Thanks for the update DickC 
One a side note, I agree with the comment from your friend that "tightening standards" and "reducing risk" are a good business decision and opportunity for the bank in THIS economic climate.
Where this changes is when their is excessive capital without use. When the investments, deposits, securities and general capital resources are heavy, then the banks and investors are looking for places to put the cash. This is when there is "pressure" to place the money and standards get more lax.
Rarity, like always, is what creates increased value. When markets are tight, the cost of money is higher (both in rates and standards). When there is more borrowers than money, rates and standards go up. When there is more money than borrowers, then rates and standards go down. This is the normal free market system.
The problems that arise is when rates are kept "artificially" low, thus creating a run on money not from true market causes, but due to artificial mechanisms. The money was not cheap due to abundance, but because debts were leveraged at artificially low prices. And since the over supply of capital was debt based and not abundance based, when there are losses they represent losses on debt which creates defaults that cannot recover through normal markets without allowing substantial failures, severe repricing of assets (stocks, bonds, real estate, etc).
Had the econcomic issues of the last few years been a result of losses to true abundance and capital vs. leveraged debt positions, then there would obviously not been the "melt down" because there would have been losses to capital, but this would not have created the ricochet of leverages positions where one loss created a debt default, which created a debt default, which created a debt default, etc, etc.
Essentially the system found itself over leveraged, without adequate capitalization (not debt capital) and no way to cover due to the creative accounting measures of modern times.
Therefore, the combination of government pressure (through artificial low rates and mandates of loaning to less than credit/income worthy) and the other supplies of capital created a huge influx of money that had to be placed. Money has to go somewhere, it doesn't stay under mattresses. As money flows in, this created added pressure to the system to loan to whoever would take the money.
In the future, less government involvement (artificial pressures) would provide for more natural market responses with less severe highs and lows. The problem with this position is that many people don't like natural market results, because it is "felt" that it isn't "fair" because some get "left out" meaning those who don't qualify, won't qualify. Thus the tendancy to override markets by creating artificial means to put people into various markets that really shouldn't be there, and who will eventually find that the short term benefits afforded, artificially, come back to haunt everyone.
IMO, as always.
@Anonymous wrote:
@wmarat wrote:Tighten standarts, new scoring model, second, third, fourth and last chances, higher APR's, lower CL's, AFs and little or no rewards - all this activity pretty much predictable.
What I am intrested to know what "bankers" prepare for customers like myself - decent score, perfect payment history, not big spender, acceptable income.
While I could not care less about APR, can live with crappy or no rewards program, I won't pay AF. Means, I would pay AF if perks provided worth it.
While I am not great profit, still I generate merchants fees, better than nothing.
I think in the long run good customers will always be taken care of. To me, I see no problems in reducing CL's down to a point where they are in line with a pesons ability to pay. Thats good business.
That is also a part of the scoring model that the gaming industry uses. They have a set limit each person is worth and they dont allow a person to go over it. In the gaming industry, say your "allowed limit" is $ 10,000. Now people don't care how you get to the amount, like $5,000 at 2 places, or $2,000 at 5 places. It just means you wont get $10,000 at 3,4 or more places.
Being as there will be fewer chances to make "money", I have no problem with an AF, if there is the chance to "opt out". As I was told, if they start the fee, a person can have it waived if they agree to "paperless statements" and handle their accounts online. When one considers it is said that it costs an average of $ 2.87 to manually generate, prepare and mail a statement to a person, I can see that.
I generate a few merchants fees for my bank, as they are a "processor" but I know many banks do not process credit cards, (having it done through clearinghouses) so they don't make that fees.
Whatever the outcome, I have no doubt a customer like yourself who maintains their accounts in such a good manner will be fine.
I completely agree. And in case my thesis was lost in my rambling: As the FED and Obama and others attempt to stimulate the economy by pumping money into the system (through debt) and artificially lower rates, there in lies the risk that we will end up in a similar crisis since we are using the poison (original problem) as the solution. When artificial rates, stimulus through excessive debt, and reliance upon comsumer deficit spending is encouraged, how can it be otherwise, eventually.
Live within means. Get out of debt. Collect interest, don't pay interest whenever and wherever pay. Have patience and wait on some purchases. Consider a modum of frugality. IMO and in agreement with DickC.
And unfortunately those who do well will most likely be labeled as evil, profiteering moguls, whether warranted or not by those who don't do well. One thing that I hope to see make a come back is a sense of personal responsibility for oneself to equal or exceed a sense of personal entitlement.
As always, IMO and without guile
