The Fight for the Middle Class: Calling on Banks to Do More

A three-page mortgage? Small town banks offer some solutions.

March 17, 2010— -- In nearly every corner of the country, there's a common denominator among a down-but-determined middle class -- frustration with the banks.

For so many, there's a simple question: If the banks that taxpayers propped up are now doling out record bonuses, why aren't they helping the taxpayer? Why aren't they refinancing mortgages or lowering credit card interest rates instead of spiking them?

Just this week, President Obama's top economic team was on Capitol Hill, including Treasury Secretary Tim Geithner, Council of Economic Advisers chairwoman Christina Romer and Office of Management and Budget director Peter Orzag. All said that the country has bounced back from the depths of recession.

That assertion drew a fiery response from lawmakers.

Rep. Marcy Kaptur, D-Ohio, said, "The people who caused this mess are doing just fine. The taxpayers bailed them out and my people are suffering. Where is the urgency!?"

To that, Geithner acknowledged, "The banks are not doing good enough."

Americans Call on Banks to Do More

Perhaps that's an understatement, particularly in light of the latest ABC News poll.

Seventy-seven percent of those polled said the banks should do more to make up for their role in the recession.

And what might they do? Simplify the paperwork with credit cards and loans, said some 83 percent of the people.

They have good reason for that request. According to Elizabeth Warren, a Harvard professor who heads up the Congressional Oversight Panel examining the banking bailout, American middle class families spent more than $100 billion on credit card penalties, fees and interest in last year alone.

"The large Wall Street banks that really run these credit cards have been able to borrow from the American taxpayer through the Fed, which is effectively zero percent interest," Warren said. "So what are they doing with credit cards? The answer is, they've often tripled interest rates."

Some raise the rates in deceptive ways, offering low interest rates up front on credit cards, only to boost the rates a year later with details buried in the fine print.

But getting the banks to listen has been difficult because so few banks hold so much of the nation's wealth.

There are 8,184 banks in the country, but nearly three quarters of all the deposits are held by just 117 banks. Those few financial giants wield huge power to raise penalties and fees, doubled from what they were just a decade ago.

Saving the Middle Class: Lessons From a Mississippi Bank

So, are any of the banks listening? Are any reaching out to help the struggling middle class?

ABC News found one, but to get there, we had to go all the way to Mendenhall, Miss. In that town of a bit more than 2,500 people, Peoples Bank of Mississippi has stood since 1908. Just like Jimmy Stewart in "It's a Wonderful Life," the Great Depression tested its strength.

Banker Dennis Amman can recall how his grandfather fought to keep the bank solvent.

"He was 19 years old and he said, 'This bank isn't going to close,'" Amman said.

Nearly a century later, Peoples Bank faced another test. Last year, when lending to small-town businesses was at a record low, the bank kept giving out loans. It kept lending even though new loans backed by the government stimulus offered little for the bank -- no interest and deferred payments.

Now, Peoples Bank is third in the entire country in offering small business owners loans.

"We looked at it and said it's going to take work on our part; we might not even make money off it in the short run, but in the long run it's going to be good for customers, so it's going to be good for us," Amman said.

"I consider them all to be my friends," Amman said. "They are our neighbors. We go to church with them. I see them at PTA meetings. I see them at the ball fields."

A Three-Page Mortgage?

There are other simple ideas that could be a big help. Elizabeth Warren wants to see three-page mortgage agreements and one-page credit card agreements become the norm, with penalties and fees marked clearly in the same big font. Right now, multi-page mortgage documents often are an inch thick.

That's an idea that appeals to Amman at Peoples Bank.

"Documents could be streamlined," Amman said. "It would reduce the paperwork to not only the lender, but also the consumer, that they could have something they could read."

They're some smart ideas from a small town, but the question now may be: Are any of the bigger banks willing to consider them?