Debt Revolution in Progress

Federal Debt Relief System spotted this at CNN Money recently:

While there were some encouraging signs that the credit crisis is not having as devastating an impact as some fear, the slowing economy looms large.

“We’re not seeing anything besides the normal tightening of credit you usually get at the end of an expansion,” said Bill Dunkelberg, chief economist for the National Association of Independent Businesses.

Alan Tonelson, a research fellow at the U.S. Business and Industry Council, which represents smaller and mid-size manufacturers, said that most manufacturers are conservatively managed and have fairly low levels of debt. Tonelson is urging caution on any government bailout, saying banks should not be encouraged to resume their free-lending ways to consumers already overburdened with debt.

Even if businesses aren’t yet impacted by the economy collapse, they are certainly planning for slowing sales as credit to consumers dries up. That could mean fewer orders for goods - and fewer people needed to manufacture, ship, stock and sell those goods.

“It’s reasonable to expect not only job losses, but wage losses as well,” said Tonelson.

Said Daniel Penrod, an industry analyst with the California Credit Union League, a trade association for credit unions: “We haven’t really seen small businesses getting hurt because of access to money, but rather just because of the slowdown.”

With the holiday shopping season just around the corner, the next sector ripe for a hit is retail, said John Challenger, chief executive of global outplacement firm Challenger, Gray & Christmas. A survey by Challenger released Wednesday said that the number of job cuts in September rose 7.2% to 95,094.

“Consumers are tapped, it’s going to be a tough year,” said Challenger. “Unemployment is going up by leaps and bounds.”

Federal Debt Relief System believes it’s important that people know the truth so that they can make up their own minds.

Also See: Credit Revolt, financial disaster

Federal Debt Relief System is at the forefront in the battle to restore the Constitution by arming millions with the sobering information and vital education designed to the multi million debt slaves all over this nation.

Federal Debt Relief System spotted this at Bloomberg News recently:

Former Federal Reserve Bank Chairman Alan Greenspan said a “once-in-a-century credit tsunami” has engulfed financial markets and conceded his free-market ideology shunning regulation was flawed.

“Yes, I found a flaw,” Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. “I was shocked because I’d been going for 40 years or more with very considerable evidence that it was working exceptionally well.” Greenspan added he was “partially” wrong for opposing the regulation of derivatives.

Greenspan’s contrition came after lawmakers and Fed watchers increasingly blamed the former Fed chairman for helping cause the crisis with lax oversight of the housing boom and derivatives markets. Normally afforded deference by Congress, he endured almost four hours of questions from lawmakers less than two weeks before a national election.

“Greenspan is finally taking some responsibility for his actions,” said the director of economic research at Northern Trust Co. in Chicago and a former Fed official. “The damage has been done. His reputation has definitely been tarnished.”

Greenspan, responding to questions, said only “onerous” regulation would have prevented the economic collapse. Stifling rules would have suppressed growth and hurt Americans’ standards of living, he said.

Part of the problem was that the Fed’s ability to forecast the economy’s trajectory is an inexact science, he said.

“If we are right 60 percent of the time in forecasting, we are doing exceptionally well; that means we are wrong 40 percent of the time,” Greenspan said. “Forecasting never gets to the point where it is 100 percent accurate.”

The admission that free markets have their faults was a shift for the former Fed chairman who declared in a May 2005 speech that “private regulation generally has proved far better at constraining excessive risk-taking than has government regulation.”

Did you see that? He said ‘better at constraining excessive risk taking”? You gotta be kidding me. The problem is that the joke is on all of us.

Federal Debt Relief System believes it’s important that people know the truth so that they can make up their own minds.

See Also Bailout, America’s Debt Revolt

Federal Debt Relief System knows this is the worst financial crisis since the Great Depression, a $700 billion taxpayer bailout, public outcry over excessive pay and the demise of three of the biggest securities firms won’t deter Wall Street from offering year-end rewards to employees on top of their salaries, compensation experts say.

From Bloomberg:

Morgan Stanley and Goldman Sachs, both still on track for profitable years, have set aside about $13 billion for bonuses after three quarters, down 28 percent from a year ago. Even some employees at Lehman Brothers Holdings Inc., which declared the biggest bankruptcy in U.S. history last month, will get the same bonus they received a year ago.

Goldman, the biggest and most profitable Wall Street firm until it opted to become a bank holding company last month, has set aside about $6.85 billion for bonuses, or an average of $210,300 for each employee, down 32 percent from $339,400 a year ago. Morgan Stanley, the second-biggest securities firm until it also converted to a bank, has $6.44 billion for bonuses, or $138,700 per person, down 20 percent from last year. Both firms accrue a fixed percentage of their revenue for compensation, so the decline in bonus pools matches the drop in revenue.

Merrill’s Compensation

The money Merrill has set aside for bonuses equates to an average $110,000 for each of its 60,900 people, up from $108,000 a year ago because more than 3,000 jobs have been cut.

The bonus figures are based on estimates that about 60 percent of the compensation and benefits expenses reported by the companies will be paid in year-end bonuses, as occurred in past years. Average bonuses aren’t an indication of how much any employee will receive, since payments range widely from assistants to top traders. Bonuses aren’t paid until the end of the fiscal year, so firms could choose to reallocate the funds.

“We are in the process of determining appropriate levels of year-end compensation, and no decisions have been made,” said, a spokesman at Morgan Stanley. A spokesman for Goldman in New York, declined to comment.

“There should be a moratorium on bonuses,” Barney Frank, chairman of the House Financial Services Committee, told reporters last week. “If nobody gave them, there wouldn’t be a competitive aspect.”

A worldwide economy collapse, caused in part by the financial industry’s losses, and a U.S. Treasury plan to spend $250 billion of taxpayer money buying stakes in banks, have made pay a political issue this year.

“I’m just flabbergasted that the financial community has failed to show any sense of leadership on this issue and doesn’t seem to understand how angry people are at them,” said the editor of Corporate Library, a Portland, Maine-based corporate-governance research firm. “They are just a bonus away from having the villagers come after them with torches.”

Federal Debt Relief System believes it’s important that people know the truth so that they can make up their own minds.

See Also Bailout, America’s Debt Revolt

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The big three credit rating firms, Moody’s Corporation, Standard & Poor’s and Fitch Ratings’ profits in recent years have been among the fattest on Wall Street. One firm, Moody’s, rang up profit margins three to four times those of Exxon Mobil Corp. while assuring investors that complex mortgage-backed investments were safer bets than they really were, according to Bloomberg News.

In recent financial filings noted by the investor web blog Footnoted.org, however, Moody’s confirmed it had “errors in the model” it used to rate some investments, and is “cooperating with . investigations and inquiries” by “states attorneys general and other governmental authorities,” including the Securities and Exchange Commission.

Two former rating company employees who took issue with their firms’ practices are also slated to testify Wednesday, according to the panel.

A former managing director at Standard & Poor’s who left in 2005, after he says he refused to go along with several clear and questionable acts of corporate corruption.

“They thought they had discovered a machine for making money that would spread the risks so far nobody would ever get hurt,” the executive told a Bloomberg reporter last month.

The other former executive to testify, Jerome Fons, has become an advocate for reforming the rating industry since leaving Moody’s Corp. last year. Fons has pointed out the glaring conflict of interest on which the rating firms are based – they are paid by the firms who will profit if their investment product gets a stellar rating – and has even suggested the lucrative industry should be replaced entirely.

A Securities and Exchange Commission investigation in June found the companies faced conflicts of interest, stemming from the fact that the investment banks trying to sell the mortgage-backed securities were the ones paying the firms to rate their products. Emails uncovered by investigators showed analysts were concerned that negative ratings would hurt their firms’ income.

Federal Debt Relief System believes it’s important that people know the truth so that they can make up their own minds.

See Also Bailout, America’s Debt Revolt

Federal Debt Relief System believes it’s important that people know the truth so that they can make up their own minds. The top dogs of the big three credit rating companies made $80 million in compensation while their firms gave bogus high ratings to trillions in dubious mortgage-related investments which led to the world’s current financial crisis- and a hearing before bitter lawmakers on Capitol Hill Wednesday morning.

The top executives – Moody’s Corporation CEO Raymond W. McDaniel, Standard & Poor’s president Deven Sharma, and Fitch Ratings’ president and CEO Stephen Joynt – are expected to say the economic collapse was “unanticipated” and “unprecedented.”

But confidential documents obtained by Waxman’s investigators show that the firms’ executives anticipated much of what has happened, and were aware that their ratings were quite possibly shaky, according to the chairman.

The story of the credit rating agencies is a sad story of the complete collapse of corporate governance on Wall Street.” Said one prominent Congressman on the House Oversight and Government Reform Committee will tell the men when they appear before his committee this morning, according to a draft of his prepared comments. “The result is that our entire financial system is now at risk.”

“It could be structured by cows and we would rate it,” one Standard & Poor’s employee wrote in a company email cited by Waxman. “Let’s hope we are all wealthy and retired by the time this house of cards falters,” wrote another in an email obtained by Waxman’s committee.

As Moody’s CEO McDaniel explained in an October 2007 presentation obtained by Waxman’s staff, shaky ratings came because few of the players – investors, banks or the firms which issued the securities – truly want an accurate assessment of an investment, if it isn’t going to be good news.

“Ratings quality has surprisingly few friends,” he observed.

Federal Debt Relief System is a powerful tool on your side in the war against credit debt.

I found this one at Federal Debt Relief System. Like many of you, all of the point-counterpoint on the current economic collapse has me searching for the answers.

Here’s the straight talk on what’s wrong with the newly passed so-called “bailout” plan. The Treasury plan was originally predicated on buying $700 billion of collateralized residential mortgage-backed securities that banks could not unload.

The idea was that the banks would get the money, which they could then turn around and lend to keep the credit markets open and credit flowing throughout the economy. In the meantime, the Treasury Department would sit on the securities until it is able to sell them, hopefully at a profit.

The idea, from a theoretical standpoint, isn’t stupid. It is, however, impossible to implement to any degree that will result in the desired economic recovery.

Here’s why:

• There are more than $1 trillion worth of subprime collateralized mortgage-backed securities out there – and that’s just one type of problematic derivative security. The bottom line: $700 billion isn’t enough. Period.

• Treasury is going to hire banking-industry managers to manage the process. Those managers are going to serve themselves – just as they served themselves to get us into the crisis

• The purchase plan is not limited to just residential mortgage-backed securities. Surprise! What else will Treasury buy? Experts predict that toxic credit card debt will require another multi-billion dollar “bailout” in the coming weeks as well.

• This government deception is even more under-funded than people realize, for it doesn’t authorize the full $700 billion: Indeed, it starts with only $350 billion, leaving an even greater shortfall. Did we mention that $700 billion wasn’t enough?

• Since Treasury can’t buy all the problem securities, if it prices what it’s going to buy too low, all remaining holders will have to mark down their holdings and take more writedowns and losses. How will that create confidence and facilitate “liquidity”?

• However, if the Treasury Department prices the securities too high, several problems quickly emerge: Hedge funds will rush to sell their current holdings, and may very well speculate by buying up more securities to sell them at a higher price (profit) to Treasury, meaning that the Treasury Department plan won’t necessarily be helping banks directly. What’s more, if those securities are priced too high, and the market for them continues to fall, taxpayers will eat the losses – a reality that likely will lead to an end to further program funding.

• There is no defined mechanism to determine what price the Treasury Department will pay for what it buys. For argument’s sake, even if Treasury were to only buy the problem securities its leadership speaks of in public – residential mortgage-backed securities – there are problems if it prices them too low: If that happens, some holders won’t sell them, taking the chance that if they hold them long enough they will be worth more than Treasury is willing to pay. How will those financial institutions regain liquidity if they won’t sell the securities needed to make this happen?

• Who’s going to fight off the lobbying groups out to influence the managers that the Treasury Department hires to direct money to their masters? Did we mention that $700 billion wasn’t enough?

The Federal Debt Relief System is dedicated to sounding the alarm while there is still time to do something about it.

Learn more at Federal Debt Relief System now.

Federal Debt Relief System knows a credit card may seem like the perfect partner to anyone with an empty wallet staring longingly at a pair of shoes with just the right fit or the newest Xbox  videogame. But beware; if you’re someone without a budget–or self-control–jumping blindly into a relationship with this piece of plastic can leave you badly burned.

If you don’t understand what you’re getting yourself into, you’re not ready.

So what is it about credit cards? They seem like the perfect solution for those of us practically living paycheck to paycheck, right? How many times have you wanted to book that flight to Europe but just didn’t have the funds right now? This is the beauty of charging; immediate gratification. But there is a downside to having the ability to buy whatever you want, whenever you want.

Just as compound interest is your best friend when you’re saving money, it’s your worst enemy when you owe money. If you can’t afford to pay your credit card bill, little fees for things like late payments and going over your credit limit–not to mention interest itself–will cause your balance to balloon. Not only will your sweet plastic love affair turn sour, you could carry the load of credit card debt  the rest of your life.

Let’s say you’re about to spend $2,500 on a shiny, new flat panel HDTV with a credit card that carries an annual percentage rate (APR) of 20%. If you’re like many people, you may choose to pay the minimum on your card, which is generally about 3% of the balance, $2,500 in this case. If you pay the minimum $75 each month on that $2,500 you will end up paying total interest of $1,180, and it will take more than four years to pay off.

Credit cards are sneaky little guys who deceive, entice and then entrap it’s victims in an endless banking scam.  Unlike the fixed interest associated with savings accounts,  credit card interest is variable and can change–mostly higher–at any time. On some cards, if you miss a payment your APR may go up substantially. In addition, that attractively low APR a credit card promises when you sign up will probably at least double after the introductory period is over. Credit cards also hit you with fees if your balance goes above your credit limit.

Credit cards can be a great companion and offer many benefits. But be smart about what you can afford to charge, and stay on top of your payments. You don’t want to find yourself head-over-heels in a relationship that holds you back for the rest of your life.

Federal Debt Relief System is ready to defend and restore your family’s financial freedom.

Learn more at Federal Debt Relief System now.

Federal Debt Relief Systemis at the forefront in the battle to restore the Constitution by arming millions with the sobering information and vital education designed to the multi million debt slaves all over this nation.

Federal Debt Relief System wants to know how are the Treasury Department and the U.S. Federal Reserve going to be able to conduct objective, responsible policy regarding fiscal matters and interest rate decisions when they will have to simultaneously “manage” the government’s portfolio of securities?

There will be conflicts and there will be fallout for the U.S. dollar and fallout with regard to American interests vs. the rest of the world, with whom we trade and partner with in all manner of ways, not the least of which involves our own national security.

While the idea that taxpayers should get warrants and ownership in the entities that we buy securities from is theoretically a good idea, there are some issues. Let’s take a look at some of the biggest potential pitfalls:

• Foreign banks aren’t going to be thrilled about that; yes, they are included in the list of whom the Treasury will buy from.
  
  

• Are taxpayers going to be limited partners in hedge funds? What if those hedge funds implode?
  
  

• Who is going to decide when to sell any of government’s ownership interests, should they turn out to be profitable? Will we own these businesses forever?
  
  

• Is government going to control private enterprise? Is this a ruse? Are we heading into an era under the stewardship of a socialist government?
  
  

• The U.S. Treasury Department could end up in control of our banking system. Considering how well they run the government’s fiscal house, is that what we want?
  
  

• There is no direct support for homeowners in the plan and no support mechanism for falling home prices. And yet, these twin evils are the root causes of what has happened.

After the House rejected the initial bill – and U.S. stock prices plummeted – the Senate rushed through its modified plan, which the House subsequently passed and the president signed. But that was just another hose from the same firefighting gang that can’t shoot straight; which will further douse the prospect of a directed approach.

Here are some of the additions that were made to the plan that the House originally rejected – meaning they are part of the plan that was signed into law. Ask yourself this question: What do they do to actually address the credit crisis?

• Extend unemployment benefits: That’s super – so when we’re all out of our houses, we’ll have enough unemployment to stay at a hotel for a day or two.
  
  

• A $1,000 tax deduction for homeowners who don’t itemize. Great, I can buy a cheap inflatable raft to float away on the red ink that flows out of my house.
  
  

• A reduction on the tax on dividends repatriated from foreign earnings. What?

• Economic stimulus measures – such as spending on transportation projects. That will actually help; if they build canals around my house, when I float away on my red-ink raft, at least I won’t end up in uncharted waters.
  
  

• Increase Federal Deposit Insurance Corp. (FDIC) deposit-insurance-coverage per bank account from $100,000 to $250,000. That will definitely calm nervous bank depositors, especially all those who have more than $100,000 in their many accounts. Personally, I wish I had that worry. Do you?

What is the common denominator to all these add-ons? They are meant to be added up so that Congress can say: “This is how much we’re going spend to help fix the problem that will benefit you, not just the $700 billion going to Wall Street.” Don’t buy into this.

However, my very favorite proposal is the push to do entirely away with fair-value – mark-to-market – accounting. This is being pushed by none other than the American Bankers Association and – guess whom else – the Securities and Exchange Commission (SEC).

That’s the same SEC that presided over the demise of The Bear Stearns Cos. (now part of JP Morgan Chase & Co., Lehman Brothers Holdings Inc., and American International Group. It’s the same SEC that eliminated the uptick rule. And it’s the same SEC that handed over to the exchanges the authority to decide who should be on the “do-not-short” list.

The truth that needs to be front-page news it that if there wasn’t Fair Value, mark-to-market accounting we would never have seen this crisis coming. Doing away with mark-to-market accounting does not change the value of problem securities. Period. Doing away with mark-to-market will only bury the bodies under the rubble. The stench will eventually suffocate us all…to death.

The Federal Debt Relief System is dedicated to sounding the alarm while there is still time to do something about it.

Learn more at Federal Debt Relief System now.

Federal Debt Relief System is at the forefront in the battle to restore the Constitution by arming millions with the sobering information and vital education designed to wake Americans up.  

Federal Debt Relief System knows credit-card losses are already taking an enormous bite out of lenders’ balance sheets. Bank of America, the nation’s second-largest issuer behind JPMorgan, revealed on Oct. 6 that roughly $3 billion of its $184 billion credit-card portfolio has soured, a 50% increase from a year ago. At the same time the bank, which is also dealing with the broader economic crisis, said it would have to cut its dividend by 50% and raise $10 billion in fresh capital.

The stock stumbled more than 25% the next day when investors largely scoffed at the new shares BofA was offering. “The good news for us is that we have the strength to get through this, but the bad news is that the earnings recovery does take a while,” says BofA spokesman Bob Stickler. “We are prudently adjusting our underwriting standards to adapt to changing economic conditions.”

The industry’s practices during the lending boom are coming back to haunt many credit-card lenders now. Cate Colombo, a former call center staffer at MBNA, the big issuer bought by Bank of America in 2005, says her job was to develop a rapport with credit-card customers and advise them to use more of their available credit.

Colleagues would often gather around her chair when she was on the phone with a consumer and chant: “Sell, sell.” “It was like Boiler Room,” says Colombo, referring to the 2000 movie about unscrupulous stock brokers. “I knew that they would probably be in debt slavery for the rest of their lives.” Unless, of course they default. Responds BofA spokeswoman Betty Riess: “The allegations do not reflect our practices. The bank has nothing to gain by extending credit to people who do not have the ability to pay us back.”

Likewise, American Express (AXP), which caters to wealthier borrowers, upped its provisions for credit-card losses from $810 million to $1.5 billion in the latest quarter, a sign that even upscale consumers are having trouble. “We have enhanced our models and continue to prudently manage our risk by scaling back some card acquisition efforts and reducing credit lines where appropriate,” says an AmEx spokeswoman.

Now regulators and politicians are trying to curb some of the industry’s abusive practices by limiting interest rate hikes, abolishing certain fees, and cracking down on questionable billing practices. Under rules proposed by the Federal Reserve Bank, a borrower would have a 21-day grace period before being hit with a late fee, instead of the few days offered by some firms now.

 A similar plan working its way through Congress would allow banks to increase rates only on consumers’ future purchases—not existing balances. And under both proposals, credit-card companies would have to allocate account holders’ payments equally to balances with different interest rates. Currently, firms first apply payments to the debt with the lowest rate, which means it takes longer and makes it costlier for consumers to pay off their debt.

To get ahead of rules that would hamper their ability to reprice accounts, for example, many firms are jacking up interest rates. A survey of major issuers by consumer advocacy group Consumer Action found that 37% of firms have raised rates across the board, even for borrowers with relatively pristine credit records. “In anticipation of a federal crackdown, card companies are scouring their portfolios and tightening credit,” says Tower Group’s Moroney.

Not everyone will be able to pay down their debts and that could make for a vicious cycle: As credit-card companies raise rates, more consumers fall behind on their payments; ,which then hurts the issuers. Says Innovest’s Larkin: “We are going to see the banks massively hit.”

The Federal Debt Relief System is dedicated to sounding the alarm while there is still time to do something about it.

Learn more at Federal Debt Relief System now.

The Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.

Through his plan, Treasury Secretary Henry Paulson aims to avert a credit freeze that would bring the financial system and the world’s largest economy to a standstill. The bill would prevent courts from reviewing actions taken under its authority.

“He’s asking for a huge amount of power and control,” said Nouriel Roubini an economist at New York University. “He’s saying, `Trust me, I’m going to do it right if you give me absolute control.’ This is not a monarchy.”

The bankers conspiracy  is to own this country, always have; only now they’ve decided to strip away the curtain and reveal the ghoulish visage of the puppet-master. It ain’t pretty.

Paulson decided that the financial markets needed an emergency trillion dollar face-lift just weeks before his former business partners at G-Sax were dragged off to the chopping block. Was that the reason? Everyone on Wall Street knew that the bulls-eye had already been ripped from Lehman’s bloody back and was about to be fastened on Goldman’s. Now, it looks like they will escape their day of reckoning due to Paulson’s eleventh-hour reprieve. Nice touch, eh?

The Federal Debt Relief System is dedicated to sounding the alarm while there is still time to do something about it.

Go to Federal Debt Relief Systemnow.