Huffington Post Comment Regarding FHA Crisis
Posted by Mark Hankins in Uncategorized on November 13th, 2009
titleFHA Bailout: Federal Housing Agency Has Lowest Amount Of Cash On Record/titlecategory1/categoryimg src=http://images.huffingtonpost.com/gen/118517/thumbs/s-FHA-BAILOUT-large.jpg alt= border=0 /br/More in the line of Plutocronyistikakistocracy (kleptos arent really calculating, they steal because of a compulsive mental illness … this is different, and more insidious).br/iMore on a href=http://www.huffingtonpost.com:80/news/housing-crisisHousing Crisis/a/ibr/a href=http://www.huffingtonpost.com/2009/11/13/fha-bailout-federal-housi_n_356729.htmlRead the Article at HuffingtonPost/a
The Financial Crisis as The Wages of Sin
Posted by Mark Hankins in Uncategorized on November 6th, 2009
This post will be a departure for me because I have not so far focused on the spiritual aspect of the financial crisis and I am no preacher. But I just heard on the radio an amazing sermon by urban preacher Tony Evans entitled “Revive Us Again-Revival in the Valley of Dry Bones.”
He pointed to the current financial crisis as the result of our sin: greed. Greed both on Wall Street in lending irresponsibly and on your street and my street in borrowing irresponsibly. He says that our economy is like the dried up bones that God showed to Ezekiel and that the revival that will reanimate them will come from God, not from our own efforts. Ezekiel’s vision of the dry bones is paralleled by Paul’s statement in Chapter 1 of 2nd Corinthians that he had despaired to the point of death. God’s purpose in allowing us to go so low is to show us that he is the only one who can really raise us up.
Banks can be a partner with debtors in their mutual revival, or they can do what they’ve usually done and crush the people who need help. In turn, those crushed will simply use bankruptcy or other legal and practical tools available to them that produce the same end result of little or no money for the creditors.
The situation is the prisoners’ dilemma writ large, with each side now believing it will get a better result by beggaring the other. My book, “Debt Hope: Down and Dirty Survival Strategies” provides consumers with strategies to avoid the worst of what the creditors can do while still working toward real solutions rather than just leaving loose ends.
Implosion of the Credit Card Banks
Posted by Mark Hankins in Uncategorized on October 20th, 2009
Anybody with a credit card from a major bank needs to read and understand this article. You may or may not have seen Ann Minch, the Internet YouTube debt revolt phenomenon on Fox News or on Suze Orman’s popular CNBC financial TV show, but what has happened to the credit card industry over the last few months is astonishing. The company that tracks credit card chargeoffs (”charging off” is the act of making an accounting entry indicating that a debt is not expected to be repaid), Fitch reports that starting from an already high overall figure of 7.4% in January, by August the rate was 11.52% meaning the number of credit card holders being charged off each month would contract the base of credit card holders nearly 12% in a year’s time. That means that each month the customer base for credit card companies is shrinking by almost 1% and that assuming those chargeoffs reflect the average amount of credit card debt carried by the other cardholders, the bad debts owed to the banks went up by that amount also (keep in mind the cardholders being charged off may well have run their cards up and have higher than average balances).
Taking the figures month-by-month, and assuming that no new cardholders are being added (probably a negligible figure in this economic climate), for every thousand cardholders at the beginning of January there would be just 880 at the end of December. Fitch expects the chargeoff rate to continue increasing through the first quarter of next year, so the cardholder base will perhaps erode even faster than that.
With losses mounting and cash flow from defaulted cardholders drying up, the banks are squeezing everybody else with increased interest (called “ratejacking”) and fees and when their squeeze pushes some over the edge into default they have to squeeze those who remain all the harder. Advanta Bank, once the 11th largest issuer of credit cards in the country had to shut down all of its cards to new charges at the beginning of June and its chargeoff rate reached 56.95% in a single month (June). Advanta now has probably less than 10% of the performing cardholders they once had because they raised everyone’s rate over 30%.
That’s happening to the other major banks, just a bit more slowly. For instance, the last three months of chargeoff rates at Bank of America were 12.5%, 13.8% and 14.54%–much worse than the averages found by Fitch. Within a single quarter, they lost 3.5% of their cardholders. In fact, Bank of America lost $9.6 billion on their banking business in the third quarter of 2009, making up $8.6 billion of it on trading profits that may or may not be real, probably don’t reflect actual cash flow, and in any case are the result of taking on large amounts of risk. In other words, if it weren’t for accounting trickery, BofA’s situation would have been much, much worse than they reported.
To rub salt in the banks’ wounds, the debt buyers who relieve the banks of their defaulted credit card receivables have been pulling back sharply. During good times banks could expect freshly defaulted acounts to fetch twenty-five cents on the dollar. As the recession worsened that figure went substantially below ten cents on the dollar. Now with the opportunity to pursue defaults at an all-time-high their difficulty collecting on those defaults means the junk debt buyers are themselves laying off workers and unable to make purchase of fresh defaulted debt at any price.
Defaulted debts require adding “Tier 3” capital to offset them, which is painful for banks—it’s a category that regulators scrutinize closely in assessing a bank’s health and that banks work hard to minimize in order to avoid triggering additional regulatory oversight of their daily operations. It is likely that some of the “too big to fail” banks will require another bailout. Other banks will have to be taken over by the FDIC, which itself does not have nearly the funds it needs to perform orderly liquidations of all the failed banks and pay back the insured funds of their depositors. Officials first suggested the FDIC assess the banks to make up the shortfall, but the banks don’t have the money. Then it was thought that having the banks prepay three years of premiums would solve the problem, but again the banks could not have funded that plan either. It appears the FDIC itself will require a bailout.
For consumers, this is the end of the credit line. For the least-impacted consumers life will return more closely to an all-cash lifestyle, while the consumers who were heavy users of credit cards and carried balances will either struggle to pay them off or face a future of uncertain consequences after they default. Once the economy improves enough for junk debt buyers to obtain access to funds with which to make purchases of defaulted debt, the consumers who defaulted will have to grapple with being in collections, and in many cases they will face lawsuits and wage garnishment, liens, levies and additional federal taxes because of the debt. Many consumers are unaware that legal and practical mechanisms are available to them to prevent those consequences even in the absence of repayment or bankruptcy.
Debtors Revolt–Credit Card Banks Are Like A Bad Boyfriend – Time to Break Up!
Posted by Mark Hankins in Uncategorized on October 15th, 2009
I cut a video where I played “Commander Zero” and inducted people into the Debtors’ Revolt Army and it skewed so male that I decided to do this one to appeal to women.
Comment on Huffington Post: JPMorgan Earnings: Bank Posts $3.6 Billion Profit, Despite Big Loan Losses
Posted by Mark Hankins in Uncategorized on October 14th, 2009
In the final stages of alcoholism an alcoholic sometimes looks pretty good … the jaundice of end-stage liver disease masquerades as a nice healthy tan if you overlook the yellowed eyes.
In perhaps the same way, the recent Fitch report on credit cards says the banks income from them is up, but is it possible that the increased income is due to ratejacking and late fees and other charges which the banks are recognizing as income but will never actually realize as cash into their coffers?
And could the credit card situation be mirrored in other aspects of the banks operations such that their entire balance sheet is a house of cards in danger from off-balance-sheet contingent liabilities for things like the second wave of securitized residential mortgage defaults and the commercial real estate implosion?
My limited knowledge of the arcana of accounting rules for such things doesnt allow for me to say anything certain in this regard. But inquiring minds want to know…
Glenn Beck Talks About CIT’s Imminent Bankruptcy
Posted by Mark Hankins in Uncategorized on October 13th, 2009
Like Advanta, CIT Group is on its way out. Here Glenn Beck talks about the imminent failure of the largest lender to small and medium size businesses.
Glenn didn’t mention that CIT’s problems are just gravy to Glenn’s favorite whipping boy Goldman Sachs, which is OVERHEDGED and stands to make a billion dollars on CIT’s bankruptcy.
Meanwhile what also wasn’t mentioned by Glenn is Advanta Bank’s collapse … check my channel for a video I made on the subject of the failure of the 11th largest credit card lender and the key lender after CIT for small businesses.
Ann Minch Endorses My Book in “Debtors: The March is ON!!!”
Posted by Mark Hankins in Uncategorized on October 3rd, 2009
Light At The End of The Recession Tunnel Is a Depression Train
Posted by Mark Hankins in Uncategorized on October 3rd, 2009
Factors are coming together in the U.S. financial sector and the economy as a whole that bode so ill that nobody should be fooled by any happy talk from the mainstream media or the government. Let’s look at some facts: the economy is continuing to shed jobs at a prodigious rate, and the official unemployment rate of 9.8% is the worst since June of 1983 and is no longer capturing nearly half of the actual jobless, who make up 17% of our population.
Banks holding 20% or more of their loans in the defaulted category are at an 18-year high. The FDIC first proposed having the solvent banks prepay three years worth of premiums, then declined to do so after learning that the banks didn’t have the money. But the FDIC needed that money, and without it they will not be able to close the banks that have failed and repay their depositors immediately. Meanwhile, just this last Friday the FDIC was blindsided by a billion dollar bank failure, Georgian Bank out of Atlanta, that wasn’t even on their troubled bank list. Over 97% of the derivatives risk in the U.S. banking system is now in the shaky hands of the five largest banks. These banks can’t be allowed to fail, so the relaxation of the mark to market rules will simply continue until we have a “lost decade” just like Japan did.
For the American consumer, the credit card party is definitely over as default rates by cardholders at major players such as Bank of America hit 14% and angry Americans like Ann Minch make YouTube videos urging a debtors’ revolt due to the banks’ efforts to use ratejacks to 30% in a self-defeating bid to recoup their losses on defaults. Advanta Bank, once the 11th largest credit card bank has already essentially folded under the weight of accelerating defaults.
What can you do? As a consumer you need to educate yourself on what your options are financially, you need to do business with a credit union rather than a bank, you need to focus on the viability of your job and the frugality you can achieve in your own family. Do not look to government or to anyone else to solve your problems-solve your own, and help your neighbor if you can.
The Coming Tsunami of Parental Nursing Home Costs
Posted by Mark Hankins in Uncategorized on September 1st, 2009
In general it’s difficult to argue against the notion that children who have the means should be willing to contribute to keep mom & dad when they no longer can live on their own: the question is do we want the state forcing that when costs have become astronomical? Well, 30 states have laws like that on the books that come under the heading of “filial responsibility” and these laws date back to what England put on their books in the 1600s. If the parents can’t or won’t pay, then to the extent adult children have the ability to pay, these states’ laws say they must.
Between 1965 and 2005, medicaid essentially covered nursing home care costs for the elderly, few questions asked. But the Deficit Reduction act of 2005 changed the parental asset transfer lookback to 5 years, now parents entering a facility are required to prove they haven’t made any asset transfers to children in that time so the nursing home can collect state medicaid and the state can get reimbursed by the federal government. All children have to be accounted for and sign paperwork. Any asset transfers reduce medicaid funding dollar for dollar.
As a result, nursing homes have been dusting off these old statutes and using them against patients’ children when there are unpaid balances to collect. The statutes pre-date the Constitution, and although they have been ruled constitutional despite attacks on several grounds, one notable ground that has not been used to attack them is the constitutional prohibition against acts of attainder. The notion would be that our Constitution stopped people from being prevented from inheriting from individuals who are out of favor with the government; it’s perhaps a stronger case to say that the government shouldn’t allow money to be taken from the descendants of a parent who has done nothing wrong.
In many ways the statutes seem surprising and unfair. You have no control over who your parents are and little control over where they decide to live. Unlike a divorce situation, you didn’t voluntarily enter into any relationship with them, and unlike your children you didn’t choose to bring them into the world. But in most cases, your parents will have supported you for eighteen years or more, and from that viewpoint there is an argument in favor of the nursing homes.
Even if the statutes are enforceable, you may not even have sufficient minimum contacts with a distant state for the courts there to have jurisdiction over you. The Supreme Court has said the Constitution requires that you reasonably expect to be in court in a state or it’s unconstitutional to take you there–but if you default on a distant lawsuit and there’s a judgment rendered it’s presumptively valid. You have it on your credit report and you will have to fight it if they try to bring it to the state where you live. An important caveat: if you set foot in the other state at any time, you could be served with papers and you would be able to be sued there, regardless of your otherwise-minimal contacts with the state.
These statutes present a painful Catch-22: If you don’t have the money to pay, you could be relieved of liability by showing up in court and fighting the situation, but you may not have the money to fight.
Pennsylvania has been the most aggressive state, but the statutes have also recently been enforced in South Dakota. Pennsylvania’s code says half your disposable income is accessible to the nursing home. If you don’t pay, you could spend 6 months in jail for contempt of court. 27 Pa. CSA s. 4603. Laws vary in the 28 other states.
The laws can also produce a nightmare scenario: a favored sibling could take mom’s money within the 5 year lookback, spend it all and then you would be on the hook for her care-the laws look for a deep pocket, not who might be at fault.
If Pennsylvania medical providers remain successful in using the statute other states will probably reenact their filial responsibility statutes. But even if that doesn’t happen, when parents go in the nursing home children are often asked to obligate themselves (if the place isn’t a run down establishment), regardless of whether there’s a filial responsibility statute.
A dozen or so states including Florida have state-administered insurance program to help families plan for nursing home care and another twenty are looking at them. Florida’s program allows you to shelter a dollar of assets by buying a dollar’s worth of coverage.
If you have aging parents, it’s vital that you and your siblings begin to think now about what you may be facing in the future. Planning can make all the difference.