THE HOUSE OF CARDS IS FALLING DOWN
ElParedon
You thought the housing crisis was bad? You ain't seen nothing yet.
By Danny Schechter
The Mess
http://www.informationclearinghouse.info/article20196.htm
28/06/08 "LA CityBeat" -- - Nationwide, two million homes sit vacant. Home
sales are at a nine-year low. Former Treasury Secretary Larry Summers says
that housing finance has not been this bad since the Depression. We still
don't know the full extent of the colossal subprime rip-off, but a recent
Bank of America study did some guesstimating on the scale of the
consequences of the "credit crisis." The meltdown in the U.S. subprime real
estate market, the bank said, had led to a global loss of $7.7 trillion
dollars in stock market value since October.
While many eyes are focusing on the housing meltdown and its hugely negative
effect on an economy clearly moving into recession, few are paying attention
to the next bubble expected to burst: credit cards. Combined with the
subprime losses, such a credit card nightmare has the potential, experts
say, of bringing down the entire financial system and global economy.
You and your credit card have become key players in the highly unstable
financial crunch. Mortgage lender cupidity and bank credit card greed wedded
to financial institution deregulation supported by both political parties,
have been made manifestly worse by Bush administration support-the-rich
policies. It has brought us to a brink not seen since just before the Great
Depression.
While campaigning in Edinburg, Texas, in February, Barack Obama met with
students at the University of Texas-Pan American. "Just be careful about
those credit cards, all right? Don't eat out as much," he said. After the
foreclosure crisis, he warned, "the credit cards are next in line."
The coupling of home equity debt and credit card debt has gone hand in glove
for years. The homeowners at risk can no longer use their homes as ATM
machines, thanks to their prior re-financings and equity loans, often used
in the past to pay off their credit cards. Indeed, homeowners cashed out
$1.2 trillion from their home equity from 2002 to 2007 to pay down credit
card debts and to cover other costs of living, according to the public
policy research organization Demos.
To compound the problem, fewer people are paying their credit card bills on
time. And, to flip the old paradigm, more are using high-interest credit
card cash to pay at least part of their mortgages instead of the other way
around.
How bad is it?
. Financial analysts say that in the U.S. alone more than $850 billion in
unpaid credit card balances is at stake and fast approaching $1 trillion,
roughly the same amount as in the subprime market.
. CNN reports that worldwide, consumers have racked up more than $2.2
trillion in purchases and cash advances on major credit cards in just the
last year.
. The unpaid debt portion of this is continuing to pile up, with U.S.
consumers last year adding $68 billion against their credit lines, boosting
credit card debt by 7.8 percent, the largest increase in seven years, just
when the last recession was beginning.
. Even as they spent, consumers have been going into default at a stunning
rate. The percentage of people delinquent on their credit cards is soaring,
and credit card companies are now writing off somewhere near 5 percent of
payments.
. By last fall, the major banks were setting aside billions for loan-loss
reserves while anticipating an increase of 20 percent in non-payments over
the next two to four quarters.
. Capital One, one of the biggest credit card banks, was forced to write off
$1.9 billion in bad debt just in the last quarter of 2007.
.By October, according to a survey of only the leading credit card banks by
the Associated Press, the value of credit card accounts at least 30 days
late was up 26% from the previous year, to $17.3 billion. Serious
delinquencies among some of the biggest lenders rose by 50 percent or more
in the value of accounts that were at least 90 days delinquent.
. Making matters worse, or more widespread throughout the economy, just as
with mortgage debt, credit card debt is put into pools that are then resold
to investment houses, other banks and institutional investors. About 45
percent of the nation's $900-plus billion in credit card debt has been
packaged into these pools, and so many companies, not just a few, are at
risk of being forced out of business by credit card debt write-offs.
What this adds up to, and what Obama didn't say, is that we are actually
face to face with the results of the most massive failure of our political
and economic system since the Depression. Since Ronald Reagan, we have been
living in an era in which neither the meltdown of the savings and loan banks
in the 1980s nor the Enron-like scandals of the Bush years has stopped the
relentless advancement and protection by both parties of the ability of
financial institutions to make a buck at any cost to the social good and
economic fabric. Which is what you get, of course, when both parties are so
dependent on massive financial contributions to get their candidates into
office and when the corporate media, heavy with advertising from the FIRE
sector - Finance, Insurance and Real Estate - doesn't warn the public or
investigate the egregious fudging, misrepresentation and outright fraud that
underpins the subprime and looming credit card crisis.
Priceless!
The credit card industry (Visa, MasterCard, American Express, etc.) and the
10 banks that dominate the industry as the primary card issuers spend an
estimated $2 billion a year in endless marketing worldwide. We are all
bombarded with their solicitations and sales tie-ins and gimmicks. They know
that they might only have a 2-3 percent return rate, but that more than pays
the enormous costs. They have thus succeeded in supplying 1.5 billion cards
to 158 million U.S. card holders. That averages to 10 cards per person. In
the last few years, retailers, banks, a wide range of companies, sports
teams, unions and even universities have launched specialized card programs.
Like the car companies that discovered that they made more money on car
loans than automobiles, the benefits of what's been called
"financialization" is obvious to more business sectors.
Credit card advertising for new card holders is especially effective now as
inflation drives costs up and consumers have less to spend. "Charging it" on
yet another new credit card is for many the only option to meet their
budgets or maintain their lifestyles, especially as gas prices rise. It's
become habit for many to spend more than they have. As a result, overall
U.S. credit card debt grew by 435% from 2002 to year-end 2007, from $211
billion to approximately $915 billion.
The relentless, continuing push by the credit card banks doesn't target
potential customers alone. Constant focus group studies and other research
techniques are still being used to persuade retailers to encourage more
credit card transactions. Increasingly, businesses simplify their use by
"swiping" and other gimmicks, no signed receipt needed.
"More and more sectors of the American economy recognize that their
financial success is based on the success of the credit card industry,"
explains Robert Manning, the author of the definitive Credit Card Nation and
a leading expert who has been sounding the alarm about the consequences of
credit card debt.
"Everything is very clearly thought out and premeditated. Whether it's
having conferences and think tank sessions about how to encourage people to
accept more debt [or] to work with merchants - for example, to persuade
merchants with empirical information that ... if they use a credit card that
they'll buy 20-25 percent more."
Manning notes that saving and thrift was historically a positive value in
the U.S. As recently as the l980s, the national savings rate was 10 to 11
percent. Since 2005, Americans have saved less than 1 percent of their
disposable incomes. In fact, the most recent figures from March show that
the savings rate is negative, below zero. And also in March the government
reported that for the first time since the Depression, Americans owe more on
their ?homes than they have in equity. Essentially, on average, America is
broke and its credit cards played a dominant role in getting there.
Manning, who teaches at Rochester Institute of Technology, has taken on the
issue with original research and financial literacy courses for students. He
found that many of his students already had credit cards before they arrived
on campus, some for years.
As we all know, the companies don't tell about the downside when they are
seducing customers. They offer low introductory or teaser rates, in the same
way that mortgage brokers enticed sub-prime customers. They offer rewards,
frequent flyer miles and other prizes. Students are especially targeted
because they have little real-world financial experience. The U.S. Public
Interest Research Group, which is campaigning against student debt, says the
average is $4,000 per student, but it easily climbs after four years to
$15,000 to $20,000.
All of this, in our globalized world, is not unique. Clear across the world
and down under, the New Zealand Union of Students' Associations (NZUSA) and
bank workers' union Finsec are joining forces to try and keep students out
of high-interest debt. The amount students owe on credit cards has increased
by 32 percent since 2004, according to the NZUSA Income and Expenditure
Survey. Credit card debt has increased at a higher rate than low to no
interest overdrafts.
Here in the U.S., one mother, Joan E. Lisante, has set up a website targeted
at other parents, www.consumeraffairs.com, so they can tell their stories.
She wrote recently about what she calls the "plastic prison."
"My 22-year-old son Jon, a college senior, got 52 credit card offers in the
last year. I know this because, like a CIA operative, I intercepted the
offers pouring into our mailbox.
"He got 19 from Capitol One, 13 from Providian, six from Washington Mutual,
four from Chase, four from eBay and one each from an assortment of lenders
ranging from PayPal to First Premier Bank in Sioux Falls, South Dakota
(co-capital with "Small Wonder" Delaware of the credit card kingdom).
"Most begged Jon to rip open the envelope and wallow in instant
gratification. Capital One, the most persistent suitor, shouted, 'Offer
Status: Confirmed. No Annual Fee!'
"'16 Card Designs' (but none that tally the total whenever you use it). You
could get a response in as little as 60 SECONDS when you apply online.
"Now this kid has never held a job (yet) for more than one summer. He spent
one summer working in the FEMA flood insurance call center, which shows how
much expertise you need to work there. Although he is familiar with the
inner workings of Blockbusters and Starbucks, Jon's not yet a member of any
corporate elite, prestigious profession or skilled craftsman's guild. Does
this matter? Apparently not."
"The key for the banks," Manning says, "is to get them dependent upon
consumer credit, shape their attitudes towards savings, consumption and debt
and to then multiply the number of financial products that they're buying
from that particular bank so the credit card will lead to the student loan,
to the car loan, eventually to a home mortgage and then maybe some insurance
products and investment opportunity.
The banks, he says, want students in a condition of dependency. "Young
people today that see credit as a social entitlement have no understanding
of what it is going to entail to repay those loans back. Once they're used
to living on borrowed money, then the banks realize that they'll be
following that pattern possibly for the rest of their lives. By the time
they graduate they're so indebted, and they're so dependent upon the use of
credit and debt, that it's already presaged their future. They can't
possibly pursue the kinds of careers that they anticipated."
Defaults on student loans are climbing. Many students used those loans to
pay off credit cards. Military recruiters are now promising to pay off debts
to entice enlistments. Other government agencies are also offering funds as
part of their head-hunting.
Rise Up
"Many of you have probably forgotten that the American Revolution was
largely driven by the great American planners, that were heavily in debt to
European banks and they had very onerous terms," Manning said in a lecture I
attended when I was making my film In Debt We Trust. "And they recognized
that they could not financially prosper under such outrageous financial
demands."
On the day I visted Manning's lecture in an alcove literally right next door
to the lecture room in the student center, local branches of banks like
Chase and HSBC were signing up students for checking accounts and credit
cards. Freshmen lined up at the tables to set up accounts. The banks had
permission from the same school administration that hires Manning to counsel
students to avoid getting into debt.
I listened in at the pitches.
BANK REP: "You don't need anything for deposit, and we're giving out free
backpacks."
BANK REP: "You get zero percent on the purchases for the first six months
and then it goes to the standard intrest rate."
QUESTION: "What's the interest rate?"
BANK OF AMERICA REP: "The interest rate is variable ... to be honest with
you, off-hand, I don't know the interest rate off-hand. Sorry."
A student is counting out twenties as his first deposit.
BANK REP: "I just need your signature. Right here, please."
ANOTHER BANK REP: "And it's free while they're a student."
What will happen when they do have to pay it back includes nonstop calls to
them and their parents. Credit card collection agencies know how to harass,
threaten and then sweet-talk cardholders who are late. They even have a term
for people squeezed by debt: "sweatbox." They also know that the longer the
debt goes unpaid, the larger the potential profit for companies, as interest
builds up at rates of up to 30 percent. Credit card promoters call people
who only pay minimums "revolvers." Those of us who pay our bills in full?
"Deadbeats."
Recently the companies unilaterally hiked late fees and penalties that
compound the debt. A few missing payments can earn you an interest rate hike
to 29 to 30 percent. If you are late with a payment on some other debt not
related to your credit card, you can readily find your interest fee doubled
on your credit card. Some companies make more on fees and penalties than on
interest payments. The companies racked up more than $17 billion in 2006,
the last year for which records are available.
Like many of the homeowners who accepted subprime mortgages, and like you
with your credit cards, youths and adults alike signed dense agreements that
are largely unreadable. The credit card banks constantly update these with
those small print notices with which you get assaulted in the mail, these
drafted by risk-minimizing lawyers. Of course, it's unlikely you bother to
read these. In part of the unread text, the companies give themselves the
right to unilaterally change the deal even after it is signed. Other small
print insures that consumers cannot sue them over differences. All
grievances have to be arbitrated in a process the companies created and
control.
Even the Federal Reserve Bank condemns some of these practices, noting:
"Although profitability for the large credit card banks has risen and fallen
over the years, credit card earnings have been consistently higher than
returns on all commercial bank activities."
Michael Ejercito
> House of Cards
>
> You thought the housing crisis was bad? You ain't seen nothing yet.
>
> By Danny Schechter
>
> The Messhttp://www.informationclearinghouse.info/article20196.htm
Michael
ElParedon
audible voice, award-winning Palestinian journalist Muhammed Omer has given
a full account of the hair-raising encounter he had last week with Shin Beth
agents at the Allenby Bridge border-crossing between Jordan and the West
Bank.
Omer, a co-winner of the 2008 Martha Gelhorn Prize for Journalistic
Excellence, said he was abused, assaulted , humiliated, ridiculed, kicked,
and strip-searched at gunpoint by undisciplined Shin Beth officers until he
had a nervous breakdown in which case he lost consciousness for at least 90
minutes.
A resident of Rafah at the southern edge of the Gaza Strip, Omer said he
didn't know for sure why the Shin Beth people treated him in such a barbaric
matter apart from the characteristic sadism and savagery routinely meted out
to Palestinians.
"They behaved with unimaginable hatefulness and vindictiveness. They couldn't
accept the very idea of a Palestinian journalist winning a renowned
journalism prize. They wanted to punish me for being a successful journalist
and especially for exposing Israeli barbarianism to the people of Europe."
The following is Muhammed Omer's story as intimated by him to this writer:
"On Thursday, 26 June, the Israeli authorities finally allowed me to return
to Gaza after several days of waiting and uncertainty in Jordan. When I
arrived at the Allenby Bridge Border Crossing, I was dragged away rather
unceremoniously to a special room where I was made to wait for more than 90
minutes. This happened as Dutch diplomats who were accompanying me were
waiting outside.
"When I arrived on the Israeli side of the Allenby Bridge, I encountered an
Israeli female officer who started mocking me in a brazenly insulting
manner.
"She asked me repeatedly where Gaza was. She then said I had no permit to
return to Gaza via Israel.
"Then a Shin Beth officer who introduced himself as "Avi" showed up and took
me to an isolated room where I was kept stranded for an hour and a half.
"He asked me "Oh, You are Muhammed Omer.
"Yes, I said.
"You know you are a fool," said Avi, adding "how could you leave Europe and
return to Gaza where there is no water, no electricity, nothing.
"I told him Gaza was my country, and I was a journalist and wanted to be a
voice for the voiceless.
"A voice for the voiceless," Avi spoke sarcastically.
"He then asked me if I was carrying any contrabands or guns or knives.
"I said no, I had none.
"Then he asked me to produce the money of the prize I won. I told him that
the money would be transferred later to my bank account."
"Then one Shin Beth agent demanded in a stern tone that I hand all the money
I was carrying with me over to them. They didn't believe I didn't have the
prize money with me.
"Disappointed, Avi, who was carrying a pistol in his hand, ordered me to
take off all my clothes, which I did, leaving my underwear. At the same
time, another officer was pointing an M-16 rifle in my face.
"Take the underwear as well," he said. "I told him I wouldn't. What do you
want from me," I protested in a suffocated voice.
"Then he ganged up on me and forcibly removed my underwear piece, leaving me
completely naked."
"Avi, training the pistol at me, told me to turn right and turn left, before
telling me to get dressed again.
"At that point, I was nearly totally broken emotionally. I felt I was being
raped. I cried and pleaded to them to leave me alone, but to no avail"
"Telling me I haven't seen anything yet, they dragged me to another room
where they interrogated me on my speaking tour in Britain, Sweden and
Greece.
"Oh, you have not left a place in Europe without speaking at.You know these
Europeans, they hate Israel.
"Then another Shin Bet officer began kicking me and pushing me. This lasted
for more than ten minutes after which I fainted and lost consciousness.
Eventually they began dragging me along the floor by my feet with my head
banging on the floor.
"I don't remember much of what happened to me during this period, but
remember a Shin Beth officer piercing his finger right below my eyes and at
the lower end of ears. Also, another Shin Beth officer was pressing his
large boots against my neck as I was lying unconscious on the ground.
"I thought I was dying. I remained in a state of unconsciousness for up to
90 minutes until a medical doctor, who was carrying an M-16, performed an
(electro-cardiogram) or ECG on me.
"Then I heard someone saying the word 'ambulance.'
"However, before a Palestinian ambulance from Jericho arrived, a Shin Beth
officer came to me and asked me to sign a form that I was not being
maltreated by the Shin Beth.
"I was too distraught, too confused and too unconscious to say anything.
"Eventually, I was taken to the Jericho hospital where I was assured by
doctors that I was fine."
Muhammed Omer said the Israeli Shin Beth inserted a special electronic
device into his mobile phone which would enable them to know his
whereabouts.
He also called upon his colleagues around the world to condemn in the
strongest words the "criminal and disgraceful Israeli behavior" which he
said "only befits criminals and thugs, not states, let a lone states that
claim to be civilized, western and democratic."
The Dutch Foreign Ministry has protested the traumatic treatment meted out
to Muhammed Omer and demanded and explanation.
Similarly, the Dutch Embassy in Israel reportedly has raised the issue with
the Israeli Foreign Ministry.
The Shin Beth, Israel's chief domestic security agency, controls all aspects
of Palestinian lives and is widely believed to systematically and grossly
violate the basic human rights of Palestinians.