FedUpUSA

Archive for December 17th, 2009

December 16, 2009 “Consortium News” — While posting breathtaking profits in the last two quarters – Wells Fargo’s $3.2 billion, Citigroup’s $3 billion and Chase’s $2.7 billion – U.S. banks have figured out a way to squeeze some extra dollars from those who can least afford it, the unemployed.

Here’s how it works. In the past two years, states have been overwhelmed with unemployment claims. Always eager to serve, America’s banks offered a deal the states couldn’t refuse.

Sign a contract — which won’t cost you a dime — and send us your weekly unemployment funds, the banks said. In return, we’ll issue our VISA or MasterCard debit cards to your laid-off workers, on which we’ll post their benefits electronically.

Thirty states signed on with the usual suspects — Citi, Wells Fargo, JPMorgan Chase, Bank of America — and some smaller ones, too. More states are lining up.

In a stroke, states dropped all their costs for printing and mailing checks. Andrew James, with North Carolina’s Employment Security Commission, told me that in the past year, his state saved a whopping $10 million. During the same time, Nevada saved $800,000, Maryland $400,000 and West Virginia $340,000.

But if the system is good for the states, it’s great for the banks. A February 2009 Associated Press article noted that Missouri’s Central Bank, which won that state’s contract, could reap $6.3 million this year alone.

The banks profit from interest earned on the funds the states deposit with them until the money is posted onto the debit cards. Then there’s the money the banks get from retailers where the unemployed shop with their cards — from 2 percent to 3 percent per transaction.

But such sums are not large enough, it seems. So the banks have figured how to extract more money from the millions of unemployed now using the debit cards. The devil’s in the fees.

Nickel and Diming

The cards can be beneficial to some of the unemployed, like those who otherwise would pay whopping fees to cash checks because they don’t have bank accounts.
LINK HERE

Could the next black/green/dark gray swan be so obvious that it has avoided everyone? Well, except for the deputy governor of the Bank of China, who just gave the world a startling reminder of economics 101, when he said that it is “getting harder for governments to buy United States Treasuries because
the US’s shrinking current-account gap is reducing the supply of dollars
overseas.” Oops.

The funny thing about natural (and economic) systems: they can only be pushed so far before they snap back to default state. With the entire world embarking on an unprecedented spree of domestic bubble blowing to mask the collapse in global GDP, everyone forgot to trade. Zero Hedge has long emphasized that the drop in world trade can only sustain for so long before it brings the current destabilized system back to some form of equilibrium. Because with every country intent on merely printing more of its own currency, whether it is to build bridges or to make the stock of electronic book fads trade at 100x earnings, said countries ran out of non-domestic cash. Alas, this is most critical for the United States, now that Treasury monetization is over, as the US needs to constantly find foreign buyers of its debt to fund unsustainable deficits. Foreign buyers who have US dollars. And according to Shanghai Daily, this could be a big, big problem.

Here is what the BOC’s Zhu Min said earlier:

“The United States cannot force foreign governments to increase their
holdings of Treasuries,” Zhu said, according to an audio recording of
his remarks. “Double the holdings? It is definitely impossible.”

“The
US current account deficit is falling as residents’ savings increase,
so its trade turnover is falling, which means the US is supplying fewer
dollars to the rest of the world,” he added. “The world does not have
so much money to buy more US Treasuries.”

In a nutshell, in printing trillions of assorted securities, the Treasury has soaked up the world’s dollars, which due to US banks not lending, is sitting and collecting dust in the form of bank excess reserves. These excess reserves can not be used to buy Treasuries and MBS as that would be literal monetization (as opposed to the figurative one which is what QE has been). And the world is running out of dollars with which to buy Treasuries.

Does this mean that the “world” will be forced to buy dollars, and thus spike the value of the greenback? Not necessarily:

In a discussion on the global role of the dollar, Zhu told an academic
audience that it was inevitable that the dollar would continue to fall
in value because Washington continued to issue more Treasuries to
finance its deficit spending.

From Bloomberg: ‘Shadow Inventory’ of U.S. Homes Climbs, Report Says

The number of homes that may be in the pipeline for a sale because of foreclosure and delinquency climbed about 55 percent to 1.7 million at the end of September, according to estimates by First American CoreLogic.
…
“While the visible month’s supply has decreased and is beginning to approach more normal levels, adding in the pending supply reveals there is still quite a bit of inventory that will impact the housing market for the next few years,” First American said.

A few points:

Too bad the dissident democrat was unable to convince more of his colleagues in the validity of his vision. The Oregon Democrat summarizies the contra case most succinctly:

“Dr. Bernanke is a dedicated and honorable public servant…however those factors in my mind do not outweigh my concerns on regulation and rebuilding the economy… Dr. Bernanke’s approach helped set our economic house on fire. That fire has destroyed the jobs, the healthcare, the retirement savings, of millions of American working families. Since then Dr. Bernanke has shown himself to be quite adroit with the fire hose, helping to put that fire out. But as we look to the future, and we look beyond the stage of putting the fire out, I think we need to look to leadership that will be adept at rebuilding our economic house.”

We hope that the Senatoral vote will see more party line breaks, in which case we urge other democrats to follow in Sen. Merkley’s footsteps. This is further reinforced by prevailing popular opinion among the American people, of whom only 21% favor the Chairman’s reappointment.

P.S. We will revisit this video many times.

Now here’s an interesting story….

The interesting thing was that even though he hadn’t paid any credit cards in 60-90 days they are all reporting "as agreed" They have cut the lines to the outstanding balance but will not report a 30 day late. I can only assume that the banks C,BAC,Cap1,Wach) are doing this in the hope that a different bag holder will bail them out with either a balance transfer or a cashout refi. I suppose if I was the lender I would do the same thing and hope that a greater fool than I existed.

Now this is a new one…. but it wouldn’t surprise me!

What, honor among thieves?  Naw, who’d be honorable in this circumstance?

If you report it as late nobody will take him on a balance transfer.  But if you don’t, perhaps someone will and they are the bagholder!

What a riot! 

I expected FICOs would become irrelevant as this mess progressed but that’s a twist I had not counted on….. yet among the viper pit it certainly makes sense.

If there is any sort of pattern to this at all the FICO score and indeed the integrity of the entire credit bureau system has just gone straight in the trash can.