Tuesday, March 17, 2009

The insanity of the financial sector

Courtesy of Les Jones, we're directed to Katie Allison Granju's blog at Knoxnews.com, where she tells us this amazing story. Here's an excerpt.

After he read an article in the Wall Street Journal about the specifics of the Housing Recovery Act (HRA), it occurred to my friend that he and his wife might qualify for the federally subsidized interest rate cramdown on their home which, because they purchased it at a time when their income was higher, now has a mortgage payment that constitutes 35% of their income. The HRA is set up to assist homeowners with payments that exceed 30% of income.

So my friend called a 1-800 number listed in the WSJ article, where the operator asked him a few questions. He was told that he did likely qualify, and was directed to a website. There, he was walked through some Q&A steps, and again, informed that he qualified. The website recommended that he call his lender, Citibank.

My friend contacted Citibank by phone, and explained that he wished to get set up with the HRA program for borrowers such as himself. The very nice Indian man - in India - with whom he spoke expressed his polite condolences on my friend's job loss, but told him that he had absolutely no idea how to help him with the HRA program.

. . .

After my friend provided his name and number, the man told him that although he couldn't help him with the HRA program, he could offer him a special promotion.

My friend was curious, and took the bait.

The man informed my friend that he qualified for a super-special, no-interest-for-one-year Citibank credit card with a $15,000 credit limit.

My friend asked what the catch was; the man explained that there was no catch. This was a credit card with absolutely NO interest for one year.

. . .

Four days later, the card arrived in the mail. My friend waited a day or two, and then decided to activate the card. He peeled the sticker off the front and called the number printed on it. Instead of getting the automated activation service one usually gets when calling one of these numbers, a real, live human answered the line. She was extremely peppy, and she informed him that he qualified for a super-special Citibank promotion.

"We want to send you the entire $15,000 credit line today, in the form of a check. No interest for one entire year," she chirped enthusiastically.

"Let me get this straight," my friend inquired skeptically. "I called Citibank saying I'd lost my job, and to ask about whether I could get my mortgage interest payments lowered by federal subsidy, and instead, Citibank wants to loan me $15,000 at zero interest, with zero collateral, and with no questions asked?"

"Yes sir!" she replied.

There's more at the link. As Les Jones points out:

In other news, Citi’s credit card division had a 9.33% default rate in February. Zeus knows why.

Dear readers, how many of you believe (as I do) that Citi and other credit card lenders will shortly be pounding on our Government's door, demanding their own version of a financial bailout at taxpayer expense?

Exits left, holding head, whimpering . . .



phlegmfatale said...

This is mind-bendingly stupid, and sadly, it's not at all surprising. Such lenders need the sand thrown at them.

Anonymous said...

Peter, the financial blogs I read are sure we are going to have -
#1 a collapse of the CC industry, #2, a second wave of mortgage failures,
#3 a vast failure of pension funds.
#4 a whole bunch more jobs lost.
And every one of them believes the Gov. is manipulating the statistics , such that if they calculated unemployment the same way they did years ago our current rate would be close to 17%.