Tuesday, December 30, 2008

I Hate Saying "I Told You So."

…Especially when it’s about something like this.

Sandra Ward of Barron’s has written an excellent piece about the coming credit card industry crisis. Although, it’s focused on warning investors, it’s a good top-to-bottom look at the credit industry’s exposure to mass defaults brought on by still rising unemployment.

I mentioned this particular inevitability at the end of a post back in September on the economic crisis. Many were wondering why certain product and retail sectors seemed unaffected by the crisis in the financial markets and the collapse of consumer spending power. My answer was that people were still using their credit cards… and now, predictably, like the investment banks that traded on overvalued “bad” debt in waiting, the credit card lenders are teetering over a precipice of their own making:
The credit card companies made it far too easy for unqualified, undercapitalized citizens to borrow, and borrow huge. Back in the early 1990s, it was said by politicians that this was good for the economy.

Debt is never, ever good. Debt may be tolerable, even necessary at extreme times, but it is never “good.

These companies have done truly despicable things to Americans:
The credit card companies preyed on people who didn’t understand the mutable one-sided agreements they were signing on to. The credit card companies ramped up interest rates, in many cases retroactively, on things already purchased by credit card holders at earlier points in time. These greedy out-of-control companies made money for the past twenty-eight years on penalties, late fees, and groundlessly escalating double digit interest fees assigned according to draconian rules and regulations decided by none other than their own lawyers and CMOs, (who uitilized stunningly criminal innovations like “Universal Default.”) They had a huge hand in creating this phony upsurge in prosperity that the manufacturing and retail sectors have enjoyed since 1990 on the back of “consumer spending”. “Consumer borrowing” is in fact what has made the consumer spending index increase year after year since 1980… the same year in which laws that governed lending were relaxed to allow for all kinds of ridiculous freewheeling abuse. 1980 is the same year that Delaware became the primary home for this coven of vampires masquerading as credit card companies when its legislature and its Governor decided its own prosperity was more important than regulating credit card companies.

Now it’s 2008 and they’re in trouble. The people they’ve been ripping off can’t pay for it anymore.

Doesn’t this sound familiar?
Doesn’t this sound exactly like what happened in the fund markets and to investment banks with their greedy exposures to unreliable mortgage debts?
I have opposed every bail out as structured by the Bush administration, the Senate, Hank Paulson and Ben Bernanke. If there’s any talk… I mean the slightest mention of a bail out for those same credit card companies who have abused people like me and you, crushing us all with usurious penalties, I will join every class action suit in progress and work toward beginning a few on my own.

This is an outrage. We cannot bail out predatory lenders.

The bad debts these companies carry would likely be paid off if they didn’t bury people with interest rates and agreements that don’t let them address the higher interest segments of a debt before paying down the lower interest segments year after year.
These companies have been paid and then some, but like some toothless, Neanderthal leg-breaker, they just keep saying they’re owed more, “but that don’t make it so, rummy.” Just ask any college student with a credit card assigned APR of 29.9999% who can’t make a dent in the principal because the initial “finance charges” of his/her transactions are not touched by his monthly payments.

Ask the students of America why nobody thinks they need a bail out.

I really do hate the fact that this is my last weblog post for 2008. I would rather have written about the great progress made for American citizens by the Senate on beating these greedy companies back, but since those regulations wouldn’t go into effect until 2010, even if they actually pass, -I’m staying real negative.

When Bank of America, Chase, CitiGroup come to Washington DC with tin cups in hand, telling us some crazy nonsense about how the health of their industry somehow should matter to us more than our own future… remember I told you so. Don’t ever make the mistake of thinking they’re too proud to ask for our tax dollars.

I’m calling my lawyer, my representatives, my senators, my AG, my state AG, and my friends…

Hey! How about that? I managed not to curse!

Happy 2009 everybody.


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