The other day I run into someone I know and they are in a surprisingly chipper mood.
HUGE SMILE, I mean HUGE SMILE on her face. So I ask what’s up and she tells me how she talked to the credit card company which she’d been ducking calls for months and told them that she wouldn’t be paying her bill.
The person from the credit card company said that they would need some payment and she replied that she would pay them $8000 out of the $18,000 that she owed them OR ELSE she would file bankruptcy and they would get NOTHING.
They accepted her offer and she is going to walk away from OVER HALF of the money she borrowed.
SMILING…NO REMORSE…NO SHAME WHATSOEVER…IN FACT I SENSED A FEELING OF PRIDE IN HER ACCOMPLISHMENT
So I asked her about her credit and wasn’t she worried that her credit would be ruined.
She turned and lifted up a stack of credit card applications telling me that she could get $100,000 in credit right there in her hands with all the credit cards that the companies are trying to give her even though they know she has horrible credit history.
I sat there flabbergasted.
Now you can’t tell me that these credit card companies aren’t aware of the horrible credit score of my friend. You can’t log onto the internet without some company offering you complete credit score information for like 29 cents. It’s readily available. This girl’s credit scores must have had a gazillion red flags. Yet credit card companies are still willing to lend her money.
Can we pass a law that says if you can’t pay off the debt you already have and are in default for months that you are not allowed to sign up or receive more credit without putting up some hard assets to back it up?
…and a corollary law that says if you are a lending institution and you make credit available to someone who knowingly has more red ink on their credit statement than a Target Flyer then your lending institution gets ZERO an I MEAN ZERO help in a bail out.
Is this not a monumental failure to asses risk, especially given that this person’s credit scores and default information is readily available with a few strokes on a keyboard? For the cost of an $8 credit report you mean to tell me the credit card company looks at that brutal pattern of abuse of credit and are still willing to lend $20,000 on a signature?
Are these the same banks offering this credit that are going to get bailed out because they are too big to fail?
WHAT PART OF THIS EQUATION MAKES IT TOO DIFFICULT TO UNDERSTAND THAT THERE NEEDS TO BE CHANGE IN THE WAY CREDIT IS ASSESED AND LOANED?
Read this-
Nice job on 20/20! I recently completed a year long collection of credit card applications. I have kept track of every offer from April 05 to April 06 and I received 141 of them. I regret not keeping more specific data but I’m attaching a couple of photos and a chart. Feel free to use this material in any manner you wish.
Good Morning Gloucester 
I agree, credit card offerings are out of control, BUT your friend is smiling because she’s a DEADBEAT? I would be ashamed of such behavior. In the end, we responsible types (who pay our bills and live within our means) end up payoing for her. A classic example of all that is wrong in today’s America. I’m surprised she isn’t in downtown Boston in a tent wailing against “corporate greed”. Sounds like personal greed to me.
LikeLike
Believe me I was sickened by the whole conversation
LikeLike
We were a nation of “makers”, now becoming a nation of “takers”. Keep up the good work on the site, love it!
LikeLike
She will have to pay taxes on the cancelation of debt. The IRS will be harder to deal with.
LikeLike
WTF is going on in this country? I have debt – we all have debt. BUT I pay mine off as fast as I can. I don’t think that’s too much to ask. For the last 20 years or so, I think most of the big banks have a “crack bar” for the executives. This is insane..
LikeLike
We live in the land of the free. Free to not be held accountable for our irresponsible actions.
People are jumping on this who cares bandwagon in droves.
LikeLike
What goes around comes around, we reap what we sow. This woman is going to have some heavy shit to deal with at some point in her life for choosing to be irresponsible and imoral in this action she is taking. Ya know what, ya wanna be free be free from debt. That’s my motto, I’m a cash and carry type of person. If I don’t have the cash, I don’t need it.
I’m also blessed to make good choices and live within my means. I want what I have and hence I always have what I want. PEACE!
LikeLike
Sounds fishy to me. I bet the Credit Card company will take her money, then continue to dun her for the amount still owed. Unless she gets a statement from them that they accept her payment as payment in full, she is in for a surprise. Basically, they tricked her into making a payment…they are not that stupid. And even if she got a statement from them saying that they accept her payment doesn’t mean the debt is dead. They can still sell the open debt to a collector who will hound her for the rest of her days. Karma is a bitch.
LikeLike
Seriously… This stuff is what’s wrong with the world?
Well, As I always said while implementing Irish Birth Control
Brace yourself Bridgett!
Holy Bailout! Federal Reserve Now Backstopping $75 Trillion Of Bank Of America’s Derivatives Trades
This story from Bloomberg just hit the wires this morning. Bank of America is shifting derivatives in its Merrill investment banking unit to its depository arm, which has access to the Fed discount window and is protected by the FDIC.
This means that the investment bank’s European derivatives exposure is now backstopped by U.S. taxpayers. Bank of America didn’t get regulatory approval to do this, they just did it at the request of frightened counterparties. Now the Fed and the FDIC are fighting as to whether this was sound. The Fed wants to “give relief” to the bank holding company, which is under heavy pressure.
This is a direct transfer of risk to the taxpayer done by the bank without approval by regulators and without public input. You will also read below that JP Morgan is apparently doing the same thing with $79 trillion of notional derivatives guaranteed by the FDIC and Federal Reserve.
What this means for you is that when Europe finally implodes and banks fail, U.S. taxpayers will hold the bag for trillions in CDS insurance contracts sold by Bank of America and JP Morgan. Even worse, the total exposure is unknown because Wall Street successfully lobbied during Dodd-Frank passage so that no central exchange would exist keeping track of net derivative exposure.
This is a recipe for Armageddon. Bernanke is absolutely insane. No wonder Geithner has been hopping all over Europe begging and cajoling leaders to put together a massive bailout of troubled banks. His worst nightmare is Eurozone bank defaults leading to the collapse of the large U.S. banks who have been happily selling default insurance on European banks since the crisis began.
From Bloomberg:
Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.
The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.
Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms.
“The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”
Moody’s Downgrade
The Moody’s downgrade spurred some of Merrill’s partners to ask that contracts be moved to the retail unit, which has a higher credit rating, according to people familiar with the transactions. Transferring derivatives also can help the parent company minimize the collateral it must post on contracts and the potential costs to terminate trades after Moody’s decision, said a person familiar with the matter.
Keeping such deals separate from FDIC-insured savings has been a cornerstone of U.S. regulation for decades, including last year’s Dodd-Frank overhaul of Wall Street regulation.
U.S. Bailouts
Bank of America benefited from two injections of U.S. bailout funds during the financial crisis. The first, in 2008, included $15 billion for the bank and $10 billion for Merrill, which the bank had agreed to buy. The second round of $20 billion came in January 2009 after Merrill’s losses in its final quarter as an independent firm surpassed $15 billion, raising doubts about the bank’s stability if the takeover proceeded. The U.S. also offered to guarantee $118 billion of assets held by the combined company, mostly at Merrill.
Bank of America’s holding company — the parent of both the retail bank and the Merrill Lynch securities unit — held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades.
That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show.
Moving derivatives contracts between units of a bank holding company is limited under Section 23A of the Federal Reserve Act, which is designed to prevent a lender’s affiliates from benefiting from its federal subsidy and to protect the bank from excessive risk originating at the non-bank affiliate, said Saule T. Omarova, a law professor at the University of North Carolina at Chapel Hill School of Law.
“Congress doesn’t want a bank’s FDIC insurance and access to the Fed discount window to somehow benefit an affiliate, so they created a firewall,” Omarova said. The discount window has been open to banks as the lender of last resort since 1914.
As a general rule, as long as transactions involve high- quality assets and don’t exceed certain quantitative limitations, they should be allowed under the Federal Reserve Act, Omarova said.
In 2009, the Fed granted Section 23A exemptions to the banking arms of Ally Financial Inc., HSBC Holdings Plc, Fifth Third Bancorp, ING Groep NV, General Electric Co., Northern Trust Corp., CIT Group Inc., Morgan Stanley and Goldman Sachs Group Inc., among others, according to letters posted on the Fed’s website.
The central bank terminated exemptions last year for retail-banking units of JPMorgan, Citigroup, Barclays Plc, Royal Bank of Scotland Plc and Deutsche Bank AG. The Fed also ended an exemption for Bank of America in March 2010 and in September of that year approved a new one.
Section 23A “is among the most important tools that U.S. bank regulators have to protect the safety and soundness of U.S. banks,” Scott Alvarez, the Fed’s general counsel, told Congress in March 2008.
LikeLike
THAT Ladies and Gentlemen Concludes the Sale of The United States of America …
The Sea To Shining Sea asset has been tendered … Joey, please put those lobsters back 😎
LikeLike