortgage giants under the terms of the bailout, which the Federal Housing Finance Agency currently expects to cost taxpayers $151 billion, although the total price tag could reach $259 billion if the economy sours further.

The CAP report is written by its mortgage finance working group, which features several housing experts otherwise unaffiliated with the think tank. The report recommends replacing Fannie and Freddie with new private, for-profit firms which buy up mortgages from banks, package them into securities and sell them to investors. The government would explicitly guarantee investors in these securities against losses, but would not guarantee the new firms themselves against losses. If the mortgages default, though, it’s still the government that loses money, rather than the firms.

The same general recommendation was put forward in September 2009 by the Mortgage Bankers Association, a major D.C. lobbying firm that includes some of the nation’s largest banks. And it’s easy to see why bankers like the idea — it means big money for Wall Street.

In the CAP report, these new Fannie-and-Freddie-like firms would be replaced with “Chartered Mortgage Institutions” or CMIs. In the MBA report, they’re referred to as “Mortgage Credit Guarantee Entities,” or MCGEs. But there’s a key, very profitable difference between these proposals and the current system: Banks could share ownership of the new firms, taking in fees created by securitizing mortgages that the government guarantees against losses.

“The ownership of at least one of the MCGEs could be in a co-op form with mortgage lenders as shareholders,” the MBA report reads. The CAP report explicitly suggests allowing banks to share ownership of the new firms, along with two other ownership structures, but does warn that, “a cooperative owned by very large originators could potentially become so dominant as to crowd out other CMIs.”

Even before the heated days of the housing bubble, Fannie and Freddie reaped enormous profits from its mortgage securitization and guarantee business. The CAP plan would allow banks to score the profits previously enjoyed by Fannie and Freddie, while sticking taxpayers with the risk.

“This whole cooperative idea, handing the banks the keys to the kingdom to become the new GSEs, that’s just a terrible plan,” says Joshua Rosner, a former GSE analyst who now works as a managing director for Graham Fisher & Co. “Why create a new class of too-big-to-fail GSEs? The banks have wanted to be the GSEs forever, and now they think they’ve finally got their chance.”

But even if financial firms were barred from owning the new Fannie-and-Freddie-like firms, the benefits from the government guarantee on mortgages will still flow directly to banks, and only indirectly to taxpayers. With the government standing behind any losses, banks that extend mortgages to borrowers would not have to worry about losing money if a borrower failed to repay the loan. That means plenty of risk-free fees for banks, as taxpayers explicitly assume risk.

The plan is not without benefits to consumers. Its proponents emphasize that the arrangement will keep mortgages cheap and readily available. If banks don’t have to take on any risk, they don’t have to charge much for loans, either. And some losses for taxpayers would be cushioned by an FDIC-like insurance fund, which the new mortgage giants would pay into.

Critics of the plan acknowledge that it would keep interest rates on mortgages lower than they would be absent a government guarantee. But they argue that subsidizing housing can be better achieved through the tax code, rather than a complex mortgage finance system that reinforces Too Big To Fail, by creating a new set of firms critical to the functioning of the U.S. housing market. And investors may not believe the government when it says it will not bail out the new firms — that was the official government stance on Fannie and Freddie for years. If the market views the new firms as too big to fail, critics envision the entire GSE disaster repeating itself.

The MBA report calls for “two or three” new GSEs at first, but would give the government the authority to charter additional firms. David Min, who heads CAP’s mortgage finance working group, told HuffPost that their plan doesn’t specify how many firms could act as Fannie-and-Freddie-like firms. “We can’t really predict,” Min said. “It depends on how much private capital comes in.”

Rosner, the former GSE analyst, said the CAP model only makes mortgages less expensive by increasing systemic risk. More direct housing subsidies would not have that problem, he said.

“If we’re concerned about people who will not have access to credit, take that out of the GSEs and housing finance and call it housing policy,” Rosner said. “If we believe that there are specific borrowers who need access to credit, then it seems to me those should be explicit government programs.”

In a March report, Raj Date, then head of the think tank Cambridge Winter Center for Financial Institutions Policy, argued that tax subsidies were a much more efficient method for promoting homeownership than a taxpayer-backed housing finance system, which creates enormous systemic risks. Date, now a top adviser to Elizabeth Warren at the Consumer Financial Protection Bureau, declined to comment for this story.

“[The government should] create transparent homeownership subsidies, or none at all,” Date wrote in March. “If . . . policy-makers decide to continue promoting artificially high levels of homeownership, more straight- forward cash subsidies (through refundable low-income tax credits, for example) would be both simpler than GSE intermediation and less prone to catastrophic error.”

Rosner suggested two major changes to the tax system and two major reforms to the mortgage finance system. The actual home finance system would benefit from a standardized loan contract and a standardized, transparent private-sector securitization contract, he said, so that investors can know they’re investing in safe loans when they buy mortgage securities. A new, purely government-owned entity would stand ready to insure mortgages against default when capital markets break down, he said, so that the housing market can continue to function when Wall Street stumbles. In order to provide clarity to markets, this government body would publish information on what it would cost to insure mortgages against default every day, but not actually insure any loans until markets break down.

Rosner readily acknowledges that mortgages under his plan would be more expensive than the CAP plan, but notes that artificially-cheap mortgages fueled a destructive housing bubble in recent years.

“My investing clients would buy mortgages hand over fist if there were clear contractual definitions and if rates were allowed to meet market risks,” says Rosner. “That would mean that the 30-year fixed-rate mortgage would be trading at about 6 percent.” Mortgage rates are currently about 4.5 percent — significantly less expensive when applied to a $200,000 loan.

So Rosner suggests two changes to the tax system to make mortgages cheaper. First, the government should create a program similar to existing college savings plans that allows people to save money for a down payment on a tax-free basis. Second, he argues that the government should replace the mortgage-interest deduction, which costs taxpayers about $250 billion a year, with a tax break based on paying down a mortgage and increasing equity in a house. The mortgage interest deduction rewards borrowers for taking on debt, while an equity deduction would encourage borrowers to pay off their loans. Banks like the mortgage interest deduction because it encourages people to take on debt, and banks are in the debt business.

But authors of the CAP report insist that mortgages will not simply become more expensive without a persistent government guarantee, but say the convenient mortgage that has dominated the U.S. housing market for nearly 80 years will disappear altogether.

“The 30-year fixed-rate mortgage is a very difficult product from both an interest rate risk and credit risk perspective,” former Office of Thrift Supervision Director Ellen Seidman, one of 19 co-authors of the CAP report, told HuffPost. “It’s not going to happen without some kind of government backing.”

Instead, the report’s authors warn, the mortgage market will see shorter-term loans that are far more expensive, pushing homeownership out of reach not only for low-income borrowers, but for all but the very wealthy.

Rosner thinks the claim is ridiculous. “If there was demand for the 30-year product, the banks would have to meet that market demand,” he told HuffPost. “It’s been around for 80 years. People are not going to stop wanting this product.”

Some conservatives are similarly nonplussed. “The rate on a 30-year mortgage set in a true market would probably be somewhat higher than a rate when it’s subsidized by government guarantees, either explicit or implicit,” said Alex Pollack, a former Federal Home Loan Bank of Chicago president who currently works as a fellow for the right-wing American Enterprise Institute. “But it would be a rate without the distorting effects of that guarantee, in which with your slightly cheaper interest rate, you make the house more expensive.”

In his March report, Date noted that the government could still find ways to subsidize 30-year fixed-rate mortgages without simply guaranteeing banks against mortgage losses. “[The government could] create a transparent fixed-rate mortgage subsidy, or none at all,” Date wrote. “If policy-makers wish to continue to support the availability of long-term, fixed-rate mortgages, they should consider doing so directly (e.g., perhaps through a direct, subsidized rate swap facility sponsored by the Fed).”

But it’s also not obvious that losing the 30-year fixed-rate mortgage would actually have a significant impact on home affordability or accessibility. In Canada, for instance, mortgage loans are typically of a 5-year duration, but remain affordable, while Canada’s home ownership rate is nearly identical to that of the U.S.

“Prime Canadian homeowners are well served by their mortgage finance system, with accessibility and costs roughly in line with those in the United States,” economist John Kiff wrote in a 2009 paper for the International Monetary Fund. “Even though Canadian mortgage markets may seem less innovative than in the United States, consumers seem to be well served. In particular, homeownership in those countries is virtually identical at about 68 percent of all households.”

The U.S. Treasury Department is expected to issue its own report on the future of Fannie and Freddie in the next couple of weeks, after missing a congressionally-mandated Jan. 31 deadline. A Treasury spokesman declined to comment on the CAP proposal.

Honey, I Shrunk The Credit Score

Steven Marks knew he was wasting thousands of dollars every month paying the mortgage on a home he bought during the housing bubble that will never be worth that much again.

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Here Comes the Story of the “Hurricane”

“Everything is context-driven. After ten benign years in the context of where we were…How would you look at the risk of a hurricane? The season after we had four hurricanes on the East Coast, which was actually extraordinary versus the year before, rates got very low… that year after 4 hurricanes… rates went up spectacularly… Is the risk of hurricanes any different any of those times?”
-Lloyd Blankfein, CEO of Goldman Sachs (January 12, 2010)

It is true that our economy was hit by hurricane Mr. Blankfein, but it was one created by you and your cohorts.

The financial services industry lobbied for the repeal of the Glass Steagall Act in 1999. That allowed banks to use their custodial power over your money to assume huge risks in investment markets.

They also lobbied for the Commodity Futures Modernization Act of 2000, which allowed banks to trade their crooked insurance in secret and exempted from all supervisory authority.

And to help grow the hurricane, then CEO of Goldman Sachs Hank Paulson made a personal plea to the SEC to allow banks to leverage more money against their capital. As much as $4,000 for every $100 in capital they held.

Wall Street may claim this was caused by a perfect storm, but the only thing perfect about it was their ability to line their pockets at the expense of our country.

Look at just the past few years of compensation for some of the CEO’s testifying today. Numbers that don’t even include the expected record-breaking 2009 bonuses.

  • $410 million for Goldman Sachs CEO Lloyd Blankfein over 3 years
  • $195 million in that timespan for JP Morgan CEO Jamie Dimon
  • $132 million for just two years work at Morgan Stanley for John Mack

Brian Moynihan has just stepped into his role as CEO of bank of America. But he stands to do just fine… His predecessor Ken Lewis made 150 million for 5 years before stepping down.

Unfortunately for the rest of us, their man-made money-making hurricane has devastated this country.

  • The deficit has skyrocketed over the past ten years. Our national debt now more than 12 trillion dollars.
  • More than 2 million families have lost their homes to foreclosure in the last 3 years. And seniors are denied interest on their savings, just so banks can receive tons of cheap money to try to gamble their way out of their hole.

So to you hurricane-makers, we say it’s time for you to come clean on your actions, let us fix your crooked system and finally pay us back for your destruction.

Today, Morgan Stanley CEO John Mack and JP Morgan’s Jamie Dimon talked about clawbacks they’ve instituted for their banks to recoup future losses… but what about the clawbacks for the bonuses you made over the past 10 years? The ones you made on the massive fraud that the American taxpayer is currently paying for?

Not to mention, the record-breaking bonuses to be awarded next week gambling with our bailout money. Take a listen to Mr. Mack’s justification during a recess this morning.

Potentially record profits Mr. Mack but they are clearly the result of a windfall of taxpayer support. So it only makes sense that this country follow the lead of Great Britain and France and enact a windfall profits tax.

Look at it this way: If we found out Katrina was the result somebody’s get-rich quick scheme, wouldn’t we demand restitution?

Why Would We Let Them Rig the Game?

Why is health insurance the only business that has an exemption from the Sherman Anti-Trust Act other than Major League Baseball? If the delivery of taxpayer trillions by our politicians to the banks to support their fraudulently paid bonuses hasn’t shown you what our current government’s values are, check this link out.

Through the governmental negligence that we as voters allowed, a health care system was created in which a single health care company controls at least 30 percent of the insurance market in 95% of the country, including states like the following:

Maine, where Wellpoint controls 71% of the market.

North Dakota, where Blue Cross controls 90% of the market.

Arkansas, where Blue Cross Blue Shield controls 75% of the market.

Alabama, where Blue Cross Blue Shield controls 83% of the market.

This monopoly, combined with the misaligned incentives that trap people in employer-based health care, is causing the skyrocketing health care costs that are hurtling our nation towards bankruptcy.

I don’t know what’s worse: that most Republicans seem to be against ending this unfair legal protection for an entrenched industry that is ruining our country with their non-competitive practices, or that most Democrats seem to be threatening this arrangement only as a bargaining chip to push for a meaningless public option that wouldn’t be accessible to almost 85% of the population?

Instead of improving our country, through creating and enforcing free and fair markets, our politicians are currently engaging in backroom deals, most of which protect the very companies who profit the most from these disastrous outdated systems — industries like health insurance and big Pharma.

While we clearly have the ability as a group of 305 million to update the system that is American Health Care and move our country into the 21st century in the process, it’s becoming clear that we may not have the leaders to do it.

Instead of seeking answers to the problem of paying for and providing medicine, we are doing the exact opposite. Taxpayers’ money is being played with by politicians who are desperately trying to protect the competition-stifling, false security of the monopolistic employer-based health care system and its outdated, over-charging, under-delivering ways. Given the least consideration are those affected the most — the patients and the doctors who care for them.

This country’s founders built an ingenious system of checks and balances for a reason: to ensure that no special interest or group could use government power to commandeer the creative and economic wealth of our nation to their own ends. How much longer must we live in a country where the citizens are subservient to the banks, health insurance companies and any other special interest able to control our government at the expense of our the most basic principles of fairness, our future as a nation and, as a result, our freedom?

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