Banks Continue To Rip Off Consumers Using Our Own Money

During the G20 meeting there was a brief interview with one protester in which a reporter asked why the group was protesting. This person stated that he was angry that the taxpayers were bailing out the banks and the banks were than loaning back the money to the taxpayer at a profit. Interesting point of view. But here in the United States we have another problem that is also making the banks extremely unpopular. 

It seems that the banks now are using the recession as an excuse to raise credit card rates. Consumers are finding themselves facing rates as high as 28% as the banks continue to receive bailout money with a 0% loan rate. Congress and President Obama are now taking a hard look at this situation and hopefully will crush these idiots into submission and get the banks back to reality. 

Yesterday I was doing some research on another project when I found this statement from wikipedia describing the depression from the ’20s and ’30s which stated the following:

During the Crash of 1929 preceding the Great Depression, margin requirements were only 10%. Brokerage firms, in other words, would lend $9 for every $1 an investor had deposited. When the market fell, brokers called in these loans, which could not be paid back. Banks began to fail as debtors defaulted on debt and depositors attempted to withdraw their deposits en masse, triggering multiple bank runs. Government guarantees and Federal Reserve banking regulations to prevent such panics were ineffective or not used. Bank failures led to the loss of billions of dollars in assets. Outstanding debts became heavier, because prices and incomes fell by 20–50% but the debts remained at the same dollar amount. After the panic of 1929, and during the first 10 months of 1930, 744 US banks failed. (In all, 9,000 banks failed during the 1930s). By April 1933, around $7 billion in deposits had been frozen in failed banks or those left unlicensed after the March Bank Holiday.

Bank failures snowballed as desperate bankers called in loans which the borrowers did not have time or money to repay. With future profits looking poor, capital investment and construction slowed or completely ceased. In the face of bad loans and worsening future prospects, the surviving banks became even more conservative in their lending. Banks built up their capital reserves and made fewer loans, which intensified deflationary pressures. A vicious cycle developed and the downward spiral accelerated.

The liquidation of debt could not keep up with the fall of prices which it caused. The mass effect of the stampede to liquidate increased the value of each dollar owed, relative to the value of declining asset holdings. The very effort of individuals to lessen their burden of debt effectively increased it. Paradoxically, the more the debtors paid, the more they owed. This self-aggravating process turned a 1930 recession into a 1933 great depression.

Does this sound familiar? Bank failures, a lack of loans to build reserves, and a vicious cycle of downward spiral? 

Auto sales suffered between 1928 levels compared to 1932. And today after receiving billions of our dollars the industry is now posting a profit. You give me a few billion and I’ll show a profit as well. The banks caused the current financial recession and now are punishing the consumer for their mistakes.

We never learn from our past mistakes.

What do you think? 

Great Depression

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  • http://laurei.com laurei

    terrible

  • http://twitter.com/dhubbart Dustin Hubbart

    Meebo is still the best. It has everything you need.

    • Anonymous

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  • http://twitter.com/mbillow Marc Billow

    I am still trying to understand how a developer could release an IM application, yet not include FB Chat… Earth to Include Tech, Facebook is a necessity if you plan on a lot of people using your app.

  • Anonymous

    Better be free…