Tegucigalpa    

Signs of the fire were still everywhere, even though the space was bustling with activity where the shopkeepers were hammering, sawing, and constructing rough plywood type structures and shelving to hold their wares.  Next door another market had also been damaged and the bent steel and twisted sheeting was still being cleaned up and wheelbarrowed away.  The small merchants we met with under a blue tarp (the common cloth of disasters large and small) felt some satisfaction at the fact that a recent meeting with the Mayor had gotten the cleanup moving next door.  

What the merchants had on the agenda for discussion with us was their problem with banks.  They weren’t the only problem, but they were the boulders in the road to recovery.  To restock would cost each of them about $6000 USD.  They were worried of course that under their tarps their customers would diminish with the heat until some semblance of order was restored or the new building was long on the way.  Many of them had existing bank loans at 19% which they couldn’t pay and had been given some limited (and expensive!) forbearance for three months, but in trying to refinance to restock the same banks were now saying they wanted 28%, and they all wanted it now.  A look around made it clear that repayment was impossible.  Dilcia Zavala, ACORN’s organizer, said there was a law that mandated forbearance for up to a year after disasters, but even meetings with the Mayor and Governor had not seemed to convince the banks to relent from their harsh terms.

These banks were not local moneylenders.  Talking to the small vendors the names sometimes sounded local like Banco Pro Creidito, but that bank was German.  HSBC and Citi both were involved and have visible offices in central Tegucigalpa.  This was big business and a 28% it was usurious.

We had research to do, but clearly the only hope that these women had to not end up as sharecroppers in the square for international banks the rest of their lives was if they had some leverage.  The only leverage seemed to be to force the government to give the law enough teeth to buy some time so that they could survive in the marketplace long enough to get on their feet, even though they might be shackled later with 28% interest.

They call this disaster profiteering for a reason!

New Orleans

In recent years sitting across the table from banks and sub-prime lending companies, we had this argument frequently over what was called “stated income” loans (I cover this at more length in my book, Citizen Wealth). Stated income allowed the potential borrower to prove their income in a variety of ways that substituted for the simple and standard W2 that a direct employee could provide.  This allowed tipped employees as well as self-employed workers to prove their incomes without W2’s.  The fact that many of the companies did virtually nothing to supervise the broker networks “manufacturing” of stated income loans was the problem (New Century had half of its portfolio in stated income loans right before the collapse!), not the existence of the loan itself.

The casualization of the workforce has increased the number of workers in self-employed categories along with the arcane definitions in labor law.  Not only do these self-employed categories include fancy jobs (though not necessarily high paying) as artists, musicians, consultants, and investors, but also straight forward jobs like taxi drivers, construction workers, many healthcare workers, some hospitality workers, and a pile of others.

Of the more than 20.4 self-employed workers (and even with the most modest family calculations we could double or triple the impact here), some already own homes, but for those attempting to access the assets to create citizen wealth, this arbitrary credit refusal is unjust, inequitable, and bad public policy.

Fannie Mae seems to be part of the problem here.  David Streitfield’s article includes this:

A Fannie spokesman, Brian Faith, said tighter regulations screened out those unprepared to be owners.

“One of the important lessons learned in the past few years is that it is not enough to help a borrower own a home,” Mr. Faith said. “We must also help ensure that they will be able to stay in the home over the long term.”

If there is a prize for gratuitous and meaningless statements for the day, then here’s to Brian Faith!  Not only were these NOT the lessons learned in the “past few years,” but even arguably if they were, Fannie and the rest of the gang are doing NOTHING to “help ensure” folks who want to own and are qualified to somehow achieve sustainability and security “over the long term.”  Please send me a copy of THAT program and its non-existent guidelines?

In the meantime, as I often say, “there’s no substitute for good judgment,” and that’s supposedly what these folks collect fees and interest to exercise.  Get at it!