“You’ve got them backwards…”
Got what backwards? Timelines don’t lie, Mike.

“You are confusing the mortgage part of the credit market with other parts of the credit market. You seem to be lumping together a bunch of different things.”
No, I’m not. I understand the aspect of the whole process of spreading risk around as “credit” towards those who passed monies around as much different than the “credit industry” of those handing out credit cards.

I do not find it illogical to conclude the tactics of the credit card industry affected mortgage defaults, leading to investment credit to fall short of expectations. It was a large gamble to assume the housing market was never going to fall as it did.

For those of you wondering how I’m making this connection, let me take you back a few years when the housing market was rising (thus, the lead up to the bailout).

The credit industry took it upon themselves to start making changes in the way the do business. Here’s what they did:
Phase I: Eliminate the high credit/limit information when reporting to the credit bureaus.

This was devious and some issuers are still doing this today. Here’s how it works (assuming a credit card limit of $3000, $1000 balance, $25/mo payment, and never late):
The information sent to the bureaus omitted the $3000. This forced the evaluation of the report to take the balance ($1000) and turn it into the limit, meaning, you were now “maxed out” at 100% of your credit line.

This move forced the credit score to drop! It also affects the debt-to-income ratio used by financial institutions. This example shows a moderately good borrower turned into a high risk borrower by the simple elimination of credit information. Millions were affected by this.

Phase II: Raising interest rates due to “competition”
Imagine, to your shock, your 1.9% interest rate instantly increased to 23.99%. You’ve never been late with a payment. So why the increase?
Simple: You had cards issued from the “competition”, and the increase was to “penalize” you for having it.

This one hits home because I was a victim of this. So were hundreds of thousands of others, judging by the information posted on the web at the time. Many people didn’t get a satisfactory answer when they called. It took me 2.5 hours to get mine, and only because the guy I was talking to felt sorry for my situation.

Phase II also included constantly changing the payment due dates on every statement to ensure borrowers would overlook it, forcing the “late payment” penalty upon them. One lady sent me in her statements, and sure enough, all 5 have a “notice” indicating the payment due date change.

I won’t even get into the dropping of the grace period many issuers enacted.

Phase III: Lobby for bankruptcy law changes in their favor!
Well, this certainly worked! In 2005, the new bankruptcy laws were changed and it came at a perfect time when interest rates were being raised for “no apparent reason” of good, hardworking people doing what they’re supposed to do: pay their bills on time.

Shortly after the law was changed, damn near every credit issuer raised their base principal rate from 2% to 4%. A simple $25/mo payment instantly turned into $70, and with the average family owning 4 cards, that’s a massive increase in monthly payments.

Consumers were now stuck. Most couldn’t escape the credit card rates even through bankruptcy, as it was now damn near impossible to file for Chapter 7 (clear of all debt). Many bankruptcy attorneys shut their doors for good because the new law was much too complicated to work out any benefit for the consumer who was really in trouble.

Follow the timeline closely and take a look at just when ARMs started getting widely used to get people into new homes. Strange, isn’t it.

Take this, the first increase in gas prices, rising goods prices, and increased taxation of states (varies), it’s no wonder the housing market crashed.

Here we are 3 years later and the economy sucks. Every article regarding the bailout clearly shows what happened, and when it started happening. Find this time line coincidental?

I sure don’t. You can try to find flaw or dispute this information all you want to, but it’s all fact.

The time line speaks for itself. What the market was doing during all this didn’t matter because no one, and I do mean no one, could have seen the housing market crash so fast because people could no longer pay their mortgage bill.

I continue to monitor the actions of the credit card industry because they’re not regulated. When I hear of tactics used by this industry to harm the consumer, I make sure it gets out into the public, despite no longer owning any credit cards.

I do this because I’m tired of the legalized loan sharking that occurs when people are given no choices to “fight back” when they adhered to the terms and conditions by the issuer, only to get bent over and reamed.

Note: The Fair Credit Reporting Act (FCRA) isn’t overseen by the government. It’s a “checks and balances” system derived because the credit industry doesn’t want government oversight, so they do it themselves to placate the government.

Nice how that worked out, isn’t it.