Warren Buffett, Berkshire Hathaway’s chairman, believes that he has the ultimate elegant solution for banks that are too large to fail: place the bank accounts of the bankers on the line.
Buffett is not happy with the damage brought about by unaccountable and overpaid bigwigs in the financial industry and has therefore been criticizing these overreaching corporate directors and managers for a while now. However, the problem regarding how to bring about great corporate behavior has reached a new high as debate goes on if financial giants should be reined in if their missteps had helped bring the economy down.
Consumers who have high credit scores happen to have more chances of defaulting on mortgages compared to credit card loans.
Last year, consumers who had FICO scores that ranged between 760 and 789 ended in loan defaults of real estate at rates twice as much than credit card loans. (Borrowers that are at least ninety days delinquent are already considered to be in serious default or delinquency.)
Before, this meant trouble to subprime. Now, even people at the market’s high end and with great FICO scores also have serious delinquency troubles.
Since its bankruptcy court last July, General Motors Co. has emerged yet again and already invested in at least a dozen plants with $1.4 billion and brought about 5,500 jobs.
Its moves in jobs and investments are very different compared to last year’s actions, when GM got rid of factories, used unprecedented cuts on production and eliminated thousands of jobs during bankruptcy. However, GM has emerged from this problem with $50 billion from federal help.
GM’s vice president of labor and manufacturing relations, Diana Tremblay, claims that it is much more fun working on this now than it was last year. In fact, GM recently recalled a thousand of their laid-off workers and added another production shift in one of their Ohio complexes, where workers will build the Chevrolet Cruze for 2011. It seems that GM has indeed been very fortunate.
On average, American consumers shell out $15 billion every year in credit card debt penalties. Because of unjust fees, some people have taken matters into their own hands by protesting dubious charges on interest rates and succeeding. Thanks to this, the CARD act was taken into effect and put several changes into place.
The new rules greatly change the practice known as universal default for one. Before, under this scheme – despite people having perfect records of repayment – the lender had the right to charge higher rates on any existing balance that was based on the person’s track record as seen by other lenders. Now, this practice is long gone and lenders are by law no longer able to change the already-existing balance terms.
However, although the reform has come about, there are still some gaps. Issuers of credit cards still have the right to raise rates on brand new purchases for various reasons at any time, for example; all they have to do is offer up a written notice of 45 days. Plus, the new rules do not work for non-penalty fees, annual charges and inactivity fees.
A brand new credit card act targeting people under 21 – mainly college students – has recently been put into effect as a huge reform on issuers of credit cards in this generation.
Several brand new rules under this particular act include marketing bans on college campuses, parental co-signing for issued credit cards to people under 21, no hikes of interest rates during the initial year, early notices of such hikes later on, and bans on shifting dates of payment.
Under this act, universities will also need to disclose any revenue of sales of students’ credit cards. This is done to prevent credit card companies and campuses from making deals which let them make revenue at the students’ expense – something that some issuers of credit cards used to do.
This act is absolutely vital for younger people since shady practices tend to make things harder for them to begin their careers and old credit card practices used to cause significant damages to their credit scores. It is safe to say that high-risk-taking markets of credit and sub-prime consumers can be blamed for the debt that the country is now going through.
Recently, banks have borrowed a bit more from the emergency lending program of the Federal Reserve. Almost a billion dollars more were averaged in daily borrowing last week compared to the week before, but these levels are still quite low.
With the slight improvement of financial conditions, banks have chosen to scale back their overall use of the emergency discount loan of the Federal Reserve. The peak of this particular crisis hit $110 billion that was borrowed daily by banks, showing how serious trouble was becoming in obtaining loans via regular channels of the private market. Such banks only pay .5% on emergency loans.
During its peak early last year, the Federal Reserve held around $350 billion worth in commercial paper. Recently, however, banks have not made any use of individual programs of commercial paper, which were made to improve the overall availability of important financing needed for paying supplies and salaries in the short term.
It seems that thousands of UK students still have not received their grants and loans. Did I mention that their term started weeks ago and payments were meant to be completed last month?
Apparently, applications are still being processed, maintenance applicants are still being approved and some students still need to provide additional information. No matter what the reason, though, the UK government really needs to get a grip on the situation as it proves to be highly stressful for students who rely on their grants and loans for an education.
Have you heard of the brand new credit card bill of rights that will restrict how credit card companies change their fees and rates next year? Well, not a lot of people have really pointed it out yet, but it does come with its disadvantages, one of which involves us seeing an increase in interest rates along with additional fees soon, if not today.
In fact, tons of credit card holders have already been receiving letters regarding a sudden change to a much higher interest rate, sometimes of up to 13%. Are you one of them?
After being plagued by foreclosures, bankruptcies and looming debts, the real estate industry of the nation’s biggest cities seem to be finding the light at last. According to the Standard & Poor’s/Case-Shiller index, home prices in 20 metropolitan areas rose 1% in August from the month before. Cities that are experiencing better and notable gains include San Diego and Los Angeles in California. Though figures for these two cities were down in comparison with the same month a year earlier, month on month comparisons show that home prices are indeed on the rise by 1.5% and 1.3%, respectively.
It’s not news that the government has helped out financial institutions that were in the red for the past year or so. One of these was Goldman Sachs. The company received loans from the Treasury. It received $13Billion from the rescue of insurer AIG. It has sold $22 billion in federally guaranteed debt in the hopes of restoring capital markets activity. It also has been a major beneficiary of the low interest rates the government has set in order to restart the economy.
Now, Goldman Sachs, a New York-based investment firm, has turned $3.2Billion in the third quarter of this year as revenue from trading, almost 4x that of the figures from a year ago. If you look at their figures for the first three quarters, they have earned a staggering $16.7 Billion. What’s interesting about these figures is that a portion of this Billion dollar revenue, usually half of it as most Wall Street firms are known to do, will be allocated for Goldman Sachs employees’ bonus.