ANOTHER DRAG ON THE ECONOMY?? AN UNTOLD STORY. The Loss of Consumer Credit.

Lenn, we have a second on a rental property, they froze the account even though our credit is excellant (we never used any of the funds). We know of a couple folks whose equity lines have been frozen, also good credit standing. Kinda PO'd that losers get money, citizens do not. Shoot, you better have ar least a 720 score nowadays...

All the more reason to learn to live within your means and have savings....

Great conversation here.  It's important that we talk these things out.  The solution comes in the understanding- there hasn't been a spotlight on clarity for years.

Interesting dialogue on Cartus and USAA's credit check and background check requirements.  I worked for Cartus as a relocation specialist back in 2001 when they had gone thru two mergers (PHH Home Equity and the other one escapes me at the moment).  They were Cendant in 2001.  They didn't do background or credit checks then...but you know, they are more corporate now than they ever were- and corporate America feeds off perception.

They did still want your 35% referral fee though:-)

In 2007, Wall Street's five biggest firms - Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley - paid a record $39 billion in bonuses to themselves.

That's $10 billion more than the $29 billion loan taxpayers are making to J.P. Morgan to save Bear Stearns.

Those 2007 bonuses were paid even though the shareholders in those firms last year collectively lost about $74 billion in stock declines - their worst year since 2002.

We are all preaching to te choir here. We need to call our elected official or e-mail them our post and comments. I call mine then I post. I even have forward links to him. I told him he wanted to see the pulse of America he needs to join A/R. This whole thing was avoidable with just simple guidelines in place or leaving the ones that we had. The worst part is they ( congress ) doesn't care and we don't have time to voice our opinion and it is going to get a lot worse.

Lenn,

Hopefully, this will breed a new generation of responsible consumers...who operate within a budget...and use resources thriftily and carefully...and not impulsively!!! Thanks,   Fran

Lenn,

That's the irony of this bailout plan now being worked on in Washington that those who royally messed up the finance market are being helped become whole again. Fortunately the original plan met enough opposition so that the new one should balance things out better.

Lenn,

EXCELLENT ARTICLE. We're so glad you touched on this. This can't be more true, sadly. 

latest news = Wachovia is looking for buyers... Things are definetely getting worse. 

Protect your assets, don't invest in online markets and instead move them into treasuries or gold.

Be careful out there folks, this is a dangerous time.

Lenn - thank you for again taking the time to point out the obvious. I just think that the old saying ' buy new and wear it out...pay with cash or do without.........has a lot of merit that has been overlooked in the last 20 years.

Lenn.... I haven't read any of the comments.... and this is one topic that I decided not to read about at all, until the dust settles. But you usually write interesting posts, so I decided to read yours. Yes, all of this can and will be a negative to the consumer. But I ignore most of what the gov't is trying to do... until they go after the CEOs and CFOs of these large companies that turned a blind eye, just to receive high bonuses, then our gov't is just as corrupt as the individuals that did a lot of this...  cooking the books, misleading Wall Street and investors about many loans that were actually poor performing loans, etc etc....  it's just starting to be uncovered now.

Lenn,

So am I, but I try to compensate for my impulse shopping by my discreet buying habits!!! LOL, Thanks,   Fran

Lenn.... I would have written about it a while back.... but I much prefer writing educational pieces about FHA.... and not about our failing market and or economy. Some people such as yourself are better at this....  but I also want to get business from the consumer. Posts suchs as these and the one that I just wrote,

Stop pointing the finger !!!!! We screwed up !!!!

are usually boring to the average consumer. But I do hope some on Capital Hill read these..... just my opinion and .02.

Lenn, I agree on your comments, but would like to add a couple.  Years ago the banks were running out of customers to lend to.  They had already made money on all the credit cards, personal loans, auto loans,etc.  So they went after mortgages.  They got a willing Congress to change time tested loan standards and the start of this mess began.  They pushed for credit scoring (there was a time without scores) because it allowed them to make loans without standards.  Now the scores are going to be used to punish the consumer even harder.  But once the banks get their pound of flesh, they will revert to the greed that got them and us to this point.  Some bright person will say that a credit score isn't indicative of a persons abilitiy to pay- and it will start all over.

The media has got to stop calling the financial industry rescue bill a "bailout". This has such negative connotations, that I think that this has led to a lot of confusion as to what the bill actually does. I think that the biggest problem in getting this bill passed is that the administration has done a horrible job in marketing the bill to Congress and especially to the public. The public really has no idea as to the effect on their everyday lives that the financial crisis will have. Over 50% of the public have investments in stocks in their 401(k)s, most have most of their net worth tied up in the home equity, and others can not get credit for student loans, etc.

The important thing to understand is the critical lack of capital in the financial system. Without new capital, lenders are unable to extend new credit. This bill is designed to alleviate this log jam by providing fresh capital to make new loans. It is absolutely critical that this bill get passed in some form .

Well said - "work out" vs. "bail out".  I think consumers are being give a lot of wrong information.  I have a client who was in default, got scared and tried to "work it out" while going for a short sale.  We finally had an offer and the banks turned it down as they "were working it out" and now they are giving up and filing Chapter 13.  Their financial advisor/attorney said it was best and they are under the impression the impact will not be what you described above.