We're Screwed on Everything From Health Care to the Economy If the Dems Don't Shape Up

By William Greider, The Nation. Posted June 9, 2009.

Usury used to be illegal in the United States but it was "decriminalized" in 1980 -- the dawn of financial deregulation. A Democratic president and Congress repealed all interest-rate controls and the federal law prohibiting usury. Thirty years later, American society is permeated with usurious practices -- credit cards charging 30 percent and higher, subprime mortgages and other forms of predatory lending, the notorious "payday" loans that charge desperate working people an effective interest rate of 500 percent or more. Businesses, especially smaller firms, are also prey to usury in less direct ways.

Needing credit to survive, they submit to the creditor's demands and are often weakened as a result, shedding workers and services that shrink customers and income.

The straightforward way to stop usury is to enact a hard legal limit on the interest rates creditors can charge borrowers. In the House, several legislators introduced interest-rate caps, but party leaders would not let the issue get a roll call vote. Rep. Maurice Hinchey of New York and co-sponsors proposed an interest-rate cap of 18 percent, the same ceiling enacted years ago for credit unions. "Offering the amendment raised a lot of anxiety on the part of a lot of people," Hinchey said.

"It was withdrawn because it had no possibility of success and it would have put a number of people in a tough situation. We had to back off."

A roll call on usury would have compelled legislators to choose between their constituents and their bankers. Rep. Donna Edwards of Maryland proposed a tougher ceiling on interest rates, but the House rules committee rejected her amendment. "Our constituents are so angry with the banks," she observed, "siding with credit-card companies would not be helpful to me, and I expect that's true in other districts." Bankers are contributors, so this is what members call "a money vote." A consumer lobbyist explained. "Let's face it," he said. "The main reason lots of members get on the House Financial Services Committee is because they want to raise money from the financial industry."

In the Senate, Dick Durbin of Illinois, the majority whip who rounds up votes for the party, introduced his own usury bill -- a cap of 36 percent including the non-interest fees and charges. Durbin's bill also empowered state governments to set lower limits. The Consumer Federation of America endorsed it, but the consumer lobbyists asked Durbin not to have a roll call on his measure because it might reveal their weakness.

Nevertheless, the redoubtable Bernie Sanders of Vermont demanded a vote on his bill -- an interest-rate cap of 15 percent.

"When banks are charging 30 percent interest rates, they are not making credit available," Sanders said. "They are engaged in loan sharking." Sanders lost, 33 to 60. Twenty-one Democrats voted with the sharks. Senators Carper, Cantwell, Byrd, Bingaman, Bayh, Baucus, Akaka, Warner, Tester, Stabenow, Specter, Shaheen, Pryor, Ben Nelson, Bill Nelson, Murray, Lincoln, Landrieu, Kaufman, Johnson, Hagan.

The scandal of "payday" lending is being confronted by numerous state legislatures, but the issue stalled out in Congress. The industry pursued a race-based lobbying strategy that targeted black and Hispanic representatives with this pitch -- poor people need these loans; don't mess with them. Rep. Luis Gutierrez of Illinois proposed a bill that usurers found acceptable -- an interest rate cap of 390 percent.

Standing With the Sharks

Perhaps the most revealing moment for Democratic timidity was the Senate roll call to authorize bankruptcy judges to intervene on home foreclosures and reduce the burden for failing homeowners. If the bankers refused to make a deal, the debtors could take them into bankruptcy court and hope for better terms. This single reform would shift the balance of power modestly from creditors to debtors and save at least 1.5 million families from foreclosure, reformers estimated. The measure passed easily in the House, but was defeated by the Senate.

Bankruptcy reform lost because twelve Democrats joined the Republicans to vote for bankers and against embattled families. Senators Baucus, Bennet, Byrd, Carper, Dorgan, Johnson, Landrieu, Lincoln, Ben Nelson, Pryor, Specter, Tester.

Dick Durbin could not conceal the bitter aftertaste. He told a hometown radio interviewer: "Hard to believe in a time when we're facing a banking crisis that many of the banks created -- they are still the most powerful lobby on Capitol Hill. And frankly, they own the place."

Durbin's disappointment may have included the former Illinois senator whom he had championed for president. Barack Obama took a walk on reform. Last year as a candidate, Obama declined to support the bankruptcy provision for the financial-bailout legislation, but he promised reform groups he would support it if elected. The White House wouldn't let reformers include it in the stimulus package or in Obama's first budget. The White House suggested the issue could proceed as a stand-alone measure (guaranteed to fail). On this important reform, the president stands with the sharks.

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William Greider is the author of, most recently, "The Soul of Capitalism" (Simon & Schuster).

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