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IT’S YOUR TURN TO ACT.
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Weekly Tip
SCARIEST HEADLINE OF
THE WEEK (REUTERS)
U.S. Hedge Funds Likely
Lost Big in July; Experts Warn Disasters May Loom Where People Least
Expect Them:
"The unraveling U.S. subprime mortgage market is causing
other markets to fray around the edges faster than
anyone expected..."
HEADLINE
OF THE WEEK FROM BUSINESS WEEK
"The Pain Moves Beyond Subprime - The debt and leveraged-buyout
markets have stalled, and more trouble lies ahead”
AP: “The widening fallout
in the U.S. mortgage industry has reminded investors of a risk they
had forgotten: the fear of risk itself. “ |
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STOP THE SQUEEZE NEWSLETTER -
ITS WORSE THAN WE
SUSPECTED!
In Debt We
Trust director Danny Schechter reports on the film and campaign.
This weekly newsletter by Danny
Schechter is produced by StopTheSqueeze.org. Please subscribe to the
newsletter and Danny’s News Dissector blog on
MediaChannel.org. Your comments, stories and suggestions are
available. Write to
dissector@medichannel.org.
Please help us organize screenings of
IN DEBT WE TRUST
and give copies of the to friends.
SYDNEY AUSTRALIA:
Sometimes the real stories come out BEFORE the media interviews
begin, That’s what happened to me last week as I was waiting to be
interviewed about
IN DEBT WE TRUST
by Australia’s SBC
for a quick sound bite in their daily world news show.
The cameraman was telling
me about an argument he’s been having with his girlfriend about
whether to take out a new loan to fix up their new place. He’
against it; she wants to get it done right away. And what is the
bank saying? Take the money is the message of course.
The report on SBS was a
good one but buried in the newscast. It focused mostly on the drop
and then the rise of the stock market with little attention paid the
structural problems posed by debt. This is costing lots of money—a
clear sign that what goes around comes around for the greedmeisters.
And maybe for all of us:
Check this
out.
The latest report last
Friday showed the volatility which all comes back to the subjects
IN DEBT WE TRUST
is covering. AP reported:
"NEW YORK - Wall
Street plunged anew Friday, hurtling the Dow Jones industrial
average down more than 280 points after comments from a major
investment bank exacerbated the market's fears of a widening
credit crunch.
The drop of more
than 2 percent in major stock market indexes was a fitting end
to two volatile weeks on Wall Street and followed back-to-back,
late-day triple digit gains in the Dow…"
Unfortunately many
Americans believe that the higher the market, the better the
economy. Not everyone profits from the stock market’s machinations.
For another perspective,
check this
out. Also, if you follow the Federal Reserve Bank, you
will find
this Site indispensable.
I am hoping that SBS will
show my new film as they did with my last one, WMD (Weapons of Mass
Deception) which I found on video here even though I don’t think I
authorized it.
Meanwhile the debt story
is a big and growing one here in Australia as Marcus Padley noted in
The Australian:
We'll be
right mate — in the long term
"INITIALLY the
fallout from the subprime mortgage market was confined to those
exposed to the subprime mortgage market. But it is spreading and
the whole debt market is now trying to adjust to:
- Tighter credit
as credit providers cut their appetite for risk.
- Investors in
leveraged funds running for the doors.
Rather than a run
on banks, it's on hedge funds. The evidence has been building:
- Bear Stearns
has frozen redemptions on a third fund.
- Two of
Macquarie Bank's High Yield Funds admit investors could lose
25 per cent — even though they aren't exposed to the
subprime market. Macquarie's shares were slaughtered (down
10.7 per cent) yesterday with Babcock & Brown's (11.3 per
cent).
- $US3 billion
US hedge fund Sowood Capital announced it had lost half its
value in a month and told investors its two funds fell in
value by 57 per cent and 53 per cent in July. They are
selling to Citadel Investment, a Chicago hedge fund known
for picking up distressed ventures. The managing partner
didn't help by saying: "A loss of this magnitude in such a
short period is as devastating to us as it is to you."
- AHL, the
flagship hedge fund of Man Group, fell 6.8 per cent in a
week, usually up or down a percentage point or two.
- Word is, some
Tokyo and large US hedge funds are in trouble.
- Talk is that
Basis Capital (Australia) has gone bust.
And a US fund
manager, Jeremy Grantham, who manages $US150 billion, is getting
a lot of air-time for his comment that "credit-market declines
may force as many as half of all hedge funds to close in the
next five years". Last year, 717 hedge funds closed, leaving
9800 open. More than 717 will close this year."
WHAT NEEDS TO BE
REFORMED
Some practices that have come under particular public scrutiny are:
Double-cycle billing. The issuer computes interest on an
original balance that had previously been subject to an
interest-free period if a holder is late paying the balance on new
purchases.
Universal default. The issuer increases rates when
cardholders don't make payments to other creditors or have an
overall decline in their credit score.
Payment allocation. The issuer applies payments first to the
portion of an account with the lowest rate.
"Most national bank
issuers have already moved away from practices such as universal
default and double-cycle billing, according to John Dugan, the
comptroller of the currency, a position that makes him the
administrator of national banks.
The Federal Reserve has proposed overhauling Regulation Z, which
implements the Truth in Lending Act, to improve the disclosures
that consumers receive for their credit cards by making the
information timely and understandable. Disclosures with
credit-card applications and solicitations would highlight fees
and the reasons penalty rates might be applied.
Further, creditors would be required to summarize key terms at
account opening and when terms are changed, and periodic
statements would break out costs for interest and fees.
The Fed has received almost 200 public comments on its
rulemaking proposal. Among them, Ruth Hasty of Houston wrote:
"Truth in lending is nonexistent in credit-card charges. The
lenders can surreptitiously amass exorbitant late charges PLUS
more exorbitant charges for exceeding the credit card limit.
That is like a cruel parent tripping a child into a mud puddle
then punishing the child for getting dirty."
WHAT DEMOS PROPOSES
The Demos report suggested these reforms:
- Eliminating
universal default terms by requiring that any penalty rate or
fee increase be linked to a material default directly related to
that specific account.
- Limiting penalty
rate increases to no more than 50% above the account's original
rate.
- Providing at least
30 days' notice a card issuer is invoking a penalty pricing
clause.
- Prohibiting the
retroactive application of pricing changes so that rate changes
are applied only to purchases made after the issuer gives notice
of the rate change.
- Ensuring that
grace periods and payment posting rules and practices are not
designed to trigger late charges and penalty rates for minor
tardy payments.
- Requiring
disclosure of the full costs of making only the minimum payments
on a credit card, including the number of years and total
dollars it will take to pay off the debt.
Here’s a fascinating story...
THE HOUSING
BUBBLE.COM : The Market Is Drying Up In California
Inside Bay Area
reports from California. “Just about every day they gather on
the courthouse steps, waiting for an auctioneer to read off a
list of foreclosed homes at the Alameda County Courthouse in
Oakland. ‘We are here every day,’ Francis Ho said Tuesday before
entering an unsuccessful bid for a Livermore condo at the
hour-long auction.”
“Still, Ho’s was
the only competitive bid of the day. While many more foreclosed
homes are ending up on the auction block compared with a year
ago, that isn’t translating into a lot of bidding interest on
the properties.”
“Only a few people
showed up for Tuesday’s auction. Of the 12 properties that went
up for auction, only one, the Livermore condo, attracted any
bidding interest. There were no bids on the remaining 11
properties, which meant they automatically became the property
of the mortgage lender.”
“‘Usually, there is
not enough equity to make it worthwhile,’ Ho said. ‘A lot of
times, there is not much action. A glut of (auctioned
properties) are so highly leveraged there is no room for the
investor to pick them up.’”
“In June, 150
foreclosed homes went on the auction block in Alameda County,
compared with 74 a year ago, according to RealtyTrac. In Contra
Costa it’s even worse. Some 408 foreclosed homes were put on the
auction block in June, compared with 70 a year ago.”
In Debt We Trust
Screenings
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Help us get the word out.
* * *
Your comments and experiences are welcome. Write: Dissector@mediachannel.org.
You can read more of my daily blogs and articles on Mediachannel.org
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DEBT BLOG
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Please send this newsletter to your friends.
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If you have comments or suggestions,
share them with me at
dissector@mediachannel.org.
Danny Schechter
Editor
Mediachannel.org
Director IN DEBT WE TRUST
InDebtWeTrust.com
212 246-0202x3006 |
