Economics
This Week’s Data
May consumer credit numbers soared $17.1 billion versus expectations of $8.5 billion:
http://www.zerohedge.com/news/revolving-consumer-credit-has-biggest-jump-2007-depository-institutions-turn-spigot
Small business sentiment nosedives:
http://advisorperspectives.com/dshort/updates/NFIB-Small-Business-Optimism-Index.php
Other
Gasoline price update:
http://advisorperspectives.com/dshort/updates/Gasoline-Update.php
Showing posts with label consumer credit. Show all posts
Showing posts with label consumer credit. Show all posts
Tuesday, July 10, 2012
Monday, February 23, 2009
Should Rick Santelli Care that Credit Card Companies are Raising Rates?
Where is Rick Santelli when you really need him? Ready to call people current on their mortgage--losers, Rick Santelli is no where to be found as credit card companies raise interest rates on customers--good or bad. Here is an issue you could sink your teeth into Rick, and I am going to help you understand it. No ignorance is bliss on this one.
Lets start with the reason credit card companies are raising rates. They will tell you, Rick, more customers are defaulting on their credit cards so they have to raise rates on good customers to make up the difference. So the losers--those unable to pay their credit card bills-- are causing the winners--those that are paying their credit card bills--to pay more (higher interest rates).
Credit card rates can go as high as 25-30 percent depending on state. This might get your Republican (or is it Liberatarian?) blood boiling Rick. Hillary Clinton while running for President told Ohioans,
Regardless of credit rating, credit card companies can charge you any rate they see fit as long as they keep it below 30 percent or the highest allowable rate in a given state. Politicians clearly in the pocket of the credit card companies are allowing these high rates of interest. Some might think of 25 percent as usury. Not as bad as loan sharking--but close.
Any of those guys that live in Barrington, Illinois that were cheering for you the other day getting screwed Rick? Would you call someone who has been paying their credit card bill month after month, year after year, a loser Rick? And, if they have been paying faithfully is it fair to raise their interest rate because "losers" aren't paying?
Rick, Help for Homeowners got you in a tizzy the other day--the rant. All of housing accounts for about 16 percent of GDP. The biggest category in GDP is retail sales. Retail sales account for about 66-70 percent of GDP. So when a credit card company raises interest rates they take money away from retail sales the lifeblood of GDP. I think it is safe to assume that most people paying interest on a credit cards are living pay check to pay check. So, their disposal income goes down if they have to send more bucks to the credit card company. As an aside, credit card companies are also raising minimum payments. Isn't this anti-American Rick?
Rick, someone needs to wake up the Obama administration about this. You seem to have their attention, and I bet if you attack on this issue not only will your blackberry freeze it will likely explode--this is the stuff that makes hero's. Somebody has to do it Rick--and you are the best man for the job.
By the way Rick, the banks that received TARP money are raising credit cards interest rates on existing credit card customers. This means they are taking your hard earned bucks and robbing the winners. I think its time for you to get your constituency riled up.
Source of these quotes:Credit Card Companies Raising Rates on Consumers
Feel free to email this to Rick Santelli.
Rick's CNBC Bio
More from All American Investor
Lets start with the reason credit card companies are raising rates. They will tell you, Rick, more customers are defaulting on their credit cards so they have to raise rates on good customers to make up the difference. So the losers--those unable to pay their credit card bills-- are causing the winners--those that are paying their credit card bills--to pay more (higher interest rates).Credit card rates can go as high as 25-30 percent depending on state. This might get your Republican (or is it Liberatarian?) blood boiling Rick. Hillary Clinton while running for President told Ohioans,
“I’ve advocated that we rein in the credit card interest rates, cap them at 30 percent and get them below,” she said.Ohioans owe around $30 billion on their credit cards. Gee, thanks Hillary.
Regardless of credit rating, credit card companies can charge you any rate they see fit as long as they keep it below 30 percent or the highest allowable rate in a given state. Politicians clearly in the pocket of the credit card companies are allowing these high rates of interest. Some might think of 25 percent as usury. Not as bad as loan sharking--but close.
Any of those guys that live in Barrington, Illinois that were cheering for you the other day getting screwed Rick? Would you call someone who has been paying their credit card bill month after month, year after year, a loser Rick? And, if they have been paying faithfully is it fair to raise their interest rate because "losers" aren't paying?
Rick, Help for Homeowners got you in a tizzy the other day--the rant. All of housing accounts for about 16 percent of GDP. The biggest category in GDP is retail sales. Retail sales account for about 66-70 percent of GDP. So when a credit card company raises interest rates they take money away from retail sales the lifeblood of GDP. I think it is safe to assume that most people paying interest on a credit cards are living pay check to pay check. So, their disposal income goes down if they have to send more bucks to the credit card company. As an aside, credit card companies are also raising minimum payments. Isn't this anti-American Rick?
Rick, someone needs to wake up the Obama administration about this. You seem to have their attention, and I bet if you attack on this issue not only will your blackberry freeze it will likely explode--this is the stuff that makes hero's. Somebody has to do it Rick--and you are the best man for the job.
By the way Rick, the banks that received TARP money are raising credit cards interest rates on existing credit card customers. This means they are taking your hard earned bucks and robbing the winners. I think its time for you to get your constituency riled up.
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Source of these quotes:
- “I received notice that the interest on my Chase card will go up from 4.24% APR to 9.24%,” Chase customer John Biek said in an email to FOX Business.
- Gary Barrett told FOX Business that his Capital One card rate was going to increase from 14.3% to 17.9%. “This is a card that normally I carry a balance of less than $800, and frequently it has no balance due, and I have never been late on a payment,” Barrett wrote in an email.
- And Patricia of York, Pa., said in an email that her Capital One Visa will see a hike as well: “My current rate of interest is 5.37%. The notice states that [the] rate increase will go to 13.9% on purchases [and] 24.9% on cash advance.”
- “Bank of America is doing the most dramatic changes I’ve seen,” said Emily Peters, a personal-finance expert for Credit.com. She said she has heard of cases where BofA card rates have been going up 10 to 20 percentage points.
Feel free to email this to Rick Santelli.
Rick's CNBC Bio
More from All American Investor
- Ray Dalio on the current state of affairs in the market
- Homebuyer Credit Won’t Stabilize Market, Analysts Say
- Roubini Predicts U.S. Losses May Reach $3.6 Trillion
- Six Errors on the Path to the Financial Crisis
- Who Caused the Financial Crisis?
- Option ARM--The Toxic Mortgage
- Debt Binge--The Perfect Financial Storm
Thursday, February 19, 2009
Obama Hits a Home Run in Arizona
No one seriously disputes the fact that the housing crisis is at the heart of the world wide credit crisis. Even tone deaf Republicans who turned their collective backs on the stimulus plan recognize the importance of stemming the increase in housing foreclosures which are quickly approaching the 6 million mark. Until we deal with this crisis the credit freeze will persist and the economy will get even worse. President Obama released a plan in Arizona today to do just that. Good for him.
Obama Hits a Home Run in Arizona
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Obama chose Arizona, a state which voted against him, because the state leads much of the nation in foreclosures. Obama didn’t just fly over the state on Air Force One and look down at the foreclosure signs for a photo-op. Instead he landed and exhibited the kind of leadership this country has not seen in the last 8 years. He came with a strong hand and he played it.
Much of the plan involves the quasi governmental mortgage giants Fannie Mae and Freddie Mac. These two companies hold or guarantee mortgages on millions of homes. Both showed an utter lack of judgment, if not complicity, in contributing to the sub prime mortgage debacle at the heart of this mess. Both bought and resold mortgages that represent half of the defaults behind the mortgage backed securities which are at the heart of the credit crunch.
Obama’s plan allows Fannie and Freddie to renegotiate existing mortgage rates down to affordable levels and provides both with additional federal support to lower interest rates on future mortgages. Both will go along with the Obama plan because they have no choice. With billions in bad paper Fannie and Freddie went on bended knees for federal funds to bail them out. They got the help but now the government effectively owns both and they will do what they are told.
That Fannie and Freddie were allowed to use their federally chartered clout to encourage sub-prime mortgages was a disgrace to begin with. The congressional committees with oversight responsibility over both entities turned their backs on a problem after repeatedly being warned it was coming. Why? Stupidity and greed. Stupidity because they believed the housing bubble would not burst and greed because many committee members took large amounts of campaign contributions from both Fannie and Freddie.
Both major political parties and U.S. presidents stretching all the way back to Jimmy Carter are at fault for this mess. Each one encouraged Fannie and Freddie to accept loan requests from people who were in no position to pay. Each president wanted to show that home ownership went up during his term. Presidents Reagan and Bush, both aiming to lure Hispanics away from the Democratic Party, were among the worst offenders. What they and congressional Republicans and Democrats left behind was a massive mess for Obama to fix.
Obama’s plan also calls for banks that receive federal bailout money to renegotiate terms on mortgages in default. The stimulus bill the president signed yesterday provides funds for communities to seek creative arrangements between lenders and borrowers so families can stay in their homes. Of course Republicans failed to acknowledge this provision in a bill they almost unanimously rejected. Why? Because they preferred to dwell on earmarks the GOP still cannot identify.
I once did a campaign commercial that sums up the reason Republicans lack sensitivity to those citizens at the middle or lower end of the income ladder. I was filming a conversation with farmers in North Carolina. One of them said it all: “If I were a rich man maybe I could be a Republican”. Which brings me to a question that has perplexed me my entire political career; how can any working man or woman not in management ever vote for a Republican?
More from All American Investor
- Ray Dalio on the current state of affairs in the market
- Homebuyer Credit Won’t Stabilize Market, Analysts Say
- Roubini Predicts U.S. Losses May Reach $3.6 Trillion
- Six Errors on the Path to the Financial Crisis
- Who Caused the Financial Crisis?
- Option ARM--The Toxic Mortgage
- Debt Binge--The Perfect Financial Storm
Thursday, January 29, 2009
Debt Binge--The Perfect Financial Storm
When historians look back they will be writing about the Debt Binge. 
The most recent of the borrowing binges--the stimulus package. Or should I say--packages.
If you saw the movie the Perfect Storm you might remember at one point in the movie it appeared that the fishermen on the Andrea Gail had ridden out the perfect storm. For a brief moment, a hole appeared in the sky and the sun peaked through. The fishermen in an almost euphoric moment thought they had ridden out the monster storm. But, as quickly as the sky opened it closed. Soon the ship was being battered with a series of monster waves that kept getting bigger and bigger. In spite of efforts of the fisherman the Andrea Gail was consumed by a giant wave that consumed the boat and sent it to the bottom of the sea. This where we are today in the financial markets.
I am a proponent of the stimulus package. It is better than nothing (nothing equals depression). Nevertheless, the stimulus package is a continuation of the same binge pattern--
It seems like much of this is happening unnoticed as history unfolds right before our eyes.
The best way out of this trap is a massive inflation that bastardizes the U.S. currency and lessens the debt burden by cheapening it. Of course, there is the Argentinian solution--default.
We should be looking around and noticing that every major economy in the world is wounded. The situation came about because of excessive debt and leveraging--the World Debt Binge.
The cure to excessive debt is savings. The only good thing I hear out there is talk about wringing out the excesses in our government to bring about costs savings and lessen the need for future borrowing. What is the likelihood of that happening soon? In case you haven't noticed over the last 25 years the quickest way to cut costs is to "fire" people. Instead, we are trying to put more people on the government payroll by creating projects funded with government dollars via the stimulus package.
Something has to give. The massive leveraging of the U.S. economy leaves us in debt to the tune of three and a half times times the output of our economy. The big credit card in the sky is being leveraged to the max. What if the lenders pull the plug? The likely result is higher and higher interest rates to finance the borrowing--or worse.
We have not learned our lesson--excessive leverage via borrowing is not a good thing. There are only two possible solutions to this problem: inflation or default. Both are ugly but the only way out of the trap.
Coming soon: Tsunami.
A binge is any behavior indulged to excess.In America, we now have a series of binges coming together to form the perfect financial storm. The components of the perfect storm include:
- excessive governement borrowing from foreigners to finance enormous debt in the public sector,
- excessive borrowing by consumers in the form of mortgages, mortgage refinancings, and credit cards,
- and, the enormous borrowing by investment banks and bank banks to leverage up their balance sheets with credit default swaps.
The most recent of the borrowing binges--the stimulus package. Or should I say--packages.
Subscribe to All American Investor via Email
If you saw the movie the Perfect Storm you might remember at one point in the movie it appeared that the fishermen on the Andrea Gail had ridden out the perfect storm. For a brief moment, a hole appeared in the sky and the sun peaked through. The fishermen in an almost euphoric moment thought they had ridden out the monster storm. But, as quickly as the sky opened it closed. Soon the ship was being battered with a series of monster waves that kept getting bigger and bigger. In spite of efforts of the fisherman the Andrea Gail was consumed by a giant wave that consumed the boat and sent it to the bottom of the sea. This where we are today in the financial markets.
I am a proponent of the stimulus package. It is better than nothing (nothing equals depression). Nevertheless, the stimulus package is a continuation of the same binge pattern--
curing a debt problem with more debt.
It seems like much of this is happening unnoticed as history unfolds right before our eyes.
The best way out of this trap is a massive inflation that bastardizes the U.S. currency and lessens the debt burden by cheapening it. Of course, there is the Argentinian solution--default.
We should be looking around and noticing that every major economy in the world is wounded. The situation came about because of excessive debt and leveraging--the World Debt Binge.
The cure to excessive debt is savings. The only good thing I hear out there is talk about wringing out the excesses in our government to bring about costs savings and lessen the need for future borrowing. What is the likelihood of that happening soon? In case you haven't noticed over the last 25 years the quickest way to cut costs is to "fire" people. Instead, we are trying to put more people on the government payroll by creating projects funded with government dollars via the stimulus package.
Something has to give. The massive leveraging of the U.S. economy leaves us in debt to the tune of three and a half times times the output of our economy. The big credit card in the sky is being leveraged to the max. What if the lenders pull the plug? The likely result is higher and higher interest rates to finance the borrowing--or worse.
We have not learned our lesson--excessive leverage via borrowing is not a good thing. There are only two possible solutions to this problem: inflation or default. Both are ugly but the only way out of the trap.
Coming soon: Tsunami.
Friday, January 16, 2009
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