Debt

Will the “Bad Bank” Plan Work?

Posted January 30, 2009 by Bernz

As discussions continue in the White House and on Capitol Hill about what the next steps should be in helping banks survive the current economic crisis, one idea that keeps floating to the top is the “bad bank” plan. The Treasury or the Federal Deposit Insurance Corporation would set up a new bank to buy up all of the so-called “toxic” assets carried by major financial institutions. This would allow all of the other banks to cleanse their balance sheets and give them the liquidity they need to continue operating, according to the theory.

badbank1The “toxic” assets include the bundled derivatives and mortgage-backed securities that got the banks into trouble in the first place. The complexity of the assets became so great that banks, regulators, and auditors were unable to place a value on them as they could no longer be directly tied to individual mortgages. As mortgage failures increased during the recent real estate collapse, the assets’ worth looked dismal. The market for them dried up and banks were left holding the proverbial bag.

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Credit card debt burying you alive? Dig out with these resources

Posted November 10, 2008 by Bernz

Been getting any mailers from credit card companies lately? No? I don’t know anyone who is. Personally, I think going to my mail box and not finding any credit card offers is a real good thing. Americans owe over 900 billion in credit card debt. Unfortunately not all of that credit card debt accumulation can be blamed on instant gratification purchases. Some people use credit cards to buy groceries, obtain cash advances for rent, to pay for health care and medicine.

These days if you happen to be carrying a little too much debt you’re considered as one of the lucky ones. On the other hand if managing your credit card debt is a daily burden (for instance if you fear the loss of your car or other personal assets tied to your credit card) there could potentially be some relief from your bank as they and other consumer groups are lobbying regulators for a plan to help consumers struggling with credit card debt. In this case I believe the best alternative is not to wait for any sort of bank bail out plan but to look for prompt solutions you can take upon yourself. Here are a few suggestions. (more…)

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