You generally can't depend on an organization to fix itself. The members of it are too vested and can't be objective. It's why companies hire consultants. So without further ado I offer my unsolicited consultative advice to the banking industry:
1. All lines of credit should have fixed terms. Notice how secured credit has fixed terms--home loans must be paid off within 15 - 30 years. Car loans anywhere from 3 - 6 years. Fixed terms fix your payment. Unsecured credit however has an unlimited term--if you never wanted to pay off your credit card you don't have to. And the banks prefer it that way. In their current format, banks want consumers to keep paying minimum payments. This allows interest to accumulate on the account thus making the bank more money. The assumption is that the consumer will eventually pay it.
If this recession has taught us anything it's that this assumption is wrong. While banks continue to lend, they have no capital to do anything else so long as people aren't paying. Outstanding consumer debt equals no capital for the bank to invest or re-lend. Thus, banks should force people to pay by setting payments based on the amount outstanding and the number of months before the account "expires" (the same date the card expires would be one way to do this). This would keep money in the bank while also helping consumers manage debt.
2. Change lending practices. Lenders generally lend money and charge more money if the debtor is deemed "risky." But why are they risky? BECAUSE THEY MIGHT NOT BE ABLE TO MAKE THE PAYMENTS! So what sense does it make to charge higher interest? I get the whole "higher risk, higher reward" dynamic. But more often than not, the risk "comes true" meaning the "reward" never comes. It makes no sense to charge the person I'm really confident will pay me back less money than the person I know is iffy--and if the person is iffy why lend them money in the first place?
The answer should be simple--lend people with iffy credit less money and charge them the same interest as everyone else. Coupled with a fixed term, force them to pay the money lent back, allowing them to build their credit and allowing the bank to take less risk. Banks can make their money and take other rewarding risks in other ways (business loans for example) rather than charging some college kid 22% interest.
3. Put free money in the Black community. I've said it before and I'll say it again: if spending is really what will get this country (and our world) out of recession, give the money to Black folks. While at the Nike outlet on 87th and Cottage recently (to make a return) you would never know there was a recession. People were spending money like it was going out of style and charging credit cards if they had them. Black folk will spend money to look good and eat good--Black people in America spend more money than any other group despite representing less than 13% of the population. Black spending will spur white investment and development and Latino employment.
One can say this would be an utter waste--and that's the point. Giving out say $1 trillion interest free to the Black population of America, even if given away in equal shares, will end up being $10 trillion once it's "put to waste" in Black folk's hands. Chains, rings, clothes, shoes, rims, cars--Black folks in the Midwest alone would save the auto industry from collapse if given free money. Eventually all those that sell this "wasteful crap" would be flush and would do what they do--reinvest in their businesses or invest in general. Wall Street would skyrocket. There would be an abundance of jobs, one because some Black folk would just outright quit after getting free money and two because businesses would grow to meet the demand.
These things will never happen because of greed, stupidity and Al Sharpton. Sure #3 sounds racist on its face, but it's no less true than the fact that incest is legal in Kentucky. This is the path we need to take to rescue or financial woes.
I'm the meanest, prettiest, the baddest mo-fo low down around this town and I approve this message.
Sho-Nuff
