Movin' On Down

In the 1970s, as a very new lawyer, I moved to California. I did consumer protection; there was such a thing back then. The city of Los Angeles was still reeling from a lien equity scandal, dating to the '60s, in which unscrupulous lenders and building contractors misled homeowners into signing usurious or fraudulent contracts. Thousands of mostly elderly and minority families lost their homes to foreclosure as a result. Back then too, interest rates were calculated by a dizzying array of impossibly convoluted accounting methods--all to conceal true costs.

The personal devastation wrought by this underhandedness was great enough to become the fuel for social movement. Laws were passed requiring contracts to display the interest rate in clear, conspicuous lettering and for that rate to be computed according to a standardized method. (That's the now familiar number we call the APR.) Caps were placed on the interest that could be charged so that it did not compound faster than any working person could pay off. "Cooling off" periods--such as three days to change one's mind--were mandated for businesses where hard-sell tactics had been particularly pervasive.

Many of those laws have been constricted or ignored since. Loan-sharking has resurged with global force. With the Bush Administration's disdain for regulation, the "ghetto lending" practices of the 1960s have metastasized, spreading across class, race and regional boundaries. Intersecting with the massive pooling of mutual and hedge funds, this corruption has had international consequences that dwarf Enron and the savings and loan scandals of the '80s. If such practices began in neighborhoods where there was disrespect for the property rights of certain Americans, it's come round to bite us in the tail. We are all in the ghetto now.

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