I haven’t used a check at a grocery store in years. I have always used a credit or debit card when I’m out because it’s 1) faster and 2) more convenient. Chris and I have a collection of checks built up just so we can send off our cable, electricity, and gas bill every month but other than that, we never use checks.

There are more frustrating things that go on at the grocery store, but when you’re stuck behind someone who is writing a check it can also be quite irritating, especially if you only have a few items and you have your card ready. Of course, incidents like that have really become less frequent than a few years ago, but every now and then you will get the person who wants to write a check.

Really, when you think about it, writing a check at stores like Wal-Mart have become a moot point. After all, when you write a check, even if you fill the whole thing out and waste everyone’s time, the store runs the check like a debit card. It is electronic now and this way the stores are protecting themselves somewhat from check fraud.

I get annoyed when I see someone pull out a check book at the very end of their grocery store trip. Once everything is rung up and it’s time to pay is NOT the time to look for your checkbook in your gigantic purse; if you’re going to go ahead and pay with a check, perhaps you should have it ready before the entire order is finished. It’s not a surprise that you have to pay at the end. /end rant

I wish stores would ban checks for a number of reasons. I know that there are a few arguments in favor of check writing, like it is easier to keep up with your bank balance when you write a check. However, even that argument is somewhat flawed because you may record a deposit in your check book, but now banks are depositing checks whenever they want to and not necessarily in the order that you actually put them in the bank.

What you can learn from this ebook

Gone are the days when we had to step outside to purchase our groceries, book flights and vacations, rent or purchase cars, or just transfer money between bank accounts. Today, we can simply grab our checkbooks, debit cards or credit cards, sit down at a computer in the comfort and safety of our home, and complete these transactions with passwords and PIN numbers. Thanks to advances in technology, the types of transactions we can now complete online are virtually endless.

Unfortunately, the increase in online transactions has been accompanied by an increase in online identity theft. Fraudulent access to personal information over the Internet is increasingly prevalent and sophisticated. Two forms of identity theft are at the forefront of this Internet piracy: PHISHING and PHARMING.

What you can learn from this ebook

You’ve probably been receiving privacy notices from banks and other financial companies. These notices
explain:

• What personal financial information the company collects

• Whether the company intends to share your personal financial information with other companies

• What you can do, if the company intends to share your personal financial information, to limit some of that sharing

• How the company protects your personal financial information.

Financial companies share information for many reasons: to offer you more services, to introduce new products, and to profit from the information they have about you. If you like to know about other products and services, you may want your financial company to share your personal financial information; in this case, you don’t need to respond to the privacy notice. If you prefer to limit the promotions you receive or do not want marketers and others to have your personal financial information, you must take some important steps.

First, it is important to read these privacy notices. They explain how the company handles and shares your personal financial information. Keep in mind that not all privacy notices are the same. This guide tells you about the other steps you can take to help protect the privacy of your personal financial information.

Washington D.C. and the surrounding areas in Maryland and Virginia saw something in September that not many places across the country have seen; an increase in home prices. Unfortunately, while the prices increased, the median sale price did fall a bit.

Sales were up almost 19% in September in the area from just a year ago; with the median sale price declining almost 5% to $371,568.

Houses in D.C. are also selling for most of what the owner is asking. The average sale price in the area was 92% of the asking price.

Seeing any area, particularly a large metro area gaining in sales of homes is a pretty good (and not outrageous) sign that the economy is doing a bit better than it was a year ago. Then again, a year ago, credit had completely frozen as the subprime crisis really took off.

As banks have begun to lend again, more homes have started to sell. As the homes start to sell, prices will gradually begin to rise again. The rise will be in areas where there are jobs and every list that I’ve read says the jobs are in Washington D.C. due to the amount of government jobs as well as all of the large companies that are headquartered there.

When I was in Maryland over the summer, it didn’t seem like the recession had hit there as bad as it looked in other parts of the country I have seen in the last year. For example, while Chris and I were in St. Louis in August, restaurants were basically empty at dinner time. It’s not like we were going to obscure places either. The only restaurant I noticed was busy the entire time we were there was a Cheesecake Factory in one of the larger malls in the area. In Maryland, everything was always busy it seemed. Shopping centers were full of cars usually and there weren’t a lot of empty businesses making it look like a ghost town.

Source

The chairman of Wells Fargo agreed last year to help the company through the financial crisis, now Dick Kovacevich will be stepping down from the job as he sees that the financial crisis is over, I suppose. After 23 years of being with the company, he was chosen to lead it through the worst crisis that had happened to the financial markets since he had been there.

The position was only meant to be temporary and he knew that he wanted to retire eventually. He wanted to help the company get back on its feet as well as lead it through the acquisition of Wachovia.

On January 1, 2010 John Stumpf, current CEO of the company, will replace him as the chairman. Stumpf has been with Wells Fargo for 27 years and has been the CEO since June 27, 2007. His career started when he joined Norwest Corporation in 1982. Since that time Wells Fargo has swallowed many smaller banks including Stumpf’s Norwest bank. He is also currently on the board of directors for Visa international and is the Chairman of the Board of Directors for Visa in the United States. Like our eBay CEO friend Meg Whitman, he is also an outspoken supporter of the Republican party.

Wells Fargo is one of the banks that accepted TARP money from the government. It got $25 billion. It is also one of the banks that, when put under the government stress tests against bailed out banks, it was told that it would have to raise more capital before it could begin to pay back the loans. It sold stock to raise nearly $9 billion but the additional $5 billion will come from earnings according to the company.

It is a huge deal when banks charge everyone and their mother huge overdraft fees. Bank of America was one of the worst. The bank would hold your deposits or allow small transactions to go through prior to the larger deposit being made. Of course, this led to many overdraft fees being incurred by the customer. For every transaction that the customer made, they were tinged $35.

Bank of America just announced though that on October 19th, it will begin laying off the serious overdraft fees and only begin tinging the account once it reaches a $10 overdraft in one day. This means accumulated and not that you can continue to overdraft as long as it doesn’t go above $10 (at least this is the way I understood it). The account holder also has to have the account back in the black in five days time.

That’s not the most exciting news regarding the overdraft fees in my opinion, though. I like the fact that customers will soon be able to opt out of the program just by visiting a Bank of America branch or calling a yet to be determined phone number. Of course, the program I’m referring to is the one that starts the overdraft problem in the first place. I would much rather be declined at the grocery store than begin incurring overdraft fees at the bank. My embarrassment is less than the  $35 that the bank would charge me for the “overdraft protection”.

Bank of America will also be limiting the number of overdraft fees that can be incurred in a day to four. This is down from 10. The rule that it could charge 10 overdraft fees in one single day was put into place earlier this year. It is nice to see that rule gone and a new, better one in its place.

I don’t know if this will position BofA in a more positive light, but anything helps when it comes to the business practices this company has been doing. I know I talk a lot about the company, but I also hold a credit card from them and have yet to see my interest rates spike or my credit limit reduced. I haven’t had one bad experience with the company (knock on wood, right?).

A lot of public scruitiny has been placed on Bank of America after giving out nearly $6 billion in bonuses to Merrill Lynch executives. Just a week after a trial resulted in a $33 million settlement, in which the bank agreed to pay but admit to no wrongdoing, in the case against BofA, the SEC has decided to go to trial against the company to see that it is properly punished for its actions.

Bank of America was supposed to turn over information regarding the merger yesterday, but instead a top executive is meeting with House Representative Edolphus Towns about the acquisition of Merrill Lynch.

The SEC is looking to charge the bank with additional charges if, through the course of the trial, new evidence is discovered or evidence supports any allegations. It could also begin charging individual executives in the trial.

Bank of America was one of the largest takers of TARP money when the government started dealing out the $700 billion in taxpayer funds. So, of course, when money started going to the companies’ executives the American public got angry. I think it’s a good thing that the SEC has decided to step in because it is nice to know that someone is working on the side of the public…even it is for their own public relations image or to try to damage a company that has embarrassed the system.

Yes, I really do think that Bank of America has done a pretty good job of embarrassing itself and the entire financial system by pulling this very “AIG” move. BofA is really damaging its own reputation with customers and potential customers alike. Anyone who may be a potential customer will probably be so disgusted by the company’s business practices that they will likely turn away and not think twice about banking with the company or getting a credit card through them.

Bank of America is also notoriously bad with current customers as well. Just think about all the stores that have been coming out on TV regarding banks charging overdraft fees over and over against customers; most of the time the bank is BofA. Also, it is in the middle of the “interest rate hike” controversy where the company is raising interest rates for credit card holders and charging the higher interest on previously held balances.

They have yet to do this to anyone I know, but I am fairly skeptical about the company because of all the bad press it has been getting. I am more unwilling to work with the company than I was a year ago, even a month ago. Since the news about the executive pay has surfaced, I’m sure the company has lost a lot of its clientele.

What you can learn from this booklet

From the Federal Reserve Bank of Boston, this e-Book provides an introduction to banking for young people that answers many basic questions: What is a bank? What makes one type of account different from another? Why do banks fail and what happens when they do?

To download this e-book, or any of our current e-books, please visit the ebook page where you may choose the e-book(s) you wish to download. *Download an e-book by clicking on it’s title.*

Bank of America first hit the news as one of the major banks receiving TARP funds. The government “stress tests” found that Bank of America needed $33.9 billion in capital just to survive. When that news came out, they started selling extra stocks and liquidating assets in order to raise such a large amount of capital and they succeeded, Now that Bank of America has made some brilliant financial decisions and created billions of dollars in capital, they are spending millions in bonuses, hoping to “lure and retain talent”.

This is understandably reminiscent of AIG paying out TARP funds as bonuses and taking an executive island vacation on the taxpayer’s dime. When AIG paid out those millions of dollars in bonuses, they were referred to as “retention payments”, making sure the talent they already had did not choose to go to a stronger company. Now Bank of America is doing the same thing.

It is likely Bank of America will not see the harsh national uproar AIG saw because it’s not exactly on the taxpayer’s dime. Bank of America is paying out capital they raised which they can do what they want with. However, with Bank of America doing through the Merrill Lynch merger situation and still being rather weak, it makes experts and the public wonder if they should be spending all these dollars in retention bonuses.

Among the employees who supposedly received the retention bonuses are two former Merrill Lynch bankers, Fares Noujaim, a former Bear Sterns banker that joined Merrill Lynch last year, recently appointed vice chairman of investment banking at Bank of America, and Harry McMahon. Noujaim is supposed to receive $15 million paid over the course of two years. Both men were offered these bonuses in exchange for the promise not to leave the company. Apparently the Merrill Lynch merger is going through after all.

“Competitive recruiting in investment banking and capital markets continues to be very intense and we’re taking the steps necessary to retain key talent in response to competitive pressures.” spokeswoman Jessica Oppenheim told the New York Post. She also went on to say that any specific reports as to the amount of money Noujaim is being paid is not correct, calling them “inaccurate”. Many news organizations have attempted to contact Bank of America directly considering this new development but to no avail.

The CEO of Citigroup, Vikram Pandit, delivered a speech to end the first day of the National Summit in Detroit. The purpose of the summit is basically just a meeting of the minds, business, economic and government leaders, to develop strategies to keep America competitive in manufacturing, energy, technology and the environment. Citigroup has been under a lot of scrutiny for the way their business has been handled, irresponsible loaning and receiving so much TARP money, which has also arguably been mishandled.

In summary, Pandit told the crowd that America needs to accept the fact that tighter credit is just going to be the norm now. He says we are in a new world where borrowing will be harder, loans will be harder to get, and tighter, more expensive, credit is just going to be the case, even after the financial market has recovered. “U.S. consumption and credit creation were the two main drivers of growth. The world needs new drivers of growth — and a new business model,” Pandit told the crowd at the summit.

He said he expects loans to be more scarce and expensive. Those smaller APRs are a thing of the past in his eyes and even as recovery occurs, banks will be careful with giving out loans, almost to a fault. He also expects corporate restructuring over a number of industries. He acknowledged that Citigroup has received ample assistance from the government and praised “strong government action” for the position they are building themselves back to. He also mentioned that Citigroup has restructured its business plan, cutting costs by 25% and work force by 20% as well as lessening their dependence upon credit and consumption.

He also blamed the credit crunch on unregulated banks that he accused of being a “shadow banking system” that packaged wholesale funding into student loans, home mortgages and credit cards, a format that was responsible for over half of credit over the last five years. Pandit also blamed the “shadow banking system” for a large credit gap when that market fell apart and credit was withdrawn.

It is obvious that we are in a new age of credit with more regulations on credit cards that will cause credit issuers to implement new fees and heighten APRs and tighten up credit, at least for a time, but are we really to the point where we can no longer rely on credit? That may also backfire, because you will see less consumers worrying about their credit scores and financial institutions will lose money from lack of credit issuing. Restructure all you want, but no financial institution can rely so little on profit from borrowing that they will be able to tighten credit that much. It sounds like another one of my infamous ‘self fulfilling prophecies’, as the credit market will ‘cut off its own nose to spite its face’ and the financial institutions will forbid themselves from further growth. What do you think?

Republicans say that the Federal Reserve threatened to oust Bank of America CEO Kenneth Lewis if they did not follow through with the plans to overtake Merrill Lynch & Co. This came after they reviewed investigation documents. They also said that there was evidence that the government withheld information related to the merger from the public, directly violating the Freedom of Information Act. Thankfully, there was no evidence that the government tried to get Bank of America to hide Merrill’s losses from shareholders.

The House Oversight and Government Reform Committee is currently looking into preliminary claims that several top government officials, including then Treasure Secretary Henry Paulson and Fed Chairman Ben Bernanke, tried to get Kenneth Lewis to go through with the Merrill acquisition and not disclose to shareholders how horribly Merrill Lynch was doing financially. Lewis is supposed to be testifying in front of the committee today.

Bank of America has received $45 billion in bailout funds, but as reported here a week or so ago, they have been working on raising capital to become independent of the government assistance. So far, they have sold $17 billion or more in extra stocks and raised at least that in liquidation funds. Some of the federal assistance was supposedly going to defer the losses they would incur by acquiring Merrill Lynch.

Republicans claimed in a memo that Paulson and Bernanke “put a gun to the head” of Lewis and the board of directors at Bank of America to force the merger between Bank of America and Merrill Lynch even though CEO Lewis supposedly “felt it was hi duty to his shareholders to try his luck in the legal system and back out of the deal.” Republicans refer to several documents including an e-mail by an employee at the Richmond Federal Reserve who said that Bernanke made it clear that if he backed out of the deal, “management is gone,” as proof of the threats.

Just a few weeks after the deal was completed, Bank of America released their fourth-quarter report where they reported a $2.39 billion loss whereas Merrill Lynch reported a loss of over $15 billion. So far, Merrill Lynch has fallen further in the depths of ‘no man’s land’ while Bank of America has been curbing losses with brilliant financial decisions and sales of company interest.

The Wall Street Journal has begun exposing how the New York financial sector is in such dire straits right now that some former stock gurus have gone to the lowly life of working for a living. For instance, take Carlos Araya. He used to be the Wall Street executive you would see ordering expensive dinners at the Palm Restaurant in midtown Manhattan. Now, he serves there. As Wall Street began to hurt, he lost his job as a crude oil trader on the New York Mercantile Exchange in 2007. After horrible luck at finding a new job in the investment industry, he applied in August 2008 to be a host at the Palm to make end’s meet. He is making just over 10 percent of his original salary.

Some former investment brokers, used to performing high end jobs that they are well trained for and earning salaries some people would kill for, are forced to accept low-wage work because they just cannot convert their experience and training into a job like the one they lost. Now, Mr. Araya is heading toward bankruptcy and is confident that he will never return to the investment business.

Unfortunately, there are thousands of stories like this one. Almost 25,000 jobs have been lost in the financial sector in New York alone since August 2007. Before 2012, that number is supposed to hike up to 56,800. This figure began building in 2007 during the financial hiccup that was a predecessor to our current recession, in which Araya lost his job.

John Carbonaro lost his job with Bank of America as a floor clerk in January 2009, and despite his experience and allure, currently takes care of the domestic duties in the family. Joe Morrone, a former Prudential trading clerk, has been unemployed for two years and struggles to support his daughters and grandson. He has worked in a deli, as a doorman, and a bouncer. He used to own three automobiles for just his own use. Now he shares one family vehicle they struggle to pay for.

Araya sometimes sees former colleagues from Wall Street in the Palm during his shifts. Some are pleasant meetings, offering encouragement. Other meetings are not so pleasant. “The way they look at you, you know they’re thinking negatively,” he says. Others come in asking if they can get a job there too. With 25,000 laid off, it’s certain many of them want a job there.

Araya’s daughter asked him if they could afford their house or if they would have to relocate. He told her he was not sure. She asked him if he knew how much money the family needed. “The way she looked at me,” Araya says, “I could tell she was counting the money in her piggy bank.” The emotionally excruciating exchange with his daughter caused him to run into the bathroom and cry. “At the end of the week, I get my paycheck and I think, ‘I used to make this much in a day,’” he adds.

If it is not bad enough that the Federal Reserve has almost unlimited control over money and interest rates and can totally control the market from an office building, the Obama administration is proposing that the Federal Reserve serve as a regulator to detect activities that could pose risks to the financial system and economy of America. So, the Federal Reserve is now the economy police. What does that make Ben Bernanke? Economy Police Commissioner?

A new plan is circulating among key lawmakers, under which the administration is recommending two new agencies, one to protect consumers and another aimed at protecting investors and maintaining the integrity of the markets. Wonderful; in a time of economic crisis, we want to expand government and spend more money. The FDIC would get expanded authority over troubled bank holding companies and a new government agency would conduct what insiders are calling “prudential regulation,” supervising government and private financial corporations.

This is only one part of six economic strategy recommendations designed to address weaknesses in the financial system that contributed to the current recession. Lawmakers and insiders say there is still much work to be done. Timothy Geithner (Security of the Treasury Department) and other administration officials have discussed this possibility in the past. It looks likely to be proposed to Congress soon, and it is just as likely to pass.

Directly from White House spokeswoman Jen Psaki, “The president is committed to signing a regulatory reform package by the end of the year and officials at the White House and the Treasury department are continuing work with Congress on the final phases of a proposal, but there is no final proposal in place and any announcement will not be for a couple of weeks.”

The agency to be raised to create consumer protection would focus on financial products but exclude securities. The investor protection agency could be an agency that merges the SEC and the Commodity Futures Trading Commission. By expanding the FDIC’s , the administration would hopefully allow the government to more effectively address failing banking institutions, or at least that is the plan.

Credit card holders feel they just won, but the new credit card legislation that President Obama signed into law Friday does not mean that you can start racking up those purchases worry-free. The rules will mostly go into effect in nine months from when Obama signed the bill, while others will kick in as early as 90 days afterward. As the new rules kick in and banks halt the abusive practices this legislation saves consumers from, you are likely to see more practices that are not against new policies that will hurt consumers just as badly, maybe worse. This may have been harmful to the balance we once saw. The banks have to respond to these changes in a way that is financially beneficial to them.

Not every response is positive. When you change a situation someone against you is banking on (pun intended), you often do not like their response. Whether you hold credit cards in order to rack up free rewards points or a debt you hope to one day pay off, you should watch out for several things: new fees, higher interest rates, less generous rewards and fewer promotional offers. It seems a few tips cannot hurt anybody.

Watch out for new fees. The new federal credit policy prohibits over-limit fees unless the cardholder agrees to allow transactions that exceed their limits. To make up for the obvious financial loss, banks will likely introduce other fees, possibly fees the “baby boomers” paid on their first cards but now thought were past history. As an example of the fees cardholders should watch out for, expect fees for rewards programs and possibly even fees for checking your balance.

You should expect annual fees to make a comeback. A few decades ago, annual fees were standard but dropped as competition among card issuers heated up. If you are anything like this author, you looked for cards with limited fees and an annual fee could be the deal breaker. Some issuers will attach annual fees on all their credit cards, while others will tie the fee to spending thresholds, so that only big spenders get away with fewer fees. It may be necessary for you to start racking up those reward points!

Prepare for higher rates. The current industry universal default allows banks and credit agencies to increase rates if a cardholder’s credit score drops or if they make late payments on other accounts. Once the new policies are in place, credit issuers will lose this powerful risk-management tool. Without the ability to act upon perceived risk level, card issuers will just start charging higher rates to everyone. Interest rates will likely go back to the 19% to 20% range for most people. The average variable-rate credit card today charges a low risk consumer 10.79% APR. (This information comes from BankRate.com, a leading industry analyst.)

Grace periods will become a thing of the past. The new legislation requires card companies to give consumers at least 21 days to pay their bills, but it doesn’t require them to offer a grace period, which isn’t the same as the cardholder’s due date though the two usually coincide somewhat. While the due date designates the day by which a payment must be received for the cardholder to avoid a late-payment fee, the grace period is the time during which the cardholder isn’t charged interest. Card issuers may get rid of grace periods altogether so that cardholders who pay their balances off each month will start paying interest immediately after making a purchase. Issuers have for many years wanted to get rid of the grace period on convenience users. It has become a bargaining tactic you will likely not see anymore.

Expect higher introductory rates. Low or 0% introductory APR offers have attracted consumers who posted a balance-transfer or opened up a new card. For example, this author is currently using a card that has three months left of a 0% introductory APR, one of many reasons it was such a wonderful credit move. Banks were able to offer those deals thanks to all the money they made on card users who made a late payment before the offer expired, invoking the bank’s penalty rate of 20% or more. Now that banks will no longer be allowed to increase interest rates on existing balances and all promotional offers have to last for at least six months, these promotions will likely disappear. Even those with perfect credit will likely see introductory rates no less than 6%.

Also expect lackluster or non-existent reward programs. Some companies have already been lowering rewards programs. Once they see lower revenue from penalty fees and interest charges due to the new legislation, they’ll become even less rewarding. Spending thresholds will likely go up so you will have to spend more to earn airline miles, points or cash back. Your creditor may also adopt more stringent rules, such as returning your rewards balance to a lower amount, maybe even wiping it out completely, if you make a late payment.

What can you do as a cardholder? Examine credit card statements and change-in-terms letters carefully. Issuers can currently change terms at any time with 15 days’ notice, but once the new law is in effect, they will have to give 45 days’ notice. You will be notified ahead of time that rates are increasing and you will be given the option to cancel your card prior to the rate hike. Remember that the vast majority of changes in terms are to the benefit of the creditor. If they send you a notice that terms are changing, read over it and find out if there are any changes that impact you in any negative way and act accordingly. When you receive any mailing from a creditor, look over every inch of every slip of included paper. You have heard of fine print. Do not assume that the fine print will be easy to find. Frankly, assume nothing.

Consumers who carry a balance will have to shop around for lower rates, perhaps in exchange for paying an annual fee in order to avoid high interest rates. Cardholders who pay their balances in full each month should not be affected. There is only so much interest that can be charged on purchases that are seventeen days old. To compare rates on new card offers, even preapproval offers, use sites like CreditCards.com, CardRatings.com or CardTrak.com. The only way to avoid interest charges upon disappearance of grace periods would be to stop using credit cards altogether or make sure credit card payments are on time and you have plenty of available balance on your card. In fact, experts advise that you keep half of your card balance unused because future creditors will not be inclined to think you are overextending your finances or living beyond your means.

If you have a low APR offer right now, do everything right and make no mistakes. Send payments in on time and do not do anything to trigger a penalty rate such as exceeding your credit limit. If you can acquire internet access via an SSL secured website, do it. It allows convenience and reduces mistakes. This author prefers internet access to credit accounts and has never had one problem.

If you have any significant miles, points or cash back and worry that your card may scale back its program, it may be smart to redeem your rewards now while there is still such a thing as a free lunch. (My apologies, Mr. President, but you made it the best cliché to use at that moment.)

The Senate passed a bill today to overhaul the way credit card companies work and how they interact with their customers. The measure passed the Senate yesterday at a 90-5 vote. It is expected to quickly pass through the House of Representatives and be on the President’s desk by the end of the week.

If enacted into law, credit card companies will have to change the way it does business, and many of the “shady” practices will have to end.

If the bill is enacted, some of the biggest issues that the credit card companies will have to begin allowing customers to pay their bills online, and even on the phone, for no extra fees. This has always been a big turn off for me. In my earlier years at college, I was the bad kind of customer that would pay the minimum balance when I couldn’t afford to pay more. My minimum balance was $15 all those years ago. I clearly remember this one time when I had to pay my bill over the phone because I had switched bank accounts and it was no longer linked to the account and I had simply forgotten about it. I called to pay the bill and the fee was $15. So, it cost the same amount to pay the bill over the phone as it did to pay the minimum balance. I have since, not used the pay by phone “feature.”

There is a bill set to take effect July 2010, but the new bill would cause changes much sooner.
Seeing as how July 2010 is so far away, that would give the credit card companies a lot of time to do some damage to customers’ accounts and balances. Until that point, the companies can change APR’s and other fees to even good customers.

When and if this bill goes into effect, the credit card companies will have to give 45 days’ notice to customers for raising interest rates; they will also have to give an explanation as to why the rates were raised.

I have yet to have any experience in that field simply because I am still building my credit history. I only have two “real” credit cards, one from Bank of America and one from Citi (I know, lucky me). Luckily for me, I have been able to fix any issues I’ve had with either card and the cards have been raising my limits and lowering my APR for the last few years.

However, it is quite shady when the companies raise APR’s and/or lower limits just to charge extra fees because they don’t know how to run their business and keep it in the black.

I hope that the government can work together to get this into effect as soon as possible to make sure that the credit card companies stay in check.

Nineteen of the country’s largest banks that were involved in the recent stress tests have shown interest in paying back the funds given to them by the government. Payments from the banks could start as soon as June.

Currently the Federal Reserve is supervising the largest banks. It is requesting additional information from those banks to see if they are, in fact, ready to begin repayment. Under the current rules that oversee the bailout fund, the banks that have received assistance can begin making repayments as long as they can prove to their primary regulator that repaying the government’s money won’t put them in a situation where they could end up in bankruptcy once again. The banks also have to prove that they can replace the funds by raising capital without guarantees from the FDIC.

At this time, the “unnamed source” from the AP hasn’t named any of the institutions that have made the request to pack back their share of the TARP fund. However, another source has claimed that Goldman Sachs and Morgan Stanley have asked to repay the funds to a combined $20 billion.
There were ten banks that needed more capital after the stress tests. The largest of the ten were Citigroup and Bank of America; they have until June 8th to develop a plan to repay the loans and have it approved by regulators.

I’m so glad to hear that there are banks that are looking to repay the loans that they took out from tax payer money. There are so many people out there who believe that the government should have never given those banks the money in the first place, so to see that there are some banks that are looking to go ahead and begin repaying the loans is a pleasant surprise.

When the banks give some of the money back to the government, perhaps the government can use that money to help out the auto industry. While I know that many people still have a serious problem with the government just giving money to the auto industry, at least the money coming from the banks would be money that wouldn’t have to come out of extra bailout money or, worse, the budget. There is, of course, more legislation and regulation that has to deal with billions of dollars being given to anyone in the form of a loan, especially from the government (there are so many strings attached to that money).

Again, if these banks begin paying back the money, perhaps they can replace some of the trust that was lost when the banks were deemed “too large to fail” and began taking the bailout funds. However, they were all still FDIC insured for their customers.

PricewaterhouseCoopers (PWC) in the United Kingdom has said that the current credit crisis has wiped out 1.9 trillion pounds in wealth in the United Kingdom alone. The loss equates to 40,000 pounds lost per person in the UK over the age of 18. Home prices in that country have also fallen by 17% to just over 150,000 pounds on average for a home.

Another company, the Financial Services Authority (FSA) estimates that if home prices were to fall 30 percent from their 2007 highs, 2 million United Kingdom homeowners would fall into negative equity. At the end of December 2008, Lloyds Banking Group estimated that one in every six homeowners in the United Kingdom is already having a problem with negative equity in their homes.

Poor credit situations have led to many people being unable to get credit. Every day it seems there are more credit card and loan applications that are rejected. It is hard to watch families find themselves in the situation where they do have to try to hope that credit cards will help get them to the next month.

When there was so much wealth going around just two years ago, it is hard to see how things ended up the way they are now. The credit crunch has eliminated a lot of desire for unnecessary items. Families are starting to have to find new things to do to entertain themselves. Frugality has become the new “trend.” It seems that the more frugal a family can be, the better prepared they are for whatever may come their way. This is the way it should have been though. There shouldn’t have been as much needless spending. There should never have been people getting into mortgages they knew they couldn’t afford, and on the same note, there should have never been banks falsifying documents to make it seem like those people could afford those homes.

Source

1. The banks are really in survival mode, but they will never admit it.

I recently switched banks. Every single bank I walked into told me they were in good shape. Wow. In an economy that caused some people to commit suicide, every bank in Maryland was in good shape? Amazing! I did a little research and I found out that all but one were lying through their window bars. I started with Wachovia. The account management official told me that Wachovia was in great shape and ahead of the game. (I researched that claim and found out they had recently obtained a bank in the west coast that came with millions of dollars worth of sub prime mortgages and were currently in negotiations with Wells Fargo before collapsing.)

I walked into First Mariner Bank, local to Maryland, and found one teller who was bored out of her mind playing pin-the-tail-on-my-text-messages, so I walked right back out. When I walked into Provident Bank, also local here, there were boxes on desks and I was told they were bought by M&T Bank, also a local bank and sponsor of the Baltimore Ravens. The courtesy Ravens stadium blanket they give you for starting a checking and savings account is folded up in my dresser at home. I was so impressed there I switched my business accounts over too.

2. This is only the beginning of inflated fees.

If you are anything like me, you have gotten more notices than ever from your bank, often included in your statement envelope, about “changes to your account.” Those changes are fees, my friends. The fee you pay for an overdraft is likely at least $35. If you are part of the majority of bank clientele, you are flirting with $40. It is likely that your free account has been changed to “basic”, which secretly comes with fees. Your savings account fee for a low balance has changed from $3 to $5, or, like my last bank, from $11 to $15. (Now you see why I decided to leave.)

3. Interest rates change constantly.

If you are anything like the majority of consumers, the interest rate on your savings account has gone down, and any adjustable rate loan you are paying has adjusted you into poverty. Whether or not you have done anything wrong, you can have impeccible credit and one day receive a notice that your APR has gone from, say, 12% to 27% and your only option is to cancel the card and pay it off at the old rate. (President Obama has begun to rally against unfairly changing rates.)

4. If you’re not a student, your bank doesn’t care.

College campuses are a gold mine for banks. Some students have the option of getting student IDs that double as debit cards, courtesy of bank that is really hoping a few plastic spenders will have a few overdraft fees. Do you spend responsibly? Was your last overdraft 22 years ago when they called it “bouncing a check?” Your bank hates you. You make them a maximum of 3% of the money you put in your savings account and nothing on your checking account because they cannot invest it and have to leave it available to cover checks. You aren’t even worth the free checks anymore.

5. In debt? The courts will not help you.

Have you ever signed an “arbitration agreement?” I signed one a couple of years ago when I took out a small loan. What it does it mean? Well, it means you cannot sue, for any reason. If they raise your rates, charge you early, or do anything, you must see their arbitration mediator that is in their pocket. Even identity theft victims find themselves subject to arbitration agreements that make their situation three times worse than a stolen identity. You can find a lawyer, but you will be reduced comic relief that lightened his day.

6. Your bank is more excited about your trip to London than you are.

If you use a foreign ATM, your bank alone (not counting the foreign bank) will charge you upwards of $7 for a foreign currency transaction and using a competitor’s ATM. Visa and Mastercard charge 1% of the transaction for converting currency. Check and see if any of your cards, for instance, Capital One, waives the foreign currency fee. Also check and see if your bank has an agreement with a foreign bank it has good relations with to waive customary fees.

7. For all the fine print, banks sure leave a lot of things out. Everything you should really know is nowhere to be found.

Banks hand you all sorts of meaningless paperwork with lots of fine print. The Government Accountability Office sent investigators around to many banks to test their information disclosure. One-third of them failed the test, leaving out information altogether or informing the person after ten minutes and with a little prodding. More than half did not disclose information on their websites or brochures. Consumers just have no idea what they are signing up for until two years later when they are at home receiving letters that make them use four-letter words.

8. Your money is better off anywhere else, maybe even under your mattress.

Banks offer savings accounts, CDs, IRAs — all sorts of ways to invest your money. Unfortunately, most savings accounts offer no more than .5% interest. Even in this economy, you can find places as high as 3% to put your money. I wouldn’t mind multiplying my interest by five, would you?

9. When it comes to banks, smaller is better.

I am part of a small bank. After five years with a semi-national bank and a year with a regional bank, I decided that smaller banks were the right way to go due to more personalized service, lower fees, and higher interest rates. I was right. Even though larger, nationalized banks have more convenience and more ATMs to choose from, they make 54% of their revenue from fees while smaller banks make 28%. Also with low overhead, they can offer higher interest rates for interest baring accounts and lower maintenance and problematic fees. Somehow with low fees and higher interest rates, my bank still has enough money to sponsor the Baltimore Ravens — so much so that the Ravens’ stadium is named M&T Bank Stadium.

10. Your online account information is probably inaccurate.

If you are like me, you used your bank card to buy gas, sent two checks out in the mail and deposited a check in your account, all of which are currently pending. With a good online account system, that gas purchase is holding for $1.00 and will only show the true amount when it posts. Let’s say your balance before those transactions is $1,219.48. (I’m making these figures up.) You just bought $45.28 of gas for your Ford Expedition at Exxon. You went to Wal-Mart and bought $62.48 worth of hair care products, office supplies and clothing. You stopped at the post office and sent out a $65.72 cell phone payment and an $800 payment for rent. Before arriving at home, you deposited a $600 check. You just checked your bank information online like you do every couple of days and it said you have $1,218.48 in the bank. You liked how that looked so you bought a $350 Pez dispenser on eBay.

Oops. Your gas held for $1.00 if you’re lucky. If you keep your checkbook accurate, you know that your balance before the deposit, which will probably post last, was $246.00 and you wouldn’t have bought that pez dispenser until the deposit cleared. You will likely overdraw and a $38 fee will come out of that deposit when it posts, leaving you only with $458. It is a good idea to check your online statement, daily if possible, to safeguard yourself from identity theft, but keep your checkbook accurate and spend from that balance, not your online balance.

Last week we saw the most promise in the economy since the recession began. Wall Street totals began to spike over the last two months and everything seems to be in place for a rise. Unfortunately, traders were so cautious that the spike was misleading that they under sold and the Dow Jones industrial average dropped 156 points. The four banks the government said were strong enough to survive a worse economy just turned to Wall Street to sell extra stocks in order to pay the government off, and they are going to trade well, strengthening the financial institutions.

Some analysts believe this is a small retreat after a big run, a good sign in a recovering economy. In fact, a healthy economy jerks up and down the scale a little bit as investors and traders get comfortable again. Despite the mistakes the government has made and the large, failing companies, the economy does seem to getting better. One key point is that as currency loses value and becomes less safe, gold becomes the alternate investment, and prices skyrocket. It is no secret the price of gold hit record highs during this recession. Gold prices are now going down.

If gold can stabilize where it was when the economy was better, life will be beautiful. Watch the gold prices. If gold goes down any further, especially in a constant downward motion, it is time to sell and invest in stocks, because the stock market is rising up the opposite direction. If anyone has invested in gold, now is the time to sell it, because gold is still technically at a record high, whereas the stock market is at record lows. Sell your gold and/or begin investing in the market again. A multitude of buyers and eager activity strengthens the economy, and if you get in on the ground floor, you can ride it up, like the wise investors you are. Bonds are also getting stronger. Keep an eye on both stocks and bonds, especially if you have gold to sell. That’s the way to ride the market back up.

At the same time, economies have always seen high points and gone right back where they were. No recession is finished until the afflicted economy has shown a habit of much higher numbers and job recreation. Right now, we still have an average unemployment of around eight or nine percent. The high point here is that we have been holding a steady unemployment rate and the economy has essentially bottomed out. When the only way to go is up, that is likely what you will do, If the economy does revive soon, it will be in spite of the efforts of Wall Street, corporate America, and even the government.

Director of derivatives investment strategy for WJB Capital Group in New York, Scott Fullman, noted that the Dow has risen about 30 percent since March, about twice as much as the market might do in a full year of strong gains. “To take a break here is healthy,” he said. Enter disagreement from Christian Bendixen, director of technical research at Bay Crest Partners LLC in New York, who said the economy remains troubled beyond what many analysts concede and that he expects the market will tumble again and perhaps breach the lowest levels of early March.

In trying times such as these, America deserves fiscal responsibility and a united society bent on resurrecting the market. America has yet to see either. The government is giving away tax money like it is indispensible, and that is hurting the market. It is likely that the economy would be much more promising without the ‘bailouts’ last year and early this year. Every time a financial bill was passed, the economy was sink lower in anticipation. The greed of the corporations has not helped either. In the words of country music artist John Rich, in his new song, “They’re selling make believe and we don’t buy that here.” When America doesn’t buy rhetoric from the lawmakers and economic “powers-that-be,” the economy suffers. That’s why the economy is still so bad and America is latching onto any glimmer of a reviving stock market, whether it is a sound movement toward prosperity or a candle in the wind.

]]> http://www.thelucrativeinvestor.com/beating-your-head-against-wall/feed/ 0 http://www.thelucrativeinvestor.com/stress-test-finds-that-big/ http://www.thelucrativeinvestor.com/stress-test-finds-that-big/#comments Fri, 08 May 2009 03:32:16 +0000 Jeremy http://www.thelucrativeinvestor.com/?p=1110 Today the government released results from a stress test of the 19 largest banking institutions in the U.S. The majority of the banks have already received money from the $700 billion bailout plan that Congress passed last year. The stress test was meant to find out if the government will need more give the banks more taxpayer dollars to prop them up until the end of the recession. From the AP:

Among the 10 banks that need to raise more capital, Bank of America Corp. needs by far the most — $33.9 billion. Wells Fargo & Co. needs $13.7 billion, GMAC LLC $11.5 billion, Citigroup Inc. $5.5 billion and Morgan Stanley $1.8 billion.

Among the banks that the government did not ask to raise more capital were JPMorgan Chase & Co., brokerage house Goldman Sachs Group Inc., insurer MetLife Inc. and credit card companies Capital One Financial Corp. and American Express Co.

The 19 banks that were tested represent 2/3 of the outstanding loans in the country today.

The government has given the banks that need to raise more capital one month to come up with a plan to raise money on their own or to get money from investors.

The test was meant to help alleviate some uncertainty in the markets and the results were overall good.

According to The New York Times, which cites an executive at the bank, the U.S. government told BofA it needs nearly $34 billion in capital to survive a worsening of the recession. An official announcement of the results of the government’s stress tests of 19 banks is expected after the close of U.S. stock-market trading Thursday.

All indicators are saying that the worst of the recession is over and perhaps the government should make BofA sweat a little before giving the banking giant such a large sum of money (it doesn’t have).

Source

The average home price fell 35% in Phoenix from February 2008 to February 2009 according to the S&P/Case-Shiller 20-city home price index. Phoenix homes are also down 51% from the city’s peak.

The report showed that out of the 20 cities indexed, the average home price fell 18.6% for February 2009 when compared to February 2008, continuing a 31 month consecutive decline.

This came on the heels of Bernanke coming out to say that the economy will turn around by the end of 2009. Well, I hope so. With the way the news is going, it seems like you’ll have to pay someone to take possession of your house by the time we’re finished with the recession rather than getting anything for it.

It is still a good thing to be a home owner, people are just having a hard time getting loans because of tightening credit at banks. It’s a vicious cycle, and today, I am blaming lenders.

This evening Kenneth Lewis was replaced as the chairman of the board of Bank of America. After the company adjourned its annual meeting, it announced the change in management. Shareholders voted 50.3% in favor to split the roles of chairman and CEO. Kenneth Lewis had held both positions before today.

Walter Massey was named the new chairman of Bank of America. He has been a director at the bank since 1998 and is currently a member of BofA’s audit comittee. He also has other distinctions such as president emeritus of Morehouse College in Atlanta, Georgia as well as a firmer director of BankAmerica Corp.

Lewis will still be the president and CEO.

During the first quarter of 2009, Bank of America funded $85 billion in first mortgages, according to a statement from BofA. Of those loans, more than $16 billion went to low- and moderate-income borrowers.

Other businesses gained through the Countrywide purchase will retain their brands, including Balboa Insurance Services and LandSafe, according to the BofA statement.

Countrywide has a long history of making bad decisions so hopefully with the name change, business practices will also be changed (from prior to July 1, 2008 anyway).

The lender has been called one of the lenders that wrecked the economy.

Is Online Banking Really the Way to Go?

Question:

With identity theft as well as bank systems having a hard time surviving in the current economy, is online banking really the most efficient and safe way to go?

Answer:

Banking systems are safe. There are rumors going around the internet that banks are unsafe and aren’t the place you should put your money, but you have to realize that the FDIC has your best interests at heart and unless you carry a balance of over $250,000 in one bank account at a time, you’re fine.

That being said, online banking is also safe as long as you double and triple check the website address before you enter your personal information in the site.

While I know this wasn’t an attempt to grab my bank account information, it was still an attempt to take some of my personal information: I was on MySpace.com and a friend had posted a bulletin about something that had a link in it. The link was to rnyspace.com…Notice the RN makes the “m” in myspace.com…This has to be watched carefully to make sure you aren’t being “phished” for information.

When you’re careful, online banking is safe and efficient.

The FDIC was appointed as a receiver of the bank and tried to find a buyer for it. When it was unable, a separate entity (Deposit Insurance National Bank of Greeley) was created to hold customers’ accounts for 30 days. The move by the FDIC is said to cost $670 million.

In January John Johnson from Johnson Dairy filed for Chapter 11 bankruptcy protection, he was one of the bank’s biggest customers. He claimed that the bank’s loan practices were what sent him into bankruptcy. Of course, bank officials dismissed the claim.

The FDIC insurers all deposits up to $250,000. About $4 million in deposits in the New Frontier bank may exceed the limit and those customers need to call (800) 830-4705 to get more information about their deposits.

The hike is said to affect those who carry a balance and have an interest rate below 10 percent. They can expect their interest rate to climb into the double digits starting with June account statements.

Recently the federal government limited how the credit card companies could raise rates. The problems is that the rule doesn’t take effect until July 2010. Congress is trying to make these rules go into effect sooner, but not in time for the Bank of America increase.

So if you don’t carry a balance or you have an interest rate higher than 10% you should be ok.

The first is a couple in a car looking at a bank giving away toxic assets with a new account:

Next up:

At the same time, he refuses to give out the names of those employees that received the bonuses to begin with. He says that their safety is more important than giving out their names.

Liddy has said that he and AIG has been receiving death threats toward the employees getting the bonuses.

Today at the congressional hearing where he was a witness, he reiterated that he would have never allowed the bonuses be paid out if he was CEO at the time.

In other bailout bonus news a judge has ruled that Merrill Lynch bonus information must be disclosed from Bank of America. Bonuses were paid out to execs of Merrill Lynch days before BofA’s acquisition of the company.

Some of the domestic banks had even received their own share of government bailout money.

Eighty percent of AIG is owned by the U.S. government and the taxpayers. It has received over $170 billion inn bailout money and was one of the firms that was “too large to fail.”

Some of the biggest recipients of the AIG money were Goldman Sachs at $12.9 billion, and three European banks — France’s Societe Generale at $11.9 billion, Germany’s Deutsche Bank at $11.8 billion, and Britain’s Barclays PLC at $8.5 billion. Merrill Lynch, which also is undergoing federal scrutiny of its bonus plans, received $6.8 billion as of Dec. 31.

The money went to banks to cover their losses on complex mortgage investments, as well as for collateral needed for other transactions.

Other banks receiving between $1 billion and $3 billion from AIG’s securities lending unit include Citigroup Inc., Switzerland’s UBS AG and Morgan Stanley.

Source