Draining the Swamp

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“Pssst – Do you think they’ve given up?” The slime monster arose from the fetid waters of the Potomac swamp, trailing tendrils of foul-smelling algae from its scaly skin. “Do you think they’ve stopped trying to drain this wonderful environment?” the creature asked me, as I was sitting alongside the tidal basin on a fall afternoon.

“That’s difficult to say,” I replied, only slightly startled to be addressed by a creature that should have been typecast to come out of Tokyo Bay instead of DC. “It looks like their plan is proceeding very well, and succeeding beyond their wildest dreams. By using a master of distraction to rivet the nation’s attention, no one seems to be paying heed to all of the shenanigans happening behind the curtains.”

“That’s good to hear,” said Slimey (or so I named him, though he had not referred to him (or her)self as having a name). “Mind if I sit beside you? It gets a little cold down there in the water this time of year, and it’s good to warm my bones.”

“Help yourself,” I said, though I did scoot down a bit towards the end of the bench, as much to get away from the drips streaming from Slimey’s arms and torso instead of out of concern for Slimey’s clawed limbs. I said, “You know, we don’t often get to see your kind around here. What brings you out of the depths?”

Slimey stretched, wrapped his tail over the side railing of the bench, and sat silently for a bit, as if pondering the question. Then, he shrugged and said, “Last year we heard they wanted to drain the swamp in DC. Kept hearing it again and again. When he won, we figured that we needed to move somewhere else where we would be appreciated, like maybe lower Manhattan. But then, we heard about the people he brought in, and we kept going, that fellow isn’t going to drain the swamp. He’s going to expand it. We just didn’t get it.”

I nodded, understanding the confusion. I told Slimey, “We were surprised as well. He kept talking about how the nation was being taken over by Goldman Sachs during the campaign. Berating Ted Cruz for his and his wife’s ties to Goldman. Complaining about Hillary being beholden to Goldman since she gave a speech to them. Then, POW, onto the Trump team comes Cohn, and Mnuchin, and Bannon, and other underlings, all from Goldman Sachs. The art of deception. Say one thing, then quietly implement the opposite.”

Slimey sighed. “Then there’s all that talk about how bad the banks were during the campaign, how they were getting away with murder after the financial crisis, and he was going to break them up. Do something good for the little people. But once he took office, all we hear about is breaking up the Consumer Finance Protection Bureau, and freeing up the banks from Dodd-Frank. ” Slimey held up a front limb to shield his eyes from the sun. “Don’t the “little people” see that he’s helping their enemies, and destroying their friends?”

I turned my head for a moment, looking back over the monuments of our nation’s history. I realized that never had our founders anticipated such a bizarre disruption of our national character when the avenues of this town were laid out. Then, realizing that Slimey was looking at me in anticipation of my answer, I said “Those “little people” don’t see it. They are used to only listening to their leaders on TV and the radio, and following what they say. They’ve lost their ability to analyze what they are hearing and seeing, they only believe what comes their way on Facebook. How else can they keep believing their ears when their eyes see the opposite?”

Slimey nodded, his crest flapping loosely atop his head. He turned to me and said, “There’s one thing I’m glad to see, though. That Pruitt guy at EPA, he seems like he’s our best friend.”

“How so?”, I asked.

“Well, he just seems to be turning the clock back on all of the environmental regulation of the past. We figure it’s just a matter of time before he rescinds the regulations on pollution in the Chesapeake watershed, and when he does, we’ll get all that luscious nitrogen and phosphorus coming back downstream. You wouldn’t believe how good that is for all of the green glop we love.” Slimey licked his chops as he thought of the bonanza he expects to come sliding on downstream in a year or two.

I pondered what this basin would look like festooned in green and blue growths of algae in the turgid waters. The odor it would create would match the mood in the city. Suddenly I grew tired of the conversation, and straightened my body against the bench. Slimey sensed my mood.

“Friend, I’m going to go on back to my kind” he said. “But before I go, there’s one thing I wish you’d help me to understand. Why was it that all of those evangelicals, who oppose the sins of the flesh, supported someone who cheated on his ex-wives, who curses in public, who oozes greed and lust? Someone who waxes wrath on twitter any time he’s criticized. I’ve never seen someone who epitomizes all seven of the deadly sins at once. And he’s the one with the control over the most massive military force the world has ever seen? Can you explain that to me?”

I nodded, finally having an answer that I know would satisfy this creature. “He wasn’t Hillary,”

Slimey stood up, bowed stiffly to me, and said. “Of course. That explains everything.” Then he stepped off into the tidal basin, disappearing into the dark waters, never to be seen again by me.

 

Of Subtle Snares and Nanny States

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Why is it whenever I try to explain a log-normal distribution to folks, eyes start to glaze over? You’d think that such a useful concept would be intuitively understood by everyone, right? Well, the correct response is that very few people have the background in mathematics, and particularly statistics, to understand how a log-normal distribution works, and why it is important.

Log-normal distributions are one thing. Understanding compound interest is something else altogether. That is a consumer survival skill in this day and age where it can work both for you and against you. It works for you if you use it early in your lifetime to start saving for retirement. It works against you if you depend upon borrowing in order to make it through your life. And what is amazing is the “legitimate” financial growth industry that has developed out of what the mafia used to call loan sharking. Payroll advance services, legal in many states, charge an annualized rate of interest of up to 780% (don’t use one of these services in Louisiana). But the people who use these lenders of last resort are the poor who are just trying to stave off eviction or keep the lights on, or fix a failing vehicle. They are indeed the ones who have the least math literacy, and our free enterprise business system takes advantage of their illiteracy by trapping them in a cycle of loans and renewals of loans. Then there’s the car title businesses – I don’t even want to know the details of their business model.

Now, the Consumer Financial Protection Bureau (CFPB) issued proposed regulations in 2016 that would cut down the maximum annualized interest rate, including fees for lending, all the way down to 390%. It also is requiring that lenders be prohibited from issuing new loans (with additional fees) for borrowers to pay off their old loans, and also that they verify a payer’s ability to repay a loan. Those regulations were put out for comment back in June 2016, and comments were supposed to close in October. Then November 2016 happened, and now the CFPB is engaged in an existential struggle with the Trump administration. The CFPB has been flagged as a flagrant excessive regulation generator. So as of today, no proposed final regulations have been issued.

Very few issues highlight the ideological divide between Republicans and Democrats like the issue of the CFPB. Republicans invoke the ideology of the free market, and view any interference with its exercise as a violation of their unwritten social contract to allow any predation upon society as a whole, as long as it is deemed legal. Look at sites like Forbes as exemplars of the capitalist ideal in order to receive indoctrination that the CFPB only desires to reduce the choices that poor consumers with no credit options have to meet daily needs. The CFPB is epitomizing the nanny regulatory state that is holding back economic growth.

Democrats on the other hand view the efforts of the CFPB as biblically based social justice, where the poor are protected from being preyed upon by the powerful and moneyed interests of the nation. Yes, there is an element of “We know what’s good for you” in this, in the perspective of the Democrats. Does this version of a nanny state mentality outweigh the monetary crack offered by the payday loan businesses that has resulted in the virtual slavery to the customers of the payday loan complex?

It is obvious in a capitalistic society, keeping score matters. The ultimate score keeping in this instance is the share price of the publically traded companies involved with payday loan operations. Since the CFPB announced potential regulation in June 2016, one would assume that the share price of these companies would have gone down since then had they taken the possibility of these regulations coming into effect seriously. But for two of the largest publically traded companies, their share price does not reflect much of a fear premium. In the past year, two of the largest companies have seen their share price go up by 51% and 14% apiece. In the realm of Trump, it is obvious that for the free market, anything goes.

It is doubtful that the administration of President Donald Trump will allow an agency to issue final regulations that are so opposed to the core interests of the moneyed aristocracy occupying the cabinet. So we will remain with a patchwork of state regulations – in some states, strict prohibitions against this parasitic industry are in effect, and maximum loan interest is capped at 30%. In many others, it is a wild west of freedom, and libertarians can celebrate their freedom to choose to pay annualized interest rates of 600-800% for the honor of accepting a payday loan.

What neither party recognizes is that the demand that built the payday loan industry into a $50 billion annual business is real, and we need to acknowledge that and work to provide real world business solutions. Republicans insist that the exorbitant prices charged by the payday loan providers is necessary to serve the market, since there is a high risk of default. Democrats insist that the providers of the service not be abusers of their customers, profiting exorbitantly on the backs of those who can least afford it.

I ask why do people find it necessary to resort to these lenders of next to last resort? What are the societal issues that keeps people needing to rely upon exorbitant interest and fee rate lenders, and how can we mitigate this need? It galls me to see a huge industry develop over the past few decades where it is touted as an investment opportunity, but it builds its profitability upon the backs of our poor. In our Episcopal hymnal there is a hymn which resonates with me whenever I hear it. It says,

For sins of heedless word and deed, for pride ambitions to succeed, for crafty trade and subtle snare to catch the simple unaware, for lives bereft of purpose high, forgive, forgive, O Lord, we cry

Far too often the rules in our society are stacked against the poor, and those with less education. And then we in our arrogance, blame these victims while we reap the riches they provide to the companies that profit from the subtle snares.