Lending the Lenders

Shifting from the California budget to the national budget, the President, when he's not whining about giving telecom companies amnesty for lawbreaking, is whining to Congress about fixing the economic mess he's created.

President Bush, acknowledging that the country is suffering through a period of economic uncertainty, called on Congress Monday to do more to help people and businesses hurt by the housing slump and credit crunch.

In a brief introduction to his annual economic report, Bush said the $168 billion economic rescue package passed by Congress last week will keep “our economy growing and our people working.”

Bush urged lawmakers to pass additional legislation that would revamp mortgage giants Fannie Mae and Freddie Mac and modernize the Depression-era Federal Housing Administration, which insures mortgages for low- and middle-income borrowers. The president also said Congress should approve legislation allowing state housing agencies to issue tax-free bonds to help squeezed homeowners refinance their mortgages.

What's not said, in public, is what Bush actually wants - more help for corporations that made their own beds and now want all of us to lie in it. Here's how this is going to work out. The banking industry is writing down tens of billions of dollars because of their own greed and predatory practices, and they want a bailout. It doesn't get simpler than that.

The banking industry ... is urgently shopping proposals to Congress and the Bush administration that could shift some of the risk for troubled loans to the federal government.

One proposal, advanced by officials at Credit Suisse Group, would expand the scope of loans guaranteed by the Federal Housing Administration. The proposal would let the FHA guarantee mortgage refinancings by some delinquent borrowers.
...

The risk: If delinquent borrowers default on their refinanced loans, the federal government would have to absorb the loss.

This is about rich investors avoiding responsibility. As Bush has said often, he has no problem with rich people avoiding taxes, and will not use his power as, you know, the guy in charge of the IRS, to close any loopholes or demand that everyone helps fund the federal government fairly. And this is the same thing. The lenders foul up by plundering homeowners and jacking up their rates, they sell the mortgage-backed securities to investors who don't understand the risk, and when the system can no longer sustain itself they want John Q. Public to pay for it?

This is what some of those same lenders are doing in their spare time.

One recent morning, dozens of elderly and disabled people, some propped on walkers and canes, gathered at Small Loans Inc. Many had borrowed money from Small Loans and turned over their Social Security benefits to pay back the high-interest lender. Now they were waiting for their "allowance" -- their monthly check, minus Small Loans' cut.

The crowd represents the newest twist for a fast-growing industry -- lenders that make high-interest loans, often called "payday" loans, that are secured by upcoming paychecks. Such lenders are increasingly targeting recipients of Social Security and other government benefits, including disability and veteran's benefits. "These people always get paid, rain or shine," says William Harrod, a former manager of payday loan stores in suburban Virginia and Washington, D.C. Government beneficiaries "will always have money, every 30 days."

The law bars the government from sending a recipient's benefits directly to lenders. But many of these lenders are forging relationships with banks and arranging for prospective borrowers to have their benefits checks deposited directly into bank accounts. The banks immediately transfer government funds to the lenders. The lender then subtracts debt repayments, plus fees and interest, before giving the recipients a dime.

As a result, these lenders, which pitch loans with effective annual interest as high as 400% or more, can gain almost total control over Social Security recipients' finances.

These are the noble citizens we're all supposed to bail out - those who prey on the elderly and the weak. And by the way, if we bail them out, they'll keep doing this.

UPDATE: Here's another fun way the government is helping out the banks:

Sen. Jeff Sessions (R-Ala.) has sponsored an unusual [not for long!] provision at the urging of the nation’s banks granting them immunity against an active patent lawsuit, potentially saving them billions of dollars.

Adopted with little fanfare [I’ll bet!] , the amendment would prevent a small Texas company called DataTreasury from collecting damages from banks for infringing on its patented method for digitally scanning, sending and archiving checks. The patents were upheld last summer by the U.S. Patent and Trademark Office after they were challenged.

Welcome to the United States of Corporate America.