fractional reserve banking in a nutshell:

1. Banks create credit (temporary money) out of thin-air by lending it out in exchange for IOUs as collateral and for interest. This is inflation. The purchasing power comes from all dollar holders including the poor. This is theft by inflation for the sake of banks and borrowers and the government. Here is where the boom part of the boom/bust cycle originates.

2. As loans are repaid, the credit (temporary money) goes back to thin-air except for the interest paid to the banker (BTW, where does the interest come from?) This is deflation which forces prices to drop for businesses. This is the bust part of the boom/bust cycle. Does it repay those whose purchasing power was stolen during the boom phase? Perhaps. Perhaps not! But in the very best case, it is an involuntary “loan” of purchasing power. But also it threatens their jobs via falling prices.

Fractional reserve banking has lasted a long time partly because it spreads the corruption widely.

Hence, don’t be so proud of your high credit scores. You have been suckered into theft by a corrupt banking system. [Not living on credit does not a thief make. G-d knows where you get this from.]

The poor are tossed a few crumbs in compensation via socialism and some people complain.

Let’s abolish the government backed banking cartel and the number of poor would soon be minimized. [Agreed, but this is not an argument for personal debt or irresponsible conduct.]

“Community Reinvestment Modernization Act of 2009.”

There’s no end to the stupidity/perfidy – or the credit/debt.

Dubious, and gullible.

A Congress without the compunction to investigate its own members’ unethical and criminal behavior (see Charles Rangel, Nancy Pelosi & husband, et al – well, perhaps the “et al” explains it all) will not hesitate to buy themselves more seat time in the halls of power by distributing ever more credit – but first, debt relief.

Barney Frank’s “cramdown” legislation is not likely to go anywhere or garner any White House support for being too transparent. The president has shown himself to be fonder of obfuscation in the pursuit of the obvious.

Don’t be so proud of your high “credit” scores then. [Most certainly DO!]

Ilana, is this too controversial a point or do you disagree? Rothbard’s The Mystery of Banking makes this clear,IMO.

Meanwhile, feel smug toward the victims who have been tossed a few socialist crumbs to corrupt them. [Come again?]

Too bad he never worked in sub-prime mortgages as I did. Many of the applicants I dealt with were “victims.” That is, they had poor credit scores primarily because they refused to pay their debts! Or they had poor self-control. They would go out and buy a boat/car/ATV on credit soon after being qualified for a home mortgage. What they didn’t realize was that lenders pull a second credit report immediately before closing. They do this to confirm nothing has changed in regards to a borrower’s ability to pay. Sometimes the changes would be positive. For example, a borrower could off old debts or have a lien released. But many times the changes on the credit report were negative.

When you combine ownership of the lenders with the power of the printing press Washington can simply order the banks to lend money to whomever they please. I expect Washington will order the commencement of one final blast of lending next year (along with a big surge in government hiring) to try and improve the economy ahead of the ’10 elections.

This of course will deepen the already considerable difficulties the nation faces, but allows the day of reckoning to be pushed back a bit further. The endgame approaches, and it’s not going to be pretty.

“After all, those who can barely pay are the most profitable customers. ”

I will bet any Loan Shark will agree LOL