Today’s topic is credit cards and the banking industry. The old Banking Rule of 3-6-3. This worked for centuries. Banks would pay their depositors 3%, lend out at 6% and hit the golf course at 3pm. But then the banks got greedy and got to the point of being open 7 days a week and open later, until 6 pm or later. Lending rules aslo went out the window. Lending 100% to purchase a home or even as high as 125% to buy or refinance. The banks are always devising new ways to getting you hooked on credit. When I was growing up, I was first solicited fro a credit card when I was 24 and in law School. Now, they start with college freshmen. The solicit at sporting events and concerts. These people are drinking and the banks think this is a good time to have you apply for credit. For what? A hat or a ball? It adversley affects your credit score each and every time you apply for credit. Why should you care? Because your credit score is one of the most important numbers in your life; right up there with your blood pressure number and your cholesterol. Another scam you should watch out for is when they increase your interest rate based on something that happened with an unrelated account. They will use any excuse to raise your interest rate. They will also lower your credit limit which then lowers your FICO score. This has an ever increasing negative impact on your credit score, which then means it costs you more to borrow for anything else, like a house or a car. The CREDIT CARD PROTECTION ACT OF 2009 which is posted on posted on the website was enacted to give the consumer some protetion against these practices. Buth the banks are already working on ways around it. They have already announced plans to change all cards to variable interest rate cards to get around the prohibition on changing rates. Since this show is called “Your Financial Health”, what should you do? Thin of credit card debt like cancer ro a tumor and cut it out. As soon as you can, pay off your credit cards with the highest interest rate. Do not cancel them, because that adversely affects your FICO score. You want to show is that you have available credit and that you do are not using it. It’s the old saying that “The bank will only lend you money if you can show that you don’t need it.” With everything that involves credit cards and the banks, there is a caveat. Banks are now charging inactivity fees to punish you for paying off you debt and not paying interest on the balance. What should you do? Charge a very small amount which you know that you can pay off in its entirety when the bill comes due. Basically you must show that you have available credit and that you don’t need it. Another practice that makes my blood boil is when they increase your credit score from 6 or 7% to 26 or even 39% after a few late payments. If you are having financial trouble with making the small payment, what makes the bank think that the answer to the problem is to raise your interest rate. …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

Michael’s-philippic-for-august-11th-2009

I am not affiliated with any political party and I have no such desires.

Some of you may at the end of each show, be convinced that I am a dyed in the wool 

knee-jerk liberal, while others may be certain that I am a member of the John Birch

Society.  I can assure you that I am neither.  What I am, is conerned with issues that affect us all even if we think they don’t.  Like today’s subject, loan modification and the foreclosure crisis.

I believe that something needs to be done in addition to the modest and so far ineffectual efforts put forth by the administration and the Senate’s failure to pass the cramdown bill.

When I read about the vast numbers of homeowners facing foreclosure and the half-hearted effort the Obama administration has made so far to stem the tide, a phrase from the sports world keeps comint to mind and that is John McEnroe’s “YOU CAN’T BE  SERIOUS”!

A brief history of what’s been done and not done this year. 

After bailing out wall street and the banking industry,  the administration pledged $75 billion to help homeowners stay in their homes.  That is less than 10% of what the banks got.

But with the money that the banks received, the first thing they did was to lobby the Senate to defeat the cramdown legislation bill sponsored by Senatory Dick Durbin.

Why is that significant?

Because the bill had already passed in the House and it just needed the Democrats to vote for it and a couple of moderate republicans.  For a while it appeared to have the 60 votes it needed.

What happened?

What happened is the banks spent $45 million in 60 days to defeat the Bill by lining the pockets of a handful of Senators to vote against it; even though the President was in favor of it.  Well, at least he said he was in favor of it.

In fact, he did absolutely nothing to support it.    You see, once he got in offcie, it was explained to him that it is not a good idea to attack the banking industry, so he sat idly by as the measure was defeated bya vote of 45-51 with 12 Democrats, crossing the aisle to vote with the Republicans.

Without anysupport from the Whitehouse, these Democarts have now stated that the guessed the Bill was not that important or the President would have come out in favor of it and done some arm twisting.  Is that just being pompous, ignorant and disingenuous?

Now that only 4 or 5 % of distressed loans are being successfully modified there is a renewed interest in the Senate and rumblings from the House to revisit the Cramdown Bill.

On the show today we discussed the “cram-down” legislation and the “Dirty Dozen” Democrats that contributed to its defeat.

The 12 Democratic senators who crossed the aisle to vote with Republicans were Max Baucus (Montana), Michael Bennet (Colorado), Robert Byrd (West Virginia), Thomas Carper (Delaware), Byron Dorgan (North Dakota), Tim Johnson (South Dakota), Mary Landrieu (Louisiana),Blanche Lincoln (Arkansas), Ben Nelson (Nebraska),Mark Pryor (Arkansas), Arlen Specter (Pennsylvania) andJon Tester (Montana).

How do you feel about this?