This one really gets me fired up: the conservatives — the same ones who have had the presidency from 2001 to 2008 and the Congress from 1994 to 2006, when most bad lending happened — are blamed a 1977 anti-discrmination law for getting us into the financial mess that now requires a $700 billion bailout. They’ve also desperately blamed Fannie Mae, Freddie Mac, and immigrants for getting us into this mess. Media Matters has a terrific page collecting the TV clips, radio clips, and columns where these bogus claims were made.
A couple of things come to mind. First is the sheer boldness of the false claims of the conservatives on this one. Hereare two great rebuttals on why CRA has nothing to do with our current problems, as well as additional background. But to summarize: first, CRA has been in place since 1977, and most bad loans weren’t made until the late 90s and this decade. So somehow it took CRA 30 years to totally push us over the edge into needing a $700 billion bailout. Second, the obvious point is that CRA only covers depository institutions — aka banks and thrifts — and does not cover nonbank mortgage companies. During the height of the subprime years, it is estimated that nonbanks — not covered by CRA — made 75 percent of subprime loans made. Nice try.
The next thing that comes to mind is how forceful conservatives have been in making the case. This viral video that blames CRA, impressive for all the production and effort that went into it — had nearly half a million views. (I could spent several blog posts pointing out all the false claims in it.) And a Wall Street Journal op-ed by Russell Roberts, a George Mason professor, uses some pretty flimsy facts to make the case against CRA, Fannie and Freddie. Although its laughable that Roberts, in his own blog, says that the case is still “a work in progress” to see if the case is “sturdy or just suggestive.”
This terrific video rebuttal against the conservatives from the op-ed page of the Detroit Free Press finally leaves you feeling justified.
Yesterday was a beautiful day in the DC area here, so I went canvassing for my favorite presidential candidate with a friend in Manassas, Virginia. The town of Manassas could conceivably be flipped to blue in a state that has been polling more blue every week. The enthusiasm was very palpable by the 60+ volunteers that showed up to the campaign office, and a supporter’s van in the parking lot with a high quality paint job with the candidate’s slogans, logos, and taglines.
Anyways, towards the end of my four-hour route going door-to-door, I overheard a woman sitting the fron porch of her apartment, complaining to someone on the phone about her son’s credit card company who had suddenly raised their rates. I thought that this was the ultimate fortuitious situation, given my presence with a knowledge of credit card debt and my long day of making the case for my candidate. When I approached her she was still on the phone so I just pointed at my campaign material and smiled. But I didn’t get the reception I’d hoped for: she pointed out the sign down in the courtyard that said no solicitors and told me to get out before someone called management. Oh well.
In an earlier job of mine, I was in charge of collecting all the credit card terms and conditions from the banks with the largest credit card loan portfolios. But with so many institutions failing and consolidating in this Wall Street crisis, its been funny to see how their websites have changed to deal with this. Washington Mutual, which was sold to JPMorgan Chase in a deal brokered by the FDIC, now has a image on www.wamu.com saying “Welcome to JPMorgan Chase,” which links to a press release boasting the strengths of JPMorgan. I thought the same might be the case with Wachovia, where I recently closed a checking account, but www.wachovia.com pretty much looks the same except for a blurb saying “Wachovia announces bank subsidiary divestitures to Citigroup” with a similar link to a press release.
Altogether, the banks seem pretty reassuring that regular people’s assets are safe, which of course they are federally-insured by the FDIC for accounts up to $100,000.
Also what I missed writing about during my hiatus: the nerdy wonk inside me got excited any time a politician mentioned rising credit card debt in a speech during the Republican and Democratic national conventions. To my informal count, Former President Clinton and Senator Obama both mentioned rising credit card debt.
What I’ve thought was most poignant is how Obama lists credit card payments among the many mounting economic pressures that families are facing today. See this ad that came out right after the bailout of Fannie and Freddie (wow, that seemed like a long time ago). From the ad:
It’s hard to pay for gas and groceries, and if you put it on a credit card, they probably raised your rate.
Instead of bringing this blog out of the mothballs, as I’ve done just a couple of hours ago, I seriously considered changing it to a blog called “credit card idiot” and doing all kinds of ridiculous things with all of the credit card solicitations I have received at my house. These included creating an actual house of cards with all the sample cards, wallpapering my walls with all of the junk mail papers, or calling the customer service numbers and acting like a total idiot and then recording myself and posting it on the blog. While these all seemed like great uses of my time, I for some reason never got around to it, although I still do have an enormous stack of solicitations on a shelf next to my desk.
Short of these noble goals, I’m forced to blog about some of the idiotic things other people have done with some of the 6 billion credit card solicitations sent out every year. Here’s one of my favorities, via nbcsandiego.com:
SAN DIEGO — A pug in Northern California would have purchased his doggie treats with plastic after being issued a credit card by mail.
The dog, named Clifford, lives with his owner in Livermore, Calif., in the San Francisco Bay Area. Clifford’s owner, Steve Borba, said he was tired of getting spam e-mails, so he signed up for an e-mail account using the name Clifford J. Dog. Eventually, a pre-approved credit card application arrived addressed to Clifford J. Dog, and Borba sent it in as a joke.
“It asked for his mother’s name. I put ‘Pugsy Malone.’ When it asked for a Social Security number, I put nine zeroes, and I even put that this was for a dog and not to send a credit card,” Borba said.
The credit card company issued Clifford a card despite the obvious warning on the application, Borba said. After the card arrived, Borba alerted the company of the error and the card was deactivated.
Borba said that Clifford never got to use his credit line.
Check out the new videos from Americans for Fairness in Lending, who interview former bank employees who pushed their customers into piling on more debt. They are very well done and very effective — unfortunately I can’t post them here because my html editor isn’t cooperating.
Last week I saw their story plugged on the front page of cnn.com, but unfortunately didn’t grab the link.
In the time that my blog was sleeping, there’s been some very serious action on the Credit Cardholders Bill of Rights, which has now become the only bill on credit cards to ever pass either chamber of Congress.
When Democrats took control of Congress in 2006, Rep. Carolyn Maloney of New York, the Chair of the Subcomittee on Financial Institutions and Consumer Credit, started a nearly two-year-long process that culminated in the passage of her Credit Cardholders Bill of Rights in the House last week. After four hearings and numerous revisions, the bill that passed the House last week was strong and realistic.
The “Credit Card Bill of Rights Act” requires credit card companies to stop:
- Applying unfair interest rate hikes retroactively to balances incurred under the old rate;
- Assessing hidden and unjustified interest charges on balances already paid off;
- Piling on the debt that consumers owe by requiring them to pay off balances with lower
interest rates before those with higher rates; and
- Charging late fees even though consumers mail their payments seven days in advance of
the due date.
Unfortunately, the Senate won’t be able to take up this bill. They were supposed to be done with business for the year by this time, but are sticking around in town for the bailout bill, of course. But regardless of the Senate, the House’s passage of the bill is a significant blow to the industry, which has successfully beaten back bills for years. And moreover, the House’s passage puts pressure on the Federal Reserve — which has a similar although weaker proposal pending on credit cards — not to weaken their proposal before publishing a final rule later this year.
Well, I’m just getting back in the saddle of walletwatch, and of course the big issue in banking — and in all news, of course — is the $700 billion bailout plan of Wall Street. Of course, the bill just barely failed earlier today. (I’m officially with those who declare John Boehner and his Republican colleagues in the House the “Caucus of Crybabies,” claiming that a little speech by Nancy Pelosi made them not want to vote for the bailout. But I digress.) During the negotiations of the bill over the past 11 days, it has been hotly debated as to whether bad credit card debt, bad car loans, and other types of debt ought to be among the bad assets that lenders can discharge.
Myself being someone who agreed with those saying that escalating defaults on credit card debt could be the next subprime disaster, I initially assumed that bad credit card debt ought to be eligible to be bailed out. However, a Moody’s report that I received from a friend with a subscription changed my mind. Securitized credit card debt — despite the fact that defaults are at their highest amount since the new bankruptcy law went into effect at the end of 2005 — are still a safe bet. It is home mortgages, in fact, that are still front and center in this crisis. The latest figures from the American Bankers Association show that one in 11 mortgages is delinquent or in foreclosure. I’d say that’s a pretty serious problem.
I’ve been taking a little time off from walletwatch to re-think its purpose, as well as read some other blogs to gather tips and ideas. Check out my updated “About” section for a little bit more on the direction I’m hoping to take walletwatch in.
Wallet Watch promotes policy solutions to make basic financial services — checking accounts and credit cards — safer and more understandable products, so that Americans can make better decisions about where they access credit and reduce their overall indebtedness. More >>
