Plunder, American-Style

U.S. Bank Tower--Figueroa, Los Angeles, California

It is said that the American banking system is based on confidence and trust. When banks trust one another, they lend to each other, and then all the banks’ friends get to borrow money to buy the things they want. That’s great, but some time ago, this system got quietly ridiculous. Now all we're doing is buying skyscrapers for banks. Here's how I got there...

When banks trust other banks, they extend credit to each other, manufacturers, wholesalers, retailers, and consumers like you and me. Manufacturers use their credit to buy raw materials then use those materials to manufacture goods. Wholesalers guess what we want to buy, and then borrow the money from banks to make sure they have enough stock to cover what we want. Retailers take the banks' wonderful credit and use it to buy wholesalers' merchandise, then we consumers buy these things with more wonderful credit the bank gave us -- Visa, Master Card, American Express -- and American capitalism skips along its merry way singing tra-la-la. The ugly part, which we seldom ponder, is that banks make money at every single stage in the life of a product. In essence, banks have a chance to make money at least five or six times on the same item before it ever reaches the end consumer.

Let's follow an ordinary refrigerator from manufacturer to consumer. Banks get paid in each of the following points in the young fridge’s life:
1. Manufacturer needs loan for parts, payroll, and overhead before they can make the first refrigerator. Bank makes loan; bank gets repaid later.
2. Wholesaler needs capital to buy refrigerators to sell to retail distributors. Bank makes loan; bank gets repaid later.
3. Distributors need money for big trucks and drivers to ship refrigerators to retail stores. Bank makes loan; bank gets repaid later.
4. Retailers need credit to pay wholesalers and distributors for refrigerators they will keep in stock and put into the stores where end consumers can drool over them. Bank makes loan; bank gets repaid later.
5. You want a new refrigerator. You go shopping, and find that the latest and greatest fridges can all talk to you and all the other gadgets in your house, as well as keep track of what kind and how much food you keep in the fridge, and even go online and order more when you run out. Wondering how the hell you ever lived one freaking day without THAT, you whip out your plastic and take that sucker home. When the retailer swiped your card, the bank made you a loan for the purchase amount and the bank gets paid back for thirty years with a predatory rate of return on your purchase because you only pay the minimum payment on your credit card bill every month.
6. Credit Card-issuing banks charge retailers an override on the purchase price of your new fridge (this is in addition to the interest they collect from cardholders). In addition to the money they make from collecting your interest, therefore, the bank also pockets another 3-4% of the refrigerator’s retail price… which YOU paid for because that amount was already built-in to the retail price of the unit. Now go ahead and add all the invisible and incalculable fees upon fees: transaction fees, account set-up fees, participation fees, late fees, overlimit fees... the list goes on ad-nauseum. Makes you feel real warm and fuzzy inside, does it not?

That, my friends, is why all the tall buildings downtown have bank names on them. The credit crisis must be pretty darn big to throw a monkey wrench into a scam that beautiful. This system, the banking system -- not American car companies, not distressed homeowners in imminent risk of foreclosure -- is where George Bush, Hank Paulson, Ben Bernanke and the US Congress voted to focus the mighty laser of financial assistance in our time of need.

THANK GOD OUR GOVERNMENT TAKES CARE OF US.