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Banks are the new oil companies

First we had oil companies making record profits for the last few years and now the banks can borrow money from the federal reserve at a very low rate to cover short term loans, plus revolving debt. Yet, I tried to negotiate lowering a credit card interest rate to get closer to the prime rate of 5.25%...they said no and my score is 800. Also mortgage rates have remained at higher levels than in January of this year by over .500 of a percent. These lenders are try to recover losses from foreclosures by leaving rates at a higher mark due largely to no regulation. The margin between the FED fund rate and the average 30 year fixed rate is almost 4 %... who do you think profits from this discrepancy.
Any thoughts on this matter

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Permalink Reply by Jeremy Williams on April 15, 2008 at 8:04am: I completely agree Steve. You've hit the nail on the head with this one. The Fed-funded Bear Stearns bailout and subsequent regulations that now allows the fed to loan money to investment banks scares me to no end.; ▶ Reply to This

Permalink Reply by Chris Flener on April 15, 2008 at 9:01am: I understand, but why should Kenny suffer and not be able to negotiate a rate closer to prime because some morons wanted to flip homes and the moron banks gave them loans to put this situation in motion?

I think the overall issue is equity (not equality). I'm not asking for everyone to be treated equal, that's not realistic, and doesn't make any since...never has, never will. However, equity is something that can be achieved on a regular basis. In this case, fairness is allowing higher interest rates to be renegotiated according to prime. The CC company will certainly want to renegotiate if prime were to sky rocket! If he has a score of 800, he should get rates accordingly, just like a person with a score of 400 should get rates accordingly (I feel sorry for that guy, lol).

I'm not in favor of most of the stuff going on, for numerous reasons. I don't think it will help in the short or long term, and hopefully the Fed will get exposed for what it really is!

With regard to the oil companies thing...I understand both points, but I lean more towards Kenny than Steve. I realize 10% profit margin may not be astronomical, but $41 Billion is! Can't the owners of these companies manage on say, $4 Billion? YES! So, the profit margin is only 1% instead of 10%, they still manage to make a living! Then the rest of the country can do the same!

I'm all for regulation on oil companies, if it's done right. Heck, i'm in favor of most regulation, as long as it's done right. The only bad regulation is when morons set it up...oh, the pretty much rules out the US Government setting up regulation, doesn't it? :); ▶ Reply to This

Permalink Reply by Kenny Johnson on April 15, 2008 at 9:00am: I agree with your " one night stand " attitude of investor over flipping houses but I know of a few investors who truly buy homes to repair, then rent to families which down the road end up purchasing the home. I think television shows depicting the ease of buy for the express purpose of flipping for a huge profit is crazy...they never show the failures and I'm sure there are many of them. Our country is the capital of getting rich quick and there is no substitute for hard work so people just lap up these info programs.

The banks knew exactly what they were doing as many opened secondary lending sites to hide behind for example First Franklin ( National City Bank ), Long Beach ( Washington Mutual ) and any financial firm in a strip mall ( retail pricing ). They made huge profits off these loans and now want to blame everyone associated in the business other than themselves. These so called big lenders wanted their piece of the pie too and they are the ones who created the sub-prime loans and guidelines. They are also responsible for underwriting these loans and ultimately approving them.

As far as competition over 230 lenders have gone out of business since the first of 2007...rightly so as these were the ones in the industry which took loans that should not have been excepted in the first place. The ones with the lowest standards with respect to credit, employment and assets. As a result the only ones left standing are the big lenders who continue to buy the little guys.

We are certainly shaking the tree and only time will tell how many leaves will be left.

Thanks for joining in the conversation everyone.; ▶ Reply to This

Permalink Reply by Chris Flener on April 15, 2008 at 10:48am: Great Analysis!!; ▶ Reply to This

Permalink Reply by Michael J Dukehart, II on April 16, 2008 at 1:33pm: Remember your local credit unions. People serving People. Only 2 credit unions nationwide got involved with the sub prime lending problems, only two. The rest of us did not want to chance our money, our members money, our family's money, etc. We always try to offer a fair rate and competitive products tailored to the needs of our members.

This public service announcement brought to you by me. :); ▶ Reply to This

Permalink Reply by Dave Woodson on June 27, 2008 at 3:54pm: What the Fed does and the Mortgage Rates are are two different entities.
The Fed decides what banks lend to each other and the Mortgage Rates are based on mortgage backed bonds like the FNMA 30yr 6.0% is up 41bps today. So, Monday we should see a better rate on our rate sheets. And, as far as, you not getting your desired interest rate. Well, they hold all the cards(no pun intended) since you owe them money. I hope this helps you a little more

if you would like I can talk to you more and share more information
feel free to call me @ (219)872-8000 ext106; ▶ Reply to This

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