| How many banks do you "have"? Perhaps more appropriately, how many banks have you? Maybe you have a checking account at one bank, a savings account at another. A few bank-issued credit cards. Maybe a mortgage or a car loan. Years ago, there used to be a Savings and Loan saying: 3-6-3. It stood for pay interest at 3%, charge 6% on loans, and be on the golf course by three. I remember my first bank account. It was my fifth birthday, and my grandmother gave me a crisp $5 bill, and we went to the bank, and I opened a savings account. (It was so long ago, that I neither had, nor did I need, a social security number, nor any ID to open the account.) The bank manager (who seemed like a GIANT) leaned over, shook my hand, and told me he'd take good care of my money, and I could bring in my passbook every few months and see the interest I was earning. He told me in 14 short years, my money would double. The day wasn't a total loss for a five year old, I vaguely remember cake. I kept that account until they did away with passbooks. Yes, I'm telling you this for a reason. Passbooks were a good idea. Unlike online banking, you could hold your money in your hand, see what you had. You had to go to the bank to get your money. It was more connected. (Yes, I bank online now.) On the cover of yesterday's USA Today, the lead article was about how banks have severely cut back on credit cards over the last year. That is, they issued 38% fewer credit cards in the first four months of 2009 compared to 2008. Limits were lower, too. Hold that thought. Barney Frank will be holding hearings later this week to see if it might not be a better idea to give money directly to homeowners to pay off their mortgages instead of giving it to the banks to restructure loans. The stat is that banks have restructured less than 6% of mortgages. Whether that is 6% of all mortgages, or only the people who asked for help is not a question for which I've been able to find a direct answer. Here's what I do know: The Fed’s study found that only 3 percent of seriously delinquent borrowers - those more than 60 days behind - had their loans modified to lower monthly payments; about 5.5 percent received loan modifications that did not result in lower payments. The study focused on 665,410 loans that were originated between 2005 and 2007 and subsequently became seriously delinquent.
Final thought, from the USA Today business section (7 July, page 1B): Household debt peaked at $13.9 trillion in 2008, almost double the figure from 2000. [...] Household debt peaked at 133% of disposable income in 2007 vs. 65% in the mid-1980's. To pare it back, consumers will have to pay off - or walk away from - roughly $5 trillion of the total debt outstanding.
So what's the current outstanding debt? $13.8 trillion. After the jump, pulling these thoughts together. |
People are up in arms that they can't get credit cards, that their limits have been cut, and that interest and fees are flirting with usury. Debt is unmanageable, especially since the U6 unemployment number is 16.5%. Business keeps contracting not only in terms of employment, but also in terms of inventories. "The banks" have become the enemy, instead of the place you went for a mortgage and to sock away savings. (A generation ago, you bought everything else with cash. Yes, kids, even cars.) And people seem to like banks this way - a potential place to strike it rich if you buy the right instruments. Unfortunately, the banks, in cahoots with the government, form the house. Back to Vegas: the house always wins. The simple solution is to bring back passbooks. Sounds crazy, I know. It won't solve the foreclosure crisis, but it will go a long way to changing us from a debtor nation to a rich nation. Here's the analogy. If you've ever needed to lose weight, and you went on a successful diet, there is a huge probability that you wrote down everything you ate. Maybe compulsively, with calorie and fat counts, or just what you ate. WRITING IT DOWN keeps you honest, even if you don't show your journal to anyone else. Stop writing, gain back a few pounds. Imagine that when you get paid, and the money is a direct deposit to your checking account, you went to the bank and moved a dollar, or five dollars from checking to savings. You wouldn't feel it. And then, a few months later, you could up that amount. Live on a little less, and you can see your savings grow. It's incremental. And then, when you want that whatever: new sofa, appliance, tires, vacation, etc., you have your passbook. And as you go through your day you ask yourself, do I really want a $5 latte, or would I rather put that money towards "whatever"? A year later, people are buying again and the banks don't get rich off it. When I was first in practice, I had NO money. And I read a book called The Tightwad Gazette. The author's contention was that the best way to save money was at the grocery store. (She had a lot of other ideas, but this was the one that resonated with me.) She pointed out that everyone had to eat, but if you could save $20/week on food, that was $1,000/year. So, I followed her advice on coupons and double deals and planning ahead, and I would take the money I saved each week and put it in a jar. At the end of the year, I took my jar to the store and bought a dishwasher. With mostly ones, fives and coins. It felt GOOD, even though I'd had to wash dishes by hand for the months that my dishwasher was dead. (Passbooks weren't available.) Point is, no matter what Barney Frank learns in his sessions, Congress is too beholden to the banks to ever be on the side of the consumer. Whatever they come up with, the banks will game the system and screw us over. We complain about the national debt, but we never seem to care, as a society, about personal debt. Americans seem to believe that old quote: "Immediate gratification isn't quick enough." I believe in big government, in its ability to do good. But not where the banks are concerned. Easy credit is kind of like heroin - feels good at first, and then you can't get out. They're not going to bring back passbooks, and most people are going to think me daft for suggesting delayed gratification. But consider it: the economy isn't going to get better any time soon. My final thought: about five years ago, I saw a sofa I really liked. I wanted that sofa. And the matching chair-and-a-half. Overstuffed. Covered in denim you could remove and throw in the washing machine. Pretty. Comfy. YUM! Didn't need them, couldn't justify the purchase. So I got a bigger jar. Two years ago, the sofa went on sale and I walked into the furniture store to buy it (and the chair.) They asked if I would be using a credit card, or did I want store credit? I did the math: if I took the store credit, and paid the minimum, it would add about 35% to the price. I told them I'd be paying cash. They thought I meant a check. But no, jar money. Honestly, they were confused. But I sit on a sofa that's MINE, not the bank's, not the finance company's. It was worth the wait. Try it. Just once. I promise you'll feel good! |
