debt collector credit card debt inflation big banks

Bailouts Have Started Pushing Up Prices
tax dollars land tax henry george

Banks Play Fast and Loose With Credit Card Debt

Debt and rent two sides of one coin. We trim, blend, and append five 2012 articles from: (1) USA Today, Apr 5 on debt collectors; (2) Reuters, Apr 13, on inflation by J. Lange; (3) Accounting Degree Online on the US budget by Peter; (4) Financial Times, Apr 16, on home prices by S. Clarke; and (5) Henry George School on course by the faculty and staff.

by USA Today editors, by Jason Lange, by Peter, by Steven Clarke, and by Henry George School Faculty & Staff

Banks are sticklers in their dealings with customers. Overdraw your bank account by even a buck, and you could get dinged with an overdraft charge. Pay a bill just minutes past 5 p.m. on the due date? Expect a hefty late fee.

But when it comes to holding themselves to exacting standards for collecting old debts from credit card customers, some major banks get all loosey-goosey.

The nation's two largest banks allegedly cut corners -- using shoddy procedures and flimsy records -- when moving to collect credit card debts or selling bundles of them to outside collectors known as debt buyers.

Bank of America sold bundles of old debts "as is" to debt buyers, with the proviso that its records might be incomplete or inaccurate, that some of the debts might have been wiped out in bankruptcy or that some might even have been paid off.

Did the bank care that the buyers would set packs of debt collectors on supposedly delinquent customers despite potentially flawed records?

After getting behind on her credit card, Maryland resident Karen Stevens paid it off in 2006 with a $1,872.70 check made out to Bank of America and sent to a debt collector. But after her "debt" was sold to a debt buyer, she spent three more years battling collection efforts. Stevens finally hired a lawyer and counter-sued to end the harassment.

JP Morgan Chase was accused by a whistle-blower of going after delinquent customers based on similarly lax records. According to the whistle-blower, the bank sold a bundle of court judgments against credit card customers that its own lawyers had labeled "toxic waste" because the debts were so lacking in documentation, they were considered uncollectible.

Much of this avalanche of debt is fallout from when banks extended credit and granted mortgages to practically anybody with a pulse.

The problems with credit card collections are reminiscent of the recent scandals in which major banks used "robo-signed" documents to push through foreclosures without proper legal review. Just weeks ago, Bank of America, JP Morgan Chase, and three other financial institutions agreed to pay a $25 billion settlement.

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JJS: Ironic how banks punish customers for debt yet banks can go very deeply into debt and profit greatly from taxpayers bailing them out. The bailouts consist of funny money that comes around to bite consumers again as inflated prices.

The U.S. Federal Reserve meets on April 24-25 to debate its policy course. In 2008 the Fed cut its benchmark interest rates to near zero. It has bought $2.3 trillion in bonds to push other borrowing costs lower.

So much new money helps some. Banks JPMorgan Chase and Wells Fargo both posted larger profits than expected during the first quarter. But the unbacked new currency does also inflate prices.

Consumer prices rose modestly in March, but inflation still outpaced workers' earnings. Consumer prices increased 0.3 percent last month. Meanwhil, workers' earnings fell 0.4 percent in March after adjusting for the increase in prices.

Food prices climbed 0.2 percent last month, with poultry prices up by the most since January 2008. Gasoline prices rose 1.7 percent, a sharp slowdown from February when costs at the pump rose more than three times as quickly.

Overall consumer prices rose 2.7 percent year-on-year, down from a reading of 2.9 percent in February.

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JJS: Even these "low" rates of inflation mean prices double about ever 25 years. Most of the bonds that the Fed buys are US Government debts. Debts for what?

The graphic illustrates a breakdown on how American tax dollars are being spent. May you find your politicians’ preferences worth it to you!

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JJS: Some people in finance take seriously inflation in general and land-price inflation in particular.

Rapid house price inflation has redistributed wealth from the have-nots to the haves, inflates the housing benefit bill, and makes it hard for people to achieve the simple ambition of having a roof over their head.

Community land auctions are not the ideal way to increase the housing stock, as previous attempts to collect value uplift in one-off hits have shown.

Far better is to move local property taxation to a site value rating basis, annually taxing the rental value of the land in accordance with planning consent. Landowners would have every incentive to develop land in accordance with the planning regime, as undeveloped land could not meet the charge. The revenues give local government a direct incentive to promote sustainable development.

Such taxation would also have the benefit of reducing the market price of land, making development of all kinds more affordable. It would also discourage urban sprawl by encouraging efficient development. Importantly, it would not penalize improvements, as it would only target the value of the site, not the buildings that sit upon it.

Such a move would do much to solve our housing problems; it would add impetus to introducing national land value taxation as we shift away from taxing work and enterprise on to collecting economic rents by taxing land and use of natural resources.

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JJS: The remedy published in that major English newspaper above can be studied in depth. Find out how rent creates debt.

Rents rise, yet thousands of unused homes and apartments remain vacant. Food and energy costs climb continuously while millions remain unemployed. The destruction of the environment threatens us all, but is often considered the price of progress. Why these contradictions?

At the Henry George School you will discover the true cause of problems such as low incomes, poverty and unemployment. You will understand why so few are so wealthy, while others go without basic necessities. You will trace the root causes of the business cycle and social ills such as unemployment and poverty

At the Henry George School in Manhattan, chartered by the University of the State of New York, students explore how wealth is created and shared. You will learn how some simple and elegant reforms to promote economic growth, together with their beneficial environmental impacts, will reward individual initiative, raise incomes and promote responsible development.

All activities at the Henry George School are free of charge and open to everyone.

Should you have any questions or require further information about registration just call us at 212-889-8020, or email us info at . To read more

JJS: It’s fascinating to learn how economies work, why they sometimes fail to, and what we can do about it. The only question left is: why don’t more people know these ideas and do something about the problem?


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

Tax to improve plans

Japan prices fall, mild deflation to

One in four Americans is employed to guard the wealth

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