Virtuous Bankers? Really!?!

By MAUREEN DOWD

WASHINGTON

The Great Vampire Squid has gotten religion.

In an interview with The Sunday Times of London, the cocky chief of Goldman Sachs said he understands that a lot of people are “mad and bent out of shape” at blood-sucking banks.

“I know I could slit my wrists and people would cheer,” Lloyd Blankfein, the C.E.O., told the reporter John Arlidge.

But the little people who are boiling simply don’t understand. And Rolling Stone’s Matt Taibbi, who unforgettably labeled Goldman “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” doesn’t understand.

Banks, Blankfein explained, are really serving the greater good.

“We help companies to grow by helping them to raise capital,” he said. “Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It’s a virtuous cycle. We have a social purpose.”

When Arlidge asked whether it’s possible to make too much money, whether Goldman will ignore the people howling at the moon with rage and go on raking it in, getting richer than God, Blankfein grinned impishly and said he was “doing God’s work.”

Whether he knows it, he’s referring back to The Protestant Ethic and The Spirit of Capitalism — except, of course, the Calvinists would have been outraged by the banks’ vicious — not virtuous — cycle of greed and concupiscence.

Blankfein’s trickle-down catechism isn’t working. Now we have two economies. We have recovering banks while we have 10-plus percent unemployment and 17.5 percent underemployment. The gross thing about the Wall Street of the last decade is how much its success was not shared with society.

Goldmine Sachs, as it’s known, is out for Goldmine Sachs.

As many Americans continue to struggle, Goldman, Morgan Stanley and JPMorgan Chase, banks that took government bailout money after throwing the entire world into crisis, have said they will dish out $30 billion in bonuses — up 60 percent from last year.

The saying used to be, whatever happens, the lawyers win. Now, it’s whatever happens, the bankers win.

Under pressure from regulators, who were trying to ensure that long-term performance was rewarded, the banks agreed to award more in stock, deferring cash payments.

But as The Times reported this week, the Goldman executives who got stock options instead of bonuses last year, at market lows, got a windfall — so it had nothing to do with bank employees’ performance.

“The company gave its general counsel, for example, 104,868 stock options and 14,117 shares in December, when the bank’s stock was around $78,” Louise Story wrote for The Times. “Now the bank’s shares have more than doubled in value, making that stock and option award worth nearly $12 million.”

As one former Goldman banker told Arlidge, the culture there is “completely money-obsessed. ... There’s always room — need — for more. If you are not getting a bigger house or a bigger boat, you’re falling behind. It’s an addiction.”

It’s an addiction that Washington has done little to quell. President Obama has not been strong on the issue, and Timothy Geithner coddles the wanton bankers whenever they freak out that they might not be able to put in their new pools next summer.

The bankers try to dismiss calls for regulation as populist ravings, but the insane inequity of it cannot be dismissed.

No sooner had the Senate Banking Committee Chairman Chris Dodd announced his plan to overhaul financial regulation Tuesday than compensation experts declared it toothless.

The banks and their lobbyists wheedled concession after concession out of Washington and knocked down proposed inhibition after inhibition. Now the banks are laughing all the way to the bank.

“Saturday Night Live” was tougher on Goldman Sachs than the government, giving the firm flak about commandeering 200 doses of the swine flu vaccine — the same amount as Lenox Hill Hospital got — while so many at-risk Americans wait.

“Can you not read how mad people are at you?” demanded Amy Poehler. “When most people saw the headline ‘Goldman Sachs Gets Swine Flu Vaccine’ they were superhappy until they saw the word ‘vaccine.’ ”

Seth Meyers chimed in: “Also, Centers for Disease Control, you sent the vaccine to Wall Street before schools and hospitals? Really!?! Were you worried the swine flu might spread to the Hamptons and St. Barts? These are the least contagious people in the world. They don’t even touch their own car-door handles.”

And as far as doing God’s work, I think the bankers who took government money and then gave out obscene bonuses are the same self-interested sorts Jesus threw out of the temple.

Frontline's "The Card Game" on PBS

What your credit card company is doing to you with usurous rates, and likely from your bailout money. Tonight on PBS' Frontline. "The Card Game"

Banks, Credit and The American Consumer

A note from Greetings:
A must see on PBS' Frontline tonight. You, your credit cards, and your banks who are raising your interest rates to usury levels... perhaps with the bailout money given to them by you.

The Card Game - On air and online November 24, 2009 at 9:00pm (check local listings) Some top authorities on the consumer lending industry accepted FRONTLINE's invitation to weigh in with commentary on the industry, its range of products, and the debate about a new regulatory framework. This blog is part of a FRONTLINE/New York Times joint project, The Card Game, comprising a series of reports by the Times and a documentary by FRONTLINE, which airs Nov. 24th.

As credit card companies face rising public anger, new regulation from Washington and a potential perfect storm of economic bad news, FRONTLINE correspondent Lowell Bergman examines the future of the massive consumer loan industry and its impact on a fragile national economy. In a joint project with The New York Times, Bergman and the Times talk to industry insiders, lobbyists, politicians and consumer advocates as they square off over new regulation and the possible creation of a consumer finance protection agency. How are the credit, debit and pre-paid card industries repositioning themselves to maintain high profits under the new rules? The stakes couldn't be higher as many fear the consumer loan industry could be at the center of the next crisis.

A Squeeze on Credit Card Customers Ahead of New Rules

Note from Greetings: Check those card statements, folks... no matter how great your credit. Last minute antics by the credit card companies before the new laws come into effect.

By ANDREW MARTIN and LOWELL BERGMAN

Banks are struggling to make money in the credit card business these days, and consumers are paying the price. Interest rates are going up, credit lines are being cut and a variety of new fees are being imposed on even the best cardholders.

One recipient of new credit card terms is Anita Holaday, a 91-year-old in Florida, who received a letter last month from Citibank announcing that her new interest rate was 29.99 percent, an increase of 10 percentage points.

“I think it’s outrageous they pursue such a policy,” said Susan Holaday Schumacher, Ms. Holaday’s daughter, who pays her mother’s bills. “That rate is shocking under any circumstances.”

While the average interest rates charged by banks are lower than Ms. Holaday’s, her situation is not all that unusual. The higher rates and fees reflect the grim new realities of the credit card industry — the percentage of uncollectible balances has hit a record even as a new law may further limit the cards’ profitability.

Banks began raising interest rates and pulling back credit lines about a year ago as delinquencies crept upward and regulators discussed reforms. As banks have become more aggressive in making changes, lawmakers have accused them of trying to impose rate increases before many of the new rules take effect in February.

On Monday, the Federal Reserve provided new evidence of the banks’ actions. About 50 percent of the banks responding to the Fed’s survey said they were increasing interest rates and reducing credit lines on borrowers with good credit scores. About 40 percent said they were imposing higher fees. The banks also said they were demanding higher minimum credit scores and tightening other requirements.

A study by the Pew Charitable Trusts, released late last month, concluded that the 12 largest banks, issuing more than 80 percent of the credit cards, were continuing to use practices that the Fed concluded were “unfair or deceptive” and that in many instances had been outlawed by Congress.

In response to voter complaints, the House of Representatives voted last week to make the law effective immediately. The bill now goes to the Senate, where a vote has not been scheduled. The Senate Banking Committee chairman, Christopher J. Dodd, Democrat of Connecticut, meanwhile, is pushing legislation that would freeze interest rates on existing credit card balances until the law takes effect.

Whatever the starting date, the law makes it much harder for banks to change interest rates on existing balances, and requires more time and notice before a new rate can go into effect.

In their defense, banking officials say they have no choice but to raise rates and limit credit. Because of the new rules and the prolonged economic malaise, they say it is now far riskier to issue credit cards than it was just a few years ago.

“We sell credit; we don’t sell sweaters,” said Kenneth J. Clayton, senior vice president for card policy at the American Bankers Association. “The only way to manage your return is through the price of the product or the availability.”

The nation’s largest banks are scrambling to figure out a new business model that fits within the new rules and current economic conditions. Those banks made handsome profits over the last decade by charging high interest rates and penalty fees to a small group of customers who routinely paid late or exceeded their balances.

Already, banks are shifting to a model in which a smaller pool of Americans will be eligible for credit cards, and customers with cards will probably pay more for the privilege through annual fees and higher interest.

Meanwhile, the banks are in the process of shedding customers considered too risky. That means tens of thousands of Americans will no longer be able to splurge on Nike gym shoes or flat-screen televisions unless, of course, they have enough cash to pay for them.

Still, even consumer advocates have said that the banks were too quick in the past to give out credit. “You know, it doesn’t take a rocket scientist to figure out that if you keep borrowing and borrowing in order to consume now, eventually you crash and burn,” said Martin Eakes, chief executive for the Center for Responsible Lending. “That’s what we’re facing.”

In the 12 months that ended in September, the number of Visa, MasterCard, American Express and Discover card accounts in the United States fell by 72 million, according to David Robertson, publisher of The Nilson Report, an industry newsletter. There are 555 million accounts still in the marketplace, he said.

In roughly the same time period, banks lowered credit limits by 26 percent, to $3.4 trillion, from $4.6 trillion, according to an analysis of government data by Foresight Analytics.

Interest on credit card accounts, meanwhile, has increased to an average of 13.71 percent, up from 11.94 percent a year ago, according to federal records.

As to credit card charge-offs — industry lingo for uncollectible balances — the number tracks the unemployment rate and, therefore, is hovering at around 10 percent.

For the banks, this is uncharted territory. In the modern financing era, credit cards were long a profit center, producing tens of billions in annual profits with a default rate that hovered around 4 percent until the recession.

“We know we are going to lose a lot of money next year in cards, and it could be north of $1 billion in both the first quarter and the second quarter. And that number will probably only start coming down as you see unemployment and charge-offs come down,” Jamie Dimon, chief executive of JPMorgan Chase, said in an earnings call last month.

Banking officials said that because the new law limits their ability to reprice credit as a customer’s risk profile changes, they will instead have to price for future risk at the start, when a cardholder applies for a new card.

That means fewer applicants will be approved for new credit cards, and those who are accepted will increasingly be charged annual fees or variable interest rates, rather than fixed rates. Currently, about 20 percent of credit cards charge annual fees, a percentage that is rising, said Bill Hardekopf, chief executive of LowCards.com. Current cardholders, too, will be affected.

Asked to explain its rate increases, Citibank issued a statement saying the “actions are necessary given the losses across the industry from customers not paying back their loans and regulatory changes that eliminate repricing for that risk.”

Ms. Holaday Schumacher did not accept that explanation. She said she haggled with Citibank to try to get her mother’s bills forwarded to her house in Washington and, during the process, two bills were inadvertently paid late, resulting in the rate increase.

“How unbelievably unfair for an older person who might not understand what this is all about,” she said. Citibank declined to comment on the account.

Still, many of the nation’s banks are trying to repair their tarnished reputations with consumers.

American Express and Discover Financial, for instance, have vowed to stop charging fees when cardholders exceed their credit limits. JPMorgan has started a program that can help consumers categorize their spending and pay down their balances more quickly.

And Bank of America is promoting a line of consumer products so simple that the terms and conditions fit on one page. The BankAmericard Basic Visa, for instance, has no rewards and a single interest rate.

Andrew Rowe, Global Card Services strategy executive at Bank of America, said the new products represented a sea change in the bank’s attitude toward consumer products. Instead of benefiting from consumers who displayed risky behavior by penalizing them with fees, the bank is now trying to help them break those bad habits, he said.

“We succeed if our customers succeed,” he said. “That’s the paradigm shift.”

Treasury Secretary Timothy F. Geithner, for one, said he would welcome consumer products that were simpler and less risky. But, he added in an interview with the PBS documentary program “Frontline”: “It’s a bit of a late conversion. It would have been nice to happen earlier.”

Edmund L. Andrews contributed reporting.

Last-Minute Credit Card Tricks

The Credit Card Accountability, Responsibility and Disclosure Act, signed into law in May, gave credit card companies a leisurely timetable — as long as 15 months — to phase out predatory practices used to bleed consumers. Not surprisingly, the companies have exploited this generosity by driving already outrageous interest rates still higher and imposing fees that are pushing struggling families further into debt.

Congress can end this injustice by moving up the deadline, accelerating reform and helping consumers.

Some of the worst (and most common) abuses are now scheduled to be outlawed in February. These include the practice of arbitrarily raising interest rates, penalizing customers when they are late paying a bill unrelated to the credit card — so-called universal default — and charging customers interest on debt that they paid off a month or more earlier.

The banks claimed that they needed the long lead time to rework their computer processing system. Consumer advocates warned that this would invite banks and credit card companies to wring as much as possible out of consumers before the law finally took effect.

They were right.

A forthcoming study from the Pew Charitable Trusts’ Safe Credit Cards Project shows that credit card interests rates — already too high — rose by 20 percent in the first two quarters of this year, even though the cost of lending went down as a result of low federal interest rates. In testimony before Congress earlier this month, one consumer advocate cited case after case of struggling consumers who had seen their credit card rates more than double for no apparent reason, even when they had faithfully paid on time.

A House bill introduced by Representative Carolyn Maloney, a Democrat of New York, and Representative Barney Frank, a Democrat of Massachusetts, would halt this exploitation by making the act effective on Dec. 1. The Senate needs to take the same approach.

Promised Help Is Elusive for Some Homeowners

By PETER S. GOODMAN

MESA, Ariz. — She had seen the advertisements for the new government program offering relief. She had heard President Obama promise that help was on the way for homeowners like her, people who had lost jobs and could no longer make their mortgage payments.

But when Eileen Ulery called her mortgage company — Countrywide, now part of Bank of America — the bank did not offer to alter her mortgage. Rather, the bank tried to sell her a new loan with a slightly lower monthly payment while asking her to pay $13,000 toward the principal and a fresh $5,000 in fees.

Her problem was that she did not yet present a big enough problem to merit aid.

Yes, she was teetering toward delinquency. She was among millions of homeowners rapidly sliding toward danger for whom the Obama administration had devised an aid program — some already in foreclosure proceedings, others headed that way as they ran out of means to make their payments. But unlike those in imminent peril of losing their homes, Ms. Ulery had never missed a payment.

“I don’t know who this bailout is helping,” she said. “We’ve given these banks all this money and they’re not doing what they say they’re doing. Something’s not working right. They keep saying they’re doing all this, but we don’t see it down here at this level.”

More than three months after the Obama administration outlined a new program aimed at rescuing millions of distressed homeowners by compensating banks that modify mortgages, Ms. Ulery’s experience illustrates the mixture of confusion, frustration and limited assistance that now reigns.

Through many months of wrangling over the fate of the financial system, with hundreds of billions of taxpayer dollars dispensed on bailouts, distressed homeowners have waited for their own rescue amid talk that it was finally on the way. Modifications of so-called subprime and Alt-A mortgages — those made to people with tarnished credit — actually fell by 11 percent in May from April, according to research by Alan M. White at Valparaiso University School of Law.

A Treasury spokeswoman, Jenni Engebretsen, confirmed that homeowners like Ms. Ulery — current on their mortgages yet grappling with a hardship like unemployment — were eligible for loan modifications under the program. She said mortgage servicers had offered to modify more than 100,000 loans since the department announced the program.

But how many loans have been modified? Ms. Engebretsen declined to say, noting that the Treasury was working with mortgage companies to “fine-tune reporting systems.”

A spokesman for Bank of America Home Loans, Rick Simon, confirmed that the bank offered Ms. Ulery refinancing and not loan modification. The bank is now focusing on modifications only for those borrowers “who are already in severe threat of foreclosure,” he said.

“We’re still putting the systems in place to handle people who are current on their loans,” Mr. Simon said, declining to say how many loans Bank of America had modified. “It’s still very, very early in the program.”

Ms. Ulery, 63, is the face of the latest wave of troubled American homeowners, a surge of people in financial danger not because of reckless gambling on real estate, but because of lost income.

Far from being one of those who used easy-money loans to speculate on homes proliferating across the desert soil of greater Phoenix, she has lived in the same modest, stucco-sided condo in suburban Mesa for a dozen years. She bought the two-bedroom home in 1997 for $77,500.

For two decades, she worked as an executive assistant at nearby Arizona State University, bringing home more than $1,000 every other week — enough to pay the bills.

Round-faced, wry and given to staccato bursts of laughter, Ms. Ulery regularly visits yard sales, seeking out plates and patchwork quilts for her collections. She takes pleasure in her two grandchildren and her beagle. She enjoys an occasional glass of wine, favoring a $6 merlot that comes in a screw-top bottle.

“I’m not an extravagant-type person,” she said. “I see these big houses all around, and they’re beautiful, but I’m comfortable in my little condo.”

Like tens of millions of other American homeowners, she added to her mortgage balance as the value of her condo swelled, at one point exceeding $200,000. She refinanced to pay off some credit cards and settle into a 30-year, fixed-rate loan. Later, she took out a home equity line of credit to buy a new Hyundai. She refinanced again in 2007, borrowing $20,000, mostly for a new roof.

Over the years, her monthly payment swelled from about $600 to more than $1,000. With planning and self-control — she tracks her monthly expenses on a color-coded spreadsheet — she always came up with the money. “I’ve never been late,” she said.

But the equation broke down last year, when she lost her job in university budget cuts. Ms. Ulery received six months of severance. She arranged a monthly $1,500 Social Security check. But when the severance ran out in October, her mortgage finally exceeded her limited means.

With so many people out of work, and with her doctor counseling rest for a stress-related illness, she did not pursue another paycheck, negotiating to have her university pension begin earlier. She has been leaning on credit cards.

Across the country, millions of homeowners in similar straits have been sliding into delinquency. Some owe more than their houses are worth.

Ms. Ulery is among that unhappy cohort — her house is worth about $122,000, and she owes $143,000 — but walking away is not for her.

“In my family, we don’t do that,” she said. “You pay your bills. And I wanted my home.”

In March, she heard about the Obama administration program. The Countrywide Web site directed her to a government site, makinghomeaffordable.gov, she said. There, she took a test to determine her eligibility for a loan modification.

Was her home her primary residence? Check. Was she having trouble paying her mortgage? Check again, and so on until the screen told her that she might qualify.

In April, she called the bank. The representative said the bank was not doing modifications for people like her, she recalled. He shifted the conversation: if she handed over $18,000, he could lower her payment to $967 from $1,046. Her interest rate would actually increase slightly, with the drop largely because she was putting down more money.

“I just laughed,” Ms. Ulery said. “It was a really good deal for them.”

To which she poses her own question: What sort of deal is it for the American taxpayer? As she sees it, the same banks that generated the mortgage crisis are now getting public money to fix it, while doing little more than seeking new fees.

“I don’t think the government gets it,” she said. “These are the same people you couldn’t trust before.”

Democrats who want 30 percent credit card rates

I've been posting some stories on the Senate defeating the cap on credit card rates at 15%, a very fair rate in these times, or any. They want it to stay at a usurous 30%, a rate which, in times previous to Reagan's usherance in of deregulation, may have been illegal if not usurous. These were rates that were once only found with loan sharks, and street corner thugs who kept families in debt to them, calling favors for those debts. It's right out of The Dead End Kids.

Now, these Senators are protecting their states where Credit Card companies and banks operate without supervision, free to do as they please. Those states are Delaware, South Dakota, and Connecticut. among others.

Thanks you (tongue in cheek) Senators Chris Dodd, John Thune, Tim Johnson (South Dakota), Tom Carper, Ted Kaufmand (Delaware) and lone Democratic Rep Stephanie Herseth Sandlin of South Dakota for joining the Republicans to soundly defeat such a bill that would actually help the consumer. It is now clear who represents the banks.

Perhaps, as I note those states looking for help from the rest of us - such as Delaware wishing for money to aid its film industry - it is up to the rest of us to call our Senators and Representatives to let them know we are watching their votes on such bills to see if there is some sort of line that says "We're for the consumer, not the banks, who already make so much on our backs."

S.D. senators wary of credit card reform plan

May 14, 2009

LEDYARD KING
Argus Leader Washington Bureau

WASHINGTON - Both of South Dakota's senators are expected to vote against a sweeping credit card reform bill unless significant changes are made to protect industry jobs in the state.

Democrat Tim Johnson and Republican John Thune told reporters Wednesday they've been talking with Senate banking committee leaders about the need to ensure that the roughly 20,000 workers in South Dakota tied to the industry don't lose their jobs.

"I'm hopeful that there will be language that protects South Dakota jobs," Johnson said. "This is a bipartisan bill, so the possibility of blocking this is not great."

Johnson and Thune sided with 58 other senators Wednesday in a procedural vote against an amendment to cap interest rates on credit cards at 15 percent.

The Senate bill is considered to have stronger protections for consumers than legislation that passed the House last month and than Federal Reserve regulations that would take effect July 1, 2010.

It would give consumers 45 days' notice before rate increases and allow them to pay by phone without additional fees. It would prohibit rate increases in the first year after an account is opened, prohibit interest charges on paid-off balances from billing in the previous cycle and protect young people from aggressive solicitations.

President Obama strongly supports credit card reform and wants legislation on his desk by Memorial Day weekend.

Thune, Johnson and Rep. Stephanie Herseth Sandlin, the lone Democrat to vote against a House credit card reform bill last month, say the Federal Reserve rules should be given a chance to take effect because they were crafted after years of careful study and treat both lenders and borrowers fairly.

Thune said the plan in Congress is "swinging the pendulum too far in one direction. It will put a lot of jobs in South Dakota in jeopardy if it passes in its current form. We're trying to work with the sponsors of the bill to see if we can get some of those issues addressed."

The three members of South Dakota's delegation also say the Senate and House versions would penalize responsible consumers and restrict access to credit at a time when America's struggling economy needs a boost.

Contributing: Nicole Gaudiano, Gannett Washington Bureau. Contact Ledyard King at lking@ gannett.com.

Senate Rejects a 15% Ceiling on Credit Card Interest Rates

So.. the Democrats and Republicans want to LOOK like they're looking after you. But really.. they're still looking after the banks. Democrats and Republicans alike... are bowing to Wall Street and not the working person. In years past.. 30 percent was considered loan sharking, and a crime. Now, both parties have made it legal. I will look for the 33 Senators who voted for it, to give them credit.. and for the rest who voted against it... the ones who are clearly still in the pocket of the banks and credit card companies. Kudos to Senator Sanders for sticking up for the working person. (From Greetings)

By CARL HULSE, NY Times

Despite complaints that banks and credit card companies are gouging customers by charging outrageous interest rates, the Senate on Wednesday turned back an effort to cap interest rates at 15 percent.

The proposal by Senator Bernard Sanders, the Vermont independent, drew only 33 votes and needed 60. A bipartisan group of 60 senators opposed it, though the Senate pushed ahead with other restrictions on credit cards. Some Democrats and consumer groups have said that an interest cap is needed to put real teeth into an otherwise solid bill.

The bill still contains provisions that would prohibit companies from raising interest rates on existing balances unless a card holder was 60 days behind, and then would require the rate to be restored to its previous level if payments were on time for six months. Consumers would have to be notified of rate increases 45 days in advance. Companies would not be allowed to charge late fees if they were late in processing a payment.

Other backers of the measure calculated that an interest rate ceiling would doom the popular legislation. The banking industry, which had some heavyweight representatives monitoring the vote, warned that an interest rate limit could cause a sour reaction in the financial markets. But Mr. Sanders said the card companies and banks were engaged in conduct that could get others hauled into court. He said one-third of all credit card holders are paying interest above 20 percent and as high as 41 percent.

“When banks are charging 30 percent interest rates, they are not making credit available,” said Mr. Sanders. “They are engaged in loan sharking.”

Curbing Credit Card Predators

NY Times Editorial

Federal regulators are finally doing something about the unfair and deceptive credit card practices that have helped to keep millions of Americans permanently mired in debt. New rules issued last week will limit or prohibit some of the most blatant abuses. But the next Congress must do more if Americans are to get fair, clear credit card rules that allow them to make informed spending decisions.

In recent years, credit card companies have stealthily adopted a variety of billing strategies that are designed to maximize penalties and fees, meanwhile driving up interest rates to 25 percent or higher. The companies hook cardholders with attractively low teaser interest rates — while reserving the right to raise those rates at any time and for any reason.

To make matters worse, credit card contracts are often 30 pages long and written in language even lawyers find hard to understand.

The billing strategies are designed to lure cardholders into the debt trap and keep them there. Under a strategy known as universal default, for example, rates can be raised — even retroactively, on old purchases — when cardholders fail to pay bills not related to the credit card account. Congress, which is considering several bills to curtail unfairness, should outlaw this.

The new rules don’t forbid universal default. But they would at least prohibit retroactive rate increases, unless the cardholder is more than 30 days late on the credit card payment itself. Another change announced last week prohibits the widespread practice of charging cardholders interest on debts they have already paid.

Another important change limits the usurious fees that companies often charge to cardholders simply because they have poor credit histories. These fees, consumer advocates say, can amount to half of the credit these cardholders are offered.

The new rules do not take effect until 2010. That’s not soon enough. Congress could make these and other changes immediate by promptly passing a credit card reform package.

Usury, or the (New) American Way?

Merriam-Webster's Dictionary
usury
One entry found.
usury Main Entry: usu·ry Pronunciation: \ˈyü-zhə-rē, ˈyüzh-rē\
Function: noun
Inflected Form(s): plural usu·ries
Etymology: Middle English usurie, from Anglo-French, from Medieval Latin usuria, alteration of Latin usura, from usus, past participle of uti to use
Date: 14th century
1archaic : interest
2: the lending of money with an interest charge for its use; especially : the lending of money at exorbitant interest rates
3: an unconscionable or exorbitant rate or amount of interest; specifically : interest in excess of a legal rate charged to a borrower for the use of money

Note from Greetings:
As you read the following article on this holy of times, please bare in mind the above definition of "usury", and think of the credit card companies who are now charging upwards of 30 percent interest on their debts. This, to me, is creating a living "debtors' prison", not seen since the times of Charles Dickens - or at least John D. Rockefeller.

Having grown up in the 50's and 60's, I remember my parents, who grew up in the 20's and 30's, talking about the people who were out of work, losing their homes, and who were in debt to people my parents called "loan sharks"... people, usually criminals, who would give loans to those who could not afford them, and then charge rates my parents found incredible... 30 percent or more! (Hmmm... can you hear me Bank of America, Advanta, and the others?) Then, it was thought to be criminal.

How did we get to a point where the banks have now taken on that outlandish rate of interest, and are beginning to foreclose on mortgages? How have we arrived at a time that is starting to remind me of the oncoming of the great depression, which left millions homeless, jobless (or with lesser jobs), and in neverending debt.

And how does one get out of debt at 30 percent interest on WalMart wages? How did Congress and this President allow the banks to first convince the government to pass a bill not allowing Americans to declare bankruptcy, and then to get government to look the other way when the banks raised their interest rates to usurous levels, often depriving people of food and shelter.

And how did they allow jobs of Americans to go overseas (or manipulate them to go overseas), leaving those in debt with paltry wages and often without insurance, giving them only a credit card with which to pay many of those debts?

And ... what will Congress or the next President do about this?

I, personally, look forward to a future where I can wish everyone Merry Christmas, knowing that they have a roof over their heads, food to eat, and a government that will protect them from things we thought only happened in the times of Dickens or the Great Depression. But, still... Merry Christmas... to all...and to all a good conscience. (AP article follows)


Unpaid Credit Cards Bedevil Americans

By RACHEL KONRAD and BOB PORTERFIELD, Associated Press Writers. December 23rd, 2007

SAN FRANCISCO - Americans are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come.

An Associated Press analysis of financial data from the country's largest card issuers also found that the greatest rise was among accounts more than 90 days in arrears.

Experts say these signs of the deterioration of finances of many households are partly a byproduct of the subprime mortgage crisis and could spell more trouble ahead for an already sputtering economy.

"Debt eventually leaks into other areas, whether it starts with the mortgage and goes to the credit card or vice versa," said Cliff Tan, a visiting scholar at Stanford University and an expert on credit risk. "We're starting to see leaks now."

The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP. That represented more than 4 percent of the total outstanding principal balances owed to the trusts on credit cards that were issued by banks such as Bank of America and Capital One and for retailers like Home Depot and Wal-Mart.

At the same time, defaults _ when lenders essentially give up hope of ever being repaid and write off the debt _ rose 18 percent to almost $961 million in October, according to filings made by the trusts with the Securities and Exchange Commission.

Serious delinquencies also are up sharply: Some of the nation's biggest lenders _ including Advanta, GE Money Bank and HSBC _ reported increases of 50 percent or more in the value of accounts that were at least 90 days delinquent when compared with the same period a year ago.

The AP analyzed data representing about 325 million individual accounts held in trusts that were created by credit card issuers in order to sell the debt to investors _ similar to how many banks packaged and sold subprime mortgage loans. Together, they represent about 45 percent of the $920 billion the Federal Reserve counts as credit card debt owed by Americans.

Until recently, credit card default rates had been running close to record lows, providing one of the few profit growth areas for the nation's banks, which continue to flood Americans' mailboxes with billions of letters monthly offering easy sign-ups for new plastic.

Even after the recent spike in bad loans, the credit card business is still quite lucrative, thanks to interest rates that can run as high as 36 percent, plus late fees and other penalties.

But what is coming into sharper focus from the detailed monthly SEC filings from the trusts is a snapshot of the worrisome state of Americans' ability to juggle growing and expensive credit card debt.

The trend carried into November. As of Friday, all of the trusts that filed reports for the month show increases in both delinquencies and defaults over November 2006, and many show sequential increases from October.

Discover accounts 30 days or more delinquent jumped 25,716 from November 2006 and had increased 6,000 between October and November this year.

Many economists expect delinquencies and defaults to rise further after the holiday shopping season.
Mark Zandi, chief economist and co-founder of Moody's Economy.com Inc., cited mounting mortgage problems that began after this summer's subprime financial shock as one of the culprits, as well as a weakening job market in the Midwest, South and parts of the West, where real-estate markets have been particularly hard hit.

"Credit card quality will continue to erode throughout next year," Zandi said.

Economists also cite America's long-standing attitude that debt _ even high-interest credit card debt _ is not a big deal.

"The desires of consumers to want, want, want, spend, spend, spend _ it's the fabric of our nation," said Howard Dvorkin, founder of Consolidated Credit Counseling Services in Fort Lauderdale, Fla., which has advised more than 5 million people in debt. "But you always have to pay the piper, and that can be a very painful process."

Filing for bankruptcy is no longer a solution for many Americans because of a 2005 change to federal law that made it harder to walk away from debt. Those with above-average incomes are barred from declaring Chapter 7 _ where debts can be wiped out entirely _ except under special circumstances and must instead file a repayment plan under the more restrictive Chapter 13.

Personal finance coaches say the problem is most grave for individuals who are months delinquent or already in default _ like Kenneth McGuinness, a postal clerk from Flushing, N.Y.

His credit card struggles began nine years ago, when he charged his son's college tuition and books. He thought he was being clever: His credit card's 6 percent "teaser" interest rate was lower than the 8.6 percent interest on a college loan.

McGuinness, 61, soon began using Citibank and Chase cards for food, dental work and copays on doctor visits and minor surgeries. Interest rates surged to 30 percent. Now he's $37,000 in debt and plans to file for bankruptcy in February.

"I tried to pay what I could and go after the high-interest accounts first," McGuinness said. "But it just kept getting higher and higher, and with late charges and surcharges I was going backward."

In the wake of the jump in defaults on subprime mortgage loans made to borrowers with poor credit histories, banks have been less willing to allow consumers to consolidate credit card debt into home equity loans or refinanced mortgages. That is leaving some with no option but to miss payments, economists said.

Investors also are backing away from buying securitized credit-card debt, said Moshe Orenbuch, managing director at Credit Suisse. But that probably has more to do with concerns about the overall health of the U.S. economy, he said.

"It's been getting tougher to finance any kind of structured finance _ mortgages, automobile loans, credit cards, student loans," said Orenbuch, who specializes in the credit industry.

Capital One Financial Corp. reported that delinquencies and defaults are highest in regions where troubled mortgages are concentrated, including California and Florida.

Among the trusts examined, Bank of America Corp. had the highest delinquency volume, with overdue accounts valued at $5 billion. Bank of America defaults in October were almost 200 percent higher than in October 2006.

A spokesman for Charlotte, N.C.-based Bank of America declined to comment.

Other trusts _ including those linked to Capital One, American Express Co., Discover Financial Services Co. and those containing "branded" cards from Wal-Mart Stores Inc., Home Depot Inc., Lowe's Companies Inc., Target Corp. and Circuit City Stores Inc. _ also reported striking increases in year-over-year delinquency and default rates for October. Most banks and other financial institutions holding credit card debt on their own books also reported double-digit increases in delinquencies.

The one exception in October was JPMorgan Chase & Co.'s credit card trust, which reported declines in both delinquencies and defaults. A Chase spokesperson attributed this to its focus on prime borrowers and aggressive account management.

By contrast, Capital One executives told analysts last month that the company projected 2008 write-offs of credit card debt to be at least $4.9 billion. This projection, analysts were told, took into account growing delinquencies and potential effects if the housing market continued its downward slide.

Capital One spokeswoman Julie Rakes said the increase in delinquencies could be due to an accounting change last summer, which shortened the grace period between when statements were issued and the due date.

Capital One also reported that the number of accounts 90 days or more in arrears had increased between October and November. More than 1.2 million of Capital One's 30 million accounts were either delinquent or in default.

Many personal financial coaches expect this trend to accelerate in 2008 _ particularly among people who took out untraditional loans whose interest rate has risen, requiring owners to pay mortgages several hundred dollars more than just a year ago.

"You're looking at more and more distress _ consumers desperately trying to preserve their credit lines, but there's nowhere else to go," said Robert Manning, director of the Center for Consumer Financial Services at Rochester Institute of Technology. "It's like a game of dominoes."

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