Business as Usual

Banks are at it again. You probably already know there’s a new law that takes effect next year preventing credit card companies from raising interest rates and fees among other nasty things. But it’s never a good idea to delay legislation. It’s like leaving the keys in the front door of your house. You’re simply inviting very thief in your city to come in and steal everything you’ve got. And that’s exactly what the banks are doing. Chase bank is increasing the minimum payment requirement on outstanding balances from 2 to 5 percent. Bank of American already raised their transaction fees for transfers and cash advances from 3 to 4 percent. Not to be outdone Discover increased their maximum fee for transfers to 5 percent, which is up from 3 and 4 percent. The bankers argue these changes are needed to help them properly manage their risks. It seems these financial institutions just can’t stem the bleeding as their losses in revenue mount due to charge-offs for borrowers who have no way of paying back their credit card charges. Fitch Ratings reported last month credit card losses hit a record 10.44 percent.

Bankers would have us believe the history of the industry has been relatively stable until this recent financial meltdown. That’s just the case. Ever read about what caused the Great Depression? I have, and it’s eerily similar to day. Remember the early eighties? I do. Back in eighties some of the biggest players all faced financial ruin after making billions of loans to developing nations in Latin American, who as it turned out couldn’t afford to repay them. Like now regulators back then also failed to do their jobs, and banks found themselves on the brink of financial collapse until the Treasury and the IMF (International Monetary Fund) orchestrated a bailout. I remember the IMF bailout, the restrictions it placed on debtor nations, and how they broke many of the banks in Latin American countries, not to mention the backs of the lower classes in these countries. Did the banks learn their lesson? Fast forward to today. Where as recent as a couple of years ago countless people were given home loans at variable rates while only having a small amount of equity to back the loan, or no equity at all. The banks are in trouble again, and like before someone will pay. In this case you and me, while they continue to rob us blind.