Congratulations, America! You just bought more of a failing company:
In its most daring bid yet to stabilize Citigroup, one of the nation’s largest and most troubled financial institutions, the Treasury Department announced on Friday that it would vastly increase its ownership of the struggling company.
After two multibillion-dollar lifelines failed to shore up Citigroup, the government will increase its stake in the company to 36 percent from 8 percent.
Meanwhile, this:
Credit-card companies continue to raise customer interest rates and fees despite a record-low target rate from the Federal Reserve and billions of dollars in bailout money that has been pumped in to the financial companies.
Though the Federal Reserve in December slashed its target rate to a range of between 0% and 0.25%, and a cut at the Fed usually means a drop in credit-card rates as well, many credit-card customers are instead seeing increases as companies try to offset increased losses in their card operations.
Just nationalize them and get this over with sooner rather than later.
Mudge
And my bank has now imposed a $12.00 a month "management fee" on my small business checking account.
It would seem that all of that money the wealthy acquired from tax breaks evaporated in CDOs. I see no indication that manufacturing capacity or enduring employment opportunities resulted from the trickle down theory. In fact, to some degree, the excess cash at the top helped topple existing manufacturing capacity.
Now banks want to put the responsibility for their foolishness on those who are suffering as a result of their foolishness. It reminds me of the old days when nuclear plants under construction went belly-up and the losses were put into rate increases to customers rather than hearty losses for the stockholders..
I guess some things never change. They should.
The Grand Panjandrum
The credit card industry is the single largest ripoff of the American consumer in our history. It does not operate in good faith and is coddled by Congress. Go watch this Frontline episode if you want to know just what a bunch of thieving criminals they really are. They are essentially legalized loan sharks.
Wilson Heath
It isn’t about increased losses. New rules are coming for CC businesses. In 2010. They’re hiking the rates and changing the terms with impunity while they can. Fraking blood suckers.
Rome Again
@The Grand Panjandrum:
They are coddled by the State of Delaware too. The single biggest problem with the credit card companies is the protectionist corporate laws they reside under. They keep charging you more, more, more and they still pay next to nothing to be in business.
wilfred
Yes, it’s inevitable. This is how capitalism dies, not with any grand revolution or sudden appearance of genuine praxis among the people, but with simple understanding that it is, was and will always be rotten to its wealth amassing, human suffering inducing core.
Good riddance.
D-Chance.
One credit card… my Discover. Every time I use it, I deduct the purchase from my checking balance in my check register so that I don’t suffer "sticker shock" when the monthly statement arrives in the mail. When I get it, I write the check to pay it in full the same day, and get it right back in the mail. No revolving balance, ever. My Visa cards have been cut up and discarded.
kindness
I was OK with thinking that Tim Geitner was doing the slow walk to FDIC take over of the big boys (Citi, BofA). But now that some brainiak has decided to switch the US govt’s preferred shares to common, I think the intent is now to let the US government take the bath instead of Timmy’s friends on Wall Street.
If there was any way to stop that maddness, I’d like someone to bring it up. It seems like it’s all fait accompli now & I for one am really pissed.
Michael
We’re getting rate hike notices across the board.
wilfred
Government of, by and for the people. It’s not the US government getting bilked but Americans.
Of course they have to give a shit and start acting like functioning adults instead of children needing soothing speeches.
Michael
BTW, I’m looking at the current problem of the credit card as one of what happens when you allow a side system of privately printed money to emerge. Given the leveraging ratios, I don’t think that there is any question that it operates as a monetary system all its own, under its own chaotic rules.
As we found out early in our history, allowing multiple banks to do this ultimately causes a breakdown.
I’d argue for a unified, regulated standard for the issuance of revolving lines of credit in terms of interest rate, repayment terms and conditions, reserves, underwriting and available credit lines. Take the chaos out of the equation and call those lines what they are – money.
Rome Again
@Michael:
Usery is the culprit, and everything that is usurious is targeted in this crisis. Unfortunately, the used are getting the shaft too.
JGabriel
Citi CEO:
If it doesn’t, then the taxpayers are getting screwed. Even if it’s true, and I assume it is, how clueless is it for Citi’s CEO to brag about it?
.
Foobar
Can someone describe the ramifications of nationalizing a company the size of Citi or BoA? Channeling Rummy, there has to be an enormous amount of unknown unknowns. Would that cause a run on the other underwater banks? What happens to the other financial institutions tied into Citi? 401ks (already hammered of course)? hedge funds? the AIGs of the world? Bloodletting imposed on international banks? China’s desire to continue buying US debt? Obviously the Paulson-Bernanke-Geitner trifecta believes we need to prop it up, but what if we dont?
BombIranForChrist
So, we are pouring money into these worthless institutions so that they can turn around and remove money from the economy by raising credit card interest rates …
No wonder we need a stimulus. Our policies are at war with each other.
HyperIon
@Rome Again:
I heard on NPR that household debt (credit cards and mortgages) is currently at 100% of GDP. Hard to imagine. So I think the AMOUNT of debt is as important a factor as the interest rate on it. IMO if the credit card interest rate went to zero, there would still be many people who could never pay off their balance.
Li
It is not possible for us to nationalize even one big bank. Don’t believe me?
http://2.bp.blogspot.com/_9ZzZquaXrR8/SaheGhINdPI/AAAAAAAADAU/yvh7VJwN8oo/s640/BankDeposits.gif
Bear in mind that the FDIC has only 15 billion to insure trillions of dollars in deposits, and these banks are so heavily leveraged that if we nationalized them the US taxpayer would be responsible for all of those accounts. Which means, even in the best case scenario in which the government can scare up another 5+ trillion just to cover deposits, we would be paying interest through the national debt for bank deposits that should be accruing interest, not depreciating under interest. In other words, we’d be paying interest to the FED for our own bank deposits!
A collapse is inevitable now. I can see no way to prevent it. If you have money in one of those three banks, best to take it out now; perhaps the Gov can cover some of the small banks, but those three, and all of their accounts, are toast.