Quote :

"I wouldn't put a ton of stock in any of this, it's just a ploy to pressure the politicians to not impose this legislation on them. And they'll probably cave."

I disagree. The current system is set up the way it is (sudden sharp rate increases after a single delinquincy) because it is difficult to judge before-hand which credit card customers intend to be bad credit risks. As such, as Congress moves to limit the companies ability to treat bad credit risks as bad credit risks once the information comes to light, the whole system will adjust. In progress, the expected per-user risk of being a credit card issuer will increase, causing the expected return of being a small issuer to fall driving investment elsewhere. As ING and others stop issuing credit cards and close out their existing customer stock, these customers will get cards from the remaining card issuers which are large enough to spread the risk. Releived of competition from the small card issuers, the big issuers will be free to raise base interest rates and cut back reward programs (1% cash back instead of 2%, etc). The ultimate conclusion being fewer card issuers, total issuer profits lower than they otherwise would be, and perhaps dramatically fewer cards issued, particularly to the poor and risk prone. This world sounds poorer to me, lots of losses and no benefits for anyone.

I doubt this would be enough, but as you said, if the rules change to no longer make it possible to sustain the reward card programs, perhaps most card users will switch to debit cards. It would not be the first time an act of the legislature prevented an entire industry from existing.

5/19/2009 11:03:00 AM

Quote :

"because it is difficult to judge before-hand which credit card customers intend to be bad credit risks."

Hello, McFico? Anyone home?

And to add to that, the CC companies and the banks specifically pushed for legislation beneficial to them related to personal bankruptcies, which they got, then immediately went on a spree of giving cards to previously unworthy holders based on their new default/bankruptcy models. The problem is, they underestimated what the default rate would be thanks to the downturn and they are now reaping what they sowed. Fuck em.



[Edited on May 19, 2009 at 11:11 AM. Reason : .]

5/19/2009 11:05:10 AM

Quote :

"The current system is set up the way it is (sudden sharp rate increases after a single delinquincy) because it is difficult to judge before-hand which credit card customers intend to be bad credit risks."

you're just apologizing for these companies that knew exactly what they have been getting into for the past decade. That's bullshit - they can't claim "well, golly-gee, how were we ever to know that mailing a pre-filled out check for $2000 to Jane Welfare could ever be risky?"

5/19/2009 11:08:20 AM

^ ^^ Wait, what? I am arguing against new legislation changing the rules to restrict the right of the citizenry to contract freely (sign a contract with rates that jump during delinquincy). I am arguing that it would further depress competition in the credit card industry. That competition has already been supressed by a repricing of risk should only make my argument stronger.

5/19/2009 11:48:07 AM

Quote :

"you're asking for evidence that credit card companies actively seek ways to screw people? where have you been?"

No, I am seeking evidence for the claims in the previously-quoted paragraph. Perhaps I am misinterpreting it, but it seems as though, when taken as a whole, the claims imply credit card companies are acting out of pure malice as opposed to acting in a rational way to compensate for default risk. For such a sweeping claim, I thought it would be helpful to see the data behind it.



[Edited on May 19, 2009 at 11:52 AM. Reason : .]

5/19/2009 11:51:12 AM

^^ and in doing so (arguing against rule changes) you're basically claiming that CC companies are the hapless victims of those nasty, card-abusing customers who pulled a fast one over on the CC companies all these years by fooling them into thinking they were good credit risks.

5/19/2009 11:56:16 AM

i'm not sure how, but i'm betting that LoanShark and E-Dogg would claim the gigantic gap between household debt and income is not really a big deal.
Right? there is no debt problem for American households?



http://globaleconomicanalysis.blogspot.com/2009/05/effect-of-household-deleveraging-on.html

5/19/2009 1:52:55 PM

For America households? No, there is no problem beyond that which we have had since debt was invented. That is because what we today call debt is a modern invention which has been used as a substitute for earlier forms of debt which are not tracked by your statistics.

Previously, when you went to the appliance store and opened a line of credit they charged you 30-40% interest buried in the price of the refrigerator. The same happened all over town whenever anyone said they would let you pay in installments. It is estimated that the average New Yorker in once had 12 pawn shop claim tickets (collateralized debt). And that is how people handled debt in the age before unsecured loans. All that is gone now. When a head of household wants into the store now they just put it on the card.

So, when you include estimates (hard figures do not exist) of these disperse forms of debt what you find is that, historically, American household indeptedness as a function of income has not changed much. All that has changed is the form of debt. And this has been undeniably a good thing, because it separated the transaction from the financing, allowing Wal-Mart to concentrate competition on low prices and the banks to compete on financing, each specializing the that which they have a strong cost advantage in, with the result of both lower interest rates and lower prices.

Quote :

"^^ and in doing so (arguing against rule changes) you're basically claiming that CC companies are the hapless victims of those nasty, card-abusing customers who pulled a fast one over on the CC companies all these years by fooling them into thinking they were good credit risks."

No I am not. I am arguing that the rule changes proposed would make us poorer. It has nothing to do with the current financial situation, as such rule changes as are proposed would make us poorer whether you proposed them in 2009 or 1909.

[Edited on May 19, 2009 at 4:31 PM. Reason : .,.]

5/19/2009 4:28:39 PM

Feel free to link the Cato or whatever other conservative crap you got that from. Love to read more about it myself.

Quote :

"American household indeptedness as a function of income has not changed much."

I just don't see how anyone can say this with a straight face, at all.

[Edited on May 19, 2009 at 4:49 PM. Reason : .]

5/19/2009 4:48:40 PM

^ I have seen many other studies that come to the same conclusion, but the one below I already had bookmarked from a while back, so hopefully this will suffice:

Quote :

"In modern commerce, credit cards (along with debit cards) serve as a payment device in lieu of cash or checks for millions of routine purchases as well as for many transactions that would otherwise be inconvenient, or perhaps impossible (for example, making retail purchases by telephone or over the Internet). Credit cards have also become the primary source of unsecured open-end revolving credit, and they have largely replaced the installment-purchase plans that were important to the sales volume at many retail stores in earlier decades."

http://www.federalreserve.gov/pubs/bulletin/2000/0900lead.pdf

5/19/2009 5:48:06 PM

Maybe it is in your link, I haven't read it yet, but I'm not disputing that credit cards have replaced money and a lot of other means of payment in recent times. What I am wondering, is just how bad off the statistics were in 1960 all the way until 1985 (when the move up in household debt really took off) that

Quote :

"American household indeptedness as a function of income has not changed much"

There are so many different pieces of data related to credit cards and defaults that disagree with this at a common sense level that I don't know where to begin.

5/19/2009 9:00:16 PM

The statistics were abhorent for good reason. First and foremost, as I said, most of what was used for debt was not considered debt. A pawn ticket was not considered debt, neither was placing an item on layaway, neither was paying for something in installments. Even in studies where trying to do so, it is very difficult to get information for comparison because back then every shop and store was a lending institution and therefore the information was exceedingly disperse. Compare that to today where household debt can be estimated to within a few percentage points just by collecting statistics from the largest institutions.

Quote :

"I just don't see how anyone can say this with a straight face, at all."

Why? Because you see one poorly scaled graph on the internet and suddenly it is laughably rediculous to believe anything else?

5/20/2009 3:46:21 AM

^

The problem is that your analysis is crap and doesn't take into account common sense factors that we pretty much all know from experience:

* Collateralized debt happens to be a lot fucking different from unsecured debt, in pretty much every way imaginable
* People buy a lot more with credit cards than what was previously purchasable with pawn shop tickets, including day-to-day goods
* The credit industry is marketed a lot differently and to a different demographic than the kind of debt you describe. College students in particular have a 15% response rate (!) to direct mailings for credit offers, and the process of leveraging obviously begins much sooner and for a much wider range of goods and services
* Different incentives drive taking on debt to make purchases. Consumers with cash in hand may choose to open cards for rewards or "discounts" offered at department stores

The list goes on and on. You can't just make broad claims like "pawn shop debt was the same as modern consumer debt, in a different form OMGBBQ" and expect everybody to take it on face value.

As to the separation of concerns wherein Wal-Mart competes on low prices and the banks on financing -- um, well, sorry to break it to you, but you may not have noticed that Wal-Mart has tried repeatedly to buy out banks with the rather obvious goal of becoming a banking institution itself. The only thing that stopped them was the regulatory climate. Do you really believe businesses dropped the pawn approach in the name of efficiency? I doubt it. In reality I suspect that the credit card institutions have an oligopolistic competitive moat around them that only the likes of Wal-Mart can truly overcome. The reality is that what you're calling a great separation of concerns, is more likely a true inefficiency where a few businesses with network effects (due to owning infrastructure and having consumer lock-in) gouge retailers at the point of sale.

Oh, and in case you don't believe me:

http://www.nytimes.com/2007/03/16/business/16cnd-walmart.html?_r=2&ref=business&oref=slogin&oref=slogin ("Wal-Mart Drops Bid to Operate Its Own Bank")

Quote :

"Its decision comes in the face of intense opposition from the banking industry and just days before a Congressional committee is set to hear testimony on a law that would ban non-financial institutions, like Wal-Mart, from operating banks."

Read the last paragraph, it's telling in light of your brilliant analysis:

Quote :

"Today, Wal-Mart insisted that its plans had never changed. Ms. Thompson said in her statement that “at no stage” did the company intend to use its license to “establish branch banking operations as our critics have suggested — we simply sought to reduce credit and debit card transaction costs.”"

[Edited on May 20, 2009 at 4:42 AM. Reason : foo]

5/20/2009 4:36:41 AM

I know they are different. But that they are different does not make the world as you say it is.

Here is a document with lots of pretty graphs:
http://banking.senate.gov/public/_files/ZywickiCreditCardTestimonySenate2122009.pdf

And it shows that if you exclude mortgages the total consumer debt service to income ratio has actually been falling since 2003 (it oscillates in a fairly narrow range). Even including mortgages it has not changed much, going from 0.11 in 1980 to 0.14 as a proportion of income.

5/20/2009 9:26:48 AM

Quote :

"Do you really believe businesses dropped the pawn approach in the name of efficiency"

Yes, because that it is what consumers wanted. It is much, much more convenient to swipe a card that is accepted at most stores than it is to establish alternative forms of credit at each store.

So, your explanation is Visa, Mastercard, Discover, and American Express forced their services upon unwilling consumers, then coerced retailers to accept their payment method with nothing to gain?

[Edited on May 20, 2009 at 10:04 AM. Reason : .]

5/20/2009 10:02:28 AM

To further your point hunt, retailers are actually penalized for taking credit cards, as the credit card companies charge up to 2% of the purchase price to the retailer.

5/20/2009 10:06:11 AM

Quote :

"And it shows that if you exclude mortgages"

Why would we even do that when comparing real household debt to income when were talking about a housing bubble created recession? Are you being serious or just obtuse?

5/20/2009 10:10:35 AM

I thought we were talking about credit cards and consumer debt? And we do not yet have the statistics but I suspect the figures for mortgage debt are falling precipitously as we speak.

^^ They are, yes, but accepting credit cards is rational. If you are selling a service or product with huge margins then when a patron walks in, offers a credit card, and then walks out when you say that 2% was too much, you might think about signing up. Some people prefer using their card and therefore fail to carry enough cash. And you need to take into account the costs of accepting cash. Afterall, cash can be stolen, requires making change, and must be deposited each night, all expenses that are not iccured for a credit card transaction.

5/21/2009 10:26:32 AM

Voters Now Trust Republicans More than Democrats on Economic Issues

Quote :

"Voters now trust Republicans more than Democrats on six out of 10 key issues, including the top issue of the economy."

http://www.rasmussenreports.com/public_content/politics/mood_of_america/trust_on_issues/trust_on_issues

LOL!

6/9/2009 6:27:34 PM

This just in: Americans short sighted, lacking in long-term memory.

6/9/2009 7:04:11 PM

^ Well, that may be true. But it ain't like the Democrats are doing such a wonderful job.

6/9/2009 7:10:34 PM

Quote :

"some here are invested in the defeat of the U.S. economy"

6/9/2009 7:11:57 PM

^ Not me--never have been, never will be. But I do think that many of Obama's plans and those of other Democrats will prove self-defeating.

6/9/2009 7:14:53 PM

6/9/2009 7:35:01 PM

^ wat?

6/10/2009 10:43:39 AM

http://www.controller.ca.gov/eo_pressrel_5893.html

Couldn't happen to a better state. However, this will have ramifications to the broader market. If we wake up one morning in about 50 days and find out that California has declared bankruptcy, the market will give up 5% easily.

6/11/2009 7:55:50 AM

In Poll, Obama Is Seen as Ineffective on the Economy [the headline before The New York Times changed it]

Quote :

"A substantial majority of Americans say President Obama has not developed a strategy to deal with the budget deficit, according to the latest New York Times/CBS News poll, which also found that support for his plans to overhaul health care, rescue the auto industry and close the prison at Guantánamo Bay, Cuba, falls well below his job approval ratings."

Quote :

"As Mr. Obama finishes his fifth month in office and assumes greater ownership of the problems he inherited, Americans are alarmed by the hundreds of billions of dollars that have been doled out to boost the economy. A majority said the government should instead focus on reducing the federal deficit."

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3928281

http://www.nytimes.com/2009/06/18/us/politics/18poll.html?_r=1&hp

6/19/2009 8:50:48 AM

Quote :

"The good news just keeps rolling in. "

6/19/2009 9:27:44 AM

6/19/2009 9:31:55 AM

hooksaw

[Edited on June 19, 2009 at 5:18 PM. Reason : .]

6/19/2009 5:16:23 PM

California has issued 50 million in IOUs already. Amazing.

They are talking to GS trying to get access to China to sell their debt directly.



[Edited on July 2, 2009 at 3:30 PM. Reason : .]

7/2/2009 3:28:35 PM

Quote :

"The shocker last week was not just that the US lost 467,000 jobs in May, but also that time worked fell 6.9pc from a year earlier, dropping to 33 hours a week. "At no time in the 1990 or 2001 recessions did we ever come close to seeing such a detonating jobs figure," said David Rosenberg from Glukin Sheff. "We have lost a record nine million full-time jobs this cycle." Earnings have fallen at a 1.6pc annual rate over the last three months. Wage deflation is setting in – like Japan. Interestingly, The International Labour Organisation is worried enough to push for a global pact, fearing countries may set off a ruinous spiral by chipping away at wages try to gain beggar-thy-neighbour advantage. Some of the US pay cuts are disguised. Over 238,000 state workers in California have been working two days less a month without pay since February. Variants of this are happening in 22 states. The Centre for Labour Market Studies (CLMS) in Boston says US unemployment is now 18.2pc, counting the old-fashioned way. The reason why this does not "feel" like the 1930s is that we tend to compress the chronology of the Depression. It takes time for people to deplete their savings and sink into destitution. Perhaps our greater cushion of wealth today will prevent another Grapes of Wrath, but 20m US homeowners are already in negative equity (zillow.com data). Evictions are running at a terrifying pace. Some 342,000 homes were foreclosed in April, pushing a small army of children into a network of charity shelters. This compares to 273,000 homes lost in the entire year of 1932. Sheriffs in Michigan and Illinois are quietly refusing to toss families on to the streets, like the non-compliance of Catholic police in the Slump. "

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5742937/The-unemployment-timebomb-is-quietly-ticking.html

7/6/2009 4:20:01 PM

green shoots on every plate!

7/6/2009 5:24:09 PM

I haven't scanned the thread in a while. Has hooksaw admitted that the economy has tanked yet?

7/9/2009 9:04:52 AM

no, the fallback position was "wow, it's impressive that the country has survived as well as it has, even with a somewhat weakened economy. There are no bands of angry hoards roaming the streets scrounging for food yet - that's a statement on how strong our financial underpinning is!"

7/9/2009 9:28:31 AM

It is impressive that the economy has withstood so many attacks from the evil Obama administration!!

7/9/2009 10:13:09 AM

Why do any of you care what I think? I'm just some guy on the Internet--my metric isn't what's important.

1. Why not focus on the econometrics used by our current elected leaders: the Obama administration et al?

Biden: 'We misread how bad the economy was'

http://tinyurl.com/mvbzxc

2. Why not focus on the fact that a relatively small portion of the so-called stimulus package has been distributed? What are "they" waiting for?

Is the Stimulus Working?
July 09, 2009

Quote :

"It's been five months since the colossal $787 billion dollar stimulus package was signed, with only about $56 billion of it having been distributed."

http://blogs.abcnews.com/politicalpunch/2009/07/is-the-stimulus-working.html

3. Why not focus on the fact that some states are misusing stimulus money?

Report: States aren't using stimulus funds as intended

http://www.usatoday.com/news/nation/2009-07-07-stimulus_N.htm

4. And why not focus on the fact that some buffoons are calling for yet another stimulus?

Attack Of The Son Of Stimulus



http://www.cbsnews.com/stories/2009/07/09/opinion/main5147286.sht

I guess it's just more fun to act like a pack of idiots and troll the shit out of hooksaw. But the fact of the matter is that you should be embarrassed by those posts. As I've indicated many times, I'm not the problem here--you are.

I mean, I took about a week away over the long holiday weekend and you're still obsessing about me? God damn, find a new toy.

[Edited on July 9, 2009 at 5:03 PM. Reason : PS: Define "tanked," JCASHFAN.]

7/9/2009 5:00:30 PM

^^^ ahh. Well, this isn't over by a long shot.

Quote :

"We misread how bad the economy was"

Was Joe B including you in that "we" big guy

Tanked is a generic term, but seeing that, buy some measures, we're over 18% unemployment, and seeing as this is easily the worst economic depression since the Great Depression, and seeing as this isn't nearly over . . . I think tanked wouldn't be a completely inaccurate term. Or tanking. Or to be tanked.

As this article points out, we tend to compress the timeline of the Great Depression. Just because we aren't all in breadlines yet, doesn't mean we aren't on the way to something very serious:

http://tinyurl.com/lkr9nq

7/9/2009 5:00:40 PM

Whoa whoa whoa...whoa. Politicians aren't good at forecasting the economy? The fuck you say!

7/9/2009 9:07:12 PM

like politicians know jackshit about economics (other than how to overspend)

7/13/2009 3:48:52 PM

White House putting off release of budget update

Quote :

"WASHINGTON — The White House is being forced to acknowledge the wide gap between its once-upbeat predictions about the economy and today's bleak landscape. The administration's annual midsummer budget update is sure to show higher deficits and unemployment and slower growth than projected in President Barack Obama's budget in February and update in May. That could complicate his efforts to get his signature health care and global-warming proposals through Congress. The release of the update – usually scheduled for mid-July – has been put off until the middle of next month, giving rise to speculation the White House is delaying the bad news at least until Congress leaves town on its August 7 summer recess."

http://www.wral.com/news/political/story/5610081/

Let's see if some of you get your panties in a bunch about this Obama move. You know, the same damn thing that you accused Bush of doing concerning the economic numbers.

BTW. . .

Quote :

". . .bands of angry hoards [sic]. . . ."

agentlion

. . .it's hordes. And bands of angry hordes is redundant. Just noticed these--you're welcome.

[Edited on July 20, 2009 at 9:24 AM. Reason : .]

7/20/2009 9:19:24 AM

thanks, i'm so embarrassed

7/20/2009 9:43:50 AM

^ For Christ's sake, it was just a "BTW." Did you happen to notice the rest of the post?

7/20/2009 9:48:56 AM

It's pretty hard to take the rest of the post seriously when a 43 yr old douche bag yet again continues to correct grammar on a message board. If we were having this conversation in person and you did that to me, I'd smack you in your fucking face.

In regards to the rest of your post, I think the majority of the Obama supporters that were here are probably a little bit on the fence to completely off the bandwagon (like myself). Supplanter is about the only guy I can think of that hasn't voiced at least 1 rather large concern about the way things are going.



[Edited on July 20, 2009 at 9:56 AM. Reason : .]

7/20/2009 9:55:03 AM

^ 1. Is that a threat?

2. And no you fucking wouldn't smack shit.

3. And I don't give a shit about whatever else you posted--it's meaningless bullshit just like all your other posts and your life.

7/20/2009 10:01:23 AM

^ Is that a threat?

7/20/2009 10:11:39 AM

Quote :

"Let's see if some of you get your panties in a bunch about this Obama move"

to get one's panties in a bunch - an alternative of to get one's knickers in a twist

1: (idiomatic) To become overwrought or unnecessarily upset over a trivial matter.


You've just implied that the issue you brought up is trivial and not worth getting upset about. Maybe you should try a different idiom.

7/20/2009 10:32:23 AM

thoroughly owned

7/20/2009 11:00:44 AM

Quote :

"White House putting off release of budget update"

Wait..what happened to the promised Obama transparancy?
Oh.. he's going to be transparant next month when congress is not in session.

For a moment there I thought he was acting like every other 2-bit politician instead of the Messiah.

7/20/2009 11:08:40 AM

It's probably less related to congress and more related to Goldman Sachs needs a week or two to start unwinding all the positions they've been buying over the last few months. Did you see their upgrades to the years end S&P number? That should work for the remainder of earnings season to hold the market here while they unload, and probably get short. Then the Fed/Treasury can release the budget and let everyone know how they are underestimating the recession and growth potential. Market sells off with GS profiting the ride down.

7/20/2009 11:50:13 AM