Misleading advertising and obscure terms for financial instruments is partly what got us into this mess.
Similar to you, I was offered 2.99% rate – for the life of my balance The fine print said 'we will assess a Promotional Discount Transaction Fee equal to 3% of the check ($5 minimum) ‘.
Clearly their advertising is misleading, if not an outright lie. A Promotional Discount Transaction Fee sounds like a good thing – could they find a more obscure way to say ‘you must pay an extra 3% up front’? Can you say 'credit default swap' ? Finance should not be creative writing.

The sad and simple truth is that the modern world economy is entirely driven by debt. The consumer debt in the US was estimated recently at over 2.5 trillion dollars (over $700 0for ever man, woman, and child in this country). This debt must grow constantly for all the cars, appliances, electronics, etc. produced by the world to be consumed.

Economists have been talking out of both sides of their mouths about this for years. Out of one side, they deplore Americans spendthrift ways and declare that if Americans don't begin saving, the results will be economic disaster. Then when consumers do cut back (either of their own volition or because of a credit crunch) they start talking out of the other side about the need for easier credit and government stimulus. Do they really think we can have it both ways? Or are we forever doomed to swing from one crisis to another?

Credit will certainly become easier–for those who qualify.

What will, and has happened is financial tightening by consumers.
When they get a zero interest transfer offer–they will transfer the balance–but NOT MAKE purchases and instead will aggressively try to pay down the debt while interest isn't accumulating.

Consumers will reduce credit purchasing, stop altogether paying off utility bills, rent, mortgage with credit cards. Those who can–will push as much cash into savings as possible.

In the end–this debt wake up call–will benefit consumers and banks. But don't look for any tightening.
Look for high interest hybrids–that will target those consumers who still need a credit card–but have rather lousy credit, or for car loans to those with less than stellar payment histories.

Lately, there have been lots of negatives about banks. Lets not forget, banks do make people’s dreams come true. As long as I can afford to make my credit card payments, why not use the credit my bank kindly offered to buy a plasma TV or a new refrigerator?

No, not over yet. The Chinese and Japnese still give out a lot. Don't they? Lexus are wonderful cars, I mean, a lot better than my Mercury. I would like to drive a Lexus with zero down payment to them of cause, eih, etc. etc.

They have to give us because we have democracy and they don't.

Not too be over too fast. We simply need a CHANGE... . At least I want to change my Mercury to Lexus.

If only Bush had appointed a parrot instead of Paulsen!

In the current crisis a parrot would have done a better job with a lot quicker result than Paulsen, by simply copying Buffets' exact deal and making that the bailout plan. Then rather than a 3 page plan or a 100 page plan, you could have had a one line plan, which could have been in play a week or more ago.

Really...while the parrot would have given taxpayers the Buffet deal...why is Paulsen being allowed to give taxpayers a deal far worse than similar investments both Buffet and Mitsubishi? (want the details, just Google...

Buffett Drives a Harder Bargain than Paulson
By RANDALL W. FORSYTH

Why has this clear conflict of interest which has manifested itself in a total bias to Wall Street versus being fair to taxpayers, been deemed as acceptable? Where is the media demanding Paulsen's sacking as they did for FEMA's Michael Brown...his handling of a crisis was no worse, and at least his failure was not driven by cronyism!

It is obvious that Paulsen is still working for Goldman Sachs. The unfunny thing is that when he was being paid 100s of millions by Goldmans he led them into their current financial disaster, but now to save Goldmans from his incompetence, he is raping taxpayers and it is taxpayers who are paying his salary.

I am not sure why suddenly credit is suddenly considered evil. Using credit can be a very useful financial tool if used correctly, but people need to be responsible for their own actions. It is no use blaming banks etc because people cannot manage their financial affairs, this is akin to blaming McDonalds because you are overweight.

If anyone is to blame I would point the finger at governments for their failure to ensure credit card contracts etc are written in plain English with clear warnings for consumers.

Greg Atkinson
http://www.shareswatch.com.au/blog

All we hear in the news hour-to-hour now that the Crash of '08 is under way is that the banks worldwide need to start lending to one another so everybody–businesses, consumers, main/high-streeters, et alia have quick and EASYaccess to even easier CREDIT !!!

Is it not this worldwide terrible addiction to Easy Credit that got us where we are having consumed to the point of total bankruptcy? All the treasuries of the USA, Europe, Asia and the Middle East are worried about and focused on is to continue the addiction and get us deeper into the pipe dream that we can always "Fly now (and maybe) pay....later???"

Such sad attempts at a solution/cure is like guaranteeing more heroin to crazed addicts in the hope they will not overthrow the powers that be. Wake up world!! and get back to the real fundamentals–such as Ben Franklin's advice three centuries ago–"neither a borrower nor a lender be!!" Or in the 1950s when the joke was that banks only loaned to people who did not need the loan, i.e., had more than enough collateral to cover their borrowings.
–

Carl Springer
Bangkok, Thailand

CNN news report (coming from London) at 1.00am this morning hailed Gordon Brown as "leading the way" in bailing out the banking system. This is totally inaccurate: while the US Congress dithered over the Bush proposals to rescue the banks, Ireland was the first to give full guarantees to bank depositors, a move condemned at the time by UK Finance Minister Alister Darling, by German PM Angel Merkel and frowned upon by Brussels.
Excuse the pun, but credit where credit is due!

Howard, your comments remind me about the impossibility of sustained growth. We cant have 3% per year growth indefinitely, unless we have this growth in everything (population, farm-land, housing units). When are the guiding forces going to wake up and strive for sustainable growth (ie, close to or at 0%)?

Please bring back Todd Benjamin and stop being critical of his economic assessments. It's a greater service to your viewers to offer them candid rather than rose-tinted analysis.

The biggest enemy of the world in this credit crisis is America. They gamble big, run their economy on big credits and finally pay big even for services whose values should be within reasonable reach. The credit crisis is simply an eye-opener that: "Hey Guys! we've pushed it beyond our reach'. Unfortunately, for now, they are speculating big and their speculation is infecting other parts of the world.

The market is always dynamic and once a bubble forms, it has to burst. However, since the government of President Bush and his European counterparts do not want the bubble to bust freely, the crisis would continue as people continue speculating whether the bubble will burst or not.

The great American wealth meltdown is the fault of Congressional Democrats and Republicans who have for decades pushed their addiction to spending onto the American people.

Congress created the art of dishonest accounting, legislated lower credit standards and hamstrung regulatory enforcement in order to stimulate consumer borrowing/spending in order to produce the economic expansion necessary to generate tax revenues that Congress needed to feed its addiction.

Congressional actions and inaction brought about the current sub-prime mortgage wealth meltdown and the dot-com securities wealth meltdown of the late 1990's.

And the next wealth meltdown . . . the looming Medicare and Social Security default is also the fault of Congressional actions and inaction.

Both the Roaring Twenties decade that preceded the Great Depression and the Irrational Nineties decade were golden ages for technology, scandal-plagued politicians, corporate greed, and unrestrained debt and speculation.

America cannot maintain a strong defense without a strong economy and a strong economy can only be maintained by a fiscally honest government that acts as a referee and not as a competitor in a reciprocal, free-and-open marketplace.

This bubble started with the housing market and burst with the oil prices going up .The Governments saw this coming but because of a mix of Voodoo economics and the wild west mentally of Bush admin. they allow wall street a free hand .

Last time when oil prices were so low, gas prices were much below 1 $ a liter. What's really going on? Let's not worry about credit, first let's worry about what we have in our wallets.

now there are about 200 million houses not sold, is it possible that
usa government permit foreigner who buy a house value USD500,000 up and keept it five years, then usa government gives them green card, the period valids within half year to one.
can this proposal can solve the usa financial crisis?

please pass this proposal to someone.

Personally I am happy that the housing crisis and credit crunch are happening. Why? Because as things were going for the last 25 years, how could anyone who practices financial discipline, has a regular but steady income, doesn't overdo or fall for "easy credit" EVER have been able to BUY a HOUSE?

As things were, only those that went in WAY over their heads, used credit irresponsibly, borrowed, stole, or begged could have gotten into a house!

What we have forgotten is that a house is shelter! Not an investment vehicle or something to "flip".

There is no such thing as "easy money" as
we all know. There is some kind of risk in front of you or around the corner. Now we've seen that there is also no "easy credit" it adds weight to my first line. If you are good enough for the money you can achieve from a bank it wil roll back to the bank without any hussle. You can do what you need to do with it, the bank gets payd in a sound intrest-rate, which makes it possible for the bank to make profit. If this is sharply clear (for a series of years) when you go into this deal, both sides really agreeing, only an accident (that in most cases can be insured) can end in a wrong outcome.
Sounds OK?
Then look back at what happened and a child can point out the clue.

And there really was no housing bubble. It just was a credit-bubble leading to something that looked like a non-existing bubble in housing. Being scared that this bubble might have an impact on me only makes the illusion bigger. Buffet is right about buying, but he should advise to spend your dollars in real-estate, as far as I can see.
IMHO there is is housing vacuüm. (OK solid shares wil rise soon enough, because the representing companies will be hit, but not THAT hard.)

Dear Adrian,
I'm sure that you are not the only one who is confused. Although I disagree with the way that Tony Blair and now Gordon Brown have been running the country, THERE IS NO DOUBT THAT THE BANKS ARE TO BLAME FOR ALLOWING SO EASY CREDIT. This however does not excuse the irresponsibility of the general public, who by use of the Credit Card Misuse have accumulated so much debt. Like you, I have received a telephone call from "Citibank" waqnting me to take a Credit Card and accountant friends in the U.K. have also had unsolicited cards sent to them. Of course being sensible, we have filed them in the rubbish basket and my arrangements are for my bank to collect any debits on the first of each month. There is no way that I am going to pay 29% interest.
People have now to learn the hard way to live within their means and if they are young and able to save???? then they should be using either Unit Trusts (hoping that they have picked a good Fund Manager)
and be doing as Warren Buffet suggests.
They should however ONLY on a "Pound Cost Averaging" basis be paying MONTHLY. That way, they will of course be getting more units and eventually (when the markets recover) they will have the advantage of greater gains. If however they are up to their ears in "hock" then hard luck, the future will be bleak for them for enjoying life beyond their means.

An old retired Financial Advisor

Re: Pensions

A question for Adrian or Todd??

I have just been reading that Inflation in the U.K. is now 5% and that Pensioners like me would receive in April 2009 an increase of £20 a month, unless the government (Brown & Darling) declare that "THEY CAN'T AFFORD IT".
After the huge bail-outs to the banks, do you think that they will use this excuse not to pay the full amount which will still only be 20% of the average wage of £457 in the U.K.????

In the midst of all these mess where the blame is aimed at the regulators, the Wall Street execs and investment bankers, even the home buyers, where are the ratings agencies (Moody's S&P, Fitch)? Why haven't there been strong aspersions on their role in the financial debacle we are in?
These agencies claim to only issue opinions but every investor rely heavily on their ratings of companies and sophisticated investment instruments like derivatives to arrive at their investment decisions. Shouldn't they be investigated as well? They should not be immune from culpability. I would appreciate CNN making a report on the ratings agencies, what do they really understand for them to give such ratings. They were involved in the Enron days, they are involved now. How can the market teach them their lessons hard?

Easy credit, low interest rates were the root cause for the financial crisis developing since 2001. Reducing Fed,Central bank rates and reducing Libor to 1% is not the solution to the current financial crisis. Highly Regulated and systamatic lending to individuals and maintaining interest rates for 1-2 years tenor will help stebalize golbal economies. Cheap corporate lending should be avoided, this will help companies maintain their borrowing cost and overall operational cost. Stimulus packages as suggested by Fed will give immediate relief but will further deepen the crisis and pain on the main street. Regulated lending and consistent interest rates for 2-3 years will help to recover. Slowly people will learn to live with regulations and reasonable interest rates and Libors. Reducing Libor and Feb rates and offering cheap credit in panic is no longterm solution.

its over with every bull market end and easy money comes at every last phase of bull run
never think that 700bn steroid can save dieing patient (us economy)

package is only mental relief for bush and team that we have done our best for the economy

so be patient in market ypu will get all things (stocks estates cars etc) more cheaper than today

GOLDEN RULE stay on cash and buy in instalment every thing

I do think "easy credit" is over and good riddens! The banks should have, since the beginning, been establishing a more rigorous policy on credits. Because of lightening those policies, people were allowed credit for almost anything! I'm not one of those! I always make sure my total monthly payments doesn't leave me with little cash during the rest of the month! That's why I'm not affected!

All the effort of countries to resolve the Credit Crisis is mere eyewash. Couple of basic questions: Do we know the real value of the Crisis?
Do we have a plan to punish the people responsible for the same?

What the governments are doing is to protect their vested interests and give money to the same institutions which have made mockery of controls. All nations (US) take pride (and dictate) in having Sound Financial Systems and Controls, what we see here is just opposite.

I request all the people of developed countries especially US to save 1$ a day on OIL related expenses, this will turn the entire economics of the world in terms of less inflations, less emission of green house gases. Control Consumption and wasteful expenditure, reduction on all consumption by 1% will make the world a better place to live.

Would it be feasible for the banks to swap mortgages with homeowners? I've noticed that many families are losing their homes, because they purchased a house that is too expensive to maintain. What if the banks didn't auction off houses that were taking back, but instead found a family with a steady income that could assume the mortgage payments. They could decide on a fair price for the homes, then calculate the mortgage for 20 to 30 years with reasonable fixed interest rates. Families could afford to pay a higher interest rate if they didn't have to come up with a down payment. And if they down-sized to a smaller less expensive home. The banks would have payments made on time, and families could give up the home they can't afford for one they can. Problem solved. Plus families that have never been able to afford to buy could get in on the action as well. Those with good credit would get the best deals, so they wouldn't feel as used with this bail-out package.

BANK OF AMERICA SHOULD BE NEXT ON YOUR TOP TEN CROOKS.
They've already been in the news for credit card due date roulette and pressure on customer service to sell credit/loans to people who don't need it. Today was a doozy. I've been with them over 15 years. I have a platinum visa and gold option credit. excellent record. however, i happen to have a subprime mortgage that i had trouble with this year. it was finally modified in august, but caused a mark during the time i had problems paying. for my problems with my mortgage (that is not with BOFA but with GMAC). BOFA pushes my platinum visa to 28.99 apr. I called them to dispute. During the conversation, I mentioned I had a Gold Option that is still at 12.99 and I could just roll over the balance from platinum. The customer service rep/Darryl Dansdy – closed the Gold Option account while on the phone against my wishes at HIS discretion (is what they are telling me). If I hadn't called them, I could've saved myself. Are their actions ethical? Especially in this climate?

Speaking of a rural, small-town America problem, easy credit would normally mean a trip to a local bank (many home-family owned) and making an application with a loan rep. you have in most cases known for years and closing the transaction. What the major media and the big dogs in Washington do not admit is the actions they are now taking will wipe out the small town, small capitalized banks. These banks are being squeezed out by thelowering of interest rates and the increase in expenses. Consumers aren't told how the banks will have to pay loarge increases in insurance premiums under the new Fed scheme. Additionally, thge lowering of interest rates cuts the interest income drastically every time it is applied. These type banks added nothing to the catastrophic greed-fed credit and market collapse. In fact, these type banks (200 million or less) were stronger than ever before the markets collapse. I don't think they want a government bailout because that's not how they became strong and sound and able to continue to exist in such a horribly deficient regulation era of the mega-bust-banks. These small banks will now really have a challenge. Their loans are right down the street in the communities across America; loans to small businesses and home owners. There you have it; three groups not helped by the bailout. Come Wednesday it will be worse with another rate decrease which will do nothing for any banks, large or small.

Well I thought television stations should not divide and concur,
nor take sides. you are trying to change,Peoples
mind from voting. let us vote , we really donut wont to hear witch,
President nominee is your favorite.

What a mess the world is in! It’s being raped by greed. And when you’re greedy – you’ve gotta have! You can’t afford it, but you gotta have it. Why – because your neighbour has one!

Wealth and its promotion are paramount. Why? Being rich doesn’t guarantee to make you happy. So why is the world living above its means?

Whatever happened to those days we bought stuff when we could afford it? Ok there was HP (Hire Purchase for you youngsters) but you had to put at least 10% on the nail.

Why do we have to have growth? Why can’t we just accept what we HAVE?

I’ve seen poverty all over the world. But the people were happy on 10$ a week and didn’t seem to be in a state of deprivation. Not every home in the world needs a TV for pity’s sake. They’d be happy to have water they can drink.

BUT no – all the world has to be like the US! Because the US believes it’s better than the rest of the world. If you are, guys, then how come you’ve got yourselves in this pickle? And you’ve pulled most of the world down around you as well.

Happily, there are still some countries where credit isn’t part of the culture. Where you change your car when you have to – either because it’s old, or your needs change. Where kids are still happy to wear ordinary stuff without all the posh designer labels. G-strings for 6 year olds – give me a break!

I bet that if we got rid of credit, we’d save the world from destruction. We’d need less cars, less HD TVs, less clothes, less toys blah blah blah... Let’s try exchange and mart again. Wouldn’t it be fun!

Ms. Alison of France, what are those countries where credit isn't part
of the culture, can you name a few? I can somehow relate to that, being grown up to the idea of exact trading where you only get the value of your money @ hand, no credit, but all in cash, in exchane of any stuff you want, but it turned out to be a not so happy life, realizing that others get ahead of you by taking on credits.

It's indeed very nice to recall a childhood of being taught to just get enough, and be happy about, of life's simplicity, of being almost constant so you appreciate more what you have along the way, there comes the value of sentimentality over anything, it being the smallest and simplest thing you get or given by you. So if you receive a gift especially during Christmas, or birthdays, for you it doesnt matter whether its cheap or expensive, labelled or local . But that is childhood, as we grow, we become global, hence your stuffs need to be global.

I am also not very sure, if being global, is having so much confidence, even on taking so much credit, because you have to make a statement to yourself that you can pay your debt in the long run, or if luck turn to your side, your loan might be paid back in the shortest time.

Or if banks would have certain financial laws or specific interest purposely for migrants, in Europe or anywhere else in the world, like Canada, or Australia, if the migrants turn to the idea of purchasing property within their territory, because by now interest rates in the banks, doesnt classify if what kind of applicant you are. I mean, interest rates on loans are seemingly standardized locally, so if your a migrant, you'd readily become "local" when it comes to availing a loan? What they offer on locals they offer on migrants. Do the migrants need to adjust to the locals, on loans, or vice versa, especially on buying cars , house and lot , etc. Because not all migrants who flew away from their birthland, live a life of luxury, there are still those who are on budget, and just trying to make their ends meet. Do we have options in this regard?

Sorry for asking too much, Mr. Adrian F.