Sunday, November 11, 2007
Penny wise and pound foolish
From Bloomberg News by way of the Boston Globe comes the story of greed creating a newer and bigger problem. The recently enacted Bankruptcy Bill, passed to keep credit card debt from being discharged is turning around and biting the banks that pushed for it.
Washington Mutual Inc. got what it wanted in 2005: a revised bankruptcy code that no longer lets people walk away from credit card bills.So people are now paying their credit cards and falling behind on their mortgage debt. Modern corporate thinking in all its glory.
The largest US savings and loan didn't count on a housing recession. The new bankruptcy laws are helping drive foreclosures to a record as homeowners default on mortgages and struggle to pay credit card debts that might have been wiped out under the old code, said Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank.
"Be careful what you wish for," Westbrook said. "They wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures."
Washington Mutual, Bank of America Corp., JPMorgan Chase & Co., and Citigroup Inc. spent $25 million in 2004 and 2005 lobbying for a legislative agenda that included changes in bankruptcy laws to protect credit card profits, according to the Center for Responsive Politics, a nonpartisan Washington group that tracks political donations.
The banks are still paying for that decision. The surge in foreclosures has cut the value of securities backed by mortgages and led to more than $40 billion of writedowns for US financial institutions. It also reached to the top echelons of the financial services industry.
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Well, if people are neglecting the idea that loan payments should not be bigger than our cash inflows, then this kind of payment delay trouble can happen.
Actually this can still be avoided, if the credit card & loan surveyor get their eyes on this kind of issues and stick to the book by rejecting the loan or card request temporarily for that specific moment of application.
J.C. Carvill
Email: support@cosmosing.com
URL: http://www.cosmosing.com/jeanclaudecarvill/index.php
Actually this can still be avoided, if the credit card & loan surveyor get their eyes on this kind of issues and stick to the book by rejecting the loan or card request temporarily for that specific moment of application.
J.C. Carvill
Email: support@cosmosing.com
URL: http://www.cosmosing.com/jeanclaudecarvill/index.php
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