All the news points to another dismal week in the markets. Yahoo is going to tell Microsoft to get bent, Hugo Chavez is telling Bush’s oil buddies to get bent, and Asian and European markets are in the process of continuing to get bent.
The only good news is that it’s one of those weeks without another major economic index report coming out showing just how bad things are getting bent right now.
Unfortunately there’s still plenty of bad news, especially for banks.
In the most blatant indicator that banks are in real financial trouble right now, they have been jacking up fees and credit card rates even as the Fed is cutting rates.
The Federal Reserve’s dramatic rate cuts were expected to make it cheaper for consumers to use credit cards. But credit card interest rates remain high and in many cases have even climbed.
Bruised by a rise in foreclosures, banks have been reluctant to lower rates for cardholders who have missed payments or had their credit scores slip, analysts and industry watchdogs said. Yet even some cardholders who pay on time have not benefited from the Federal Reserve’s recent actions, as banks raise rates and fees to make up for losses in their mortgage departments, analysts said.
“Not everyone is going to get a rate decrease,” said Edmund Mierzwinski, consumer program director for the U.S. Public Interest Research Group, a Washington-based consumer advocacy organization. “People presume that because the Fed lowers rates, the banks will.”
The increases have perplexed customers such as Richard Davis, an insurance agent who lives in Fairfax County who said the annual percentage rate on his Chase Business Visa card went from 8 percent to 24 percent in December, three months after the Fed’s first rate cut. “That just floored me,” he said.
You can thank the latest bankruptcy bill for this. Congress is of course making noises about “looking into this practice” just like they have with everything else they have promised to do. I wouldn’t hold your breath waiting for that one.
Having been burned by their own greed, the banks are going to get their money back by taking it out on an already strapped US consumer by charging usurious rates, slowing down the ecomomy even more as they pocket the fed rate discount and pass along even more of the cost to you. On top of that, they’re jacking up ATM fees to $3 a transaction. Nice to know taking out ten dollars at an ATM could run you five or six bucks now, huh? 50%+ fees for actually using your money. You think the banks are getting desperate yet?
Financials are such good corporate citizens.
And as I’ve said, it’s not just US banks that are covered in the smell of failure and flop sweat.
Societe Generale, the French bank reeling from a rogue trading scandal, launched a rights issue at a steep discount on Monday, aiming to raise 5.5 billion euros ($7.97 billion) to bolster its balance sheet.
The one for four rights issue at 47.50 euros per share is 38.9 percent below Friday’s closing price and dilutes the share capital by some 20 percent. The bank’s shares fell 6 percent to 73 euros.
SocGen revealed plans for the capital increase on Jan. 24 when it unveiled 4.9 billion euros of rogue trading losses.
Jerome Kerviel, the trader at the heart of the scandal, was jailed on Friday.
The French bank’s losses related to the U.S. subprime crisis totaled 2.6 billion euros, including 600 million in write-downs that were not previously detailed.
The cash call discount is steeper than some market participants expected, with fund managers reported last week to be seeking a discount up to 30 percent.
Fire sale prices on one of France’s largest banks! Get it while it’s hot! When in doubt, create something out of nothing, worth less than nothing. Get taken to the cleaners for several billion? No problem…just issue more paper that purports to be worth something.
Works for the US Federal Reserve and money, after all.
But hey, our leading financial experts here say everything will be fine in time for the election.
Before you can say “Barack Obama is president of the United States,” the economy will be growing faster again.
That forecast is based on the rise in the five-year Treasury yield from its lowest level relative to two- and 10- year notes since 2001. The last two times that happened was during the recessions of 1990 and 2001, and the economy began to expand within nine months.
“We’re actually starting to see tell-tale signs by the market that it expects the economy to be in recovery in six to nine months,” said James Caron, head of U.S. interest-rate strategy in New York at Morgan Stanley. The five-year note “tends to be the most forward-looking point on the curve,” said Caron, whose firm is one of the 20 primary dealers of U.S. government securities that trade with the Federal Reserve.
If past is prologue, then the five-year note’s yield indicates the economy will be on the mend by the Nov. 4 general election. Whoever wins the White House may have Fed Chairman Ben S. Bernanke to thank for cutting interest rates at the fastest pace in almost two decades and President George W. Bush and Congress for a proposed $168 billion stimulus package.
Yep, I’m sure four years from now, whoever is President will be thanking Bush and Bernanke for this economy. This recession is just like all the others, short, painful, but ultimately not a problem. Right?
I mean c’mon, Bush says there’s no recession and after all he’s been completely honest with the American people. It’s not like nearly everything out of the man’s mouth has been a lie or anything. Certainly not on anything as important as Iraq, Iran, the Warren Terrah, torture, wiretapping Americans, or anything else like that.
So surely we should believe him now when he says everything’s fine with the economy.
Willing to bet your job, your home, your family and your financial freedom on that statement?
We already have.
