Rebel Traders – Analysis Without The Hype

The economy is doing just great… well so says the banks (sarcasm).

The Associated Press reports tonight that bankruptcies are surging. And that is with the new bankruptcy law that was passed in 2005 which makes it much more difficult for individuals to file bankruptcy.

The number of U.S. businesses and individuals declaring bankruptcy is rising with a vengeance amid the recession, despite a three-year-old federal law that made it much tougher for Americans to escape their debts, an Associated Press analysis found.

“There’s no end in sight,” said bankruptcy lawyer Bryan Elliott of Hickory, N.C., who is working seven days a week and scheduling prospective clients a month in advance. “To be doing this well and having this much business, it is depressing. It’s not a laugh-a-minute job.”[...]

[...]Nearly 1.2 million debtors filed for bankruptcy in the past 12 months, according to federal court records collected and analyzed by the AP. Last month, 130,831 sought bankruptcy protection — an increase of 46 percent over March 2008 and 81 percent over the same month in 2007.[...]

[...]Congress voted in 2005 to make bankruptcy more cumbersome after years of intense lobbying from the nation’s lenders, who complained that people were abusing the system. Before the move to change the law, bankruptcies were running at what was then an all-time high of about 1.6 million per year.

The tighter requirements initially appeared to work, with bankruptcies plummeting from a record-shattering 2 million cases in 2005 — a total that reflected a rush to file before the new law took effect — to 600,000 in 2006. But now bankruptcies are booming again.[...]

[...]“You wouldn’t get this large of a rise without serious problems in the economy,” said Lynn LoPucki, a UCLA law professor who researches bankruptcy.[...]

In 2005 the banks and financial institutions lobbied congress to make it more difficult for individuals to file bankruptcy. Now those very same banks are increasing interest rates to 29, 30, and even 34%, cutting credit limits by significant amounts, and even changing terms in the ‘card member’ agreements in some cases to now include the following:

“We may consider you in default if we obtain information that causes us to believe that you may be unwilling or unable to pay your debts to us or others on time.”

“If we consider your account to be in default, we may close your account without notice and require you to pay your unpaid balance immediately.”

The above excerpt is reportedly now included in the JP Morgan / Chase Credit Card agreements. So even if you are paying your bills, Chase can decide that you ‘might‘ someday not pay and decide to put your account into default without even telling you and then demand full payment immediately.

(warning: soapbox statement coming)

Just who the hell runs this Country? I think the answer is clear: The banks run the country and the tax payers have been bent over the railing many times; from the bailouts, executive pay, raising credit card interest rates to levels that make it impossible for people to pay off, and then we have to give them more money from our hard earned salaries.

This is madness!

Have a credit card? Stop using it, pay it off and get rid of it for good. Use a debit card/check card for making purchases. But don’t give one more cent to these banks and financial institutions, not one cent.

Bank of America said today that they will be raising the interest rates on nearly 4 million customers who are currently carrying a balance on their credit card.

Beginning this June, any Bank of America credit card customer who is carrying a balance and has been enjoying an interest rate of 10% or lower will see their interest rate immediately jump to double digit territory.

The bank’s move follows similar rate hikes that other banks, including Citigroup Inc., J.P. Morgan Chase & Co., and American Express Co. have implemented in recent months. The banks, facing rising delinquencies, blame the economic turmoil. Many have already been tightening the screws on people with less-than-perfect credit, but now they’re pinching a broader swatch of customers who have good credit records, but carry a balance.[...] (emphasis added)

[...]The rate hikes come as many card holders are losing their jobs and losing easy access to other forms of credit, like home-equity loans. That makes millions of Americans even more dependent on their credit cards to get by.

The Federal Reserve and other bank regulators passed rules in December that would limit banks’ ability to hike credit-card interest rates. But that doesn’t start until July, 2010.[...]

Source: WSJ

Today major credit card companies reported their most recent charge off rates.

From Reuters:

U.S. credit card defaults rose in February to their highest level in at least 20 years, with losses particularly severe at American Express Co (AXP.N) and Citigroup (C.N) amid a deepening recession.

AmEx, the largest U.S. charge card operator by sales volume, said its net charge-off rate — debts companies believe they will never be able to collect — rose to 8.70 percent in February from 8.30 percent in January.

The credit card company’s shares wiped out early gains and ended down 3.3 percent as loan losses exceeded expectations. Moshe Orenbuch, an analyst at Credit Suisse, said American Express credit card losses were 10 basis points larger than forecast.

In addition, Citigroup Inc (C.N) — one of the largest issuers of MasterCard cards — disappointed analysts as its default rate soared to 9.33 percent in February, from 6.95 percent a month earlier, according to a report based on trusts representing a portion of securitized credit card debt.

“There is a continued deterioration. Trends in credit cards will get worse before they start getting better,” said Walter Todd, a portfolio manager at Greenwood Capital Associates.

U.S. unemployment — currently at 8.1 percent — is seen approach 10 percent as the country endures its worst recession since World War Two, leaving more than 13 million Americans jobless, according to a Reuters poll of economists.

However, not all were bad surprises. JPMorgan Chase & Co (JPM.N) and Capital One reported higher credit card losses, but they were below analysts expectations.

Chase — a big issuer of Visa cards — reported its charge-off rate rose to 6.35 percent in February from 5.94 percent in January. The loss rate for the first two months of the quarter is 126 bps from the previous quarterly average compared to an estimate of a 145 bp increase, Orenbuch said.

Capital One Financial Corp’s (COF.N) default rate increased to 8.06 percent in February from 7.82 percent in January.

Analysts estimate credit card chargeoffs could climb to between 9 and 10 percent this year from 6 to 7 percent at the end of 2008. In that scenario, such losses could total $70 billion to $75 billion in 2009.[...]

Meredith Whitney, one of Wall Street’s best known and most bearish bank analysts, estimates that Americans’ credit card lines will be cut by $2.7 trillion, or 50 percent, by the end of 2010 — and fewer Americans will be offered new cards.[...]

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