Lyndon B. Johnson’s “War on Poverty” was initiated 50 years ago, but poverty rates have barely budged in America in the absence of help from one of the contributing factors to the war: the banks. This week marks the milestone, but it doesn’t mark any significant progress.
The poverty line has dropped to 15 percent, when the level was at 19 percent a half century ago. The Atlantic reports, the University of Kentucky’s James P. Ziliak and the Obama administration’s Jason Furman agree that “the biggest potential gains that could be made on poverty would be in raising market incomes.”
American families live pay check to pay check. Economic studies confirm 3 percent of full-time workers are in poverty. The unemployed suffer poverty three times as much at an alarming 33 percent.
Financial institutions such as Ally Bank and Bank of America have deepened the holes in consumers’ pockets, not helping the “War on Poverty.” The line of poverty is high with no help from banks in sight. Ally Bank spiked interest rates on car loans signed by minority buyers.
Auto loans rank third among consumer debt. The Justice Department and the Consumer Financial Protection Bureau reports Ally allowed car dealers to raise interest rates based on the credit profile. Minority car buyers wound up paying $200 to $300 more over the life of the vehicle. The rest of the interest payments are divided between the dealership and Ally.
Ally Bank agreed to a $98 million dollar settlement in the lawsuit alleging customer discrimination. $18 million goes toward the fine. The other $80 million is given directly to affected car buyers.
In a statement, Ally contended its car dealers did not have intentions to discriminate. The 6-year-old bank, officially named under the U.S. Bank Holding Company Act, states that contracts do not reveal ethnicity or race of consumers.
Ally did not pass the Federal Bank Reserve’s U.S. bank stress test in 2012. The test consisted of standards regarding a financial institution to support itself during a crisis. Ally’s capital was deemed not sufficient enough to continue its lending practices under an economic meltdown, according to the Federal Reserve.
Bank of America does have the capital means to ride the storms of a financial crisis with a passing grade from the Federal Reserve in 2012. The nation’s third largest bank does not get a pass from the city of Los Angeles. The country’s 2nd largest city is suing Bank of America for mortgage discrimination.
Housing ranks second among consumer debt. The court case filed last month claims Bank of America is responsible for increasing foreclosures in the city due to predatory lending to minority buyers. City Attorney Mike Feuer details how much low-income communities suffer from home loans they cannot afford. The city of Los Angeles has to cover costs for city services. There is essentially little revenue derived from property taxes.
The Los Angeles Times reports Feuer filed cases against Citigroup and Wells Fargo that same week. He accuses the financial institutions of unfair lending to minority borrowers in respect to white borrowers. The evidence lies in the ratio of foreclosed homes in each community.
Wells Fargo and Citigroup have released statements declaring fairness to all borrowers.
The nation’s top banks fuel the “War on Poverty.” J.P. Morgan, Citi Group, Bank of America, and Wells Fargo are among the institutions slapped with a $25 billion settlement. This multi-billion dollar deal is aimed at preventing foreclosure abuses. These banks led mortgage services in 2012. According to government authorities, some of the banks still have not completed all paperwork regarding bankruptcy filings.
The Federal Trade Commission’s Consumer Information website, consumer.ftc.gov, has guidelines for borrowing from financial institutions.
Both consumers and government authorities stack lawsuits against the institutions citizens call upon for lending. Taxpayers bailed the banks out of the financial crisis. Taxpayers bailed Ally Bank out of the auto industry crisis. Taxpayers face their own war, walking the poverty line with lack of help through financial support from banks.
By Teria Seah