Tuesday, June 21, 2011

With Two-Tier System, Credit Bureaus Make Joke Of 'Free Market' -- Again

By Manifesto Joe

There are many things that make a mockery of the notion of "free markets." But a new twist on this, courtesy of our three beloved major credit bureaus, has been made public -- the bureaus operate two systems, one for the rich, powerful and famous, and another for the rest of us.

Economic folklore has it that in a "free" marketplace, there's no room for "politics" or favoritism. Everything is strictly facts and cold, hard cash. That kind of marketplace exists in economics textbooks and nowhere else. Deregulation has never put lobbyists out of their business, which is clearly to influence public policy in a manner favorable to whichever sector they represent.

On to the credit bureaus: In a "free" marketplace, treatment is also supposed to be fair -- just the facts, ma'am. Everybody is supposed to be dealt with the same.

The New York Times reported last month that Equifax, Experian and TransUnion all keep a sort of "VIP" list, according to consumer lawyers and legal documents.

Here's a link to the story.

The favorable list includes people such as celebrities, politicians and judges. It's the Orwellian wisdom that all animals are equal, but some are more equal than others.

So, what did the credit bureaus themselves have to say? Transunion and Equifax said all consumers can speak to a live representative. Don't you just love doing business over the phone with Dennis from Bangalore?

Experian was different, denying that they have such a list. According to the story:

David Szwak, a consumer lawyer in Shreveport, La., provided sworn testimony from former Experian employees that the category existed.

At least all the above is consistent with one's experience. It seems like when you call any company or agency nowadays, they either deny the situation or they give you over to some phone jockey who has no firsthand knowledge of anything.

So, what is the practical effect of such a preferred list? Preferential treatment, of course. If there's an error on your credit report, it's much easier to fix it if you're a VIP. As a result, a VIP's credit score is likely to be higher than it is for the rest of us, no matter what the individual has done. And then, it's easier to get loans, mortgages, credit cards, etc. It's the old story of the more you have, the more you get.

A classless society?

That's the toxic and pernicious idea that "free-market" enthusiasts would generally have market participants believe.

Although this idea is a delusion, it has very deep roots in American culture. In 1981, economist Robert Lekachman discussed this phenomenon in simple terms. The United States is a young country that, through most of its history, has had a frontier. "Political" equality, at least for white males, was considered a given, not something that was part of what workers had long been fighting to win.

"A worker seemed to have every opportunity to become independent, to rise from his class rather than with it," Lekachman wrote.

He went on to discuss a 1906 classic by German economist Werner Sombart, Why Is There No Socialism in the United States? Lekachman quoted Sombart:

"The economic success of American capitalism has made the average worker into a sober calculating businessman without ideals. ...

"America is famous for its rags-to-riches stories. But how many Carnegies are there? The self-made man is largely a myth. 3 in 10 sons of blue collar workers will make it to white collar status. But only 1 in 10 will achieve longer-range mobility."

Lekachman wrote, "Sombart observed that the United States was 'born Bourgeois.' It didn't inherit any of Europe's pre-capitalist social groupings -- peasants, artisans or aristocrats. The U.S., more than any other country, enshrines the individual aim of owning property. ..."

That is, if you can get a loan or a mortgage. Here, class will tell, and the folklore of American equality of opportunity is rendered nonsense. Being rich and powerful counts, and it always has. If you think you're on a level playing field ... well, I guess you can call up one of the major credit bureaus for a report. They will let you talk to a live representative.

Manifesto Joe Is An Underground Writer Living In Texas.


Motivated In Ohio said...

The self made man, probably went to college with a Pell Grant or the GI Bill, got a Business Loan at a low rate from the Small Business Association, takes their goods to market on publicly funded roads, and then takes a vacation to a National Park, bought and paid for with U.S. dollars.

There is no such thing as a "free market" that is something that people on the right like to tell themselves. Ayn Rand and her disciple Alan Greenspan have lied to the American People for years.

Jack Jodell said...

The "free market" is a myth. All capital is manipulated and managed solely for the benefit of the rich, and to hell with anybody else.

lokywoky said...

What I want to know is who exactly appointed the credit bureaus to be the gods of deciding who gets credit and who doesn't? And who made up their draconian rules>?

A while back, my daughter and I were starting a business and in the process, the very act of looking for financing drove both of our credit scores down. She re-financed her house - and because the bank didn't report the new loan right away - she got downgraded because she didn't have a mortgage. Huh?

I financed a piece of property I owned - I got downgraded because the loan was too small. What?

We applied for an SBA loan. The application caused our scores to go down.

Didn't get the loan so I used some cash from another source - that did not make my score go up that's for darn sure.

The whole thing is a scam and a gigantic rip-off.

Cletis L. Stump said...

People are getting desperate. Desperate people tend to stop talking. We need to fix the Jericho Road (Hat tip to MLK) real soon.