CHARLOTTESVILLE, Va. -- Here in the shadow of Monticello, I often wonder what Thomas Jefferson would think of today's America, a nation that is rapidly but silently abandoning the individual in favor of faceless corporations, rapacious banks and a collusive, unresponsive government.
The Founding Father who envisioned a republic built on the unalienable rights of "life, liberty and the pursuit of happiness" would be sickened at how the very institutions built to protect average citizens from repression have instead become weapons of the rich, the powerful, and mostly the corporate.
Whole branches of government have become enablers and enforcers for the corporations and banks that created the economic crisis out of greed and irresponsibility and now are exploiting the mess they themselves created to tighten their grip on America.
Big bailouts of Merrill Lynch, Bank of America and AIG get the press attention. Far more corrosive are thousands of unpublicized, self-dealing transactions overseen by bureaucrats following laws written by a pliant Congress and enforced by lifetime-tenured judges trained to believe in the bank over the debtor.
A prime example of how the common good is subverted can literally be seen from the gardens of Monticello. Prior to the financial crisis, I was building a hotel in my hometown of Charlottesville. As its own balance sheet faltered, Silverton Bank, the Atlanta-based institution funding the project reneged on its commitment to finance and simply cut off funding. I sued the bank; the bank sued me. Within two months, Silverton was taken over by the Federal Deposit Insurance Corp. in the largest bank failure in Georgia history.
I am sure you would expect that the FDIC's priority would be to maximize the value of the asset for the public by working with me to wrap up the problem caused by the failed bank. We could have put more than 100 people back to work, injected millions of dollars into the Charlottesville economy and finished a half-built structure that now stands as a nine-story testament to hard times.
Instead, Chairman Sheila Bair's FDIC did nothing of the sort. The FDIC accused me of defaulting on the loan, but unlike the actions banks usually take in a default, they did not foreclose. I thought that was extremely odd -- until I learned that the loan had been split up among eight banks and as long as there was no foreclosure the banks could say the loans were "good." In other words, the banks can say the loan is good even though the project is a see-through concrete-and-steel skeleton that has sat idle for more than a year.
How fitting, then, that the person overseeing my project for the FDIC is Claire Cotter, a former employee at Ameriquest, which established a fund to settle accusations that it had engaged in unlawful mortgage lending practices during the real estate boom. When Cotter's bank went belly up, she joined the FDIC knowing the ropes. She immediately went to work to protect the balance sheets of the eight lending banks by wasting millions of taxpayer dollars continuing to fight Silverton's misguided legal battle, all so these banks don't have write down my loan. (I've already won arbitration against the bank's developer on the project; I face the FDIC in October.) Between the government and me, roughly $10 million already has been spent in legal fees on a dispute over a $10.3 million loan.
Ridiculous, I know; so why do I fight? The simple answer is that someone must or we will emerge from this recession with wealth and power concentrated in a few tiny financial institutions representing a new ruling elite, not unlike the one that inspired Jefferson's generation to revolution. The same day I heard Bank of America pledge to pay back its taxpayer-funded loan from the government my babysitter told me the interest rate on her Bank of America credit card doubled -- from 14% to 28%.
When the FDIC carves up the assets of failed banks, it cuts incredible deals with other financial institutions -- offering loans for pennies on the dollar and even guaranteeing future losses. So banks bailed out because they were too big to fail get bigger as they swallow the portfolios of those smaller banks the government decides are expendable. And they are aided in this bulking up by the so-called regulators, who can clear pesky obstacles (formerly known as bank customers and clients) by just legally dismissing their claims or offering up threats of litigation funded by a bottomless federal purse.
Countless projects like mine, with countless jobs attached, feeding countless people are considered collateral damage, if they are considered at all. Every time I called Claire Cotter, the FDIC official overseeing my project's failed lender, to discuss a solution she told me to talk to her lawyer and hung up the phone on me.
Litigation is expensive and very few people have the money necessary to fight a bank, let alone the federal government. That's what they count on. Forget the notion of equal access to justice. A minor dispute can easily cost half a million dollars to try, not counting appeals which big companies and the government always take. Even then, it's the individual who bears all of the personal risk: lose, and the court can seize possessions; win, and face the prospect of a draining appeal.
That's why small businesses have watched helplessly as their credit lines are unilaterally slashed or capriciously revoked, leaving them without the flexibility they need to hire or expand or order fresh inventory. Most can do almost nothing beyond cycling through the push-button responses on the customer service line and hope that things change.
The first step toward that change is for people to know what their government is doing with their money in their name. When people hear terms like FDIC "financial protection," they should understand that it doesn't necessarily refer to their financial protection but to the banks that hold their mortgage or their credit card. All that FDIC sign in the bank means is that if the banks really screw it up, you and I will pay ourselves back. FDR would be appalled by the FDIC, created in 1933 and designed to help people.
Americans are rightly suspicious of moneymen, and not just in the last few years. Jefferson himself once said "that banking institutions are more dangerous to our liberties than standing armies." When it exists to support businesses and create jobs and fund innovation, finance is integral to a modern economy. But when finance becomes an end in itself and morphs from tool to master, it's easy to imagine Jefferson's fear realized in a system that deprives "the people of all property until their children wake up homeless on the continent their fathers conquered."