A Few Scary Stories from the U.S.

After a week in Kansas, I wanted to share a couple of U.S. stories from the world of finance and credit. They’re certainly insights that make you think or just shake your head:

You knew this day had to come: Atlantic City is the #2 gambling destination after Las Vegas in the US. Within ten hours of Atlantic City, there are more than 100 million people to draw from, and that’s a pretty huge market. While it’s possible to get cash advances from credit and debit cards in every casino on the planet, Atlantic City has gone one big step further. Gaming laws have now been amended to actually allow people to use their credit cards right at the blackjack and craps tables for a cash advance! Yes, you heard that correctly. Just sit down at the blackjack table and pull out your credit card. So far, only the Trump Taj Mahal has implemented it. But you know it’s only a matter of time before every casino in Atlantic City, and then Vegas, will roll this out, just to keep up.

JP Morgan Chase, one of the big six credit card issuers who control two-thirds of all credit cards, just announced doing away with a bunch of affinity cards. Those are cards for a specific retailer, where the merchant receives a kick-back. Gone are the Avon card and Starbucks. And if you’re a basketball fan, they also couldn’t get enough interest in the credit cards for the Detroit Pistons and Orlando Magic. Gee, you think the world can do without a few more credit cards??

On television, there’s more and more happy talk about the U.S. economy. While that may be true, in some areas, the foundation of people feeling more secure about their finances is always the value and equity in their homes. And that isn’t getting much better in many of the so-called “bubble states, where there are still over 3 million foreclosures expected this year alone.
But the no-service Bank of America is now seeing the light, and are prepared to do principal reductions of up to 30% on people under water. That is, they’re actually now prepared to help, after writing off billions of dollars in foreclosures. Principal reductions means they will actually cut the balance that people owe on a home that may be worth half of their mortgage. It’ll apply only to sub prime mortgages with insane interest rates, but it’s a start to actually help people and give them concrete hope. They finally figured out that they didn’t need to lose tens of billions of dollars kicking families out of their homes, and then take a massive bath on trying to sell literally millions of empty houses. This is going to be less than half as expensive for the bank in the long run. Too little too late for a ton of families but better late than never…

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