No Credit

RE my post a few days ago: Told you so.

This crossed my screen this morning, Thursday, Nov.13, 2008

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Yahoo!

 

Nov. 12, 2008

 

WASHINGTON – Federal bank regulators have rejected a request by banks and consumer advocates for a program to let lenders forgive huge portions of credit card debt.

The Office of the Comptroller of the Currency rejected the request for a special program that would allow as much as 40 percent of credit card debt to be forgiven for consumers who don't qualify for existing repayment plans.

An unusual alliance of financial industry interests and consumer advocates, represented by the Financial Services Roundtable and the Consumer Federation of America, made the request to the Treasury Department agency on Oct. 29. It demonstrated the urgency of the situation in a deepening economic crisis: consumers — even those with strong credit records — defaulting at high levels on their credit cards, while banks battered by the credit crisis bleed tens of billions from the losses.

An agency official said the government objects to allowing banks to defer losses for several years on the forgiven debt, as would occur in accounting by lenders under the special program.

The agency "does not consider any plan that defers the timely recognition of loss as prudent, and any such proposal cannot be viewed favorably by us," Timothy Long, senior deputy comptroller for bank supervision policy, said in a letter to the two groups dated Monday and made public Wednesday.

"The timely identification, reporting and management of credit losses, along with adequate loan-loss reserves and capital levels, provide the public with ... confidence" in the banking system, Long wrote.

The Financial Services Roundtable, which represents more than 100 large banks, brokerage firms and insurance companies, will "continue to look for ways to help consumers in these extraordinary times," said the group's senior vice president, Scott Talbott.

Travis Plunkett, legislative director of Consumer Federation, said that with the number of deeply indebted consumers growing dramatically, "we still hope to work with bank regulators or Congress to create an alternative" to bankruptcy for them.

Under the proposal, borrowers would be able to defer payment of income taxes they owe on the forgiven part of the credit card debt until after the remainder was paid off. The lenders could wait until then to book their losses on the forgiven debt.

The two groups hoped such a pilot program would become permanent and that as many as 50,000 people struggling with credit card debt would be involved. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent. Consumers would be allowed to pay back the remainder over several years.

The largest credit-card banks each set aside between $1 billion and $3.5 billion in the third quarter for losses on card loans as their profits plummeted.

The biggest credit card lenders include Discover Financial Services LLC, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Capital One Financial Corp., American Express Co. and HSBC Holdings.

Credit card charge-off rates, balances written off as unpaid, rose to 6.8 percent in August, up 48 percent from a year earlier, according to Moody's Investors Service.

Americans are weighed down by about $900 billion in credit card debt, according to the latest available Federal Reserve figures.

 

 

Creditable But Not Credible

CREDITABLE BUT NOT CREDIBLE

Ed Barna

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        A few days ago another credit card offer arrived in the mail, touting all the benefits that would accrue if I used it to make all my purchases or transferred any other balances. Among the “rewards” would be a chance to choose a more personalized style for the card itself: an American flag; a train rolling past amber waves of grain; the Earth from space; someone standing atop what I assume was meant to be a conquered mountain peak but which, from the scale of man to surmounted material, was probably a dirt pile from some construction project, with the glow of a sunset in the background; and so on.

       My own preference would be to have a reward put out to bring in the people responsible for the credit card industry’s usurious interest rates, dead or alive; and to have some of the banks involved sunset if necessary to change our present monetary  sharecropper system back to a sane and sound financial system.

       Here’s my take on the economy, and we can see how the theory plays out in the next year: the current liquidity mess will not be cleaned up unless and until the nation comes to grips with its household liquidity mess. Partly this is a matter of individuals taking a different attitude toward acquiring stuff, but by now the situation has reached the point where interest rates and fees have become problems in and of themselves. Henry: “There should be a crime for this kind of predatory larceny.” Mr. Bones: “There is.” (Readers of John Berryman’s poetry will understand.)

       Along the way, let’s give credit card holders a chance to put truly relevant images on their plastic fantastics. For starters, how about a reproduction of an engraved image from an old edition of Charles Dickens’ “Oliver Twist” showing him in the workhouse asking for more? An image of someone straitjacketed and confined to an old-time insane asylum might be  apt. A photo of a great white shark, taken by someone suspended in one of those protective metal tourist scuba cages, would do for those preferring a nature scene—or perhaps a flock of turkey buzzards, perched and eagerly watching while a down buffalo cashes in its chips.  Some with a penchant for puzzles and subtleties might prefer a matching pair of Chinese finger traps.

       If the current worldwide financial unraveling started with people being unable to meet their mortgage payments, it would seem to behoover us to find out why. It’s really not that hard a problem; in fact, it can be unlocked with a credit card.