Wednesday, May 20, 2009
By all means, let us subsidize the deadbeats
Call me a bonehead, but I could swear that one of the causes of the present economic crisis was that the "greedy" mortgagees, acting under the influence of regulators and politicians of both parties, lent money to people with poor credit -- "subprime" mortgagors, in the vernacular -- at rates that did not compensate the lenders for the risks they had assumed. The consequence, as we have all learned to the point of national anguish, is that creditworthy people are subsidizing both the deadbeats and the creditors of those foolish mortgagees, perhaps for a generation or more to come.
So, naturally it makes sense to do the same thing with credit cards.
Politicians are known for their short memories, but the current leadership at both ends of Pennsylvania has collective Alzheimer's.
24 Comments:
By 
, at
Wed May 20, 09:23:00 AM:
"...the current leadership at both ends of Pennsylvania has collective Alzheimer's."
Either that or they are intentionally trying to wreck capitalism and hope to change our economic system into something else.
The President did say he wanted to spread the wealth around, so at least he is not lying this time.
For me, I can't afford to support any more people, so I guess I will have to cancel my credit cards.
By , at
Wed May 20, 09:25:00 AM:
Banks are just vehicles for transfer payments.
By , at
Wed May 20, 09:58:00 AM:
Cool, I think I'll put my college tuition on a credit card and let you suckers pick up the bill.
By , at
Wed May 20, 10:04:00 AM:
SeniorD seZ;
Not Alzheimer's but a far worse condition known as Radical Socialist Thievery. Known to affect rich, liberals and some rich Republicans, the disease presents as a 'Do as I say, not as I do' demeanor and abject willingness to extract huge sums of money from the proletariat while simultaneously prohibiting a similar extraction from themselves.
The only known cure is a complete replacement of the affected individual with the naturally immune Conservative.
By , at
Wed May 20, 10:09:00 AM:
You haven't nailed it. You don't know what the real problem is.
The real problem is Political Correctness.
All things are being engineered towards Political Correctness; that is the driving force for all things.
Left really doesn't care about effects---it only wants Political Correctness.
Look, Rhodesia was the bread basket of Africa. Under European rule, it exported food all over Africa. When the Left attacked Apartheid, what has happened to Rhodesia? Take a guess. Does the Left care that now starvation is rampant? Does it even do any retrospection? So long as the European man is on the run---The Left doesn't care about consequences only that Political Correctness won in Rhodesia. That is all that matters.
To hell with right business practices. That doesn't matter. So long as Minorities have a slice of the pie of the business elite, consequences be damned.
The Mortgage mess was political correctness.
The Blight of urban cities is caused by political correctness. When segregation was ruled illegal. When you have to sell to a minority, wrecking Europeans chance of community,---they fled with their money. Urban blight is caused by political correctness.
Don't you get it? Consequences don't #^#*%( matter! Consequences be damned. Only that the ideology be imposed!
That is the only importance. You live in a Marxist country with Marxist morality, i.e. political correctness and like the simpletons they are--they are imposing this political indoctrination on everything.
California's ballot measures are going down in defeat and the commie pinko state is now facing somewheres close to 40 billion deficit. It has to file for bankruptcy.
It's all coming down folks. Idiots run this country. Ideologues run this country.
Humpty Dumpty sat on a wall,
Humpty Dumpty had a great fall,
All the kings men and all the kings horses,
Couldn't put Humpty Dumpty back together again.
It amazes me how nursery rhymes so well portray reality these days.
By , at
Wed May 20, 10:21:00 AM:
I have no sympathy for the credit card companies. These companies have a license to steal. They issued cards to poor risks because loan sharking is highly profitable. They may squawk about the new rules, as they have over past legislation, but they will find other ways to prey on their customers. It is pretty obvious to me that ethics is not taught in business/law schools. The attitude seems to be if you can get away with it, do it.
By 
Christopher Chambers, at
Wed May 20, 11:47:00 AM:
I know, WLindsayWheeler (your name says it all hahah), I know. These awful dark people/foreign babblers and the white fools who pander to them brought this whole economy low. Bowed our mighty nation. Got one of them elected president of our country. Rocked our banks. I mean, this power, far out of wack with their numbers, or wealth (or lack of) or voting strength or income (unless you count the millions of...um...thousands of...okay hundreds of entertainers,rappers, sports stars) is phenomenal. To influence this might nation so? Housing these people has destroyed our system. Ask anyone in your neighborhood.
And those deadbeat white people? I think those independent studies about people using credit cards and going bankrupt over medical problems and lack of resources to stop that, or whole communities of upstanding soccer moms and little league dads doing exactly what business and Republican govts over the years have asked--spend to keep the economy afloat--has created this wobbly card table of credit. Not too mention globally, where the US (private and public sector alike), gets it's cheap money, cheap labor overseas.
No. I won't stand for it. I would turn back the hands of time and kill Andrew Jackson before creams the Bank of the US, extends voting to all white men regardless of property holdings. Before he tries to ERASE the debt of of all such persons (though using the West as a safety valve--removing those cursed redskins, of course--isn't a bad idea).
Deadbeats, All! Cannibals, All! Redeem our nation!
I'm ready!
Oops...I got a notice from Visa. My APR's now at Mafia vig levels, and there's a $50 late fee...but I wasn't late--I called?! They haven't fixed it. Oh well, it's my own fault. I spent when W told me to spend, as did every commercial on TV. Even the NRA told me to charge that AR-15 with the faux rocket tube (those thieving Hispanics down the street won't know the difference) and, yeah, I brushed up against my credit limit...but damn, this is extreme.
Still, it's my fault. OMG...I've become a deadbeat. At least I'm armed...
(TH--this was a silly post, and of course it prompted sillier comments like Lindsay's. Better to stick to hard news like FlyByGate or Michelle Obama's arms LOL)
By , at
Wed May 20, 11:56:00 AM:
Here i thought banks et al were the "mortgagors" and borrowers were the "mortgagees".
By , at
Wed May 20, 11:57:00 AM:
Subprime mortgages went bad because securitization was abused by the mortgage originators, aided and abetted by Fannie and Freddie ... and flawed ratings. Unlike old fashioned lenders, mortgage originators only cared about ramping the volume -- they didn't have a stake in the long-term performance of the mortgage. Subprime mortgage borrowers are all over the lot -- some participated in outright fraud, some were victims too ... but most put little or nothing down and got put into a house they couldn't afford then and maybe can't afford today. The real victims were those who bought what they were told was AAA paper.
Credit card lending is different. Credit card companies are very sophisticated at getting people over-extended and then raping them. The card companies need favorable bankruptcy laws to do this -- and got them with the help of the Senator from MBNA -- Joe Biden. This is an area that screamed for reform.
A handful of banks now control most of the credit card business. They have to move away from a model that counts on getting some of their customers trapped into paying 30% or more rates. Right now, these deadbeats are literally subsidizing customers
who never carry a balance.
Usually I'm not anti-corporate -- but these banks have been acting like loan sharks -- and it's been deliberate.
Link, over
By Christopher Chambers, at
Wed May 20, 12:00:00 PM:
Addendum:
GREAT NEWS! JG Wentworth, which made a mint paying out lump sums to these deadbeats (procured in settlements from greedy, filthy pandering to the mudsill TRIAL LAWYERs) has filed for Chap 11 protection. No more can the deadbeats who ruined out economy buy their Hummers (tho the figures show it was overwhelmingly younger white males who purchased--financed?--these wholly appropriate vehicles) or their Jay Z DVDs!
Plus we are saved from the God-awful commercials, right?
Of course, the problems didn't appear to be related to the customer base, but who cares?
Peace-out, wingnuts...(smile)
By , at
Wed May 20, 02:04:00 PM:
CC, you are as loony as Wheeler.
For the sane elements among commenters interested in the next shoe falling on we, the taxpayers, my guess is it's pensions.
By , at
Wed May 20, 02:11:00 PM:
Yes, Mr. Chambers we are bringing the wonderful fruits of Zimbabwe here to America. Washington DC with Marion Barry and Detroit and Zimbabwe are wonderful examples of Minority rule.
Bring it on baby!
Let's turn America into a TURD world hell hole---That ought to show the uppity Euroman whose boss! I'm glad all those Yuppie Euro children get to live in the Left's Utopia hell-hole called America.
Steve Sailor, another one of those filthy Europeans, just posted this:
[quote]""For decades, everybody who was anybody demanded more mortgage lending to minorities. Skeptics were marginalized and vilified. So, in this decade, we got what we'd been asking for, and we got it good and hard.""[/quote]
For more scholarly approach of the minority causes and what havoc political correctness has wrought, here are some good links from Steve Sailor:
Mozilo ManiaCalifornia Foreclosure Rates and RaceIsn't political correctness a swell thing?!?
Altogether sing now,
"We all live in a Turd world submarine, A Turd world submarine,..."
And sing it loud and strong when you're standing in the soup lines if you haven't been butchered by a minority first.
By JohnnyL, at
Wed May 20, 02:24:00 PM:
Credit cards are simple. The rules are spelled out in the Schumer box. Pretty easy to follow. If you want to use the card follow the rules and quit whining about how those evil banks et al, lured you in to spending what you didn't have and getting over extended. You want the convenience then put up with the rules. Too high interest? Pay cash. It's not like you have a right to borrow someone else's money at the interest rate YOU set.
Don;t like how your bank is treating you? Go somewhere else. Try a credit union. Quit whining as if you were being forced to accept the card and use it. Its your choice. Accept some personal responsibility.
By , at
Wed May 20, 03:29:00 PM:
Christopher Chambers, you have written racists statements every bit as objectionable as what Wheeler wrote. Just ignore him as thinking people on this blog ignore you and everything will be fine.
By JPMcT, at
Wed May 20, 03:52:00 PM:
A few thoughts:
* Last time I checked, all new credit cards had to have an application, accompanied by a brochure outlining their policies and rates. Nobody was forcing anybody to sign the application without reading the brochure. Cry me a river, poultroon!
* Congress has been forcing banks to lend money to people with no creditworthiness since the 1970's. What in the name of all that is holy did they THINK was going to happen?
* Hey, CC...how much money has the US government spent on the "War on Poverty"? Pretty close to a trillion at my last count. Let me know when you all have had enough.
Bt the way, CC...the racism crap is getting a little old. Even Jesse and Al are having a hard time finding a good scam nowadays. Give it up!
By , at
Wed May 20, 04:49:00 PM:
The Obama administration spends too much money, and the country's ability to generate more tax revenue is limited. Inflation seems inevitable, since the government can't monetize these deficits with borrowed money, and already we see the dollar dropping like a rock.
Coming out of recession could take a long while and anti-growth policies coming from Congress along with no indication Congress has any intention at all to force moderatation on future Obama spending (let alone 2009-2010) means we can expect to see high unemployment, high inflation and low growth rates in GDP for years to come. If the Republicans can't find a platform and voters in that mess, then they are beyond useless.
By , at
Wed May 20, 05:22:00 PM:
Here i thought banks et al were the "mortgagors" and borrowers were the "mortgagees".Nope, the person who gives is the 'or', the person who receives is the 'ee'.
Right now, these deadbeats are literally subsidizing customers who never carry a balance.No they don't. You do know what an "interchange fee" is, don't you? The real money is in factoring, not lending.
By Aegon01, at
Wed May 20, 08:37:00 PM:
I'm sure CC was being sarcastic, and I know what Lindsay was TRYING to say, but one HAS to admit the very poor choices of words, and examples, and...logic.
And as to this whole thing, it seems like the credit card thing is going to benefit consumers a lot, and hopefully relieve some of the debt that plagues most Americans. Therefore, I don't see the problem. My information came from NYT this afternoon.
By , at
Wed May 20, 08:50:00 PM:
Tigerhawk Teenagers- It will most definitely benefit "some" consumers at the expense of "other" consumers.
And those that look for a dishonest advantage will still be able to game the system, like they always do. What we have is another extension of the "Culture of Corruption".
By , at
Wed May 20, 09:57:00 PM:
To Randian, In fact, I do know what interchange fees are. Years ago, I was an M&A investment banker and worked on several sales of credit card companies.
Almost all credit card portfolios have a segment of customers that lose money, and another that's profitable. You don't really know which is which until after the fact. Marketing is tied to credit analysis with a lot of sophisticated computer work.
Card companies lose money on customers who pay on time and don't carry interest-bearing balances. Interchange fees aren't enough to cover this. In the old days, that's why they had annual fees. Card companies keep these customers, hoping they'll screw up and thus become profitable.
The old AT&T Card was a model example of a plain vanilla card business -- solid citizen, moderate income customers who tended to pay on time, and not carry large balances -- as a result it wasn't that valuable a franchise. I think it got sold for something like a 10% premium on balances. When financially modeled, interchange fees made some contribution to valuation but not all that much -- people in the business looked at interchange as mostly going to cover the expense of running the network -- not so much as a profit center.
MBNA was a much more valuable franchise, pound for pound, as its customers tended to carry balances and thus pay a lot of interest. You'd be surprised how many professionals carry big balances -- these are the folks that made MBNA rich. If memory serves I think they got sold for a premium of 25% of receivables. Interchange was only a modest contributor to this. What makes you money is lending at 10 to 15% when your cost of funds is 5%. In the MBNA portfolio, the doctor carrying the $60,000 balance was covering the cost of several no balance accounts and still making MBNA money.
Not everybody can be MBNA -- other companies needed other angles. I was very familiar with Metris, the original subprime credit company. A lot of major players copied its practices ... many of which were sleazy. Metris went after people who were already subprime. What's worse about today's companies is that they actually hope for people to turn less than prime. They've perfected the art of how to trip people up in a lot of ways and then hose them.
In a typical portfolio like this -- the people who wind up paying 30% -- but who don't default -- are 1) covering the credit losses on the real deadbeats, and 2) are covering the costs on the unprofitable model citizens.
Now some here will say that's life in a free market -- but the card companies depend on the state and the courts to break their knee caps. This is the only area of consumer finance where I'd say there is predatory lending. I haven't looked at the new legislation in detail, but this is an area that was crying out for reform.
Feel free to disagree with me -- but for me there's a limit to how far I'd go to defend bad business practices in the name of freedom of contract. Consumer protection laws do have their place.
Once again, this is very different from what happened with subprime mortgages.
Link, again
By , at
Wed May 20, 10:37:00 PM:
"They've perfected the art of how to trip people up in a lot of ways and then hose them."
They have perfected the art of hosing!
Now, please tell me how this is ethics? Is this how we treat our neighbor? our kinsmen? ---We hose our fellow man?
Is that Capitalism? Is this what is taught in Business Schools?
Socrates said, "Where money is prized---Virtue is despised".
How true. And how sad, that we live in a country that is virtueless.
By , at
Thu May 21, 07:20:00 AM:
Link again,
I thought of an analogy. Health and fitness clubs really make their money on the folks who pay but don't show up -- that's like MBNA's doctor carrying the $60,000 balance at 12% -- not smart but fair.
But what would you think of a health club that buried zingers in its fine print -- say, if you don't give a termination notice you get locked into five years at triple the cost of the competition ... that's today's credit card companies.
People don't sign up for cards thinking that they'll get caught in a credit card roach motel -- it's gotten worse because the industry is much more concentrated than it was a decade ago. It's gotten despicable -- it's a long way from John Galt.
By Elise, at
Thu May 21, 10:11:00 AM:
I'm pretty much with Link on this one but I do have a set of questions. What people are angsting over is that credit card companies are not going to be able to charge high enough interest rates, late fees, etc., to make it worth their while to give credit cards to those who have a good chance of defaulting. Therefore the credit card companies are going to stop bonus programs, charge annual fees, start charging interest at point of purchase, and so on in order to make enough to cover defaults. Assuming I've understood the angsting correctly, here are my questions:
Why don't the credit card companies just not give credit cards to people who are likely to default? And set reasonable credit limits on the people they do give cards to? Like maybe, no more than some low percentage of their income? The card companies will still get their money from the merchants; will still get (a now reasonable rate of) interest from those who carry a balance; and will be less likely to lose big time on defaults. I realize this may not make them a fortune but surely there's some place in the world for a sure, steady, reasonably profitable financial business amongst all the more bubbly ones.
By , at
Thu May 21, 07:23:00 PM:
Many credit card companies may start seeing bigger losses on their portfolios as we cycle through this recession ... but that's a result of business decsions they already made. Should they be able to jack rates to 30% on some of their customers now -- for even trivial violations -- in order to make this up? Therein is the nub of the problem. At 30%, many people can't get out from the burden even if they want to be good payers -- it can be a real hardship.
If card companies learn they can't do this, in the future I expect they'll be more conservative in their standards. They'll act more like Elise suggests they should.
I'm years away from the industry, but expect it's been very profitable over the last few years. With consolidation of the players there's been less need for direct mail and telemarketing -- which were huge expenses years ago -- this would boost bottom lines a lot. Bank costs of funds have been low -- but card rates didn't come down as much--- so spreads were wide. So if banks start crying now, it's after years of their raking it in.
I doubt card companies start charging annual fees on existing accounts that don't carry balances -- it's a threat. Even if they do, do you really need seven cards in your wallet?
More and more, people will learn to use debit cards -- debit card volume has been growing by leaps and bounds.
Link, over
