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Sunday, December 28, 2008

What's wrong with finance in America

I didn't plan to post today, but three things moved me to do so. The first was the amazing New York Times story about Washington Mutual's mortgage lending policies, which is yet another parallel to the stories of Madoff, Enron, and the Harvard endowment. The huge Washington Mutual operation, it turns out, did not even make a pretense of making sound loans to people who could pay them--they simply made as many loans as they possibly could. The whole story is evidence of the extent of the rot within our entire financial system, which, I am beginning to think, may have to rebuilt from the ground up like the city of New Orleans (not, I know, a reassuring analogy.) We are eventually going to discover, I think, that the whole recovery and boom of the second half of the Bush Administration was built entirely on sand.
The second was an article in the current New York Review of Books about how drug companies have managed to corrupt the process of trying out and approving new drugs. It does a great deal to explain why American health care is the most expensive in the world and why the expense does not translate into better health. It doesn't even mention, by the way, one of the biggest abuses of the system: the American decision (unique, I believe, in the industrialized world) to allow the advertisement of prescription drugs on television. But it will make it very difficult for readers to see their doctors the same way the next time that they visit them.
But my second stimulus was personal--I paid a charge bill that I received from one of our leading banks. It's a card that I don't use very often but I've switched to paying the bill online, and every time I do, I notice the same thing. After a (properly) rather complicated logging in procedure, one can click a link that shows the current balance (several hundred dollars in this case), with further links allowing one to either "view statements" or "pay bill." I naturally clicked "view statements" to see if I recognized the charges that added up to (let's say) $540.25, and I did. So I went back a page and clicked "pay bill." The new page came up with place to type in what I owed--but that space had a default amount in it. What was the default amount? Not $540.25--but $15.00, the monthly minimum. Nowhere on that page did my actual balance appear. To find that I had to go back a page again (since I hadn't committed the figure to memory.)And I did.
Now I hardly think that the software code that produced that result was an accident. Obviously the practice of inviting the customer to pay only the minimum indicates the bank's preference. Even now, with bankruptcies soaring all over the country and major banks (including theirs) drowning in bad debts, they want me and their other customers to go further into debt. That, as much as the stories in the Times and the New York Review, tells me how the United States got into the mess that it is in today.
Yesterday's post on the foreign scene appears below. Meanwhile, yesterday, in response to Hamas's decision a couple of weeks ago to halt the cease-fire with Israel, Israel has undertaken a huge military operation that has killed well over 200 people already. The renewed rocketing that followed the Hamas decision had not killed anyone, although a rocket fired yesterday (when Hamas retaliated in greater numbers) did kill one Israeli. The Israeli government has historically been proud of its tradition of disproportionate retaliation, but it seems to me neither moral nor, to date, effective. (And because I'm a consequentialist rather than an intentionalist, the latter point bothers me more than the former.)


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Bozon said...

Just stumbled on this.

Re credit cards: I noticed that software scenario, too.

I decided to just stop using one entirely, even though debit cards are less safe.

A few CCs still litter my wallet. Litter is the right word somehow.

All the best,