Big banks turn to high interest payday-loans to wring American consumers for last bit of lucre

(Online Journal) -- You remember how Wall Street was going to reform itself? Stop with the loans to borrowers who couldn’t pay them back and so on. Well, before you can say subprime lending bites it, some of Wall Street’s oldest games are back with some brand new names and games, for consumers, corporations and investors, sort of an equal opportunity casino, where everyone gets screwed.

For instance, some of old Wall Street’s good old gamers, Bank of America (BofA), Citigroup and JPMorgan Chase, have unveiled some lines of credit tied to those complicated, unpredictable things called derivatives. Not to be outdone, Wells Fargo and Fifth Third are rolling out payday-loan programs for cash-poor consumers, just making it paycheck to paycheck. Imagine that. What will they think of next? Well, others are pitching new, highly risky “structured notes” to small investors. Ain’t that swell?...

Let’s look at some of Wall Street’s new names for the old games. Lenders generally tie corporate credit lines to short-term interest rates. But now Citi, JPMorgan Chase and BofA, to mention a few, are tying credit lines to both short-term rates and the nefarious credit default swaps (CDS that brought down AIG Financial Products which insured them). These are high-risk and intricate derivatives that are supposed to behave like “insurance,” paying off the owners if a company defaults on its debt. Of course the “Too Big To Fail” three declined to comment on resuscitating these lime-pits. But trust them to try them...

At the other end of the borrower rainbow, big banks are offering another pot of controversial gold: payday loans, whose interest rates can zoom as high as 400 percent, yes 400 percent. In the past, the market was characterized by small non-bank lenders (loan sharks), mainly operating in poor urban areas and offering customers advances on their paychecks (and broken kneecaps if they didn’t pay back the vigorish and/or the loan). But now big lenders Fifth Third and U.S. Bancorp started offering the old games (loans to the strapped), while Wells Fargo works to promote its payday-loan program. In fact, more big banks are jumping in the market as a flurry of recent usury laws broke the smaller players’ backs...Cont'd...LINK