President Obama’s sweeping reforms on the credit card industry should be signed into effect today, enacting consumer protection from predatory lending practices by giant credit card companies such as Chase, Citi, and Bank of America. These companies have argued that in a free market economy they have the right to charge people whatever amount they choose for lending them money, and that interest rates that top out at 23.9% aren’t usury, and late fees equal to 10% of the balance aren’t unreasonable.
This argument despite the fact that usury is illegal, and with the credit reporting system set up to affect everything from mortgages, car rates, even employment opportunities one could make the argument that credit card companies are engaged in a form of RICO. This white collar criminal activity is sanctioned by the business community due to presence of black suits and silk ties, masquerading as a corporate culture.
President Obama’s role as Robin Hood in this particular drama is living up to a campaign promise he made on the trail to the White House, and is part of economic reforms he has enacted while in office. Is it good? For the millions of American’s struggling with high credit card balances, the wording of the bill is weak and ineffective. It affects people on the verge of collapse, but since the Great Recession is almost over, and yes, there is an end in sight, this bill is too little, too late, and won’t save the people who need it most. Those are the millions who have lost jobs and are behind on payments now, people who have had the credit card companies raise their rates to over 20% and doubled the debt with late fees, over balance fees, “we’re going to screw you” fees and more. The bill doesn’t help those people.
The credit card company’s attitude is “those people” didn’t know how to manage their money properly and abused the privilege of using a credit card. There is some merit to that argument. However, faced with paying a credit card bill or buying groceries to feed the family, what person is going to choose to pay the multi-billion dollar corporation over the care of their child?
That’s part of the problem with the credit card companies: they have tried to demonize men and women who haven’t paid their credit card bills back. They have painted this picture of freewheeling party animals running up huge amounts of debt living a lifestyle and trying to skirt the bill. Reality paints a different picture. The majority of people in credit card debt have used the cards as a form of paycheck to cover bills, bloated mortgage payments and even the aforementioned groceries.
Obama is enacting these reforms in an effort to prevent the teetering credit tsunami that is threatening to overwhelm the banking and credit card industry in 2010. It’s almost as if he’s preventing the companies from creating a bigger problem on top of the problem they have created in the first place.
Does it make sense to charge someone fee’s when they can’t afford to pay the bill in the first place? This created money on top of more created money turns into write off’s on the company’s accounting sheets, which in turn offset’s profits, and limits the amount the companies have to pay the government in taxes. Less taxes mean less services to people, so guess who’s getting screwed again. It’s not the corporations or the high salaried executives who are making the decisions to overburden people who can’t pay their bills. It’s the people who can’t pay their bills, credit card holders. They’re going to lose their financial reputation, their ability to borrow cheap money for home, car and maybe even future jobs. And they’re going to lose services in their community like police protection, fire departments, parks, and more.
Obama’s reforms are a great place to start. But here’s where day traders can come in. We’re ready to be robbing hoods (Robin Hood) stealing from greedy corporations and giving back to the poor. (ourselves and the charities we choose to support)
Start by researching which credit card company you want to pillage. Citi, Chase, Bank of America are big targets. I personally think Bank of America is ripe for a good ravishing.
The stock is trading around 11.29 right now, but this company which is a leading lender with tons of toxic debt from the mortgage debacle is also going to be hit hard with defaults on credit cards. 3Q 2009 looks to be the time this wave of bad balances will begin to hit the books, and unless BAC and other credit card companies become proactive in fighting this debt, it’s going to result in another round of consolidations and bank closings.
BAC needs to be shorted down to around $3 per share or less. The simple fact that banks are consolidating to shore up losses and consolidate balance sheets is the only reason CHASE, CITI and others haven’t dipped to Ford and GM levels.
When you’re looking for someone to blame for the recession, it’s easy to paint a target on the American consumer and say it was poor spending practices that led us to this precipice. But America has a consumer based economy and when companies like Bank of America begin penalizing people for spending, they stop spending money. When they tighten lending standards to the point where no one can borrow money, the economy stops. Bank of America is a logjam to this economy’s recovery, and Obama’s credit reform bill doesn’t go far enough.
Perhaps the consumer should begin penalizing the corporations for putting us into this economic quandary? How can we tack fees onto the banks and credit card companies and collect the thousands of dollars in lost productivity and income they have caused for millions of out of work employees? The simple fact is we can’t ever collect that money. Companies like Bank of America have screwed the people yet again. Obama’s reform is working to prevent future screwing over, or at least make the disclosure from the company more pronounced, “Hey, we’re going to screw you now” from the credit card companies.
This is our disclosure. Short credit card company stocks over the next several weeks and bring their prices down. Once you own a stock, write the board of directors and demand resignations. Write letters to your editor, create a stink and stir and drive these stock prices down. Then buy at bargain prices, because these companies are so big, so powerful, they’re not going away. Ride the price up again, cash out your profits and give some to charitable organizations that feed and care for the homeless and displaced. After all, the credit card companies put a lot of new people in that bread line.
