Elizabeth Warren, Obama’s choice to head his Congressional Oversight Panel created to monitor the bank bailout, was interviewed in Business Week this month. The issue at hand is the regulation of financial markets and the formation of an independent consumer protection agency in the wake of the collapse and subsequent bailout of this sector by the US taxpayer.
Much of the interview focuses on whether or not such an agency, if created, should be part of existing government bureaucracies, the Federal Reserve, or be a totally independent body. There is no such thing as an independent body under these circumstances of course as the state has class character and Warren herself, as a Harvard Law School professor is one of its chief representatives.
In order to give the impression that as an individual she is independent of class politics, she chides her class colleagues, “There’s nobody in Washington focused on the family..”, she says and points out that the job of protecting the consumer is the “stepchild nobody wants.” She describes how the credit industry changed to the point that credit agreements went from about one page in 1980 to about 30 pages of almost indecipherable script today. An interesting factor in the light of the rise of the financial sector as a percentage of GDP and its recent collapse is, as Warren admits, when “we got rid of Usury laws.” The problem with consumer protection as it is now she argues, is that it is divided between seven bureaucracies that are, “...captured by the large financial institutions.”. This is part of the propaganda that perhaps some of them believe themselves that state is a neutral body, independent of class character. The moneylenders have merely “captured” these state agencies.
But the “we” she is referring to does not include the victims of usurers, the people that have lost their homes or cannot get an apartment because moneylenders have bled them dry. The “we” is the moneylenders themselves and their political representatives of which she is one.
So laws that made it easier for moneylenders to get their pound of flesh from workers and society as a whole were passed over the last 30 years through a coalition of Democratic and Republican politicians, the representatives of the two wings of capitalist politics.
The same can be said of the Savings and Loan debacle that cost US taxpayers billions through the nationalization of the debt, including interest, of the failed industry. Politicians of both parties, from right wing Republicans to left wing Democrats created the legal structure that made these crises more likely.
Below is a brief history of changes in usury laws. More can be found here
The Prophet Ezekiel includes usury in a list of “abominable things,” along with rape, murder, robbery and idolatry. Ezekiel 18:19-13.
1978
The US Supreme Court decides that national banks may export the state interest rate law of their home state into any state where they do business. In response, South Dakota eliminates its interest rate caps. Several credit card issuing banks move to South Dakota and operate nationally with no interest rate cap.
1980
Congress preempts state interest rate controls on all first lien mortgages. This enables predatory mortgage lenders to make seemingly affordable loans, like adjustable rate and interest-only loans that lead to foreclosure for many.
1994
Congress adopts the Home Ownership and Equity Protection Act of 1994, which provides some substantive protections to home mortgage borrowers with interest rates or points that are extraordinarily expensive, but sets no limits on what can be charged for these loans.
1994-2005
Many states and cities try to protect their citizens by adopting state statutes and local ordinances to curb predatory lending, but preemption claims by the federal government impede their efforts. Numerous bills are introduced in Congress to protect consumers in a wide range of transactions, including rent-to-own, credit cards, payday lending, and predatory mortgage lending, but none of these bills makes it to a hearing.
2001-2007
Predatory and mainly subprime lenders make home loans to people who cannot afford them, boosting their own profits in the short term. Many of these loans are packaged and sold to Wall Street.
2005
After extensive pressure from the industry, the federal government changes bankruptcy laws, making it harder for consumers to discharge debts and get a clean start in bankruptcy.
Readers may remember back in 2006 when Congress passed the “Talent Amendment” which capped interests on loans made to active military personnel and their families. Workers driven in to the military through an economic draft don’t fare too well on the poor pay and were falling prey to usurers who were charging exorbitant interest on their payday loans. Given that more workers were needed to kill and be killed in US imperialism’s predatory wars and that capitalist politicians were going on about supporting the troops, they felt they had to appear to be doing something; so they capped interest rates at 36%. Residential mortgage loans, home equity loans and lines of credit, reverse mortgages and open-end credit loans are not covered---and we all know what happened.
In the last analysis, social upheavals like the recent credit crisis and subsequent “Great Recession” are an inherent part of a capitalist economy and cannot be avoided. This doesn’t mean that the effects of them cannot be mitigated. In Europe for instance, the welfare state undoubtedly provides more protection in the form of a social safety net than
the conditions that prevail in the US do.
An important part of the increasing struggles that are developing in the US is the building of a mass worker party, a necessary step along the road to the taking in to public ownership and management the productive forces of society including the banks and finance houses. The allocation of capital is an integral part of the Labor and productive process that, when out of private hands will ensure success in the building of a democratic socialist economy and a democratic socialist world federation. This is the only permanent way crises like the present one can be avoided.
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