Saturday, July 7, 2018

Modern Day Loansharking and Obama Treasury Secretary Timothy Geithner

Mister Banker Mister please, how much does money mean
Won't you reconsider Mister Won't you do this thing for me
Mr. Banker 

-Lynyrd Skynyrd
I've written before that if you were a criminally minded sort in today's environment you'd be a fool to join the Mafia or other illicit organizations. These days, the benefit is no longer worth the cost. Working outside the law you have to worry about informants, violent paranoid co-workers, electronic surveillance up the wazoo, and long prison terms. That's no good. If you have wicked urges be smart and work inside the law. For example, if you want to assault or kill people, become a cop. You will be virtually untouchable.

If you want to help people gamble away their cash so that you can make a profit, open a liquor store and run the state sponsored lottery. People will give you money for nothing and thank you for the opportunity. And if you want to loan money at extortionate rates, interpreting contract terms to your benefit while emptying your client's sucker's pockets, then do what former Obama Treasury Secretary Tim Geithner did and open up/run a finance company that markets predatory loans to impoverished and/or desperate people.

The check arrived out of the blue, issued in his name for $1,200, a mailing from a consumer finance company. Stephen Huggins eyed it carefully. A loan, it said. Smaller type said the interest rate would be 33 percent.

Way too high, Huggins thought. He put it aside.
A week later, though, his 2005 Chevy pickup was in the shop, and he didn’t have enough to pay for the repairs. He needed the truck to get to work, to get the kids to school. So Huggins, a 56-year-old heavy equipment operator in Nashville, fished the check out that day in April 2017 and cashed it.

Within a year, the company, Mariner Finance, sued Huggins for $3,221.27. That included the original $1,200, plus an additional $800 a company representative later persuaded him to take, plus hundreds of dollars in processing fees, insurance and other items, plus interest. It didn’t matter that he’d made a few payments already. “It would have been cheaper for me to go out and borrow money from the mob,” Huggins said before his first court hearing in April.
Most galling, Huggins couldn’t afford a lawyer but was obliged by the loan contract to pay for the company’s. That had added 20 percent — $536.88 — to the size of his bill.

“They really got me,” Huggins said.

Mariner Finance is owned and managed by a $11.2 billion private equity fund controlled by Warburg Pincus, a storied New York firm. The president of Warburg Pincus is Timothy F. Geithner, who, as treasury secretary in the Obama administration, condemned predatory lenders.

“It’s basically a way of monetizing poor people,” said John Lafferty, who was a manager trainee at a Mariner Finance branch for four months in 2015 in Nashville. His misgivings about the business echoed those of other former employees contacted by The Washington Post. “Maybe at the beginning, people thought these loans could help people pay their electric bill. But it has become a cash cow.”

The market for “consumer installment loans,” which Mariner and its competitors serve, has grown rapidly in recent years, particularly as new federal regulations have curtailed payday lending, according to the Center for Financial Services Innovation, a nonprofit research group. 

Among its rivals, Mariner stands out for the frequent use of mass-mailed checks, which allows customers to accept a high-interest loan on an impulse — just sign the check. It has become a key marketing method. The company’s other tactics include borrowing money for as little as 4 or 5 percent — thanks to the bond market — and lending at rates as high as 36 percent, a rate that some states consider usurious; making millions of dollars by charging borrowers for insurance policies of questionable value; operating an insurance company in the Turks and Caicos, where regulations are notably lax, to profit further from the insurance policies; and aggressive collection practices that include calling delinquent customers once a day and embarrassing them by calling their friends and relatives, customers said.

Finally, Mariner enforces its collections with a busy legal operation, funded in part by the customers themselves: The fine print in the loan contracts obliges customers to pay as much as an extra 20 percent of the amount owed to cover Mariner’s attorney fees, and this has helped fund legal proceedings that are both voluminous and swift. Last year, in Baltimore alone, Mariner filed nearly 300 lawsuits. In some cases, Mariner has sued customers within five months of the check being cashed.

Read the whole article here.

Now as a Democrat presumably Geithner was supposed to be one of the "good guys" no? He used to speak against predator lending. Ha! His business model is of course benefiting from Trump driven changes in regulations around usury and payday loans. This is an excellent example of predatory capitalism or more descriptively vampire capitalism. People are making money not by providing capital for business expansion but by extracting every last cent from people who are already barely keeping their head above water. 

To the extent that people were distraught that some voters in 2016 were cynical about differences between the major party candidates and the interests they represent, Geithner's business model and the apparent lack of opprobrium shown by Democratic politicians and consultants should explain at least some of that voter cynicism. When f*****g poor people out of their money is just acceptable good business practice, something is wrong with the moral basis of the entire American political-economy. Trump is a symptom, not a cause.
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