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Credit Card Meltdown Coming Soon

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wm pasz	Posted: Wed Feb 25, 2009 8:30 pm
Joined: 29 Jan 2006 Posts: 1180 Location: Toronto	Here's a good article from the Huffington Post about the looming credit card meltdown. It's encouraging to see the criticism of the banks and their predatory practices when it comes to the mountain of plastic they've built up. Also encouraging to see talk of fighting back and strict regulations on interest rates. I especially like the idea of clearing credit card balances in exchange for bailout money. I'm watching this one closely as I think it will be the part of the meltdown that brings the whole deceptive financial system crashing down. Pass the popcorn... _________________ Time is on the side of the oppressed today, it's against the oppressor. Truth is on the side of the oppressed today, it's against the oppressor. You don't need anything else. - Malcolm X
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exraleys	Posted: Fri Feb 27, 2009 4:19 am
Joined: 21 Mar 2006 Posts: 193	Blame the banks for the idiots who took the cards and ran up the bills!! In this day and age , I wish for once, those that make that mistake take the blame. I'm sorry for those that have financial problems , but most of it is self induced. Too many people have made insignificant, their own signature on contracts. When things don't go their way, they look for someone to blame.
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wm pasz	Posted: Fri Feb 27, 2009 2:06 pm
Joined: 29 Jan 2006 Posts: 1180 Location: Toronto	I posted my views on this notion that the indebtedness crisis is self-induced in another thread: The thing you have to keep in mind is that the vast majority of the people who are losing their homes or drowning in consumer debt don't fit the stereotype of the reckless, fast-living, free-spending materialists who just had to have that third SUV or time share condo. Large numbers of people fall into a couple of groups: The working poor who must live beyond their means because they can't afford to live any other way. As secure jobs with decent pay have dried up, what has evolved is a large group of people who can't afford the basic necessities of life - rent, food, clothing, transportation (which in the US almost invariably means having a car of some sort) and let's not forget about health care. This group has increasingly relied on easily available consumer credit to make ends meet. Why is this? Because it beats the shit out of going hungry or getting evicted. Why don't they all just get better jobs? There aren't any and many are already working 3 crappy minimum wage jobs just to come close to making ends meet. So who's really at fault for the astounding indebtedness of these people? Are the people themselves just being irresponsible by wanting to keep a roof over their heads or feeding their kids? Or is it the corporatists who won't pay a livable wage (and have gone out of their way to destroy secure employment) but have gone out of their way to wave easy credit under the noses of this group as they've slid deeper and deeper in to poverty? Please people, let's open our eyes and check out the exploitation here. You send credit cards and blank checks for cash advances to people in impoverished areas - what are you doing? It's all a calculated move to make zillions in interest and other fees off of people who you know will eventually default. The defaults are all factored into the business plan and open the door to other money-making schemes (like the credit counseling racket, the consumer bankruptcy racket and other lucrative rackets that are predatory enough to make a mafioso blush). Then you have the working poor who got suckered into the home-ownership scheme promoted by the President of the United States and his corporatist cronies who made zillions off of something that anyone with half a functioning brain should have known would eventually end in a rash of foreclosures. Here is just one of many speeches made by GWB as part of his homeownership roadshow in 2002 wherein he touted homeownership as the "American Dream" and even set a goal of 5.5 million more homeowners by 2010 - most of them people who didn't qualify for conventional financing. His none-too-subtle signals about "removing barriers" were the green light for regulators and the financial industry to get the ball rolling on high-risk lending (which had now become a presidential imperative - so, as we Canadians say, why not eh?). The speech at the link that I included is actually an interesting piece of work. If you analyze it at bit you can see that POTUS is actually pitching homeownership as the antidote to most if not all of the nation's problems. Heady stuff. It's important to note that many of the people who initially got involved with these high risk (or as they came to be called "subprime" loans) were not getting in over their heads. They could afford the monthly payments. In many instances, these payments were no more than (or even less than) the cost of renting. What got them in trouble were the predatory practices that the lenders had up their sleeves. These included substantial increases in interest rates, service fees and refinancing options that would give some temporary relief and then trigger the whole exploitive cycle all over again. Sometimes these tricks were in the fine print and sometimes they weren't. In any event, the bewildered borrowers were told not to worry. Their properties were increasing in value and so they were doing alright. The whole thing was just a scam and again, anybody who understands the basics of mortgage lending, could see that. But because there was so much money to be made on the scam, nobody was talking about that. Thousands of wheeler dealers in the construction industry, real estate industry, investment banking and lending industry made millions and millions of dollars on what was happening. When they started packaging up these high-risk debts and selling them as "asset backed commercial paper", people in the financial industry would make humungous commissions every time the bag of bad debts got passed from hand to hand. All of them knew - or should have known had they bothered to think about it - that sooner or later the whole thing would collapse. But none of them gave a damn because when it did, they'd still have their millions in commissions, bonuses and profits. The poor suckers who they'd fished in would be out in the cold - too bad for them. Can we really wag our fingers sanctimoniously at these nouveau homeless? I think this kind of finger-wagging is misdirected. This group was by and large the kind of people we like to hold up as good examples - hard-working, people with modest lifestyles and realistic expectations. But hey, with the POTUS himself telling them to get out there and buy houses and with the low, low interest rates and easy terms that were being dangled in front of their noses, what could we realistically expect that they would do? You don't toss a hungry person a steak and then wag your finger at him for eating the damned thing. Yes, there were people who lied about their income or their employment to get these loans, but are not the majority of this group and who approved them in the first place? The name of the game here was to make zillions of dollars on the interest and other fees and then scoop up the properties through foreclosures, sell them at a profit to buyers who would need your easy sleazy financing, find themselves in over their heads, refinance...you get the cyclical nature of this scam? Then there were people who had some measure of job security and lived modest lifestyles but who got into the debt trap because of unfortunate circumstances like health problems, the exorbitant cost of college tuition, job loss or well-intentioned efforts to start their own businesses (another American Dream venture). Look, when you need $50,000 for surgery or college tuition so that your kids can have a shot at something other than poverty, you're going to pony up the funds even if you have to borrow them. And for these people there was a whole predatory venture called home equity lending. If you need money for some kind of emergency, hey there's a ton of "equity" sitting in your home just waiting to be tapped. This was another bill of goods that a lot of people were sold. The snake oil was in the fine print and in the myth of perpetually increasing real estate values. The sales pitches were misleading and exploitive (people would actually find blank checks in their mail boxes inviting them to tap the value in their homes by writing in an amount and signing the check - that's how easy it was to put a mortgage on your house!) Who can blame them? If it's a choice between having the important surgery or putting your kid through college so he or she can have a chance at the American Dream, well it would be wrong not to do it. Of course these people were to find out sooner or later what the predators knew all along: They would become mired in more debt than they initially took on and lose anything of value - to the predators who would then peddle it to the next sucker. Then you have the people who perhaps should have known better - the ones who were comfortably off, had a mortgage that they could manage and didn't need to take on piles of additional debt. But they ended up doing so anyway because they wanted to renovate their homes or buy bigger homes or buy more stuff, bigger cars and so on. In their defense I will say this: The entire corporatist universe and its cheering section encouraged and promoted this behaviour, all the way up to POTUS himself. Spending, buying, consuming have been and continue to be touted as the solutions to our economic problems - even right up to this very day all you hear the economic gurus and soothsayers yapping about is the need for consumers to consume more stuff. In the corporatist universe, consuming is the means and the end, the only pathway to happiness and contentment, to respect and worthiness in the world. If you don't have the latest this or that, you're a loser. In this kind of environment it's understandable that people will get suckered in to the sleazy credit hawking schemes that have abounded for the better part of the last 20 years but which really went over the top in the post 9/11 era. Don't get me wrong: I'm not advocating that people thumb their noses at their debts. I believe that everyone should make good on honest and real debts - debts among equals, where real consideration changes hands and where nobody is bamboozling or misleading anyone or changing the terms in mid-stream and where enforcement of the bargain, should the borrower default, should not inflict more pain and suffering on the borrower than the default will inflict on the lender. Consider this: Suppose you take out a $100,000 home equity loan. You sign on the dotted line and put your house up as collateral. Yet the $100,000 you've just borrowed isn't real money. It's what some guy tells you you might get for your house (in addition to what you paid for it when you bought it) if you were to sell the place today. Oh sure, his assumption is based on a whole bunch of factors that sound solid enough but the reality is that this money isn't going to be real until you sell the house and actually pocket the money. It could be that down the road you might do this or it's just as possible that you might have to sell for a lot less and never realize the $100,000 you just borrowed. While you've just borrowed $100,000 imaginary dollars, you have committed to paying them back - with interest - with real dollars. If you don't, the lender will seize your house and put you and your family out on the street. The lender will not wait until you sell the house and realize the $100,000 of equity that his appraiser said was in it or take only the part the you renovated with the money you borrowed, or cut you any other slack. Sound fishy? Inequitable? It should because it is. Now some of you may be saying that "Oh yeah, sure the 100K wasn't real but you went out and bought real things with it or you gave it to some other lender to whom you owed money". This may be so, but it doesn't change the fact that the money wasn't real to begin with but you collateralized it with something that is very real - your home. It actually compounds the problem because when you think about it, we have an economy that is kept afloat by a lot of pretend money. This can't be good. The system words as long as enough imaginary money is being "deposited" into enough business and personal bank accounts - this means that there have to be enough people earning and spending real money to prop up the fictitious nonsense that is the global capital market. But when there aren't, well the whole thing falls apart like the big Ponzi scheme that it is. Many societies have prohibited the lending of money with interest or any other fees. This practice (called "usury" way back when) continues to be off limits in the Muslim and Hassidic communities (and there may be others). Even Adam Smith advocated tight control of interest rates (see a good overview of the history and practice of usury here.) It's interesting that Smith was concerned that allowing speculators to control the money supply by charging high interest rates would disadvantage low risk borrowers who were likely to undertake socially beneficial investments. What concerns me the most about the current state of indebtedness of our citizens is that most will never get out of debt. It's impossible. No amount of credit counseling or finger-wagging is going to change that. They don't have the money and aren't ever going to have the money. The interest and other fees will continue to pile up leaving the yoke around their necks for the rest of their lives. Debt will become something their children inherit (think about those 40 year mortgages). This creates conditions where it is less and less likely for rebellion of any kind against the predators. British Labour Party politician Tony Benn puts it this way: People who are shackled with debt, have no hope. People who are hopeless don't vote." - or otherwise participate in civic life). Keeping people shackled with debt is an integral part of the corporatist paradigm. Keep people hopeless and frightened and they'll just hang on quietly hoping things will somehow get better. This I believe describes the North American citizens' current condition. This is why I advocate a seemingly radical solution to the debt problem. _________________ Time is on the side of the oppressed today, it's against the oppressor. Truth is on the side of the oppressed today, it's against the oppressor. You don't need anything else. - Malcolm X
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wm pasz	Posted: Fri Feb 27, 2009 2:50 pm
Joined: 29 Jan 2006 Posts: 1180 Location: Toronto	Check out Amex innovative new offer. Are these guys desperate or what? They made a big blunder years ago when they decided to get into the credit card game (versus the pay in full each month cards they used to offer) and now they're paying the price. I smell more bailout begging. _________________ Time is on the side of the oppressed today, it's against the oppressor. Truth is on the side of the oppressed today, it's against the oppressor. You don't need anything else. - Malcolm X
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Elvis	Posted: Sat Feb 28, 2009 8:44 pm
Joined: 01 Feb 2006 Posts: 642 Location: Toronto	wm pasz wrote: You don't toss a hungry person a steak and then wag your finger at him for eating the damned thing. Yes, there were people who lied about their income or their employment to get these loans, but are not the majority of this group and who approved them in the first place? I could have inserted 15 other quotes, but that steak line seared me the most! Over the last few years, TD (Toronto Dominion) Bank put me through a hellish credit experience I still find tough to fathom. The scale and dollar value of my experience is probably nothing compared to those going through the mortgage stuff, which makes me even more naseous. I do take responsibility for some of it (being very naive and enjoying things like steaks and poker!), but I will never accept that I am fully to blame. The bank(s) created a credit snakes and ladders game for me to play, but then systematically sawed through all the ladders that were supposed to be in place as I was trying to navigate through it. It was and is a giant scam. Here was my situation... I'm 33. Single-no kids. Rent. From age 17-31 I worked in the food/restaurant industry. My yearly income reported on my taxes was never over about $15,000.00. I did declare tips. It was standard among servers and bartenders that I knew to declare tips in an amount equal to about 10% of their pay, on their income taxes. This apparently keeps the tax guys happy. Needless to say, I never really had cash in the bank. The minimum wage cheques covered the rent and bills. If I made some extra coin, I spent it. That's just the way things are in the service industry. We spend at least half of the cash we make at night drinking/eating out after our shifts. The rest goes on the off-days. Back to TD Bank. I was there at least 25 years. My mom's name was still attached to my chequing account. Everyone at the bank knew me. Shit, I was the guy that years ago hit a $36,000.00 jackpot at a casino and then blew it all and more during the stock market bubble. Using a TD Bank trading account! Easy come, easy go (easy to say at that time). I'll never believe that the stock market isn't a rigged gambling swindle. It's been awhile now, but some of you know the Mondo Condo story and that I was out of a job sometime back around 2005. I was stringing together various bar jobs and surviving. In the meantime this is the credit that TD graciously was providing me with... TD Line of Credit: 12,000.00 TD Visa 1: 3200 TD Visa 2: 2500 I also had 2 high-interest mastercards for another $2000.00 in credit. Let's say that by this point most of the above was already maxed out. So at some innocuous and technically jobless point (remember $15G/year is my max in good times) I walked into the bank and was offered a further overdraft of $3000.00 on my chequing account (carrying a balance of a few bucks). Please understand that the offer is little more than a line from the teller and then a click of a button. Voila your available credit has been increased. I have recently seen tellers at the same bank offering other suckers/customers these same lines. A car salesman earning commission is probably more ethical with his 'sales' pitch. Don't ask me how long it takes to get into a $22,000 credit hole when you don't really work. Stupid question. I'm still working on the answer as to how long it takes to get out. I was lucky. I was able to live off the credit and part time jobs long enough while doing a commission-based job in the legal field, which would eventually pay me 3-4 years down the road. In the meantime, my friends at TD decided to "tighten-up" things on me. I probably missed a payment here and there. You do a lot of account transfers (each for a fee) when you have multiple amounts owing. Credit lines are also tricky because you not only have to pay the interest, but a chunk of the balance before you can use it again. So many times your whole paycheck has to go there first, before you can piece it off to other balances (again for a fee). Oddly enough, TD would never CONSOLIDATE my balance, as my income was not high enough! And maybe my parents and I had not banked there long enough (extreme sarcasm)... The logic escapes me to this day since I'm the guy that was able to get $3,000.00 overdraft on the 5 bucks that was in my chequing account along with a ton of other credit. What this meant was they began attacking me from four corners of the same bank (one for each amount owing). Non stop phone calls on payments due. They were even calling my mother, whose access to the account stopped two decades ago. Scare-tactic letters from lawyers that payments must be made in full (as in the whole amount). I would ask "didn't I just speak to someone about the exact same thing yesterday?". I only got attitude back. And I'm sure the bitch was flagging me further on her end. I'm kinda stressed right now and going to do a load of laundry before I continue. Give me a few minutes. FUCKING TD PIECE OF SHIT BANK ASSHOLES!! Wow, TD rage was on the level of the old UFCW days there a few minutes ago! So where are we? Ah time to totally fuck Elvis over. Let's start freezing account activity. This is tipping point for anyone surviving on credit. When a payment can't be made it creates a domino effect that will destroy your bullshit credit rating within days, tack on multiple extra charges, increase interest rates, and pummel you with NSF fees. I bank online or at an ATM for the most part. I can't really recall which one was frozen first, but let's put it this way. If you deposit a cheque into your $3,000.00 black hole chequing account with a suspended overdraft, how do you transfer the funds to your Visa or credit line? You can't. The money no longer exists. Oh maybe you can pay those directly? Sure you can. In essence, Elvis was given the choice... which of the 4 amounts owing gets your cheque in full? But wait!! Um I do need $20 in cash to pay for a can of tuna and a couple of other staples! Can I cash the cheque, take $20 and put the rest in? Guess the answer! The answer is (I had to figure it out myself)... Go open up a chequing account at another bank, so that you can "live" before you get raped for the rest, by the TD jackasses. You cannot "partially" cash the cheque. I'll advise you to not argue the logic of it. Go pound your head against a brick wall if you think a TD teller can understand the concept of the cheque being cash that you have the right to apportion. Apparently, you do not. I was forced to live two banking existances over the last couple years, so that things like rent and cat food could be paid for before the bank. In no way was any of this fun and I sit here trying to breathe slowly so that I can continue. My thoughts are all over the place right now, so I'll fast forward to today. I'm making money and paying down the debt. I'm at about 14Gs owing. I just got back from a needed trip to Cuba. I threw that nugget in for those that might question the logic of it. Let's say that I'm in a much better place right now. I walked into TD a couple weeks ago and laughed at them. My accounts are all frozen/closed. Hate to think what my credit score looks like! But my amounts owing have been reduced. I'm consistently knocking down the balance. I get the rare phone call these days. They recently sent me a letter saying that I paid $2,000.00 in interest last year just on the credit line alone. Oh well, they still pay more in the States for an education! I'll end here for now. And I'll soon be back into financial positive territory... wow, you guys can't imagine how big a smile I have at that thought! Pay off your credit. Don't accept credit. Best advice I can give. _________________ Henri Ducard: Your compassion is a weakness your enemies will not share. Bruce Wayne: That's why it's so important. It separates us from them.
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wm pasz	Posted: Sun Mar 01, 2009 4:07 pm
Joined: 29 Jan 2006 Posts: 1180 Location: Toronto	Thanks for sharing your credit nightmare story E. It's good to know you're digging your way out. For many people however, there's no way out. They'll never get those bills paid off, in fact the bills will keep growing at an alarming rate as the interest and other fees keep piling up. Your case provides an opportunity to look at how the financial industry makes its money. I've read a lot recently about how bank employees have been expected to push credit "products" (lines of credit, cards, overdrafts and so on). The teller who upped your overdraft scored some good job performance points for giving you that $3000 of future indebtedness and, if she did it for enough customers, probably got a performance bonus for her efforts. The same goes for pretty much all other "customer service" representatives. It's a very callous game - they don't care that you only had $3 (or whatever) in your account, had low income and were precariously employed. The criteria for floating you some credit was basically like this: You're not bankrupt and you don't have any TD accounts under suspension. You probably could have asked for $5,000 or even more and she'd have given it to you. Now this is the really beautiful part (and the part that most people don't quite understand). Although the bank had extended you $22,000 in credit (or whatever the final tally was), they didn't actually fork over a cent of real money - their money - to you. It's not like they took money out of their vault or some other account and gave it to you. What they actually did was they created an entry in their online system that showed they had given you $XXXX.XX in imaginery money. You then were free to take that imaginery money and spend it as you wished and you would pay the bank back with real money. The benefit to the bank is that, right off the top, the imaginery money they loaned you, became a receivable - an asset for them. All of these receivable (the zillions in similar imaginary loans), plumped up the bottom lines of the banks, generating huge bonuses for their execs and driving up the value of their stock (so that many others could also make big $$$ at the big stock market casino - but that's a whole other thing.) The fact that you might not pay back all of the imaginery money with your real money wasn't a big concern. Chances were good that you would pay back at least some of it and if you're lending phony dollars and getting real dollars back, well, every real dollar you get in exchange for a bogus dollar is gravy). True, you took that imaginary money and bought real stuff with it. But that just meant you were passing the imaginary dollars on to the merchant that you were doing business with. He or she thought it was real money but it was just more electronic numbers coursing through the system. It plumped up their bottom line too, and they in turn went out and borrowed imaginary money as well so they could sell more stuff and get more imaginary money. The whole thing worked like a well-oiled machine - as long as enough people kept feeding enough of their own, hard earned, real money into the system to keep it afloat. Unfortunately that couldn't go on indefinitely. People started losing their jobs and so there was less real money to go around and, at about the same time, a lot of greedy financial industry types were busy sucking all the real money out of the system and into their pockets. Like a Madoff's Ponzi scheme, the whole house of cards was going to collapse sooner or later. I practically barfed the other night when I heard Barack Obama calling credit the lifeblood of the economy. It's true in a sense but the patient has been bled dry. And this is why the bailout packages are so important - the system urgently requires more real money, lots more. That way the fun can start all over again. _________________ Time is on the side of the oppressed today, it's against the oppressor. Truth is on the side of the oppressed today, it's against the oppressor. You don't need anything else. - Malcolm X
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paco	Posted: Sun Oct 04, 2009 12:22 am
Joined: 03 Oct 2009 Posts: 4	If you think you cant trust employers the banks are far worse. I was always taught never to borrow to buy a depreciating asset and to always pay cash where possible.Once the cash is gone so's your purchasing till pay day.It helps to have been raised by a cheap Scotsman who grew up in Canada during the Great Depression. It amazes me to see the number of coworkers working part time service sector jobs driving cars that cost more than their parents first house. A sign of the times I suppose. Paco
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