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-- America's Debt = "We're Screwed!"
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| Originally posted by zookeeper Did you see me standing next to him? I was the guy who was having his kneecaps broken by a gang of debt collectors |
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| Originally posted by Shakka Times be tough! |
Welcome to communism. I can't see how this could possibly pass--certainly there are enough self-respecting democrats that would never support something as ill-conceived as this. I don't see how it's possible there could even be a shred of bi-partisan support for this.
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| Follow Up: US eyes home loan subsidies in rescue plan, according to sources - Reuters Reuters reports that the Obama administration is hammering out a program to subsidize mortgage payments for troubled homeowners who have gone through a standardized re-appraisal and affordability test, sources familiar with the plan said on Thursday. The program would be a major break from existing aid programs, which are triggered once homeowners fall into arrears. Under the plan being contemplated, mortgage companies would use a uniform eligibility test even before a borrower becomes delinquent, sources said. The administration hopes the mortgage industry will soon agree to a set of standards that will allow it to move quickly to modify many home loans. Sources said government-controlled housing finance companies Fannie Mae and Freddie Mac would play a supporting role in the government's new plan, but said they are not expected to expand their securitization of loans. In an interview, James Lockhart, the regulator that oversees Fannie Mae and Freddie Mac , said the mortgage finance industry was eager to have a standardized mortgage modification standard. "I've talked to all the major servicers -- both the big bank ones and the big independent ones -- and they are all ready to go, they're chomping at the bit," Lockhart, the director of the Federal Housing Finance Agency, said. "The other thing they're asking for standardization." |
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| Originally posted by Shakka Welcome to communism. I can't see how this could possibly pass--certainly there are enough self-respecting democrats that would never support something as ill-conceived as this. I don't see how it's possible there could even be a shred of bi-partisan support for this. Essentially the government is talking about subsidizing mortgage payments for people who bit off more than they can chew. Save the weak, screw the sensible. Edit: With hindsight, who knew this idiot was so fucking smart?? Edit edit: Judd Gregg just withdrew as Secretary of Commerce nominee...sas "issues such as stimulus are 'irresolvable conflicts.'" Good for him. |
Who knew the government's tits were so big?!?!?
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| Originally posted by jerZ07002 I'm all for a stimulus plan that upgrades infrastructure, i'm not for a stimulus plan that rewards poor risk/reward decisions. |
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| Originally posted by atbell here here. more trains, better sewers, environmental clean up, fiber optic infrastructure. |
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| Originally posted by jerZ07002 I'm all for a stimulus plan that upgrades infrastructure, i'm not for a stimulus plan that rewards poor risk/reward decisions. |
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| Originally posted by Groundhog Boy +1 - I'm really annoyed with this mortgage subsidy idea that came out today at 3 and rallied the market. I'd like to know where my handout is for being smart enough to not buy a house in the midst of the bubble when I couldn't afford it. Hell, I just found out that there's a pay cap for the homebuyer deduction that might have enticed me to want to buy this year. $75K in NYC is nothing. It's been bad enough that I can't deduct student loan interest anymore. I should just stop working in August/September so I can deduct everything. It'd end up being the same in the end. |
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| Originally posted by jerZ07002 Also, if the final stimulus bill has the $15,000 first time homebuyers credit I may just purchase the entire house from my grandmother and sell it back to her in a year (or so). That is if: 1) there is no minimum holding period, and 2) the 'credit' isn't a loan like it is in the current $7,500 first time home buyers credit. |
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| The Senate's version of the stimulus plan had included the lesser of a $15,000 or 10% non-refundable tax credit to all homebuyers for a period of approximately one year, with no income limits. The cost of this tax credit was estimated at roughly $35B. This was a major focal point of the "Fix Housing First" lobbying efforts. According to our contacts, the tax credit in the compromise version of the bill will be scaled back to resemble the House's original proposal of a $7,500 tax credit with income caps of $75,000/$150,000 for single and joint filers, respectively. This credit would only be available to first-time homebuyers. While we had previously been skeptical of the effectiveness of this tax credit since it would not be available for down payments, the reduction in the amount is a major blow to builders... |
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| Originally posted by Shakka Seems like the $15K amount is becoming less likely (sorry!). My latest (most respected) research notes: But $7500 is better than nothing I guess! I view it as a 1x waste of taxpayer money. i.e. the trick doesn't work on a large scale--why wouldn't someone just jack up the asking price by $7500? What happens to the "value" of the house when someone then tries to turn around and re-sell it--it vanishes! Anyway, not that the latter concerns would necessarily be relevant to your specific scenario, but nonetheless. |
Shakka, what do you think about this:
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Punctual Payers Face Higher Rates From Card Companies (Update1) Email | Print | A A A By Alexis Leondis Feb. 13 (Bloomberg) -- Mel Brandt said he got a Citibank Home Depot MasterCard for its rewards program. His reward for paying on time was an interest rate increase to 19 percent from 12 percent. “If I didn’t opt out and close the account, I’m afraid the interest payments would snowball and I would default,” said Brandt, 52, a self-employed house painter in St. Louis, who relies on credit cards to fund his painting business. Lenders came under fire yesterday in a U.S. Senate Banking Committee hearing for raising interest rates, adding fees and cutting credit lines, even for consumers perceived to be low- risk with high credit scores. Connecticut Democrat Christopher Dodd, the chairman, called the practices “gouging.” The federal funds rate, or the interest rate banks charge each other for overnight loans, is as low as zero and U.S. lawmakers have agreed to a $789 billion economic stimulus plan funded by taxpayers. Rates for consumers should be falling faster than they are, said Ben Woolsey, director of marketing and consumer research at CreditCards.com, an online resource for credit-card users. Banks, facing an increase in defaults and a decline in consumer spending, are “still very reluctant to pass lower rates or increased credit access to consumers,” said Woolsey. Rate Changes The average interest rate charged on credit-card balances decreased to 13.4 percent in November from 14.4 percent a year earlier, according to the Federal Reserve’s December G19 report, which tracks rates for credit-card accounts. The prime rate has decreased to 3.25 percent from 6 percent last February. Most variable credit-card rates are linked to the prime rate, which follows the federal funds rate. Rate changes announced by New York-based Citigroup Inc., the biggest U.S. credit-card issuer, American Express Co. and Charlotte, North Carolina-based Bank of America Corp. are intended to raise revenue, said Woolsey, who is based in Austin, Texas. Citigroup’s charge-off rates of loans increased by 88 percent, climbing to 7.81 percent in December from 4.16 percent a year earlier, according to data compiled by Bloomberg. Charge- offs are loans the banks don’t expect to be repaid. American Express’s charge-off rates more than doubled to 7.23 percent from 3.32 percent while Bank of America’s rates increased to 8.45 percent from 5.24 percent, a 61 percent jump. Costs Fluctuate The cost of funding for banks fluctuates with economic cycles, said Peter Garuccio, a spokesman for the Washington- based American Bankers Association. Credit-card companies have seen one of their sources of capital, selling bonds backed by card payments, dry up, Garuccio said. “In order to keep credit flowing in a responsible way, we had to change rates on these cards,” said Citigroup’s chief executive officer, Vikram S. Pandit, at a House Financial Services Committee hearing in Washington on Feb. 11. Citigroup has received $50 billion and Bank of America has gotten $45 billion from the Troubled Asset Relief Program, according to Bloomberg data. Citigroup is changing rates for consumers who haven’t had their rates adjusted in at least two years. The bank is offering the option to cancel the cards and pay off existing balances at the original rate, according to Samuel Wang, a spokesman for Citigroup. Kenneth Lewis, Bank of America’s CEO, said during the hearing that 9 percent of the bank’s customers had their interest rates increased in 2008. The figure includes customers who had a default or change in credit profile, which may include external credit risk, said Betty Riess, a spokeswoman for the bank. Rate Hikes The majority of American Express cardholders saw interest rates increase by 2 to 3 percentage points in December, said Desiree Fish, a spokeswoman for the bank, who declined to be more specific. American Express has received $3.39 billion from the government. “I felt like my credibility was in doubt, despite my 20- plus years of on-time payments,” said Donald Neville, a 54- year-old regional sales manager for industrial machineries. Neville, who lives in Swedesboro, New Jersey, said he no longer uses the card for purchases and is just paying down the balance. There is the risk that increasing rates on borrowers who are already struggling with payments may result in more defaults, said Linda Sherry, director of national priorities at Consumer Action, a Washington-based advocacy group. “Sudden rate hikes across a broad swath of cardholders can bust family budgets,” Sherry said. Risk-Modeling The banks use risk-modeling systems to predict the likelihood of default, said Garuccio of the ABA. Michael Megeath, a Treasury analyst in Tulsa, Oklahoma, has five credit cards and has accumulated more than $40,000 in debt. He said he has tried to negotiate with American Express to decrease the 13 percent interest rate on his Amex Blue Card. “If a bank raises the interest rate on a person with a lower credit score, even though he’s current on all of his payments, it will cause the financial collapse of the cardholder,” said Megeath, 61. “Who’s going to bail me out?” The Federal Reserve approved provisions in December that include 45-days’ notice for rate increases, instead of 15 days, and 21 days to pay a bill. The rules are effective July 1, 2010. The Fed’s measures dovetail with legislation introduced by Dodd. The bill would prevent “any time, any reason” rate increases, according to a summary of the bill. “At a time when our economy is in a crisis and consumers are struggling financially, credit-card companies in too many cases are gouging them, hiking interest rates on customers who pay on time and consistently meet the terms of their credit-card agreements,” Dodd said at the hearing yesterday. “Winter sets in and jobs evaporate,” said Brandt, the painter. “This month may be the last that I can or am willing to make these card payments.” To contact the reporter on this story: Alexis Leondis in New York aleondis@bloomberg.net. Last Updated: February 13, 2009 10:44 EST |
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| Originally posted by jerZ07002 Shakka, what do you think about this: http://www.bloomberg.com/apps/news?...illk&refer=home personally, I'm not bothered by credit card companies increasing their interest rates. Usurious practices by CC companies will result in harm to that company anyway, and a low cost provider will always emerge to service qualified customers. Unsecured credit lines are dangerous for most people, and americans make use of them far too frequently (I only use my CC to get continental airline points - i pay it off in full every month). I think this is a necessary adjustment that will flush out of the system certain risky credit lines that these companies were taking in the hay-day of easy money. People have no business having $40K in CC debt anyway. If your CC debt is that high, and you don't have the income to pay the balance in a short period, you are a risk (whether actual credit risk or timing risk). On another note, I'm sick of people bitching because they don't have access to something that doesn't belong to them, or because a company followed a legally binding agreement that harmed them. These people signed contracts that allowed variable interest rates on their credit cards. /rant |
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| Originally posted by Shakka There are a lot in Congress who have had their sights set on the credit card industry for years and are licking their chops. I think there is probably a legitimate case to be made that in some instances the card companies have been a bit aggressive with fees and penalties and that may be coming home to roost, but I don't think it's the rule vs. the exception. This kind of reminds me of a housing/banking note I read not to long ago that talked about how banks that have lost so much money on bad loans are going after the performing loans/good borrowers and demanding more collateral for no other reason than that they can actually get money back there (even if it violates the loan contracts they have in place, and makes it more likely that the good borrower will become a delinquent borrower in the future--possibly because of the bank's "proactive" actions. Kind of like the old "cutting off your nose to spite your face") There's a reason I make sure to pay my credit card balance off in full every month (even when my wife goes a little crazy from time to time!). I may be overly conservative in this regard, but I simply abhor the concept of debt in any sense. I still have about $25K in student loan debt and a mortgage and I hate that I have either, though certainly they are much more desirable debt than the guy with 10 maxed out credit cards, paying the minimum, who is so representative of our overly credit-bloated culture. My dad told me when I was in college that having good credit was one of the most important things I could do to help myself out in life. I never thought that much of it, but I have always paid my debts on time and dealt with problems if they arose. I have a near flawless credit score and as a result I get more favorable lending terms and less hassle from credit card companies. I don't know about the guy in the article, but I just got a new Amex card with a few new perks. Most importantly though, I never use a card that has an annual fee--I just think that's stupid. Credit cards are commodities--there is simply no reason to pay $100 a year for the privilege of using plastic. Lastly, whatever the government's intentions--my rule of thumb is that generally, when government gets involved it leads to undesirable results. If the government forces changes in one part of the card issuers' business model, they will find ways to make it up in other areas. There's regulation and refereeing, and then there's interference. It seems like lately the government thinks it's job is to find profits and destroy them. It's sickening to the worst degree. |
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| Originally posted by jerZ07002 To my knowledge, no credit card gives you airline miles without an annual fee. |
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Washington seems in disarray February 13, 2009 Imagine! There is a Congressman who actually wants to delay the vote on the stimulus bill so he can read it and make sure it says what he was told it says. Kudos for him. There is still hope for our country. This 575 page piece of legislation is being rammed through Congress without any hearings, without any detailed examination, without any vetting. It is loaded with pieces of spending that are not going to trigger job creating activity for months or even years or maybe never. It is larger than all the money spent on the Iraq war. Its size rivals the Defense Department appropriations. It will be funded through federal borrowing. And there has not been any comprehensive vetting of the component parts. Now we are continually told that there will be a "catastrophe” or a "disaster” if this 789 billion dollar package is not passed at once. Note that there is a continuing reference that ONLY government can fix the economic problems in the United States. Not once did anyone mention that Cisco financed a 4 billion dollar bond issue without any TARP funds and without any government guarantees. Note that Intel announced an investment of billions into an entire new facility that will be located in the United States (Arizona) and will be privately funded. Intel didn’t need TARP funds. Intel didn’t need the stimulus package. Not one official in the Obama administration has even acknowledged the Intel commitment. All we hear is that government can fix what will otherwise be a complete disaster. And all we hear is that banks are not lending and that there is no credit available. Yesterday our chief monetary economist, Bob Eisenbeis, cited bank lending figures compiled by the federal authorities which show that bank lending is not at a dead stop. Sure credit is tightening. But creditworthy borrowers are getting loans. We see that among the clients in our firm. In the United States our government is meeting behind closed doors and working up an $800 billion spending package and then giving the country no time to examine it. Even the Members of Congress who have to vote on it haven’t had time for their staffs to examine it. Campaigner Obama promised transparency. President Obama seems to have forgotten his message. And for those of us in the business of managing the wealth of clients, we must deal with the conflict of emotions when we see the policy prescription in Washington on a collision course with the investment needs of our clients. Our job is to protect the wealth of our clients as best we can. Our job is to try to allocate among the component choices available to them. And our job is to tell our clients, their consultants and those readers who listen to us what we see and how it impacts them. We see a Washington in disarray. We see repeated failure in assembling a cabinet. We see nominees having to withdraw their names because of their failure to comply with our tax laws. The first scofflaw was confirmed and he used up a lot of the new president’s political capital. The series that followed have had to withdraw. Senator Gregg apparently withdrew when he realized that the Census Bureau was going to be moved from the Commerce Department to the White House. And he realized that this formerly neutral agency would be at risk of political influence. At least his withdrawal was not for failure to pay his taxes. In Washington we see harsh and shrill rhetoric attempting to force immediate passage of legislation without vetting. And we see apologetic admission of “screwing up.” What we don’t see is a stimulus bill that will put people back to work promptly. We do not believe the United States will fail immediately if something is not done at once. We think the 135 million Americans who still go to work every day and pay taxes and try to save and invest are the backbone of the country. And we think that government is NOT the only answer. Today we fly to South America. In Argentina we will visit a country that squandered its great natural resources and ran up its debt and has defaulted several times. Argentina can claim the award for the largest US dollar denominated default in history. It, too, had a banking crisis. I remember visiting when “no al corralito” was chanted in the streets by citizens who could not get their money from the banks. We will also visit Chile, a country where dictatorship has been replaced with democracy and market based systems that seem to work. Chile is a success story. Argentina is an example of how populism and socialism destroyed what was once the fifth largest economy in the world. This is our tenth trip to that region and to Patagonia. The people are friendly and welcoming. They do not trust their government. They have good reasons. We will travel as best we can in South America. In these times we will carry a satellite phone when in remote areas where black berry has not penetrated. While away on our trip our Cumberland colleagues made up of tax paying employed private sector employees are available to serve our clients. Our asset allocation remains unchanged. We are invested 50% in Stocks and 50% in bonds and zero in cash equivalents. Cash earning zero is a bad deal in our view. Our normal allocation is 70% stocks and 30% bonds. So we are under on the stock side and over on the bond side. In the bond accounts we are favoring tax-free municipal bonds and in the taxable accounts we favor higher grade taxable spread issues and we are avoiding treasury issues. In stock accounts we are using only exchange traded funds and we are broadly diversifying risk. The enduring quality of these great United States is that our institutions survive our politicians and endure in spite of them. The real fabric in America is the willingness of its citizens to participate in the government. And it is in the ability of our society to voice criticism and to debate ideas without fear of retribution by the government. Those wonderful characteristics are still alive. I would still rather be a citizen of our country than anywhere else. But I am very concerned about the start of the new Obama Administration. I supported him and I voted for him I want him to succeed. I repudiated what seemed to be a failed policy of the last few years; that was my personal choice. But I am now very insecure in the way the government is being run by the new folks. I find the thought of a Pelosi dominated policy repugnant. And it seems to me that the House of Representatives is now a one party system without any respect for the tradition of debate on the issues. 2009 is certainly an interesting year. Happy Valentine’s Day and Happy Presidents Day. David R. Kotok, Chairman and Chief Investment Officer, email: david.kotok@cumber.com |
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| Originally posted by Shakka The trick is to get a miles card that has no annual fee for the first year and then cancel it before it rolls over(or call them and threaten to cancel and see if they'll give you another free period!). A lot of cards give you a nice chunk of miles just for using the card the first time. I used to do this with a different Amex card. Most cards give you that first year free anyway. I collected miles but thought they might be at risk of becoming worthless given the state of the airline industry (and the fact that miles tickets were becoming more expensive and harder to attain given restrictions and what not). There are times that I would love to have the lounge perks, but I don't personally travel enough for it to be a big deal. |
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| Originally posted by jerZ07002 Also, I can't do the sign up and cancel thing because I'm a frequent flier with continental, so it makes no sense to sign up for delta points, US airway points, or with any other airline. |
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| Originally posted by jerZ07002 if there's a 75K income limit i'm shit-outta-luck. Our government is full of idiots! Why would they limit the benefit to the people who probably can't afford to purchase houses? It seems to me that giving peeps on the upper fringe of the middle class the benefit would do more because we actually can afford to purchase houses and we still have access to credit. You have to love how they are aligning the incentives in the same way that caused the issue in the first place (trying to lure people who should be renting apartments into buying homes). |
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| Originally posted by jerZ07002 People have no business having $40K in CC debt anyway. If your CC debt is that high, and you don't have the income to pay the balance in a short period, you are a risk (whether actual credit risk or timing risk). On another note, I'm sick of people bitching because they don't have access to something that doesn't belong to them, or because a company followed a legally binding agreement that harmed them. These people signed contracts that allowed variable interest rates on their credit cards. |
I kinda want to start a catch-all "Pork" thread, but I like keeping this one alive, so I'll post it here. Latest thoughts from Merrill Lynch's David Rosenberg, who has had a great macro call for a while. Here are some thoughts on the porkulus package.
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More about redistributing income than creating wealth The best that we can say about the fiscal stimulus plan, $787 billion covering over 1,000 pages of documentation, is that something is certainly better than nothing. It is often dubbed the 'infrastructure package', and yet of the $507 billion of new spending less than 10% is directly aimed at infrastructure outlays. Of the $282 billion in tax cuts, fully one-quarter is the typical annual provision that spares tax filers (24 million of them this year) from being ensnared by the AMT. The largest part of the tax relief part of the plan, just over 40% of it, is in tax credits for individuals earning up to $125,000 (and couples with income up to $250,000). Individuals see up to $400 and couples up to $800 of proceeds via lower withholding taxes on their paychecks. It remains to be seen how an extra $8 per paycheck is going to end the recession, but we are willing to keep an open mind. We do know that it is reductions in tax rates that, at the margin, influence households to change their behavior, and similar attempts to kick-start the economy in last year's second quarter exerted a very temporary impact on the pace of economic activity. It is questionable how long-lasting the effects will be There are other provisions, which we will go into in more detail, but suffice it to say that we think it really is questionable as to how long-lasting the effects of this fiscal package are going to be. Our primary concern is that it is a plan that relies heavily on multiplier impacts. If they don't occur, then we would expect to see the economy relapse after what could be a brief spurt of growth in the third quarter. That by no means suggests that there will be no winners - education, health care, energy, asphalt, the environment and technology - but it does mean that enhancing the social safety net does not necessarily translate into sustained growth in economic activity or wealth creation. Investors should pay for growth that is sustainable Now to be sure, while the equity market did enjoy a tradable rally ahead of last year's fiscal stimulus (which was aimed solely at low- and middle-income consumers), particularly the early cyclicals (transports, homebuilders, retailers), it was brief and the last time we saw the S&P 500 at 1400 was when the last of the tax rebates were being mailed out. Investors who have a longer-term view should be paying only for growth that is sustainable; we believe rallies that occur around the prospect of the odd statistical rebound in quarterly GDP are rallies to rent, not own. |
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| Originally posted by Shakka I kinda want to start a catch-all "Pork" thread, but I like keeping this one alive, so I'll post it here. Latest thoughts from Merrill Lynch's David Rosenberg, who has had a great macro call for a while. Here are some thoughts on the porkulus package. |
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| Originally posted by jerZ07002 I think much more of the package should have went to infrastructure projects that were necessary regardless of the downturn. |
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| Originally posted by zookeeper Living in New York State, where we have the highest state taxes in the country (except California, but not by much), there is constant construction of roads with LOTS of people working on these projects, what will this stimulus do...MORE construction and MORE delays?!! ...a sidebar here, a NY joke: "What is big, bright yellow and sleeps 5?" " An NYS Thruway Authority service truck" If "infrastructure" also includes the upgrade of the national grid and electricity delivery systems, I might be all for that. But as Jer said, I don't have enough time to read all/any of this package, and I don't think anyone else did either. Well, it's law now, and I guess we'll have to wait and see. |
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| Originally posted by zookeeper Living in New York State, where we have the highest state taxes in the country (except California, but not by much), there is constant construction of roads with LOTS of people working on these projects, what will this stimulus do...MORE construction and MORE delays?!! ...a sidebar here, a NY joke: "What is big, bright yellow and sleeps 5?" " An NYS Thruway Authority service truck" If "infrastructure" also includes the upgrade of the national grid and electricity delivery systems, I might be all for that. But as Jer said, I don't have enough time to read all/any of this package, and I don't think anyone else did either. Well, it's law now, and I guess we'll have to wait and see. |
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