Let's Become a Bank So That We, Too, Can Participate in the Bailout!

Recently I talked here on my blog about credit limits being reduced, first with HELOC's, then credit cards. Well it appears that the media, a little late to the party, are now beginning to report on this.

Some media reports are now saying that there are a couple of criteria that some banks are using. For example, if you live in an area hit hard by real estate value drops, chances are your limits are going to be reduced. You could always have paid all your bills on time, have had the accounts for years and you can still find you credit lines reduced. It also appears that if you’re in a category where others are defaulting you will be affected, regardless of your personal history and payment record...so if the percentage of females age 20 - 29 defaulting on credit cards is going up, if you’re a female age 20 - 29 your credit card limits will be cut.

And think about this. If someone had a credit card with a $15K line with WaMu and also one with a $15K line with Chase the risk would have been distributed. Now that the banks are one and the same I would think the exposure of $30K would make Chase more aggressive about either closing one or at least reducing the credit lines wherever possible; after all, Chase would have qualified the card holder for a $15K line, not a $30K line.

In my personal experience some are just looking at the total credit line and comparing it to the outstanding balance and cutting the credit limit back to that. It's obviously what they did when they cut one of my credit card lines by only $1,240! American Express is really coming down hard with this; they reduced my credit line, and the lines of several people I know.

BTW, maybe American Express' strong-arm approach is because today they just got the OK to be a bank? Different guidelines to meet? http://www.bloomberg.com

From the news story: "New York-based American Express said last month that credit-card holders failed to repay loans in the third quarter at almost twice the rate of a year earlier." And it seems that by becoming a bank "American Express, the largest U.S. credit-card company by purchases, joins securities firms Goldman Sachs Group Inc. and Morgan Stanley in gaining "increased liquidity support'' as part of a $700 billion bailout of the banking system. American Express said its conversion won't require "significant divestitures.''

So...now we just have to figure out how to become a bank so WE can participate in the $700 billion bailout!

What Are the Banks Doing With the Bailout Money?

I'm at the Phoenix airport waiting for my flight home after my seminar and thought I'd comment on some things I've seen about what the banks are doing with the money they got from the $700 Billion Bailout.

I had CNN on in my room the other night and a banner went by indicating how much in bonuses was going to be paid by several of the banks. Huh? Bonuses for messing up? And these were BIG numbers. I searched the internet and couldn't find any more information, even at CNN.

Then last night they were talking about how one of the banks used some of the money to buy another bank (probably one in trouble, right?). The question in my mind is why there were not more caveats attached to the use of the bailout money. I understand that we don't want the government running private banks, but come on, giving banks huge amounts of taxpayer's money and not putting restrictions on what they can use it for (I understand they did limit "golden parachutes," but I'm not sure to what extent) doesn't make sense to me. This was supposed to be for our benefit in some way, wasn't it? If they use the money in ways that don't directly benefit us who's to say the same people who mucked things up won't make poor decisions with this money?

Let me be the first to say I'm not well-read on the provisions in the Bailout Bill, and if someone is able to comment from a more well-read position, please do.