Why are we in such a financial mess? It started in 1978 when the U.S. Supreme Court ruled that banks could lend at interest rates set by the state where the bank is chartered and not where the loan is made (Marquette National Bank v. First of Omaha Service Corporation). In effect Minnesota could not enforce its usury law against a credit card issued by a Nebraska bank. The effect of that was that banks set out to find states that had no ceilings on interest rates. And you wondered why credit cards were being issued from South Dakota?

Reasonable state limits of 5 to 9 percent were cast aside as states repealed their limits and lessened any usury laws in order to meet the competition. Interest rates spiked.
Of course, ceilings on interest rates are still on the books in many states and you will often read that it is against the law to charge too much interest. However, Congress took care of those state laws when it comes to mortgages and credit card issuers.
In 1980, when inflation was raging, the U. S. Congress passed the Depository Institutions Deregulation and Monetary Control Act exempting federally-chartered savings banks, installment plan sellers and chartered loan companies from state usury limits. This effectively overrode all state and local usury laws.

The Alternative Mortgage Transaction Parity Act (AMTPA) was enacted as part of the Garn St. Germain Depository Institutions Act of 1982.  AMPTA preempted any state law that restricted alternative mortgage financing.  This law enabled predatory mortgage lenders to make seemingly affordable loans, like adjustable rate and interest-only loans that lead to foreclosure for so many people. Also state-chartered banks were given the same ability to charge out of state customers the highest interest rate permissible in the state where the bank is headquartered.

Federal law delivered the death blow for a state’s usury limit in 1999 with the Gramm-Leach-Bliley Act, a section of which permitted local banks to charge the greater of the state usury limit or the rate charged by an out-of-state bank with a branch in the state.
The sky is the limit!

Now let’s see who was in charge when all this happened. In 1980, Democratic President Jimmy Carter signed the DIMCA and in 1999 Democratic President Bill Clinton signed the Gramm-Leach-Bliley Act. So much for blaming this financial mess on just the deregulation movement of the conservative Republicans. Democrats are right in there with them.

I usually write about finance but I saw this article the other day on fusion centers and I thought I would share this with you.

We should always follow the money. The way we spend our resources defines who we are. If you as an individual like to buy lots of books, it defines you just the same way you are defined if you like to buy lots of clothes. This nation likes to buy safety and it is under the illusion that it can do so by putting people in jail. According to a study by Office of Justice Program’s Bureau of Justice Statistics, almost 7.2 million people were under federal, state, or local probation or parole at the end of 2006.  298 million people lived in the United States in 2006. The rate of incarceration in prison at year-end 2006 was 501 sentenced inmates per 100,000 U.S. residents, up from 411 in 1995. This amounts to 1.5 million people which means 8.7 million people were involved either in prison or on probation in the United States in 2006; that is 3% of the United States population was in the criminal justice system in 2006.  That is the highest proportion of population involved in the criminal justice system in the world. In countries such as England, Italy, France and Germany, the incarceration rate is about 1 in 1,000 persons. In the United States it is about 1 in 143 (Justice Anthony Kennedy in a speech before the American Bar Association Annual Meeting, August9, 2003). 

The amount of money we are spending to keep citizens in jail is enormous. The cost of caring for all those in prisons is over $40 billion a year (again Kennedy). And this doesn’t include the other costs of courts, probations, and homeland security. Billions of dollars are being poured in Homeland Security and when that happens, the money is often spent to watch Americans in America. The federal government has set up fusion centers around the country who conduct research and investigations on suspicious Americans. Homeland Security tell us: “As of February 2009, there were 58 fusion centers around the country. The Department has deployed 31 officers as of December 2008 and plans to have 70 professionals deployed by the end of 2009. The Department has provided more than $254 million from FY 2004-2007 to state and local governments to support the centers.”

This is getting scary. The ACLU in Virginia exposed a controversial report from Virginia’s Fusion Center assessing the threat of terrorism not just from overseas but domestically.  The ACLU, which brought the report to the public’s attention several weeks ago and recently urged government officials to investigate the Fusion Center, had criticized the report for exaggerating the threat of terrorism in Virginia and using baseless generalizations to connect racial minorities, college students, and religious organizations with threats of terrorism in the state. Take a look at this. These types of investigations are being financed throughout the country. The way we spend our money defines who we are. And right now we are spending far too much money on watching Americans whose only crime is to disagree with the political elites of this country.