There are loan sharks and then there are pay day loan stores. These are the stores that lend money on no credit and charge in 319% interest. If you can’t pay back the original pay day loan, then they renew and in many cases continue to loan money which ends up putting the customer in a trap that they will never escape.

Now, you can add banks to that pay day loan category. Banks such as Wells Fargo, Fifth Third Bancorp, and US Bancorp are already running a pay day loan program. Of course they certainly don’t call it that. Here is how it works – You can take out a short-term loan for 30 days. They charge $10 per $100 borrowed. That is the equivalent of 120% interest. The Wells Fargo spokeswoman says, “the advance is less expensive than a pay day loan.” So, in other words, it is OK to charge a fee that works out to around 120% in interest. The average pay day loan is $15 per $100. Wow! It looks like Wells Fargo is doing the customers a favor.

So, why are they going this route? Federal regulators finally cracked down on the abusive business of bank overdraft fees. This is the program where they give the customer the ability to continue use a debit card even though they are debiting more than is in the account. A bank customer could have nothing in his or her account, use the debit card 7 times in a day and have 100’s of dollars in fees because they didn’t know they were at a negative balance.

Now, federal regulators say that banks will have to give the customer the ability to opt into the program rather than just abusing them. This could be a loss of 15 to 20 billion dollars in revenue. Really? We should feel sorry for a banking industry that has used abusive means to make money. Just like the credit card industry, these banks will turn to different methods to abuse consumers. Now they are going to be pay day loan sharks. Sure 120% is lower than the 391% effective interest rate for pay day loans; however, it is still abusive. Banks are just going to provide another way for customers to get themselves into a problem.

Don’t worry – it will take regulators around 5 years or so until they deem this abusive then they will clamp down on the banking industry once again. It is amazing that the very people that are suppose to protect consumers from abusive consumer practices will allow these obvious abuses to be practiced for years before doing something about it. They allowed this practice of overdraft fees to go on for years.

Tags: Debt, Fees, interest rates, loan

John Mauldin’s Frontline Thoughts is a must read for everyone. It is some of the best investment writing available and it is free. You can sign up at www.frontlinethoughts.com. Look at what he had to write about the FDIC in his latest newsletter. This should be no surprise. The FDIC is just not set up to take the magnitude of bank failures that we could face.

From John’s Letter: A Hole in the FDIC

And speaking of holes, let’s look at a huge one that is looming at the FDIC. Institutional Risk Analytics (IRA) is maybe the premier bank-analyst service in the country. They charge over six figures for their flagship service. A good friend and Maine fishing buddy Chris Whalen runs the show and was kind enough to send me some of his new data, which they have not yet released to the public. You get it here first. (www.institutionalriskanalytics.com)

IRA takes the data from the FDIC and crunches it with their own set of risk parameters. While the FDIC has a little over 400 banks on its current “watch” list, IRA gives 2,256 banks an “F.” They project that over 1,000 banks will either fold or be taken over during the current cycle. To date in 2009, a total of 92 banks have failed across the country, compared with 25 for all of 2008, according to the FDIC there are 900 more to go. Ouch.

How much money are we talking about? The banks rated “F” have total insured assets of $4.46 trillion. So far in this cycle banks that have been taken over by the FDIC are showing losses of 25%!

Turning to a note from IRA: “An important point in the analysis is that estimated losses for failed bank resolutions by the FDIC are running around a quarter of failed bank assets, a level much higher than between 1980 and 1995, when failures cost an average of 11 percent. Our firm’s long-held view of the likely loss rate peak for the US banks in this credit cycle is 2 times 1990’s loss rates or, as noted by the IMF, around 4 percent of total loans. Since total loans and leases held by all FDIC-insured banks was some $7.7 trillion as of Q2 2009, the IMF estimate implies a cumulative loss of over $300 billion.

“If you start with the internal assumptions used by our firm that roughly half of the banks currently rated “F” or some 1,000 banks will fail and/or be merged with another institution and that the loss to the FDIC bank insurance fund will be approximately 20-25% of total assets, then the cost of these resolutions to the FDIC through the full credit downturn could be in excess of $400-500 billion. Keep in mind that in making this alarming estimate we ignore other banks currently in ratings strata above “F” and that some of these institutions may indeed fail as well. Also, our overall “worst case” or maximum probable loss (”MPL”) for large US banks above $10 billion in assets is $800 billion through the current credit cycle.”

Tags: bank failures, Bob Brooks, Deceptive Money, FDIC, IRA, Prudent Money, risk parameters

Well it appears that Citigroup is having a tough time keeping their word to Congress. Over the past few years, Congress has done a lot of talking about credit card reform with one of the focuses of eliminating the universal default clause. This is the clause that every consumer signs off on, allowing the credit card company to change the terms and conditions, interest rates, etc just because they want to do so.

In 2007 as Congress was talking about credit card reform, Citigroup promised that they would not raise rates on any cardholder as long as they were in good standing.
Last November, Citigroup went back on its word and started raising fees on customers in good standing. The notice that they sent out said the following:

If the customer had not enjoyed a rate increase in two years, he or she could expect to enjoy one in January. No, I cannot make this stuff up!
So why would they go back on their word? Company spokesman told the New York Times that the business environment was tough and hurting bank profits. As a result, they were forced to raise rates.

This is an unfortunate trend that we are seeing all across the credit card industry. However, not all companies are utilizing the universal default clause. If this happens to you, take these action steps:

1) As a general rule of thumb, be paying very close attention to your statements. The credit card industry has at least until July 2010 to change anything it wants on your credit card account. Make sure that you stay aware. They don’t send out a lot of fan fair announcing these changes.

2) If your rates go up, check your credit score. If your credit score is in the 700’s, find some other company and transfer the balance to a lower rate.

3) If your credit score is not very good, call the credit card company and aggressively find out what has to be done to get interest rates lowered. When I say be aggressive, that means to be polite, persistent, and determined. If you don’t get a good answer, call back and or ask to talk to a supervisor. It is hit or miss and sometimes depends on the supervisor and/or the credit card company.

4) Don’t close the account. Sometimes you get the option to do so. Closing accounts has no benefit and can lower your credit score.

5) Don’t claim that you are being treated unfairly and just stop paying based on principle. This is the worst thing that you can do. By not paying, you will create a whole set of problems. Remember when you sign a credit card application, you just signed away the option to be treated fairly.

Tags: Bob Brooks, citigroup, Congress, credit card company, credit card reform, Credit Score, Deceptive Money, Prudent Money

New Stock Market Alert – Price Level Alert

OK, let’s see if the CZAR system really works.  Remember there is a CZAR appointed by our Government for everything.  The latest and maybe my personal favorite is the Salary CZAR, who dictates the executive level pay for anyone receiving money from the Government.  Mr. Salary CZAR, let’s see what you are made of.

It is reported that Citigroup plans to raise workers’ base salaries by as much as 50% this year to offset those poor small pitiful bonuses.   I do feel so sorry for those employees.  Those mean old politicians would not let them take billions of dollars in tax payer money and give bonuses at the time.  So, what is a company to do?  Give the bonuses through increased salary. 

Goldman Sachs is on pace to pay out record level bonuses.  Let me say it another way.  Goldman Sachs, former TARP recipient, who needed the money, is going to pay THE MOST money in bonuses to employees than it ever has before.  Even in the middle of a financial crisis, these people are living large.  Don’t forget that Goldman is always protected, since it seems like the prerequisite for being appointed to a cabinet position is being a former executive of Goldman.   

Nevermind that the Government has conveniently arranged it so that these banks can create profits by hiding losses in their accounting systems.  No, those problems didn’t just go away.  They are hidden for later.  If you have a problem, don’t take the loss and just hide it.  I wish that I could take my checkbook and add 7 zeros to the last number. 

It wasn’t even 3 months ago that Citigroup was on the verge of going under.  Now, they are increasing executive pay.  Oh, and through “creative accounting” they are now profitable.

Yes, these companies represent the greed and the aggressive sales and marketing that helped create our unemployment problem, our foreclosure problem, the global recession, the increase in taxes that is coming to pay for all of this, the mortgage future of the next 3 generations, etc… 

So, Mr. Salary CZAR, what gives?  If (when) Goldman Sachs needs help from the government again, will you make them give those bonuses back?  I am still having a little trouble with the Citigroup deal.  It was my understanding that our money is still funding their operations.  I want a little socialism and I want it now.  You can’t practice capitalism when it is convenient and it helps the Wall Street boys who put the politicians in office. 

There is no doubt about it!  Something stinks!!  The politicians are getting away with murder while the American people watch.  I don’t know why I am getting so bent out of shape.  I need to do my part.  I don’t mind helping to fund the lifestyles of these executives.  After all, President Obama said that we all need to sacrifice.

Tags: Bob Brooks, bonusus, citigroup, CZAR, Deceptive Money, financial crisis, Goldman Sachs, Government, increased salary, politicians, President Obama, profit, Prudent Money, Salary CZAR, TARP, Taxpayer Money, Unemployment

New Deceptive Money Posting – Bank of America charging $1 per debit?

New Prudent Money Outlook – The One Reason this Bear Market Is not Over

OK, I typically don’t reproduce e-mails.  However, I really found this to be funny.   I think that we can all use some humor.  Full disclaimer – I did not write or come up with this list and have no idea who created it.  

The Top Twelve Indicators that the Economy is Bad  

12.   CEO’s are now playing miniature golf. 
11.   I got a pre-declined credit card in the mail. 
10.   I went to buy a toaster oven and they gave me a bank.
  9.   Hot wheels and Matchbox car companies are now trading higher than GM in the stock market. 
  8.   Obama met with small businesses -  GE, Pfizer, Chrysler, Citigroup and GM, to discuss the Stimulus Package. 
  7.   McDonalds is selling the 1/4 ouncer. 
  6.   People in Beverly Hills fired their nannies and are learning their children’s names. 
  5.   The most highly-paid job is now jury duty. 
  4.   People in Africa are donating money to Americans. Mothers in Ethiopia are telling their kids, “finish your plate; do you know how many kids are starving in America?”
  3.   Motel Six won’t leave the lights on. 
  2.   The Mafia is laying off judges. 

And my favorite indicator of all. 

  1. If the bank returns your check marked as “insufficient funds,” you have to call them and ask if they meant you or them.

Tags: Bad Economy, Bank of America, bear market, Bob Brooks, Chrysler, citigroup, credit card, Deceptive Money, GE, GM, Pfizer, Prudent Money, Prudent Money Outlook, Stimulus package

Get ready for fees and more fees.  The banking industry is doing their part in response to the latest credit card legislation that limits their ability to raise their revenue through excessive interest rate increases.  Well, it sort of limits their ability.  Remember, this legislation is far from perfect and does give them some wiggle room. 

Unfortunately, the law does not adequately address fees.   So, this is where banks are going to get their new revenue stream.  In June, led by Bank of America, many of the banks are going to be raising various fees based on account type.   For right now, it looks like overdraft fees could be one of the benefits of an increase in fee.   Overdraft fees have always been big revenue producers for banks.  Overdraft fees represent 74% of banks’ service charges on deposit accounts.  

The debit card is one of the biggest reasons that overdraft fees have become so prevalent.  This is precisely why I don’t like debit cards.  I have always believed that banks rely on human nature to take over, mistakes to be made, and overdraft fees to be charged because of error with the debit cards.   These cards make it easy to make mistakes.  Banks became very smart by giving people overdraft protection. This bank benefit will allow you to go ahead and make a charge on your debit card even though your account might be overdrawn.   So, you could use your debit card multiple times in a day, be in overdraft, and not even know it.  Meanwhile, that Venti Starbucks that typically costs you $2.11 just cost you an extra $30 due to the additional overdraft fee. 

I have heard stories where a consumer would rack up as much as $300 in a single day in overdraft charges.    A recent study of 462 banks by the FDIC found that three quarters of those institutions automatically enrolled customers in fee-based overdraft protection programs, in some cases not giving them the opportunity to cancel.   This is just more abuse that Congress had the opportunity to address and did not do so.  Once again, they are not going to take everything away from their campaign contributors, the banking system.

Don’t feel too sorry for the credit card companies and this latest legislation.  As I said earlier, they will replace lost revenue with new fees.  A recent study showed that only 85% of the banks charge an annual fee.  Well, that is about to change.    If you look at the top 10 banks, they have roughly 540 million credit cards in circulation.  Let’s assume that 85% of them (460 million of those cards) don’t charge annual fees.  A traditional charge of $75 a year would generate additional revenue of roughly $35 billion in new fees each year for the top 10 banks.   It is estimated before any new fee increases that fees are likely to cost consumers $39 billion this year.  

Make sure that you stay informed on changes to the fee structures of your accounts. If they haven’t already started showing up, they are coming.

Tags: Bank of America, banking industry, Bob Brooks, debit cards, Deceptive Money, FDIC, Fees, overdraft fees, Prudent Money

“Never tell anybody outside the family what you’re thinking again.”

“Today I settled all family business, so don’t tell me you’re innocent, Carlo.”

- Don Corleone, The Godfather

The headlines of the Wall Street Journal get better and better.  Let’s start with the latest addition to Obama’s “family.”  The Compensation Czar.  Yes, we now have someone who is going to determine the executive pay of anyone who took money from the “family.”  Kenneth Feinberg will be in charge of setting the pay for 175 top executives.  Do you wonder why every bank and financial institution that took money from the “family” is desperately trying to give it back? 

Do you recall that Secretary Paulson forced the banks to take the bailout money last year?  They had no choice.  Do you recall that now Secretary of the Treasury Tim Geithner gets to decide who give the money back and who has to stay indebted to the “family”?  Do you see a pattern?

It gets even better.  Today the politicians will be grandstanding on Capital Hill through a line of questioning trying to determine if Bank of America CEO Ken Lewis was pressured (threatened) in any way when trying to get out of the Merrill Lynch deal.   Back in December, Mr. Lewis attempted to walk away from the Merrill deal.  The “family” didn’t like that decision.  Here are some excerpts from the Wall Street Journal Article.

During the December standoff between the big bank and top government officials, Federal Reserve Chairman Ben Bernanke dismissed the pullout threat as a “bargaining chip.”

A Dec. 21 email from Federal Reserve Bank of Richmond President Jeffrey Lacker to Fed employees said Mr. Bernanke “intends to make it even more clear” that if Bank of America kills the Merrill deal, and later needs government assistance, “management is gone.”

Mr. Lewis testified to Mr. Cuomo that the Treasury Secretary at the time, Henry Paulson, pressured him to not disclose details about the government talks, and suggested Mr. Bernanke concurred.

The hearing today was expected to determine if Mr. Lewis was pressured in any way.  He stated exactly what happened. However, we wouldn’t use the word “pressure.”  So, Congress has everything they need.  Conclusion?  Our federal regulators are acting like a bunch of thugs and using pressure to get what they want. 

However, this hearing wasn’t about the advertized intention of determining if federal officials acted appropriately.  By the line of questioning used, the politicians are trying to discredit Mr. Lewis and draw the conclusion that he knew all along the Merrill deal was not a good one.  They are grilling the one who was bullied.  Remember the family always takes care of the family.

Tags: Bank of America, Bob Brooks, Capital Hill, Deceptive Money, Don Corleone, federal regulators, financial institution, government officials, Merrill Lynch, politicians, Prudent Money, Secreatry Paulson, The Compensation CZAR, The Godfather, Treasury Secretary, Treasury Secretary Tim Geithner, Wall Street Journal

The hallmark of this administration is to say one thing and slowly and methodically do another.  President Obama stated that he was against nationalization of the banking system.  However, nationalization is occurring.  Unfortunately, the American people don’t see it.  Nationalization is when the Government takes control of an industry.  They are aiming for the biggest prize, which will be the first step towards true socialism, the banking system.

No, I am not a conspiracy theorist.  I am just watching the administration and what they are doing.   The good thing about the politicians is that old politics are out the door.  They are practicing new politics.  The old way was to do things behind your back. The new way of doing things is politics right in front of you.  It is so very obvious.  Let’s look at the three things they are currently doing.

1)  The Obama Administration does not want banks to pay back TARP money – Ask any banking executive who has taken a loan from Big Brother, and they will tell you that they want out.  Goldman Sachs and JP Morgan can pay back the money.  Secretary Treasurer Geithner says no.   He says that there might be hurdles for the banking system yet to clear. Well, Geithner, if that is the case, then loan them the money back.  As taxpayers we want to be paid back.  The real reason is that the Government loses control without the TARP money. With the banks having the TARP money, they retain a degree of control. Of course they do not want them to pay back the money.

2)  The Government is stress testing the largest banks and then releasing the data – This plan is just about as ridiculous as the first point.  First, the FDIC stress tests the banks on a monthly basis.  There is no need for the Government to do so.   Second, even if they think that is necessary, releasing the information of how weak or strong banks are is very risky and could further damage confidence.  The real reason I believe is that they can use the “results” of the bank stress tests to say that nationalization might be needed.  They can point out that things are worse than they thought and the Government might need to step in. 

3)  The Government wants the banks to convert bail-out loans to common stock – Now the Obama Administration says that they have found a way to stop spending taxpayer money.  With this new idea, they will use common stock instead.  This gives the Government control and ownership over the banks through the use of common stocks.  The real reason is that they are using a multi-prong attack on the system to take it over. 

Maybe I am very misguided and I hope that I am. I hope that readers can come back and say I was completely wrong and need my head examined.  It all adds up and doesn’t make sense.  Yes, America, our Government is taking us down the road to socialism.  Nationalization of the banking system is one of the first big moves and the healthcare system will be the next.

So, are we ready to stand up for our rights yet?  Realize that the majority of America sees no problems here.  It is going to take way more than a handful of tea parties to stop this process.

Tags: Banking System, Big brother, Bob Brooks, Deceptive Money, FDIC, Goldman Sacha, Government, JP Morgan, Nationalization, President Obama, Prudent Money, Secretary Treasurer Geithner, socialism, Stress Testing, TARP money

Bank of America announced last week that they would be raising rates on roughly 4 million credit card holders due to the rising delinquencies and tough economic times.  I don’t know who gets picked for the rate increase.  However, I am sure that they have some type of formula that they have designed to pick accounts that will benefit the bank.

Bank of America was the poster child for credit card debt.  They were handing out credit like it was candy.  That was occurring up until probably about 4 months ago.  They especially encourage credit card holders to move money over to them and to hold a balance.  Now they want to penalize those who carry a balance and pay on time.

So, this is where this rubs me the wrong way.  If it were not for you and me, Bank of America might not even exist.  No one really knows in the secret world of the good ol’ boy club how much money Bank of America has taken from the taxpayers.  I suspect that Bank of America has taken an enormous amount.  After all, they have a ton of liability as well as the consequences of buying Merrill Lynch and Countrywide.  Both of those deals had to be a favor to the Government.  Neither deal made any sense for Bank of America.  I am sure that Hank Paulson was doing the old “you take care of me and I will take care of you” deal with Ken Lewis.  So, I would suspect that you and I are really on the hook for billions.

At the same time, Congress wants to crack down on the practices of any company that takes money from the federal Government.  They also want to get rid of credit card abuse.  They especially want to prevent banks and credit card companies from raising rates for any reason like Bank of America is doing.  The federal regulators have already passed laws that would ban this practice.  However, those laws don’t go in effect until July 2010.

So, should Bank of America, who is the recipient of billions of taxpayer dollars, be allowed to raise rates when this practice has already been defined as abusive by the federal Government?  The federal regulators already told credit card companies that they want them to adhere to the new laws even though they don’t have to until July 2010.  Well, I guess everyone in Washington is going to turn their backs as Bank of America socks it to about 4 million people.  Wasn’t it Congress that wanted to ban all of those abusive credit card practices? 

Here are some words from the Honorable Christopher Dodd.

“This is the moment for credit-card reform,” Sen. Dodd said. “We cannot recover if we allow practices to continue that drive so many families deeper and deeper into debt.” 

Well, Politician Dodd, you guys are certainly doing your job.  It would be very easy to say enough is enough and not allow banks and financial services who are taking taxpayer money to continue practicing abusive tactics.  By doing nothing, you are going to allow 4 million families to have their debt costs rise in the coming months.  

What are your thoughts?

Tags: Bank of America, Bob Brooks, Christopher Dodd, Congress, credit card debt, Deceptive Money, federal government, federal regulators, Hank Paulson, interest rate, Ken Lewis, Prudent Money, taxpayers

No denying it, yesterday was a strong day in the stock market.   It was a welcome sight to see considering the market was stuck in what looks like a free fall.  So, what was the reason that was assigned to such a strong day? 

A memo written by the head of Citigroup “leaked” yesterday morning.  It is amazing how these things happen.  What better to stop the free fall of a stock than to leak some unofficial good news.  Prior to the news leaking, you could buy a share of Citigroup and cheeseburger at McDonalds for $2. 

The news was that for the first time since 2007, Citigroup was making a profit during the first two months of the year.  Of course, they left out one little detail that the media seemed to overlook.  That profit was BEFORE any losses were taken into consideration.  Of course, Citigroup conveniently didn’t know what the impact of that loss would be on profits. 

I have an announcement I would like to make.  I have $100,000 in my bank account.  I also have $120,000 worth of expenses that need to be paid for.  That is the equivalent to Citigroup stating they made a profit.  The sad part is that the news sucked in a bunch of investment money as the stock went up 30% plus.  The problems with Citigroup have not changed nor has the potential takeover by the Government.  Any type of nationalization by the Government would potentially wipe out the stock price.

The market put in a great day yesterday because the stock market was due.  That is how markets work.  In a bear market, the stock market doesn’t fall in a straight line.

This is a headline from the Wall Street Journal that you don’t want to see.  It appears that Politician Christopher Dodd is attempting to change a law that would increase the “line of credit” for the FDIC insurance fund from $30 billion to $500 billion.  It wasn’t too long ago that FDIC Head Sheila Bair said that the FDIC fund is in great shape and that there is nothing to worry about. At the end of the week, she is concerned that the fund could become insolvent.  Today, she tells one of the morning shows that they have plenty of money for the year and they just need a “cushion.”  Apparently, someone told her that it was not a good idea to use the word “insolvent” when talking about the FDIC. 

Regardless of her everchanging opinion, she always assures everyone that the FDIC fund is backed by the full faith and credit of the United States Government.  Well, that is reassuring considering we are practically insolvent as a country if it weren’t for the fact that we can print money.

Last week, Ms. Bair announced that they would raise fees on banks in order to fund the depleted FIDC account. Of course, the banking system whined that they couldn’t afford it and it would make things worse.  In steps the Honorable Politician Dodd to prevent his buddies (read – campaign contributors) from having to endure any further hardship.  The Dodd bill would prevent the banks from having to pay for the cost of doing business (increased FDIC expenses for insurance) and put it on the backs of the taxpayer.

At least, this time we are bailing out ourselves by paying for the insurance that is supposed to insure us in the event of a bank failure.

What is more disturbing is that the FDIC has had to deal with 25 bank failures last year and already this year there have been 16 bank failures. 

What if we would have not practiced moral hazard and socialism and just allowed the chips to fall where they may last year?  Well we would have billions of dollars that could be used to take care of Americans in the event a bank failed rather than give the banking and investment industry hundreds of billions of dollars to take care of their losses.  How about making sure that the FDIC was sound and let the system work instead of bailing out these institutions?  As this is illustrating, you can’t become a little pregnant nor a little socialistic.

I bring this up because of the disturbing trend we continue to see.  All of these bail-outs are there to support big business rather than Americans.  Yes, you could argue that the Obama mortgage plan will bail out homeowners.  I think that you will find that the mortgage plan will not help out as many people as advertized.  In fact, out of the $11,000 of incentives the Government is paying per loan, the bigger percentage goes to industry rather than the homeowner.  If you are going to practice socialism, why not help the homeowner more than the industry that helped to create the mess?

Then there is the Dodd bill.  Instead of making banks pay higher fees to help fund the FDIC fund, they are going to force the FDIC fund on the taxpayer.  You have to love these politicians.            

Tags: Dodd Bill, FDIC, Sheila Bair

I am often asked about the best credit cards or the best automobile rates.  With so much conflicting information in the markets it is tough to know the best resource. 

Pentagon Federal Credit Union is one of the greatest resources for credit that I have found.  Incidentally, I do not receive any compensation for recommending them.   This credit union does not play games!

Who is Pentagon Federal Credit Union?  They are the credit union for the United States Pentagon.  If you or anyone in your family (includes extended family) is active or has served in the US Army, US Air Force or Coast Guard, or Reserve, National Guard, or ROTC, then you can join the credit union for free. 

If not, you can join the National Military Family Association for $20 a year.  Either way, you can take advantage of these great rates.

Auto Loans

They are currently offering an interest rate of 3.99% for up to 5 years for new AND pre-owned.  You can refinance a higher rate and really save money. 

Credit Cards

They also have a great Visa credit card program with a balance transfer program that is currently at 5.99%. 

How to Qualify

You obviously need good credit.  They go to Equifax for their credit scoring.  They take that credit score and then apply their own underwriting formula.  I would consider applying with a credit score of 680.  However, that probably is the lowest score for them to consider.  I am using that as a ball park score.  They don’t share their underwriting information.  Anything over 700 should be an excellent fit.  Once again, many factors in addition to the credit score are considered.  You do have to join the credit union before you can apply.

They are very easy to work with in the application process.  The web-site is www.penfed.org.

Tags: Pentagon Federal Credit Union

If you were thrown a lifeline, wouldn’t you be as frugal and responsible with that lifeline as possible?  Well companies that are receiving our taxpayer money just to survive are still showing that they don’t deserve it.

Bank of America just dropped 10 million dollars (estimated – they will not release the actual dollar amount) in sponsorships for the Super Bowl.  Now when you are talking about billions of dollars, $10 million is nothing, right?  Any financial institution that is receiving taxpayer money should not be going about business as usual and spending money throwing parties.  There is no telling what amount of money is being wasted that we can’t see.

Then there is Morgan Stanley.   The 10 billion dollar tax payer money recipient held a three-day conference for clients at the Breakers, a five-star oceanfront resort in Palm Beach, FL.  They say that they make the attendees pay for their airline ticket and their room.  Regardless of how it is spun, this is a complete waste of taxpayer money.  I have been to these types of conferences and they are extremely nice and expensive to host.

Unfortunately, there is one more story to tell you about.  Wells Fargo was planning on a Big Vegus trip in April.  They booked 12 nights at two different casinos.  Nothing wrong with a little gambling with our money.

Will these financial institutions ever learn?  Unfortunately, as long as the Government just hands over taxpayer money, they have no incentive to be responsible.  This is the unintended consequence of bail-outs.  Now we get to watch as the Government wastes over a trillion dollars that apparantly does little to meet the objective of stimulating the economy or creating jobs.

This is a situation that is completely out of control.

Tags: Bank of America, Bob Brooks, Deceptive Money, Prudent Money, Taxpayer Money, Wells Fargo

John Thain, the former CEO of Merrill Lynch, was given his walking papers yesterday by Bank of Ameria CEO Ken Lewis.  Thain was hired at the beginning of 2008 to help clean up the mess that Stanley O’Neal left behind,

So, what was one of the first fiscally responsible actions that he took to turn around a company that was mired in losses?  Well, he did what any prudent CEO would do.  He spent 1.22 million dollars decorating his office.

Yes, I cannot make this stuff up.  According to CNBC, John Thain spent 1.22 million dollars of his company’s money at a time when Merrill Lynch was losing billions.  When you are losing billions, what is a mere 1.22 million dollars, right?

You can get the full list of expenditures on the CNBC website.  

I think that my favorite was the $1,405 he spent on the Parchment Waste Can or maybe the $35,115 that he spent on a commode. 

You don’t have to look further than this story to see what is wrong with Corporate America.

Tags: Bank of America, Bob Brooks, CEO, CNBC, Corporate America, Deceptive Money, John Thain, Ken Lewis, Merrill Lynch, office, Prudent Money, Stanley O'Neal

Well it appears that Citigroup is having a tough time keeping their word to Congress.  Over the past few years, Congress has done a lot of talking about credit card reform with one of the focuses of eliminating the universal default clause. This is the clause that every consumer signs off on, allowing the credit card company to change the terms and conditions, interest rates, etc just because they want to do so.

In 2007 as Congress was talking about credit card reform, Citigroup promised that they would not raise rates on any cardholder as long as they were in good standing.

Last November, Citigroup went back on its word and started raising fees on customers in good standing.  The notice that they sent out said the following:

If the customer had not enjoyed a rate increase in two years, he or she could expect to enjoy one in January.  No, I cannot make this stuff up!

So why would they go back on their word?  Company spokesman told the New York Times that the business environment was tough and hurting bank profits.  As a result, they were forced to raise rates.  

This is an unfortunate trend that we are seeing all across the credit card industry.  However, not all companies are utilizing the universal default clause.  If this happens to you, take these action steps:

1)       As a general rule of thumb, be paying very close attention to your statements.  The credit card industry has at least until July 2010 to change anything it wants on your credit card account.  Make sure that you stay aware.  They don’t send out a lot of fan fair announcing these changes.

2)     If your rates go up, check your credit score.  If your credit score is in the 700’s, find some other company and transfer the balance to a lower rate.

3)     If your credit score is not very good, call the credit card company and aggressively find out what has to be done to get interest rates lowered.  When I say be aggressive, that means to be polite, persistent, and determined. If you don’t get a good answer, call back and or ask to talk to a supervisor.  It is hit or miss and sometimes depends on the supervisor and/or the credit card company.

4)       Don’t close the account.  Sometimes you get the option to do so.  Closing accounts has no benefit and can lower your credit score. 

5)       Don’t claim that you are being treated unfairly and just stop paying based on principle.  This is the worst thing that you can do.  By not paying, you will create a whole set of problems.  Remember when you sign a credit card application, you just signed away the option to be treated fairly.

Tags: Bob Brooks, citigroup, Congress, credit card debt, credit card reform, Credit Score, Deceptive Money, interest rates, Prudent Money