American Capitalism in Action July 15, 2009Posted by Dwight Furrow in Dwight Furrow's Posts, Ethics.
Tags: abusive banking practices, American Capitalism, medical insurance reform
Here are two examples of American Capitalism in action. Via USA Today:
Even as regulators crack down on abusive mortgage and credit card practices, another type of lending threatens to mire consumers in a credit trap.
It’s called “courtesy overdraft” and has long been used by banks to automatically pay transactions that account holders don’t have the money to cover — and then charge them a steep fee. For years, banks have made it easier for customers to overdraw their checking accounts, aided by a cottage industry of consultants who make big money by helping to wring fees out of consumers, a USA TODAY analysis finds. […]
….Has banks’ pursuit of profit gone too far? Ken Vollmer, 49, of Augusta, Ga., thinks so. He sued Wachovia this year, alleging it “purposely structured transactions to make money.” A merchant mistakenly put a hold on his funds, then the bank cleared transactions from high to low, triggering hundreds in overdraft fees, he says. Spokeswoman Richele Messick says Wachovia processes transactions in an “appropriate” way and will “vigorously defend” itself in the case. […]
This is how this perfectly legal scam works. Via Kevin Drum:
Just to make this clear: Say you have $100 in your checking account and four checks arrive at your bank in the following amounts: $15, $20, $30, and $150. If you clear them in that order, the first three are fine and only the last one incurs an overdraft. If you clear them in the opposite order, all four incur overdraft fees. Ka-ching! That’s why banks like to clear high to low.
This seems like an easy problem to solve. Why doesn’t Congress prohibit this practice? Well, I don’t suppose the folks bouncing $10 checks are big campaign contributors.
And on a related topic:
Over the weekend Bill Moyers interviewed Wendell Potter, the former Cigna executive who testified before congress last month. It is a hard hitting narrative of the deception and thievery that passes for medical insurance today.
In his first television interview since leaving the health insurance industry, Wendell Potter tells Bill Moyers why he left his successful career as the head of Public Relations for CIGNA, one of the nation’s largest insurers, and decided to speak out against the industry. “I didn’t intend to [speak out], until it became really clear to me that the industry is resorting to the same tactics they’ve used over the years, and particularly back in the early ’90s, when they were leading the effort to kill the Clinton plan.” […]
Looking back over his long career, Potter sees an industry corrupted by Wall Street expectations and greed. According to Potter, insurers have every incentive to deny coverage — every dollar they don’t pay out to a claim is a dollar they can add to their profits, and Wall Street investors demand they pay out less every year. Under these conditions, Potter says, “You don’t think about individual people. You think about the numbers, and whether or not you’re going to meet Wall Street’s expectations.”
Can’t you see that invisible hand of Adam Smith just doling out wealth fairly so that every one gets what they deserve?
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