I haven't been getting enough salt in my diet or something, because throughout the banking crisis, the state secrets crisis, the Michelle Obama weird-looking cardigan crisis -- I've been perplexed, sometimes a bit despairing, but not often outraged. My blood-pressure has remained pretty steady. Then I did something I just can't explain: I subscribed to the Wall Street Journal. And now, you guessed it, my head is pounding. Anyone have a Bank of America credit card? Watch out:
Bank of America Corp. is raising interest rates on as many as four million U.S. credit-card customers who carry a balance, becoming the latest bank to crack down on people who don't pay off their bill every month.
Starting with June account statements, any credit-card customer who carries a balance and has an interest rate below 10% will see his or her rate jump into double-digit territory. A company spokeswoman declined to provide an exact number, saying the changes would affect less than 10% of the bank's card customers in the U.S. The bank has 70 million card customers world-wide, but doesn't break out the number of customers who are in the U.S. "It impacts a small portion of our cardholders," said Betty Reiss, the spokeswoman.
The next paragraph goes on to name the company that BoA keeps in this raise-the-rates party, and it includes the bank that's quickly becoming my favorite villain. I know it's very in vogue to hate Goldman Sachs, but no one puts me as far along on the road to an ACE inhibitor than J.P. Morgan Chase. As emptywheel at firedoglake has been writing about, they're turning out to be evil on a new magnitude. Essentially, here's the story:- J.P. Morgan Chase (JPMC) has taken at least $25B in federal money, through TARP, AIG payments, and loans.
- It is a major bond-holder for Chrysler, to the tune of $2.5B.
- The government would like JPMC to take a "haircut" on this $2.5B, and swap it for stock to reduce Chrysler's debt load. This is part of the 30-day restructure plan released about a week ago (doesn't it feel like years ago?).
- JPMC, recipient of all that lovely government cash, has said no, and is pushing other banks to say no as well:
- WSJ: "J.P. Morgan, which has taken the lead in negotiations with the government, holds Chrysler debt in the range of $2.5 billion, said a person familiar with the matter. This person said the other lenders 'don't have quite the same view' as J.P. Morgan on how hard to push back on granting concessions."
- If Chrysler goes into bankruptcy, JPMC, as an asset-backed lender, is ahead of pensioners and government loan makers (taxpayers) in getting its money back:
- WSJ again: "The J.P. Morgan position, said these people, is that concessions by Chrysler's creditors should be treated as they would be in a normal bankruptcy -- meaning the billions of dollars of government debt and the UAW retiree health-care obligation should be wiped out before the secured lenders lose anything on their $6.8 billion."
- If Chrylser goes into bankruptcy, the net result according to Chrysler would be the loss of 300,000 more jobs (and health benefits for up to 700,000 thousand). But don't worry -- JPMC will make some money anyway. It has the contract for Michigan's unemployment debit cards, and is planning to charge some hefty fees [.pdf] for their use outside of very narrow parameters. For instance: need to check your balance at an ATM? You can do that once per unemployment deposit for free -- after that, it'll be $1 each time.
Yeah, that feeling? It's a medical condidtion called Hypergreedtension, where your rage begins to physically manifest itself in a spike in blood pressure simply at the mention of JPMC's name.
Dday points out, very reasonably, that if the Treasury department continues to see JPMC as any kind of ally after this, they're insane. I agree. My long-awaited day of reckoning with Treasury is coming up, with the results of the stress tests, but any further assistance to JPMC before then -- or any continued friendliness to them if they spear-head an effort to drive Chrysler into bankruptcy instead of reorganization with Fiat -- will probably make us enemies much sooner than that.
If you crave action, Emptywheel recommends closing your Chase account, if you have one. (Full disclosure: I just realized I do have one -- Starbucks runs their Visa Duetto program through Chase, apparently. I won't be cutting it up, but I'm happy just to use the gift-card side of it for the foreseeable future). I'm not one for advocating a run on any bank, even if it's a spectacularly evil bank, but it does seem that the language of profit is the only one this bank understands. Something to think about. And probably cheaper than medication.
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Catherine Forsythe
Writer to the Stars
Emily Holleman
Iron Skillet
Leslie Harpole
old new lefty
Salon.com
Comments
ps.. me thinks zuma's gonna write a whole post with just stolen lines.
A few years ago, I kept getting these "invites" from Citi to apply for one, but by then Congress had already let the usury companies have their way with credit card fees, including those outrageous interest rates that they could impose, EVEN IF you weren't late with a payment to THEM.
It was too bizarre.
Even then, when I had looked at what I had coming in and where it was going, I realized that I honestly didn't have enough discretionary income left after each pay to justify a credit card.
And... if I had let one run up, I'd sure be feeling it now, even though I'm earning significantly more money, just because everything costs so much more.
I still can't believe what we spend on food every week!
Once again, Saturn, you bring it back down to earth for us.
(Saturn, the planet that (metaphorically speaking) provides us all with major Reality Checks. It's a good thing, perhaps, that Jupiter Jones was already taken.)
I also don't understand why anyone uses credit cards these days. It's like having Count Dracula as a roommate in order to help pay the rent.
So why would credit card companies try to encourage behaviour like mine? You can shear a sheep many times, but you can only skin it once.
So?
JPMorgan Chase is in business to make money. They are protecting their investment in Chrysler. If I were a shareholder of JPMorgan Chase and they weren't trying to protect their interests and the interest of their shareholders, I would be pissed off.
And nobody's convinced me that it's in the best interests of the country to have Chrysler survive. I mean, I find it hard to believe that we're tossing all this money into GM and Chrysler when there's a company that is in the same industry as they are which hasn't taken a single dime from them yet -- Ford.
I would be just fine if the Big Three became the Big Two. Seriously, when was the last time Chrysler actually produced a product which people wanted? When they came out with the minivan?
I think that those in the know (the big, big players, not the peons) realize the entire financial system is on the brink of failure ( despite any stock market rally and Gov. help) and they just want to squeeze the last drop of blood out of Joe 6 pack and then they'll be in high cotton when the end comes. Those at the bottom won't be too happy though.
But if you read the human heart you already know what to expect.
As to JP Morgan's actions, this is unfortunately the result you get when government gets involved in business (let alone two businesses--a car maker and a bank). As Herbert Stein once said, all economic news is good for somebody, bad for somebody else, so once government gets involved, it has to choose who to hurt. If you give JP Morgan TARP money, you want them to succeed--so they can pay their FDIC assessments, which pays for more bank examiners, which improves safety and soundness, and make more loans to businesses, lower rates on credit cards, etc. It's discombobulating, but it's true.
As for what happens in a bankruptcy, employee health benefits are entitled to a priority over unsecured creditors (such as the businesses who sell Chrysler parts, steel, etc.) Those businesses have to pay their employees wages and health benefits (much less generous than auto makers), and they aren't getting a bailout. They'll probably have to lay people off, or increase employee contributions in order to survive. I think those companies and their employees are the ones deserving of the most sympathy.
Such weasels.
I gotsta find a jobby job...
But then they upped it to ***27%***
Screw them.
Of course, good luck if you want to switch to a cash-only basis: [http://www.youtube.com/watch?v=XMB6L487LHM&feature=player_embedded]
That being said, if we assume the TARP money is necessary, then that means banks need to build up their equity positions, which means pulling in their loans (i.e. delevering).
It's mathematically impossible for the banks to simultaneously expand credit and delever.
What Stella said.
I have a balance transfer on a BoA card riding at a promotional 1%. If they touch that I'm going to... fast-forward to the end of Fight Club and watch it over and over.
I only carry and use my Amex, for the reasons stated by an earlier poster.
I get hypergreedtension whenever I stop to pay attention, which is why I don't always pay attention. Thanks for this succinct and understandable analysis Saturn.
I wish the "haircuts" for some of these institutions started somewhere around the neck....metaphorically speaking, of course.
It won't matter to you.
And don't tell me it can't be done. I grew up in a one income family with a brother and a sister. My dad NEVER ran a balance on his credit card. NEVER.
He actually gamed the system by taking money from Discover, paying a low fee, putting the money into a money market fund, collecting the interest, and then paying Discover back when the bill was due.
If you are running a balance on your credit card and you are paying a high interest rate, you've got only yourself to blame.
In reply to a few who are calling credit cards crazy, while I understand the sentiment and certainly the logic behind never keeping a balance on a credit card, for some of us that's unrealistic. If I charge something I can afford -- say, a rental car or a hotel room on a vacation, since both require a credit card anyway -- and then, before I can pay that balance off, my car breaks down, or my front tooth breaks, then I will suddenly need to let that balance ride for a month. That's the situation that a credit card was invented for -- the "I'm good for it" situation, the emergency. Yes, they're sometimes -- perhaps often -- used to extend a lifestyle beyond what can be afforded, but I think blanket statements about the evils of using them aren't considering the full picture.
http://open.salon.com/blog/j_busse/2009/04/04/jp_morgan_chase-why_do_they_exist
But this is still nothing compared to using the Federal Reserve to run down competitors stock to buy them up the way Citigroup did it to Wachovia. The Fed is owned by investment banks Goldman, JPM and Citigroup. Lehman Brothers was another hit and run victim.
Investment banks are the main contributers to Congress and candidates, own the US debt and run the Federal Reserve and are corporate canibals. This is the real story.
http://www.webofdebt.com/articles/banking-bailout.php
http://open.salon.com/blog/jimgalt/2009/03/29/big_fish_little_fish
But if you want a career in writing you might pretend to never have read this. Take a guess who funds about every international org there is? Who had reps at every major international conference during wars and reparations? Banking and politics is inseparable. One runs the planet, the other pretends to run the planet.
interest raised from 9 to 22? just quit paying them...
What has the lessening of competition brought us in the auto industry? Cars that don't do much better in fuel efficiency than their ancestor models did a half-century ago, safety innovations largely forced by Congress and a frittering away of a culture of innovation the auto industry used to help drive in this country.
Anyone who hasn't needs to read Kevin Phillips' "American Theocracy." It lays out the roadmap for what is happening now and his predictions for what our probable fate is as a country is not pretty. I'm only surprised at how quickly his predictions are coming to pass.
So, Saturn, you still copasetic with Summers and Geithner? Were you taken in by Greenspan back when he was advocating taking out adjustable rate mortgages, even when fixed rate were available cheaper?
Much as I applaud your insightful posts, I gotta say - wake up and smell the bullshit!
I did exactly that to Discover Card and Wells Fargo Financial two years ago. After a few months of haranguing me, they finally got the picture - I wasn't going to pay them a dime until I got some major concessions. Discover lowered my rate to .05%, and agreed to accept $6000 to pay off a balance of nearly $7500. Well Fargo lowered my rate to ZERO!!
Don't be afraid to play hardball with Credit Card lenders. They are nearly powerless as regards getting money from you if you choose not to pay. Sure, they can ruin your credit rating, but the last thing you probably need right now is a credit standing which is actually good for one thing only - borrowing more and getting in deeper. And when you do settle with them, get it in writing that they will remove any negative entries on your credit report(s).
Is it better to eat into your savings which are paying you two percent or pay JP Morgan Chase 14 percent?
You do the math.
I repeat -- if you run a balance on your credit card, you've only got yourself to blame. And yes, you are the bank's bitch. It sucks, but you've only got yourself to blame.
Up until a few months ago, my credit score was golden. Then a credit card started to send ebills in October, even though I didn't ask for ebills and starting in December 08, I asked for paper bills. (The ebills would go to junk or trash half the time.) I would have to call and ask them what I owed. In Jan, they told me a wrong amount, which I paid. They then said I was "late" in my payments even though they told me the wrong amount and even though I yelled at them and talked to every supervisor they said too bad, we're raising your interest to 32% (it was 0%) which then caused all my other credit cards to 1)lower my available credit and 2) raise my interest rates to 24% or higher, when they were below 10%. I have gone on strike and I'm not paying them anymore. The first credit card already junked my "golden, perfect" credit score so as far as I'm concerned too bad for them.
I haven't seen the Tucker movie but what I've read about Preston Tucker seems to indicate he made some business decisions that, while not corrupt, weren't wise. The fact that it was future Illinois governor Otto Kerner who tried to put Tucker in jail--a man who would later blaze a trail for other future Illinois govs by being jailed himself--was sort of icing on the irony cake. Given the production difficulties Tucker was having, it's hard to see how the major companies could have seen him as a threat. Moreover, the 50 Tucker '48 prototype models that were produced used freaking helicopter engines, so it's not like they were some decades ahead of their time green machines. Though, to be fair, the Tucker '48 had a number of innovative features.
Actually, Studebaker and AMC had the ahead of their time cars when it came to fuel efficiency, especially the Scotsman and Ramblers.
Well, this one is no surprise to me. There have been lots of articles on the general issue of banks starting to big pull back on credit cards in the last two weeks. I don't see anything for anyone to get all hyped up about. We surely knew it was coming, else why are their bills introduced in both houses to put limits on credit card interest rates, etc.? Senate Finance is scheduling hearings. It has long been the least regulated part of the banking bingo game.
I think it is interesting that, once again, when it comes to seeing the adverse impact on the public, the Treasury and the Administration are not in the lead. Any clues there for you? I continue to beat the drum in an echo chamber. But you cannot forever think that Messieurs Geithner and Summers are on our side, unless, of course, we are defined as a bank, hedge fund, or other Wall Street prince.
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I have a Chase card I have had over 25 years. I have no idea what the interest rate is and have never paid a dime of interest. It is an easy way to keep track of what we spend.
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People who need a good credit rating in the near future should keep in mind that no matter who closes your account or for whatever reason your credit score will go down. Better to just not use it for a while. Or, God forbid, pay it off on time every month.
Take care,
Monte
Take heart! When Chase gets sued they always, always, always lose. It's a tradition going back to the 1970's when they were Chase Manhattan. Sue 'em and you'll win. It's an in-house joke to anyone who has ever worked for them (and I did, years ago.) They are without a doubt the most neurotic bank ever. They keep thinking they can pull some crappy trick, they get sued, they lose. Rinse and repeat and repeat and repeat.
I don't even know how they stay in business considering the billions they have had to pay out over the years. They might not have even needed that tarp money if they had a legal team who could get them to listen to their advice. That, or they have the worst lawyers in the world.
And what does paying on time have to do with it? Millions who paid on time still had their interest rates jacked up. What planet did you say you were living on?
How is this different from just raising the rate now? If I tell you the price of an apple is $1.00 now on the shelf but it's $10 if you buy it, what price is the apple really?
Second, if you are running a balance, close the card and pay it off under the old terms. And never run a balance again. Ever. It can and should be done. I'm guilty of running a balance on my cards but you better believe that ain't gonna happen once I am done paying them off.
As for the banks jacking up the fees, baloney. I've got my fee free Amex and have had it for about a decade now. And my father has had fee free credit cards as long as I can recall.
Credit card companies make money even if you don't run a balance. In fact, Amex used to only issue cards that had to be paid in full every month. How did they make money on those?
By charging merchants a fee for every transaction they processed, just like they do now.
So, if you generate enough revenue through that to make them money, they'll be happy to keep you as a customer even if you don't run any balances.
Now, if you only charge a couple hundred bucks a month on your card, and you don't run a balance, well, then, in this day and age, you likely will see your card closed. So be it. You didn't need it. Just use your debit card instead and be done with it.
http://tinyurl.com/dhvxq2
There is a class action suit over it. I have a Chase checking account, and a Chase card that I never used and they closed it on me. I'm wondering if that will allow them to trash my credit rating now...
Bastards...
I wish we could call a do-over with the TARP funds. I'd protest - loudly - giving any of these thieves any taxpayer money. They're like a rescued dog who turns on its rescuer. Enough!