Breach of the Social Contract
July 29, 2010
Until I studied banking and Wall Street, I was the most-useful idiot mankind had ever seen- a libertarian. People would complain about unfair deals, to which I would answer, "It's a free market." The bailouts forced me to re-examine my libertarian assumptions. A detailed study of Wall Street and modern banking and general leads me to only one conclusion: Lynch mobs should be forming.
My student loan with Sallie Mae offers a typical example of the subtle theft that occurs daily.
Unlike many people who went to law school, I have no regrets. I love what I do - at least insofar as anyone can love work. I do not regret financing my education through debt. Once I graduated law school, I began repaying my student loans.
Tonight - on the advice of someone more cynical than myself - I audited my student loans. My cynical adviser assured me that a close inspection of my loan's repayment terms would reveal fraud. He was right.
I noticed a subtle theft that had been occurring for the past few years. Unless you're an accountant or otherwise sophisticated, you might need to squint. It's worth it, though:
Loan # | Monthly Payment Amount | Current Principal Balance | Interest rate
01 | 130.80 | 7,250 | 2.47%
02 | 105.95 | 8,544 | 5.75%
My largest payment goes towards Loan 1. The interest and principal on Loan 1 are lower than the interest on Loan 2. Thus, I will repay Loan 1 before Loan 2. Isn't that backwards?
Shouldn't my largest payment go towards the loan with the higher interest rate? That's basic economics, right? Of course it is. A rational economic actor always pays high-interest debt before paying low-interest debt. This is no-brainer material.
Or I thought it was. Yet I simply paid the monthly bills, presuming some sort of good faith on Sallie Mae's part.
Is it too much for me to presume good faith on the part of a bank? And if you laugh at my naivete, how does that support your free-market [sic] values? Doesn't laughing at me for being a chump prove my point, namely that banks are evil and bankers should be hung from nooses?
Incidentally, I tried changing the payment arrangement online. I cannot do so without spending several hours printing, filling out, and faxing forms to Sallie Mae. More bad faith.
More and more, I am considering paying the interest only on these loans for the next several years; acquiring capital; and expatriating, leaving no assets in the United States that my lenders may attach in a lawsuit.
If I have to watch my back in every economic transaction, why bother? If my vote brings no change, why bother voting? Sallie Mae should be out of business, and yet they are cheating me every month.
What Sallie Mae is doing to me, they are doing to millions of others. And every bank is running this type of fraud.
I am someone who, until recently, played by the rules. I was what you wanted out of an American. I was willing to work hard to earn my way through life. The more I look at the Bailouts, and at the banal evil of Sallie Mae, the less I see the point. Why bother?
Some may say this is a childish rant, and that's fine. I've gone beyond caring what other people think. Since my arguments rely on logic, my critics are left with nothing by name-calling.
For years I've watch idiots treat partisan politics as if it matters. Obama was elected: What changed? Nothing. Banks will continue robbing you, and robbing the public. Wars will continued to be funded by deficits. Trillions will continue disappearing in the Blackwater-Pentagon black hole. Yet those of you who disagree with my position will continue loyally voting for your dictator of choice. Voting "R" or "D" symbolizes "L" - for lunacy.
Moreover, I am not alone. I wasn't the first to learn about these scams. Many others share my outrage.
Many talented Americans are considering leaving the United States. Conditions in Costa Rica and Panama are favorable; and if those countries show stability, more people are going to leave. Thailand, too, is an option.
What happens when young, would-be-hard-working people leave? Who is going to pay taxes? Who is going to prop under Medicare and Social Security? Who is going to keep the Ponzi Scheme alive?
Soon enough, we may learn that the answer is, "No one."