So Now What re this fiscal mess

[Tokala]

scoutingagain wrote:

"This is a "crisis" because the "haves" are losing what they have. Not because the "have nots" are losing something they didn't have. As I said before, the loss of over 200,000 manufacturing jobs, over the last 8 years was not a crisis. The foreclosure of thousands of homes was not a crisis. Maybe to the individuals involved, but not to this government."

 

The loss of manufacturing jobs was not a crisis, but it was a symptom of the current crisis. The loss of manufacturing jobs was driven by the desire of the American public for cheap, disposable "gadgets" and the desire of big corporations to show profits and pay dividends.

 

I have worked in the injection molding business for 25 years. ten years ago, the county I live/work in had 50-60 small, private shops that either built injection molds or ran production. Most of these employed 12-20 people and paid salaries 2x-3x minimum wage. Currently there's about 20 shops left and most have about 6-10 employess and salaries are just above minimum wage. Their sales are probably about 1/2 what they were 10 years ago.

 

It's not a crisis, but look at the loss of income (taxes) for the government. Payroll taxes, property taxes, tangible and intangible property taxes, and sales taxes. Shops can't find skilled machinists any more when they do need to hire because no one wants to take another chance in the industry. The ones that are left are smart, cautious and most have either DOD contracts or supply medical products which have offshore manufacturing restrictions.

 

The current situation is of a much larger and systematic scale. From my perspective, some tariff/trade restrictions could have helped keep American manufacturers remain competitve, but they chose free market action. Selfishly, I'd like to see them take the same attitude with the banks and Wall Street greed that's got us in this mess.

[scoutingagain]

"the might democrats will slay the wolf and lower the principle or forgive what is overdue."

 

Funny because this is exactly what John McCain said he would do if he was President in last night's debate. I have no doubt that an Obama administration would do something similar as ultimately the loans will have to be renegotiated by someone to allow people to pay what they can pay, not necessarily what they agreed to pay which they can't pay anyway. Lenders will get something at least, but not what they expected. Kind of like what we'll get out of Social Security.

 

Some banks are beginning to do this on their own recognizing they may be able to get a better deal from individual homeowners than signing up with the government regardless of who wins the election. I just read where home sales were up in August over the same period last year in several of the most depressed markets. This is good because it will begin to put a floor on the value of those homes subject to renegotiation. Banks and lenders are more likely to renegotiate loans once they have a better idea of what the value really is of the underlying asset. Bank of America has already started this. They're option is to otherwise wait until the government makes them an offer.

 

Any guesses on how much of our money the Bush administration will be paying for these distressed loans to they're buddies in the banking industry? I have no doubt whatsoever that executives at the most distressed banks that will need to go to the government are sitting around with their lawyers and accountants trying to figure out how to game the system and figuring out how to put our money into their pockets. All you have to do is look at the testimony of the last few days from Lehman Bros. and AIG. Someone who really is a pitbull towards the banking industry needs to oversee this or it could end up being the biggest government give away of public funds of all time.

 

Given the increase in home sales in August and the decline in oil prices, I think the bottom is closer than we think and recovery will begin sooner than most expect. The collective media hype is probably blowing this up more than it otherwise would and the negativity ends up feeding on itself. Keep thinking Little Orphan Annie. "The sun will come out tomorrow...." I could be wrong though.

 

Me I'm reallocating a portion of my 401k into high quality dividend stocks. I'll either actually get to retire or end up working at scout camps until I'm 85. I may do that anyway.

 

SA

 

 

 

 

 

 

 

[skeptic]

Perhaps I have missed it somewhere in the blizzard of comments and often circuitous thoughts, but how do these proposals address the "credit card" usury? While it certainly may not be on the level of the home loan fiasco, I cannot help but think if there were forced caps on credit card debt interest and other fees, many people would then be able to apply more money to paying down the debt. Of course the banks need to suck it up and not count on continuing their obscene profit margins on these services.

 

Maybe it is addressed somewhere in all this already, but I have not been able to pinpoint it.

 

What say those of you more schooled in this area?

[Beavah]

Perhaps I have missed it somewhere in the blizzard of comments and often circuitous thoughts, but how do these proposals address the "credit card" usury? While it certainly may not be on the level of the home loan fiasco, I cannot help but think if there were forced caps on credit card debt interest and other fees, many people would then be able to apply more money to paying down the debt. Of course the banks need to suck it up and not count on continuing their obscene profit margins on these services.

 

Yah, I think that would be a kindness, eh? What are top card rates now? 35% or more? Plus fees.

 

But nope, no proposals like that in the law. There should be, I agree. Same problem, really... lendin' to those who can't afford to repay, then makin' da interest so high that they will never be able to afford to repay.

 

If yeh cap rates, then yeh restrict the loanin' of too much to poor risk borrowers, because the return isn't high enough to cover da risk.

 

B

 

[packsaddle]

I'm not schooled in this area but I have practical experience. I have noticed that when I pay the debt back more quickly I pay less interest. I pay no interest if I pay the entire card balance when it's due, which I have done since 1984.

 

As an alternative to capping the interest rate, I would suggest that the way the banks figure the minimum payment be changed so that all minimum payments will result in a more timely payoff of the debt. This will do two things regardless of the interest rates. First, it will force people to pay their debt in less time. Second, it will tend to make banks refuse credit to those who are not creditworthy, the effect that would be realized by artificially capping interest rates.

 

Ultimately, I am unsympathetic to those who have essentially 'kited' debt by shifting it around cards and paying the minimum. They knew what they were doing and like this country has treated the national debt, they figured they'd put the pain off to some future time. It's time to feel the pain.

[evmori]

packsaddle,

 

Right on the money about paying off credit cards monthly! You pay no interest.

 

Re figuring the minimum payment on credit cards is not the answer. If you make only the minimum payment on a credit regardless of the rate, you will be paying on it for a long time & if the balance is high enough, you will never pay it off. And paying off one credit card with another credit card only prolongs the agony.

 

If you have an installment loan, the way to pay less over the life of the loan is to make a principal only payment monthly equal to 1/6th of your monthly payment. If it's a mortgage, it's 1/6th of the P&I monthly payment. This will reduce your the principal amount of your loan & that is what the interest is figured on. You will pay your loan/mortgage off early & not pay as much interest.

 

Ed Mori

1 Peter 4:10

[scoutingagain]

With respect to credit cards, there has been some movement in this area. I believe minimum payments have been increased a bit, but they should probably be increased further. I would also support a cap in interest rates.

 

However, neither of these things are what Banks and credit card issuers want. They limit they're project revenues, earnings and ulitimately don't let the executives mislead investors. You would think they would be smart enough not to lend people money they know people can't pay and then project those impossible payment into the future. This is another shoe waiting to drop as while folks may not be able to get loans but may have rediculous credit allowances available on their credit cards at loan shark rates.

 

It's amazing to me how much the tide has turned against free markets so quickly. 30 years or so ago Ronald Reagan lead a rebirth of the Republican party on the platform of limited government and free enterprise. In the last two weeks even the most stalwart Republican leaders are turning to the government as the last institution with enough credibility to invest in, (T-bills) lend and borrow money. Now this administration is talking about government purchasing banks ala Sweden.

 

 

SA

[evmori]

If every person who had a loan or mortgage with a financial institution made their monthly payment on the 11th day after their due date, the financial institution would be swimming in cash & the person's credit rating would not suffer.

[Gold Winger]

Credit card companies are evil. They claim that the high interest rates are necessary because of all of the people that default. What about those of us who have never defaulted?

 

Chase just ratched my rate up to 30% because I was a day late in their mind on making an online payment. I went from 6% to 30% in a heartbeat.

 

Years ago, I had a bunch of credit cards that I wasn't using so I cancelled them. My remaining card rocketed my rate up from 7% to 29% because I "didn't have enough available credit." I paid it off an cancelled the card.

 

Banks are like any other large company, they'll screw you if they can.

 

I found out the hard way that when you use your "Check Visa" card as a credit card that if you don't have enough money in your account, you start getting overdrafts. With my old bank that wasn't the case so how I was I supposed to know.

 

Anyway, my bank pays me a dime everytime I use the card as a credit card so I use it for everything. Coffee. A bottle of soda. A pair of socks. Well, an automatic payment when through unexpectedly and I went negative. Many times. Many, many times. That cup of coffee became a $40 cup, etc. I spent nearly $400 in overdraft fees that weekend. Ouch.

 

So I go to the bank and talk to the manager and ask if there's a way I can prevent this in the future. I have a large savings account and want them to do an automatic withdrawal from savings if I overdraw the account. Nope. Overdraft protection? Not for my type of account. What's the solution? Check on-line more often.

 

So I leave there and go to the bank nextdoor. They'll transfer money from savings but there's a fee. However, they'll give me free overdraft protection, free checking, no fee ATM, and a free safe deposit box if I transfer my checking and savings.

 

Hello new bank! I went to close the old account and was asked, "Why?" I told the manager and he said, "well, we could have done that for you." Why didn't they?

[TheScout]

Banking is a business too and banks need to make money.

[Gold Winger]

That is true but they don't need to rip off old customers while smiling and telling you that they're your neighborhood friend.

[frankj]

I don't work for a bank or a credit card issuer. Someone in an earlier post suggested forced caps on credit card interest. Sure, it would "benefit" credit card users who don't pay off their balances monthly, but the unintended consequence would be that companies would get out of the business of offering credit cards or they would offer them only to people who had high credit ratings. Someone with little credit history (a category all of us were in at one time) could not get access to credit, so people in this category who have the ability and the intention to stay current would be penalized.

[Gold Winger]

In our kinder and simpler ways there was a limit on interest and you had to have a history to get a major credit card. As incredible as it may seem, my parents didn't get a Master Charge (as it was known back then) until 1975. They had bought numerous cars, three houses, had a card from each of the major department stores but never needed a Master Charge.

 

The world was a simpler place back then. If you couldn't afford a TV, you didn't get one. We didn't have too many families making $20,000 a year and having $40,000 in consumer debt.

 

Now, instead of advocating wise decision making, the credit card companies are telling America that since you deserve that trip to Disney World, charge it.

[skeptic]

Yep, back in the 70's, I applied for a MC three times through my bank; filled out the application and submitted it. Got turned down each time, even though I had two accounts there with adequate funds and no bounced checks. Turned out that my income from GI Bill (I was a grad student and working full time)was not counted. Finally went to the manager of the bank, and he approved it; but the normal system would not do it. Now, I could have gotten a half dozen or more if I wanted to; but I only have two, and pay them off every month if at all possible.

 

College students get in all kinds of trouble with the "easy" cards. When I was an undergrad in 1969 I had to beg to get a card from my bank in Arizona; the limit was $50, and there was no way they were going to raise it with my income levels at the time. Rational thinking seemed to be use by the banks back in those days.

[packsaddle]

Anyone check the Dow today? Down 678.91 points on the day to close at 8,579.19. Lost 5000 points in one year ($8.3 trillion in value, I think, is the figure I heard). Have a nice day.

 

But at least we pacified Iraq, turned Afghanistan around and finally got Bin Laden and wiped out the Taliban and al-Qa'ida.

Oh well, I can dream can't I? Bush probably still can't think of any mistake he's ever made. Think I'll go watch Body of Lies this weekend just for laughs.

 

At least we fought off the horrendous threat of gay marriage in most of the country. I guess it was worth it.

 

I suspect that John McCain suspected his association with George Bush would be toxic during this election. I doubt he envisioned it would be THIS toxic. The irony is that the guy who screwed McCain over in 2000 with political dirty tricks is now screwing McCain over again and Bush doesn't even have to lift a finger.

On a dimmer note, Bush is going to offer some optimistic words for the country tomorrow morning at 10am. What an apocalyptically deluded man.