Boiling Frogs

Posted: May 26, 2007 12:01 AM
Boiling Frogs

To tell you the truth, never once have I been tempted to boil a frog for any reason, but it would not surprise me if thousands delight in the practice. You know… those folks who like to bury cats up to the neck and then run them over with a lawn mower.

Don't get me wrong. It's not as if I have a spongy place in my heart for frogs, so if you love to kick back on Friday night with a beer and a plate of steaming frog legs … knock yourself out. Edna, my maternal grandmother fed me frog legs when I was about five years old; leading me to believe it was chicken until they were down the hatch. She was lucky, because she could have gotten them back in a big hurry.

In any case, perhaps you have heard the little factoid, that if you drop a frog into a pan of hot water, it will jump out like a bolt of lightning. However, if you put the frog in a pan of cool water, and then slowly increase the heat, it will stay there, dumb and happy, until it boils to death.

I hate to break it to you, but we are all frogs. America is a big pan of water, the heat has been steadily increasing, and just like our green friends, we are heading for a boil. Some of us are sitting in a cooler part of the pan, so the cooking has not become an issue worthy of concern; however, others have noticed that their skin has begun to slough off.

If we are the frogs and America is the pan of water, then exactly where is the heat coming from? The answer, of course, is something that every one of us must deal with to one degree or another. Those who no longer deal with it have already boiled beyond repair. I am speaking of our banking (finance) and insurance industries, two of the most powerful forces in our lives.

Perhaps it will seem odd for a conservative fellow to be harping about "the man." Nevertheless, this is something that has been gnawing on my common sense detector for a long time, because frankly, it just makes no sense at all when you step sideways and peek around the curtain. Yet we have all been taking it, some segments of our population more severely than others have, but it affects everyone in some manner.

Let us examine the banking (finance) business first. The lion's share of financial consumers are not suffering to the degree that others are, but everyone has the potential to walk in these shoes on any given day. There are simply no guarantees in life, that if your life happens to be dancing along, carefree, that it will continue that way.

If you fall into the category of being a credit risk, somewhere on a sliding scale of credit scores, you will experience a few degrees of heat. This is simply one of those areas, which makes no common sense at all. If you are at risk for having potential difficulty in meeting your obligations, the industry believes that the only logical thing to do is to make it even more likely for you to fail, by giving you credit at a higher rate of interest.

The man says, that we must charge a higher rate of interest because the risks are greater. Unfortunately, this is one of those self-fulfilling edicts. A family, already struggling to stay on an even keel will have larger payments; in some cases double, what "credit worthy" families must endure.

There is no doubt; many are simply irresponsible with credit, buying this and that without regard for how they will pay for it. Yet for a great many, the credit problems have come due to circumstances other than irresponsibility.

You may believe that the logical thing for these people is to make due without debt; however, the sad fact of American life today is that for average folks, buying a home or a later model car is very difficult to accomplish without debt. A five-hundred dollar car, instead of a ten-thousand dollar car, might seem the answer; however, employers are not inclined to tolerate frequently late arrivals, no matter the wisdom of living within a cash budget. Inexpensive used cars are inexpensive for a reason; namely, that they are incapable of providing reliable transportation.

How many Americans today could save enough to purchase a home with cash? When homes sold for five, ten, or fifteen-thousand dollars, such was a real achievable goal. Work hard and save for six or seven years and hooray, mission accomplished. Today, with rents approaching or exceeding the level of house payments, there just is not much cash left over for the mattress.

So just to be clear, I smell a rotten fish in the idea that higher payments make sense in providing credit to people who have difficulty making payments already. Logic screams for the opposite position, to make it "easier" for people who are already struggling.

Perhaps a more "logical" solution would be to provide more affordable credit, while removing some of the freedom to screw it up. Evaluate the paycheck, the portion which can be used for credit purchases (cars, homes, school, whatever), and deduct the payment directly from the payroll.

People need cars, but they do not need Hummers. People need homes, but they do not need six-thousand square feet on the beach. The more credit worthy you are, the more flexibility you have to manage your own budget and credit decisions.

While we are on financial institutions, I cannot move on without talking about fees. This same mentality exists in dealing with checking accounts and credit card accounts. If you happen to screw up keeping track of your checking account, it is possible to get into trouble very quickly.

For many people, there is not a lot of leeway in available funds. If something becomes fouled up, a veritable nightmare can begin. For example, say you think you have a hundred bucks in the bank, and so you write eight checks to pay bills, buy bread and milk, pay for school lunch, or whatever. In reality, you forgot that last week, you had to pull eighty dollars out of the ATM to have your broken car towed from the side of the highway.

The grocery check comes in for $10, and all is well. The other seven checks come in behind it. The school lunch check was $20, and bang, the bank does you a favor by paying it, but they charge you $28 to punish you. Now you have a -$38 balance. The other six checks hit, and the bank decides not to pay those, and they send them back, but not without deducting (6 x $28) or $168 from your balance, which is now -$206, just to make sure you learn your lesson.

Now payday is five days away, but you have $220 in a savings account. You move it over to the checking account to bring things above zero, which leaves you with $14 as a balance. Unfortunately, the trash company sends their bounced check through again, which is $16. The bank sends it back again, but deducts $28 from your account, putting you at -$14, below zero again.

So what have we witnessed here? There is obviously a problem, and you should have kept better track of your account, but my logic detector is buzzing at the thought that the solution to a lack of funds to cover a customer's mistakes is for the bank to suck even more funds from the account, right in the middle of the crisis.

Credit cards are much the same. You are near your credit limit, you screw up and forget to make your payment on-line before 2:00 pm EST (you made it at 5:00 pm instead), and bang… the credit card issuer socks your account with a $38 late fee. Of course, this puts your balance above your credit limit, and bang… the credit card issuer socks your account with another $38 fee.

Of course, you have now violated the terms of service, which forces them to increase your interest rate from 14.9% to the default rate of 32.9%. If you keep your account current for the next six months to a year, your account might be eligible for a standard interest rate. Well, you do not have to take such abuse, because you can simply pay off the stupid card and take your business elsewhere. Yeah… that must be why you were carrying a high balance on your card account, because you had a load of cash sitting in your checking account, and you simply love the idea of paying interest.

Insurance (no offense to insurance industry workers) is a scourge on our souls. What drives me completely bananas is that we pay enormous premiums for various insurance policies, and then we end up paying for whatever it is anyway.

Take health insurance for instance. For a time, I was paying upwards of $800 per month to insure my family, which is more than $9000 per year. We barely had reason to see the doctor, but the few times we did, I still had to pay because of the deductible and the co-pays.

This seems especially infuriating when things are running a little tight anyway, and all of a sudden, I have to write a doctor check for two or three hundred dollars, after having paid the insurance company some $27000 over the past three years.

The explanations for all of these assaults on logic have roots deep in the bedrock of our free enterprise system. Unfortunately, there is a distinct odor of gouging, and these monstrous industries are doing it because they can.

I am not against profit, and I certainly disdain government over-regulation of business or personal freedom. Nevertheless, I have to believe that at some point, the frog suddenly realizes that he has been boiled, and surely, that must really piss him off.

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