Financial Reform: A Boom for Legalized Loan Sharks

By: Don McNay
By: Don McNay

Under the alleged "financial reform," banking services for lower income people is only going to get worse.

At the dark end of the street
That's where we'll always meet
-Gram Parsons
One the insights that I got from Gary Rivlin's Broke USA  is that people  often use payday lenders because they don't have access to traditional banks.  
I didn't realize that many banks won't give a checking account to those with bad credit.  
Under the  alleged "financial reform,"   banking services   for lower income people is  only going to get worse.
"Too big to fail" banks are racing to  charge fees for checking,  raise the minimum amount of money to get free checking and hitting consumers with a bunch of nickel and dime charges.
Those nickel and dimes will add up for billions in profits  for the banks we bailed out two short years ago.
In reaction to financial reform, Jamie Dimon, whose Chase  bank earned a $4.8 billion profit last quarter,   seemed  to speak for Wall Street   when he told the New York Times,  "If you're a restaurant and you can't charge for the soda, you're going to charge more for the burger."
The burger is going to come out of the hide of their poorest customers. 
As payday lenders  and others in the poverty business have found out,  it is easy to stick it to poor people. They have the fewest options. 
More and more will fall out of the traditional banking system altogether. 
They will cash their  paychecks at  Wal Mart, liquor stores and payday lenders.  
"Financial reform" will be a boom for people in the payday business.  There will be many new customers who need bank-like services.
It's almost like Congress implemented a plan of "reverse Robin Hood."   Rob from the poor to give to the rich.
It is not really a surprise.   Reverse Robin Hood is a good way to describe the past couple of decades.  
Wall Street made its profits sticking it to Main Street.
I wonder what "financial reform" actually accomplished.   As Paul Volcker noted,  The bill  is so watered down that it really did  little to avoid financial meltdown.  
We had a system that worked for 80 years.  It was called Glass Seagall.  
Banks were banks and brokerage houses were brokerage houses. They stayed in the businesses they knew best.
Glass Seagall fell during Bill Clinton's administration.   The person who championed it's fall was Dr. Lawrence Summers.
The same Dr Summers, who went on to become president of Harvard and is now President Obama's chief economic guru.
With Dr Summers whispering in the president's ear, it's easy to see why bringing back Glass Seagall was not on the table.
I've been championing a concept first proposed by Arianna Huffington and others at Huffington Post:  Move Your Money.   You can learn more about it at
I'm hoping that two things will  happen.   
First is that  people  keep moving their money from "too big to fail" giants to community banks and credit unions.
Second is that the community banks and credit unions have an open door to the segment of society that the big banks are running off.
Being fair to your customers is a great marketing opportunity for community banks and credit unions. 
Everyone knows that the Wall Street banks have not played fair.    If you need further proof,  call Citibank and try to speak to a "customer service" representative. 
Making money with small depositors is hard work but can profitable.
 It's not the multi billion dollar casino games that Wall Street  has been playing but it is a money-making, steady business.    It  provide  a service at a decent margin and make their  communities better places to live.
Small banks and credit unions can make or break a community.  They can truly add to the quality of life.
I doubt  Main Street  banks will be looking for a future  bailout.   Most of them missed out on the first round of handouts.
Banks can make money without squeezing every last nickel out of their customers. 
Banks can make money by doing good just as   George Bailey showed us   in "It's a Wonderful Life. "
I'm counting on people to move their money and I'm counting on community banks and credit unions to do the job that Wall Street banks ought to be doing.
If it doesn't happen,  I'm counting on it being  a big year for the payday lending industry.

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