When banks charge morgage interest rates like credit cards… it’s called USURY

by Adrian Loveridge, small hotel owner

A couple of days ago we approached our bank about rates for a commercial mortgage and were quoted rates of between 11.5 and 14.5 per cent interest.

Yet only recently I saw an article where the banks were attempting to pressure the Central Bank to lower the interest rate paid to depositors from the current minimum of 2.5 per cent.

How can we in the private sector and Government, at least giving lip service to encouraging small businesses and entrepreneurship, tolerate ludicrous spreads like this of 9 to 12 per cent?

We are already forced to accept a level of poor service that would simply not be put up with in the countries where many of these banks have their origins: Unanswered voicemail messages and because its almost impossible to speak to a human being, lengthy and time wasting queues. There are endless delays in trying to procure critical documentation. Managers feel they have no obligation to respond to the written requests of their customers.

Small wonder that the President of The Bankers Association stated that 43 per cent of the non-performing loans were in the tourism sector. How on earth with all the other escalating costs can any small business service an interest rate of 14.5 per cent, let alone repay the capital.

This is an area that Government must intervene.

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16 Comments

Filed under Barbados, Business & Banking, Consumer Issues

16 responses to “When banks charge morgage interest rates like credit cards… it’s called USURY

  1. A policy holder

    They need to repatriate those profits!

  2. Green Monkey

    Interestingly enough, in its original meaning usury referred to not the excessive payment or earning of interest on a loan, but the earning of any interest at all on a loan of money between two parties. At one time, this was strictly prohibited, not just by the Muslim faith but by Christianity as well.

    Definition of Usury from DictionaryDotCom:

    Usury
    1.
    the lending or practice of lending money at an exorbitant interest.
    2.
    an exorbitant amount or rate of interest, especially in excess of the legal rate.
    3.
    Obsolete. interest paid for the use of money. (my emphasis /GM)

    It was only after bankers in the middle ages and over a period of many years, convinced kings, queens, chancellors of exchequer, prime ministers and presidents etc. that it was a fitting thing for their privately owned banks to be allowed to create and circulate\new money by loaning out money they did not actually have while they also charged interest on these loans that, in the non-Muslim world at any rate, the idea of charging interest on a loan became accepted as a normal business practice instead of a sin, and the meaning of usury morphed into, not the charging of interest, but the charging of excessive amounts of interest.

    Of course what amounts to excessive amounts of interest is, like beauty, in the eye of the beholder. You can bet that the what a consumer or small business man like Mr. Loveridge sees as an excessive rate of interest will be regarded as quite within the bounds of propriety by a bankster CEO.

    A Privatised Money Supply, modern Banking and the Fractional Reserve System

    [Figures and illustrations were current when written in 2002.]

    Do you know where the bank gets the $160,000 for your mortgage? It’s very simple. Someone walks over to a computer and types 160,000 beside your name. With only $27.93 of cash reserves for every $10,000 of assets (in Canada as of June 1999) the bank has just created the remaining $159,553 of that interest-earning money out of thin air. When, after 25 years of hard work, you pay off your mortgage, the $159,553 vanishes back into thin air. Not so the interest however. It vanishes into the banker’s pocket. Chartered (i.e. privately owned) banks, such as The Bank of Montreal, The Royal Bank, The CIBC, etc. have created about 95 percent of our total money supply ($589.1 billion as of Sept 1999) in exactly this way. But the cash reserves in their vaults amount to only a paltry $3.893 billion. (About $32 billion of cash circulates in public hands.) This is called fractional reserve banking, and it’s the greatest scam of all time because it creates debt for no reason other than to enrich the banking class. Its long term effect—as becomes clearer every day—is to steadily suck wealth out of the community and into the hands of a few people, a fact that bankers and most politicians stubbornly refuse to admit.

    Charging interest on money created out of nothing is, in the main, unjust and immoral, and Plato, Aristotle, Cicero, the Bible (Deuteronomy 23:19), the Koran (2:275-278), the Catholic Church at various times, many codes of law and most writers on morals have condemned it for more than two thousand years. The historical name for this evil is usury. Nevertheless bankers enjoy peace of mind because they know that the public thinks they merely lend out the savings of their depositors. In fact, banks create more than 95 percent of all deposits, for when a bank creates a loan it simultaneously creates a deposit. What banks do to justify the accusation of systematic economic exploitation is to lend out interest-bearing money of their own creation using a very thin sliver of legal tender (cash) to back it up.

    More at:
    http://www.basicincome.com/basic_banks.htm

  3. Peltdownman

    Good post Green Monkey, and even though they are making out like bandits, they still treat you as if they are doing you a favour.

  4. where is the money?

    Thanks Green Monkey

    Those are good statistics of banks without sufficient capital in the event of a correction. Switzerland just penalized two Swiss Banks for being under capitalized.

    How much do you estimate is sitting offshore in Banks or companies that flow through monies with such tax treaties as the Canadian Barbados Tax Treaty?

    For example, Barbados is the third recipient of FDI or Foreign Direct Investment after the US and UK which monies flows right through Barbadian IBC’s with as much as $57 Billion a year from Canada without much more than a 100 million being “dividended” back.

    After decades of money flowing in and out of Barbados, what do you think is sitting offshore with interest accumulating and compounding?

    Would the money be sitting in these same Banks offshore in off balance sheet situations?

  5. yatiniteasy

    One can get a 15 year mortgage of 2,5% in the US…we are out of whack in the Caribbean.

  6. fact

    BFP I usually agree with what you post but your response in this is ludicrous
    @”where is the money” – it is where anyone who does smart investing puts it…. if you were in that same situation you would do the same 😉
    @ “yatiniteasy” you are talking shit….plane and simple.

    CHALK VS CHEESE COMPARISON
    You can get a 2.5% RESIDENTIAL MORTGAGE IF you put more than 15% down of the principal. If your bank is giving you 2.5% interest rate (Prime + whatever) then you are borrowing from a bank that is a perfect example of why the US banking system failed.
    2.5% commerical property lending? In your dreams! Do some reading…
    http://www.bankofamerica.com/small_business/business_financing/index.cfm?template=real_est_loans

    What will happen in 5 years when your mortgage is up for renewal? GUARANTEED you are not getting that 2.5% rate and it will state this in your original mortgage lease.

    As for Commercial Mortgages : the average range in the US & Canada is between 8 & 12% with between 25% & 30% down. 11.5% – 14.5% is inline with what rates are for small business loans.

    For e.g. Lets say I want to buy a $500,000 commercial condominium (this actually happened last week) . I would need to put down 25% minimum (which was done) @ $125,000 leaving $375,000 in a mortgage over 30 years @ 8% with renewal every 5 years. Depending on who you bank with , the terms and conditions after 5 years varies.

    Unfortunately the small business hurdle is one MANY suffer through. Once you break through it you are home free . Demanding a lower commercial interest rate is laughable….welcome to the real world, not your dream world.

  7. Adrian Loveridge

    fact,

    I must be looking in the wrong place then!

    Steelhead Capital (Investment Advisors)

    Commercial Mortgages:

    Hotel/motel – Floating – 3.75 – 6.5 per cent interest

    Commercial (other) 3.25 per cent interest

  8. Fiction

    In this time of deleveraging and government printing of monies,

    Yakiniteasy is correct

    rates for construction loans with prudent equity of 25 per cent is just a point or two above the 30 year bond rate just under 3 per cent.

    There is no end in sight at the moment to this deleveraging,

    These are not normal times

  9. Green Monkey

    We have to stay focused on the real problem in banking

    Another week, another banking scandal. If you’ve seen the papers you’ll have seen Barclays boss Bob Diamond falling on his sword and professing his love for Barclays, the bank at the centre of a scandal about manipulating interest rates. Politicians have been expressing their moral indignation that a bank – a bank, of all things! – could do something that wasn’t entirely in the public interest. And yet, for the fifth year since the banking crisis started, the media once again managed to cough up a million words of analysis whilst completely and utterly missing the point.

    So what if Barclays manipulated Libor, the interest rate statistics that influences how much interest people pay on millions of mortgages, loans and other financial contracts? We’ve given the banking sector a monopoloy on creating the nation’s money supply, in the form of those numbers that appear in your account. Rather than getting angry that we’ve been slightly overcharged for the privilege of borrowing this money from them, maybe we should be getting angry that we’ve been put in a position where we are – collectively – forced into a position of debt to the banking system.

    We have to stay focused on what the real problem in banking is. We need to tackle the creation of money, by private profit seeking-banks, for their own short-term interest. A system like this will never work well for society or ordinary people.

    http://us1.campaign-archive2.com/?u=7396d6c5dc44c9d3b64d8265c&id=d0eefa18fc&e=2a0c5d0036

  10. fact

    @Adrian Loveridge & Fiction…
    Both of you are showing clear signs of ignorance and I would bet my left shoe that if we actually put names to “alias’s” the 2 of you would walk away with your tails between your legs.

    Just looked up your steelhead capital and you should play close attention to this:

    75% purchase 75% refinance cash-out refinance – 70%

    …there is your catch.
    Enjoy

  11. Green Monkey

    Oh dear, more evidence being produced that the banks have been manipulating the Libor rate going back to the 1980s.

    Have Banks Been Manipulating Libor for DECADES?
    Posted on July 6, 2012 by WashingtonsBlog
    Industry Veteran Closely Involved in the Libor Process Says that the Rate Has Been Manipulated for 15 Years

    We’ve previously noted that Libor manipulation has been going on since at least 2005 … and continued long after the manipulation was first reported.

    The Financial Times started reporting on the manipulation in 2007, and the Wall Street Journal in 2008 (see this, this, this, this and this).

    But as the Economist reports today, the manipulation probably goes back a lot further:

    The FSA has identified price-rigging dating back to 2005, yet some current and former traders say that problems go back much further than that. “Fifteen years ago the word was that LIBOR was being rigged,” says one industry veteran closely involved in the LIBOR process. “It was one of those well kept secrets, but the regulator was asleep, the Bank of England didn’t care and…[the banks participating were] happy with the reference prices.” Says another: “Going back to the late 1980s, when I was a trader, you saw some pretty odd fixings…With traders, if you don’t actually nail it down, they’ll steal it.”

    Given that homeowners, students, credit card holders, and other borrowers pay more when rates are higher, the banks appear to have fleeced consumers for 10 years during the entire bull run leading up to the financial crisis.

    http://www.washingtonsblog.com/2012/07/have-banks-been-manipulating-libor-since-1997.html

    Seems like complaining about a bank attempting to fleece you with high interest rates on a loan is somewhat akin to an unarmed hiker crossing the African veldt on foot and then complaining about his circumstance when a lion jumps from behind a bush and proceeds to eat him for lunch. I mean, it’s just the nature of the beast. It’s just what lions do.

  12. Green Monkey

    The Planet-Sized Financial Casino That Rules Our Lives

    Any enquiry into the Barclays Libor Scam created by the government, either a select committee or a QC lead enquiry, will do nothing to address the real problems. Such an enquiry presupposes that the fault lies either with the conduct of the banks or with the regulatory system.

    But the real problem lies with the entire design of the banking and financial system as we have it. That can only be addressed by understanding that the current system is not just faulty but wrongly conceived – insofar as it was ever conceived.

    As Positive Money argues, the means by which new money enters the system needs to be completely changed so that the banks are banned from performing this function. Money creation by the banks is as old as banking, but some new practices have appeared with the new world of banking ushered in by the Neo-Liberal orthodoxy that date only from the 1980s or later.

    SNIP

    Securitisation leads to swaps but then swaps lead to an even more obscene, unnatural, degenerate invention by the “masters of the universe” – “synthetic derivatives”. Don’t you love the terminology? It is designed to be off putting. A synthetic derivative is a means whereby two parties construct a contract around an asset that neither need actually own. One party pays a regular fee to the second and the second then underwrites the risk as if the first owned the asset.

    This is not investment it is pure gambling. Since the introduction of synthetics in 1997 the market for them has ballooned the total size of the financial “economy” many times over so that now it dwarfs the real economy where you and I work and live. Tony Blair tried unsuccessfully to set up “supercasinos” but meanwhile Gordon Brown and Ed Balls were participating in the creation of a planet-sized casino, sucking trillions into its coffers.

    Will the government enquiry address such issues? Hmmm. Well, I think not. The problem is way outside of their world view. Worse than that, they are wholly implicated in the system as it stands.

    http://www.positivemoney.org.uk/2012/07/the-planet-sized-financial-casino-that-rules-our-lives/

  13. Green Monkey

    Former senior executive with the Halifax Bank of Scotland, Paul Moore, writes on ethics and the British banking industry.

    Called to account
    Ethics of British banking

    Paul Moore – 7 July 2012

    snip

    Of course, the Barclays affair is not the only nasty news about banking at the moment. There’s interest rate swap mis-selling to small and medium enterprises (SMEs). There’s HBOS and Farepak Christmas savings club and the way HBOS knowingly took security over Farepak depositors’ money and then took that to pay themselves back first. So what should we do about all these problems with banks and financial sector giants? We clearly have not got to the bottom of things or fixed them yet.

    Although I believe there are important secu­lar solutions that will address these problems, I am also sure that none of them will work without a fundamental moral and ethical transformation of society from its addiction to the “isms” – reductionism (only atoms and science counts), secularism, ­materialism, consumerism, individualism, celebrity-ism and moral/ethical relativism. These things are presented to us as all about freedom and happiness but they are, in reality, a form of spiritual slavery.

    On the secular front, as I stated last month in evidence to the Treasury Select Committee in relation to its new inquiry into “corporate governance and remuneration in systemically important financial institutions”, the whole banking system is broken and needs total reform. As we have still not carried out a thorough, rigorous and transparent investigation into the causes and implications of the banking crisis, we have built our reform agenda on sand (emphasis added /GM). The only way to get to the bottom of what caused the crisis – and resolve what we need to do to ensure it does not happen again – is to carry out a thorough, forensic and transparent judicial investigation as we have done in other areas of public importance, such as the collapse of Equitable Life, the decision to wage war in Iraq, and Leveson. Preferably, we need a royal commission.

    We must change the fiduciary duties of directors of large and publicly quoted companies to include public duties, so that they are legally obliged not to focus solely on short-term profit. The current fiduciary duties do not adequately reflect the societal importance and impact of such large organisations.

    Many global companies now have balance sheets larger than those of sovereign governments. Current fiduciary duties permit (or even require) directors to focus almost all their attention on short-term profit because of the demands of the investment analysts to deliver more and more growth in shorter and shorter time frames. Driven by this short-term focus, the chief executives and their teams really have no choice but to push the boundaries of risk-taking to achieve short-term financial priorities. And, despite protestations to the contrary, it is also the case that, to hit their targets, executives push the boundaries of the civil, regulatory and criminal law and ignore the basic social ethics of integ­rity, fairness, compassion and responsibility (emphasis added /GM).
    http://www.thetablet.co.uk/article/162939

  14. buena informacion, muchas felicidades por tu articulo.