credit unions

The House passed the $819 billion stimulus package. The bill extends unemployment insurance benefits, expands access to health care for the unemployed and allocates $125 billion for public education (plus many many extras). While the size of the stimulus, which almost equals the entire cost of annual federal spending under Congress's discretion, may seem shocking, it is chump change compared to the numbers flying around concerning the "bad bank." According to the Wall Street Journal, Government officials are discussing spending ANOTHER $1 to $2 trillion to help restore banks to health. One of the proposals, involves seeding the "bad bank" with $100 to $200 billion in TARP funds and then borrowing as much as $1 to $2 trillion by issuing debt. If this proposal comes to fruition, I would highly recommend a new moniker: Big Bad Leveraged Bank. It would be sort of like combining all of the stupidity from the past few years, into one big ugly operation run by the government, and then piling on some leverage for good measure. Sure this proposal is bound to make bank stocks rally, but it scares the living daylights out of me.

Meanwhile, the bailout du jour involves credit unions. Federal Regulators guaranteed $80 billion in uninsured deposits and injected $1 billion of new capital into the largest of these wholesale credit unions, US Central Federal Credit Union of Lenexa, Ka. According to the WSJ, the vast majority of regular credit unions are financially sound, however, a few of the wholesale or "corporate" credit unions were invested in mortgages (uh oh). The corporates are owned by the retail credit unions and provide services to the retail credit unions. Consequently, a failure of the corporates would affect the nearly 90 million Americans who hold deposits at credit unions. As of November, five of the largest institutions posted unrealized losses on their investments of $11.6 billion, up from $9.4 billion just a month earlier and double the level of last May. When the aforementioned US Central chose to take a $1.2 billion writedown by permanently recognizing some unrealized losses, regulators (The National Credit Union Administration) grew concerned and felt the need to take action. The $1 billion in new capital into US Central came from the NCUA's $7 billion insurance fund. Simple math tells me that the insurance fund now has $6 billion left and the industry has over $10 billion in unrealized losses, much of which will likely end up being real. The NCUA better work fast to get included in the TARP.

monetary policy

Yesterday afternoon, the Federal Reserve announced a hike in the discount rate from 0.50% to 0.75%. Everybody panicked, sold equity futures and bought dollars. While the Fed had already made clear that a hike in the discount rate would likely be the first move towards reversing the extraordinary monetary easing of the past two years, the market was positively flummoxed. Despite accompanying comments from the Fed stating the "modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy," market participants were scrambling to interpret the move. Traders of all products were seen running around in circles after the close yesterday grabbing each other by the collar and screaming "I know they said it doesn't mean anything, but WHAT DOES IT MEAN???!"

After all, if the move was completely meaningless, why do anything at all? And why announce it at a weird time on a day when nobody was looking for the Fed to make an announcement? In its effort to keep from roiling the market, at least the folks at the Fed made the announcement after the close. But still, has Mr. Bernanke not heard of after-hours trading?

The discount rate, for those who are still unclear on the difference between the Fed's money market rates and various facilities, is the rate that banks can borrow from the Fed's emergency discount window. Up until the most recent credit crisis, NOBODY borrowed from the discount window, EVER unless they were minutes away from bankruptcy. In fact, rumors of a bank needing to borrow from the discount window could cause a run on the bank. Until the Fed relaxed the rigid rules of borrowing from the discount window during the height of the panic, investment banks on the brink would go knocking, begging to the Fed's discount window (i.e Drexel, Bear etc.) only to be turned away. Even though the Fed tried to encourage banks to borrow during the height of the crisis and ignore the stigma, it still refuses to hand over the names of the banks who were borrowing from the discount window. The stigma still exists even though nobody wants to admit that there is still a stigma.

So why, for the love of God, would the Fed raise the discount rate? Why make an announcement when nobody is expecting an announcement from the Fed? What purpose can it possibly serve? If it's largely symbolic, why accompany the move with a statement that says don't read anything into this? I believe that this is a big hint to the credit markets. The easy money party is nearly over. Be prepared for the Fed to turn on a dime and start making moves that aren't largely symbolic. Take heed. You have been warned.

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It is the job of every insurance agent to sell the scheme to a customer by wrapping up the entire package with impressive features and hiding the limitations by putting them in hardcore professional jargon and codes. Otherwise, check if there is a state sponsored risk pool. If a physician charges $120 for an office visit that means you will be charged $120 just to make the appointment

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It is the job of every insurance agent to sell the scheme to a customer by wrapping up the entire package with impressive features and hiding the limitations by putting them in hardcore professional jargon and codes. Otherwise, check if there is a state sponsored risk pool. If a physician charges $120 for an office visit that means you will be charged $120 just to make the appointment

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repair the credit cards

Credit repair is very possible, but it takes time. Don’t wait until a crisis that has you screaming, “fix my credit!”

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The downturn of the global economy has been hardly reflected on the financial status of almost every middle classed American.