Financial Problems

Financial Problems:

Today I'd like to talk about two significant financial issues for the average American, one private and one public. They share two common threads.

Private:

Turns out Citibank, which had been collecting hundreds of dollars a month from us to pay the insurer, hadn’t made the payments. It was, I later learned, one of the usual tricks mortgage servicers use to squeeze more cash out of their customers. About a month later, I learned of another trick: Citibank informed us that it was increasing our monthly payment by nearly $300....

My wife and I are reasonably savvy consumers – she has a brand-name MBA, and I began my career as a business reporter for the Wall Street Journal – but we were no match for a bungling bank. After five months of trying, we still haven’t been able to resolve all of Citibank’s mistakes – nearly all of them, curiously, in the bank’s favor [...]

FDL points out, quite rightly it seems to me, that the "shared experience" of having been ripped off by the bank is what woke up this Washington insider to a wicked reality.

Public:

We are fooling ourselves most of all. United States government debt in public hands is now more than $9 trillion, but most people still don’t realize what it will take to pay that off.

Here’s an example: Say that you have $20,000 in Treasury bills. You probably believe that you own $20,000 in wealth. This will encourage you to spend and come up with ambitious plans. Yet someone — quite possibly you — will be taxed in the future to pay off the government debt. The $20,000 may be needed in order to do that.

These cases are alike in that average Americans are involved in supposedly safe, bedrock investments -- mortgages and Treasury bonds -- with pillars of the community. That they are being misled or outright ripped off by these pillars is a moral outrage.

They are alike in another way too. If "we" need your $20,000 investment returned to "us" in taxes, it is partially because "we" spent a boatload of cash to bail out banks and major corporations who made bad investments. In other words, we are making your investment a bad investment so as to prevent them from suffering the costs of their bad investments. Why did these banks and corporations get bailed out? Because they were politically connected.

Why are the bank's errors so often -- "curiously" -- in their favor? Put another way, if it's their error, why aren't they the ones responsible for fixing it at whatever expense? Because that's the way the law is written. Why is the law written that way? Because...

Right.