Thank you, Mr. Banker, May I Have Another, Sir?

This Brandon Patch blog is written by S.E. Day, a consumer finance expert and a consumer advocate radio host of the Legally Steal Show.

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On Oct. 3, 2008, banks were deemed “too big to fail” and President Bush signed into law TARP (Troubled Asset Relief Program).

The TARP program created a $700 billion government capitalized fund to bail out banks with troubled assets, such as  toxic mortgages and faulty mortgage-back securities). The government was to purchase these assets and equities from financial institutions to strengthen its financial sectors.

This act was signed into law one month before the 2008 presidential elections, a parting gift from Presiden George Bush to his buddies in the banking industry.  There should be a law against making large parting gifts as you prepare to exit the highest, most influential office in the world.

Here is where the parting gift gets interesting: The U.S. government gave taxpayer money to the banks to purchase the “troubled assets” but the banks did not honor the agreement. Instead, the banks held the money for an extended period of time and made billions in regular overnight trading with the money provided by the government.

When the Obama administration asked for the troubled assets, the banks said, “No! We are going to keep the assets but we will repay the borrowed money to settle our debt with you because you have too many stipulations!”  It was the biggest interest-free loan to the financial sector from the government since the savings and loans scandal in the 80's. It was a very smart move by the bankers, who had insider help, and a very dumb move on the government, the inside helpers. Score 2-0 Banks (1-point for the parting gift and 1-point for making money overnight on our money).

The banks returned the TARP money. The Obama administration then pressured the banks to help the troubled homeowners by refinancing their mortgages and to start lending again to move the economy forward. However, without any leverage and with continued support in the U.S. Congress, the banks said, “NO! Thank you for the TARP money and allowing us to make billions on the interest-free loan.  However, we are not stable enough to start lending again and since we gave you back your money you can’t make us.” Score 3-0 Banks.

On Feb. 9, 2012 the Obama administration, in conjunction with several state attorney generals, the Security and Exchange Commission, and the Justice Department reached a $25 billion National Mortgage Settlement deal with five of the nation’s largest banks over charges of systemic and widespread mortgage fraud. The deal is in relief for distressed borrowers, states, and federal government. Ally/GMAC, Bank of America, Citi, JP Morgan Chase, and Wells Fargo all were willing participants in this systemic and widespread fraud. If you or I committed fraud of this magnitude we would go to prison and have to pay fines and restitutions.

Not the Bankers.

Score 4-1 Banks (I had to give the banks an additional point because they avoided prison in this deal and they are going to pay out $25 billion cumulatively from the money they made on the use of our money in overnight trading.) 

Good job, Mr. Obama, for earning a point, but the banks are still ahead by 3 points. The banks will remain ahead until “We the People” take control of our personal financial lives and tell the banks, “Don’t Ignore US!”

Because we have a voice. Financial corporate executives and detached politicians have created a 70-degree slope and coated it with a very slippery substance called greed.

The American middle class is all but gone and it is partly our fault. We were playing by the given set of rules but failed to pay attention when the game changed. We got caught up in greed as well.

I know when the ‘B’ and ‘T’ words (billions and trillions) starts to plague the ears of the American middle class most want to run for the hills. Most Americans cannot fathom those dollar amounts and it is not because we are ignorant. It is because we are entrenched in our daily lives and trying to live on the salaries and income we currently earn. Even though innocent enough, we wanted things we knew we could not afford and we got "caught up.”

My hope is that we take the time to become financially literate. That we stand up, demand accountability and create calls to actions. If not, we will find ourselves saying, “Thank you, Mr. Banker, may I have another, sir?”

I would love to hear your feedback and your agreement or disagreement to my opinions. Feel free to write me at OPED@legallysteal.com.

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S.E. Day is a consumer finance expert and a consumer advocate radio host of the Legally Steal Show.