Mortgage bailout proposal to help banks, not homeowners
June 25, 2008
Here's a story that's disturbed Clark so much it required both a Clarkonomics sounder and a rip-off alert one!
During the coming weeks, you're going to be hearing about how Congress is rescuing the American homeowner with a foreclosure bailout. This is natural rhetoric for an election year. But Clark wants you to know the real story.
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CLARK'S TIP TOPICS
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First off, Countrywide is being sued in Illinois and California for conspiracy to defraud would-be homeowners. They allegedly issued loans when they knew there was no way they'd ever be paid off. Countrywide made a lot of money by originating these loans and then selling them off. The ones who really got burned were the investors who snatched them up from Countrywide.
Meanwhile, The Washington Post recently reported on a 28-page Bank of America document -- marked "confidential and proprietary" -- that's been floating around Capitol Hill.
The document basically outlines a potential bailout for lenders, where the Countrywide loans and others like them would be dumped on the government. This plan is being sold as a "bailout for homeowners," but it's the lenders who really benefit.
This is a perfect example of socialized risk and privatized reward. BoA is using its influence in Washington to get a deal for itself and other lenders from the government -- with taxpayers being put at risk to fund it.
The question remains: Will this move actually help the homeowners who are delinquent? We'll have to wait and see. There's no telling if this is a workable solution for those who got into loans they could never afford.
Most of us who pay our mortgages every month aren't happy about a taxpayer-supported bailout. But there are complicating factors. For example, every foreclosed house in a neighborhood lowers the value of surrounding homes by 1%.
Still, the takeaway here is this: The next time Congress pretends to act like a knight in shining armor, you need the real story behind the scenes. This is all about bailing out the influentials in the banking business.
Credit limits being reduced without your knowledge?!
June 23, 2008
The nation's banks are reaching new lows when it comes to customer no service. The latest wrinkle took Clark by surprise because he's received scattered calls about this issue without realizing there was a pattern emerging.
Now The Wall Street Journal has discovered that banks are arbitrarily reducing credit limits without telling you. The first you'll hear about it is when your purchase is denied!
Some banks are having up to a 10% default rate on the cards they issue. That's a huge number compared to historical averages. Their panic is so great that they're indiscriminately reducing credit limits -- even sometimes for those who pay their bills in full every month.
The Wall Street Journal also reports that banks are taking a zip code approach to reducing credit limits. This is especially true throughout the real-estate bubble states -- California, Arizona, Nevada or Florida. Again, the banks are frightened because they've seen people go from being current on their bills to declaring bankruptcy practically overnight.
Meanwhile, the banks are also targeting the self-employed because they're frightened of small business bankruptcies. Clark read about one person who had an American Express card that got cut from a credit limit of $36,000 to $4,300!
So if you fit into any of these categories, make sure you're not dependent on any one bank or one credit card. You should have multiple lines from multiple banks. But beware if you miss a payment or are late. Then you've really got a bull's-eye on your back.
Banks offer diverging interest rates on savings and CDs
June 20, 2008
There's something really interesting going on with savings rates right now.
With the inflation rate hovering between 4% and 5%, it's almost impossible not to fall behind with your savings. ... More
Online loans at interest rates of 2,000%!
May 23, 2008
The Federal Reserve sets the interest rates it controls at 2%. Prime rate for good borrowers is around 5%. Contrast that with the stories of desperate people who take out loans on the web with interest rates as high as 2,000%. Clark doesn't know anyone who gets up in the morning and actually wants to get ripped off with a loan at 2,000%! ... More
Maximum Earnings checking account pays 6% APY
May 23, 2008
Recent news reports have trumpeted how savers are getting their clocks cleaned as CD and online savings rates continue to drop. ... More
More recent Bank & Credit Card Tips from Clark:- Online loans at interest rates of 2,000%!
- Maximum Earnings checking account pays 6% APY
- More banks following BoA's lead on ATM surcharge hikes
- Lower interest rates open refinancing window
- ATM fees topped $4 billion last year
- New guidelines proposed for credit card industry
- 40 cents for a stolen credit card number?!
- Payday lender starving out food bank
- Students seeking loans from peer-to-peer lenders
- Free credit score now available online
