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Credit Where Credit Is Due


Lucky
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It seems that credit is tightening up all over America, with credit lines from American Express getting cut, equity loans called back, and tractor trailers harder to buy. One guy who knows his credit is Brad Rock, and, while I can't prove it, he definitely sounds like he could be related to our own Rock- he's taking a very hard line on credit!

"Mr. Rock, chairman of the American Bankers Association, with 8,400 affiliates, does not see a problem in this turn of events.

 

“Now people are going to actually have to have a job to get a loan and they are going to have to make installment payments that are already higher per dollar borrowed than they used to be,” he said, arguing that the debt-fueled prosperity of the bubble years was unsustainable."

 

It makes me happy I got that 2.9% financing on my car when I did.

 

http://www.nytimes.com/2008/09/19/business/economy/19econ.html

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I hope we'll be able to keep this thread at a level of discussion that prevents it from getting exiled to the Politics Forum. That said I'm going to have to agree with the gentleman from the ABA on this issue. For the last 40+ years we as a nation have lived beyond our income levels. The government does it with deficit spending, corporations do it with complex balance sheets, and our citizens live beyond their means using formerly cheap credit.

 

All this was the driver for our economy (and the world's for that matter) for decades. It's only natural that this credit crisis should appear at this time. Loans were made to people who could not afford, and never should have been given in the first place for artificially inflated real estate.

 

There is going to be a lot of finger pointing in regard to this mess. The political parties are going to be doing so much of such that it’s going to resemble a Three Stooges comedy. The Federal Reserve kept interest rates way too low for too long thus taking risk out of the market place. Wall Street screwed up big time slicing and dicing these mortgage securities and derivatives to such complex levels that for every one dollar on the books, thirty dollars was leveraged against it. No wonder the house of cards collapsed.

 

All of these parties will get their day of reckoning. Thus I place credit for this mess on US. Yes, Joe Average, the American consumer. WE are to blame for living beyond our means and leveraging to the hilt for McMansions, BMWs, SUVs, plasma screens, iPods, and all other aspects of the entitled "keeping up with the Jones’s" lifestyle. To borrow a quote from Walt Kelly - "We have met the enemy and he is Us."

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In the late 1970’s I had a couple of degrees under my belt and was operating my own business. It admittedly was in the fledgling stages, but I had been conscientious enough to have achieved something of substance in my life. I had several student loans… and was dutifully being accountable in that regard. The one thing I never had was a credit card… something that would make business transactions easier.

 

I accordingly visited my local bank and applied for a "Master Charge" with a modest line of credit. I was promptly rejected. I protested, was directed to a bank officer on an upper floor, and after much griping was grudgingly given a credit line of a whopping 100 bucks… not much but it was a start.

 

Things have changed a bit since those days…

 

That was a time and place where bankers were not only responsible, but customers had to prove their responsibility as well.

 

I think we need to return to the basic mindset of those days…

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For most of my life, I have never bought anything on credit except homes--if I didn't have cash in hand to pay for something (travel, car, furniture, clothes, escorts, etc.), I went without. Recently, however, I gave in and bought a new car with a loan (since cars now cost more than I paid for two of my homes), and I feel terrible knowing I will be making payments for years to come on something whose value will steadily deteriorate. I don't understand people who can sleep comfortably with huge debts for things they really didn't need, and whose future value will probably be less than the debt.

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Guest zipperzone

>Things have changed a bit since those days…

 

Tell me about it! I just received my monthly statement today and saw that they had raised my limit by 30% without asking me if I wanted more credit. So much for the credit crunch......

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Guest zipperzone

>That means they like you...they really like you! Many are

>getting their lines cut, so you must be a good credit risk.

 

I always pay it off each month and never carry a balance over - I hate to pay their interest charged. So they don't make much money on me.

 

I would have thought those who carry balances over from month to month would be their favorites for at least they make a profit on them.

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