The credit card reform bill passed the Senate yesterday and is headed to President Obama's desk soon for signing. The hitch, as I reported earlier when this was in the House, is that it won't take effect for 9 months. Nothing like giving the crooks a good lead before you go after them, eh?
Yet the "spin" on this story, tucked somewhere near the lead of most news on it, was that "the bill may reduce credit." The line is that since banks can't hang you with interest rates that only the mafia once charged, slam you with rate hikes applicable to the entire card balance, (effectively increasing the price on everything you have charged,) hike rates at their whim, delay your payment processing and then slap on a late fee, skewer you with over limit fees instead of declining a charge, apply your monthly payment only to the lowest interest balance first, and do a whole host of other nasty tricks, now they can no longer "manage risk."
Manage risk? These are the companies who over-leveraged themselves at 40 or 50 to 1 and loaded up their level 3 asset columns with metric tons of bad assets that they now refuse to declare or value by current market conditions. Manage risk? These are the geniuses who drove their own organizations to insolvency with outrageous derivatives and swaps that went bad. They lost, in true Carl Sagan fashion "billions and billions" of dollars with their reckless and irresponsible lending and securities schemes. But now, after legions of banking industry attorneys failed to lobby away this bill, the banks claim "it will reduce credit." Let me correct that right now--the BANKS will reduce credit, not the bill.
You see, after all their failed gambling games, they still want to pretend the real culprit behind the economic mess they created is YOU. They shake their heads solemnly, wag their fingers and now, since they can no longer slam you with all these unfair and usurious credit card practices, they just won't extend credit. In a recent post I showed how, in spite of $12.5 trillion in free taxpayer money, Fed programs, and other "facilities" intended to free up credit, the banks have consistently reduced lending month by month. Now they promise that fewer will receive those nifty credit card offers and, just for spite, say goodbye to bonus bucks, frequent flyer miles and other "perks." Perhaps it's their way of saying thanks for all the fuss we made about John Thain's $48,000 office carpeting, or his $5000 waste basket.
Yes, my dear reader--YOU are the culprit in their eyes. They drove themselves to insolvency, received truckloads of public money in bailouts, but by god, they're going to keep a close eye on all the slaggerds out there who may be three days late on a $36. credit card payment. And they have the unmitigated gaul to brand us all with their little FICO score to measure how well we abide by their unfair credit game rules.
The banks got what has long been coming to them in this legislation. We had to wait for the Democrats to get control for this reform bill to happen, and it would have never happened in a Republican controlled congress. Yet the Dems, for all their good intentions, still exhibit a spineless quality that runs through the middle of most of their get tough legislation. The 9 month grace period was a bone they tossed to the Boyz who fund their re-election coffers.
So unfortunately, while banks can raise your interest at the drop of a hat, they get nine long months now before any of these reform measures take effect. That means they'll be kicking the big credit card squeeze into overdrive, cutting credit lines, hiking interest rates and doing all the other things--making hay while the sun still shines. And then...why they will have to mail you your bill in a timely manner now, and notify you of a rate hike 60 days before it happens, and tell you why they raise your interest--heaven forbid! And if you pay promptly for 6 months after a rate hike , they have to lower your interest rate again. (Gawd!!!) And they can no longer target your monthly payment to the high interest rate balance to cap and protect amounts owed at lower interest rates. (Yikes!)
What's a banker to do now? They'll have to find another way to poke and prod and punish their borrowers. And if the lead line in the spin on this story is any indication, they just wont extend credit now. Like an angry child, they will simply take their football and go home. Earth to CEO--count the free taxpayer dollars sitting on your books at 0% interest. And realize also that the money in your vault doesn't belong to you at all. We walked in and handed it to you for safekeeping and convenience. It's ours. Kapish?
Yet the "spin" on this story, tucked somewhere near the lead of most news on it, was that "the bill may reduce credit." The line is that since banks can't hang you with interest rates that only the mafia once charged, slam you with rate hikes applicable to the entire card balance, (effectively increasing the price on everything you have charged,) hike rates at their whim, delay your payment processing and then slap on a late fee, skewer you with over limit fees instead of declining a charge, apply your monthly payment only to the lowest interest balance first, and do a whole host of other nasty tricks, now they can no longer "manage risk."
Manage risk? These are the companies who over-leveraged themselves at 40 or 50 to 1 and loaded up their level 3 asset columns with metric tons of bad assets that they now refuse to declare or value by current market conditions. Manage risk? These are the geniuses who drove their own organizations to insolvency with outrageous derivatives and swaps that went bad. They lost, in true Carl Sagan fashion "billions and billions" of dollars with their reckless and irresponsible lending and securities schemes. But now, after legions of banking industry attorneys failed to lobby away this bill, the banks claim "it will reduce credit." Let me correct that right now--the BANKS will reduce credit, not the bill.
You see, after all their failed gambling games, they still want to pretend the real culprit behind the economic mess they created is YOU. They shake their heads solemnly, wag their fingers and now, since they can no longer slam you with all these unfair and usurious credit card practices, they just won't extend credit. In a recent post I showed how, in spite of $12.5 trillion in free taxpayer money, Fed programs, and other "facilities" intended to free up credit, the banks have consistently reduced lending month by month. Now they promise that fewer will receive those nifty credit card offers and, just for spite, say goodbye to bonus bucks, frequent flyer miles and other "perks." Perhaps it's their way of saying thanks for all the fuss we made about John Thain's $48,000 office carpeting, or his $5000 waste basket.
Yes, my dear reader--YOU are the culprit in their eyes. They drove themselves to insolvency, received truckloads of public money in bailouts, but by god, they're going to keep a close eye on all the slaggerds out there who may be three days late on a $36. credit card payment. And they have the unmitigated gaul to brand us all with their little FICO score to measure how well we abide by their unfair credit game rules.
The banks got what has long been coming to them in this legislation. We had to wait for the Democrats to get control for this reform bill to happen, and it would have never happened in a Republican controlled congress. Yet the Dems, for all their good intentions, still exhibit a spineless quality that runs through the middle of most of their get tough legislation. The 9 month grace period was a bone they tossed to the Boyz who fund their re-election coffers.
So unfortunately, while banks can raise your interest at the drop of a hat, they get nine long months now before any of these reform measures take effect. That means they'll be kicking the big credit card squeeze into overdrive, cutting credit lines, hiking interest rates and doing all the other things--making hay while the sun still shines. And then...why they will have to mail you your bill in a timely manner now, and notify you of a rate hike 60 days before it happens, and tell you why they raise your interest--heaven forbid! And if you pay promptly for 6 months after a rate hike , they have to lower your interest rate again. (Gawd!!!) And they can no longer target your monthly payment to the high interest rate balance to cap and protect amounts owed at lower interest rates. (Yikes!)
What's a banker to do now? They'll have to find another way to poke and prod and punish their borrowers. And if the lead line in the spin on this story is any indication, they just wont extend credit now. Like an angry child, they will simply take their football and go home. Earth to CEO--count the free taxpayer dollars sitting on your books at 0% interest. And realize also that the money in your vault doesn't belong to you at all. We walked in and handed it to you for safekeeping and convenience. It's ours. Kapish?
