"HOPE ON MAIN STREET"
October 17, 2008
"Imagine a day four years from now when every senior graduates as an 'El Paso Entrepreneur'— with real savvy in balancing check books, reading the fine print on credit cards, negotiating a home loan, understanding a college savings plan—knowing and using the key financial skills that matter in achieving stability and success."
Written by Senator Eliot Shapleigh, www.shapleigh.org
Today, in Texas, the annual interest rate on predatory loans is 1100 percent. More students file for bankruptcy than graduate from college. Savings rates are now at Depression-era levels.
Essentially, Americans now spend more than they make.
At the heart of today's meltdown are predatory rates in credit cards, home loans and payday loans. That’s the story that has not been told in Texas newspapers. And much of this industry is headquartered in the Dallas area, Ft. Worth and North Texas.
In Oregon, Ohio, Illinois, and Arkansas, Governors and Attorneys General have fought back—with transparency, mandatory disclosures on interest rates and terms and solid caps to limit usury. Right now, there’s a war on the street.
To protect a very lucrative trade in greed, the payday lending industry is on the offensive—most recently in Arizona and Ohio. In Arizona, payday lenders are funding a campaign, called "Proposition 200," to limit restrictions on predatory lending. In Ohio, payday lenders are fighting "Issue 5," a ballot proposition to impose greater restrictions on payday lending—including a 28 percent interest cap.
After many states have cut and capped interest at only 36 percent, the predatory lenders are battling back to keep rates that would make the money changers at the temple blush with shame.
Consumers can’t pay—a $300 payday loan becomes a $3,000 burden within a year after all the fees, penalties and interest are added up. Home loans turn over every three years with adjustable rates—and what a paycheck once covered moves out of reach.
Then these loans are sold, and sold again so the cycle can continue. Some investment banks have leveraged their investments in these loans 30 to 1. These predators then take a healthy CEO bonus, and start the cycle again.
Where once Main Street America ruled the world with hard work, great products and innovative ideas—now Wall Street is mainly known for aggressive ways to pick your pocket. Banks now make more off ATM charges, bank drafts and "penalties" than from earning your interest. In Texas, with Phil Gramm’s help, pay day lenders have stripped away regulation so that they now charge 1100 percent interest per year. Even after taxpayers bought 80 percent of AIG to stave off the insurance giant's bankruptcy, executives splurged $86,000 on an English hunting trip and $440,000 on an executive retreat. Old habits die hard.
In Europe, Gordon Brown has now called for a return to a system of "morals" in the market. When governments have to bailout a gilded age of greed with taxpayer money, elected officials can’t risk hundreds of thousands of dollars in executive junkets on the taxpayer dime. So, what to do?
In Texas, our bills to regulate predatory practices are regularly killed by the predatory lending lobby in Austin—who dole out millions to the Governor, Speaker, lobbyists and committee chairmen. We can’t expect that to change this election cycle. But, we do have hope—the “Invest in the American Dream" conference.
If in the absence of any state leadership, each Texas community can educate a generation on how best to navigate financial waters, save money, buy a home the old fashioned way, with a 30 year fixed interest loan that is never more than 20 percent of pay, then we return our state and nation to sound financial foundation—one family, one neighborhood, one community at a time.
Imagine a day four years from now when every senior graduates as an “El Paso Entrepreneur”—with real savvy in balancing check books, reading the fine print on credit cards, negotiating a home loan, understanding a college savings plan—knowing and using the key financial skills that matter in achieving stability and success.
Imagine if we open 50,000 new savings accounts—with sixth graders, first day soldiers and new immigrants.
Imagine if small business here fights their way to a piece of the Ft. Bliss pie—and out of it comes the next Mc Kee Construction Company or Loya Insurance Company.
Keep the faith—in Texas today, we can’t regulate, at least today. But we can sure educate. Our destiny is our own responsibility—and change is on the way.
Please join us in El Paso for "Invest in the American Dream"—and help us put hope back on Main Street.