A posting on the internal Circuit City forums from an irate store manager upset over having to shrug his shoulders in response to a customer who had a $2,500 CC refund check bounce elicited this response from the CC accounting team:

Due to the Ch 11 filing, the bank had to put a stop on all checks that had not been deposited. We WILL be reissuing all bounced checks. I don't have an exact date to tell you, but we intend to make good on every single mail refund that bounced.

Adjust your spreadsheets accordingly.

The Whiteboard: How credit cards become asset-backed bonds [Marketplace]

Mike asks:

What's the typical mortgagee's point of contact to find out how all this bailout stuff affects them? If I have a challenging mortgage situation and want to see if I qualify for relief, what do I do? Call my mortgager? Write my congressman?

It sounds like you need some professional guidance. The FTC recommends contacting a housing counseling agency. Here is how they recommend finding one:

Call the local office of the U.S. Department of Housing and Urban Development (www.hud.gov) or the housing authority in your state, city, or county for help in finding a legitimate housing counseling agency nearby. Or consider contacting the NeighborWorks® Center for Foreclosure Solutions at 888-995-HOPE or www.nw.org. The Center is an initiative of NeighborWorks America.

Here's NeighborWorks America's Foreclosure Resource page, and here's a Guide to Avoiding Foreclosure from HUD.

We hope that helps you, Mike. Good luck.

Mortgage Payments Sending You Reeling? Here’s What to Do [FTC]
Foreclosure Resources [NeighborWorks America]
Guide To Avoiding Foreclosure [HUD]
(Photo: Groovnick )

AMEX just sent out some new changes to terms of service for some customers, and one of them has us scratching our heads in particular. There's various increases in APRs and fees, but then under "In Case of Errors or Questions About Your Transactions" they're now adding "You authorize us or an agent to debit your Bank Account for this amount." What scenarios would qualify under "errors" or "questions"? Don't like the sound of agreeing to let anyone make withdrawals on my bank account without myself pulling the lever. The notice of TOS changes, inside...

Notice of Changes to Your Account

The terms of your Account are subject to change in accordance with the American Express Cardmember Agreement ("Agreement") governing your Account (including increasing rates and fees, changing fixed rates to variable rates, and adding new terms). Any language in your Agreement contrary to or conflicting with terms amended herein is replaced fully and completely. All terms of the Agreement not amended herein remain in full force and effect. These changes apply to existing balances and future balances on your Account. We urge you and any Additional Cardmembers on your Account to read this notice carefully and file it along with your Agreement in a safe place for future reference.

APR for Flexible Payment Features
For billing periods that begin on or after December 2, 2008, we are replacing the third sentence of subsection B of the Finance Charges section of your Agreement with the following:
- "Except as provided below, the APR is the Prime Rate plus 11.99%."
This is a variable rate. As of October 13, 2008, the Prime Rate plus 11.99% is an APR of 16.49% and a DPR of 0.0452%.

APR for Default
For billing periods that begin on or after December 2, 2008, the last sentence of subsection D of the Finance Charges section of your Agreement is replaced with the following:
- "The Default Rate is a DPR which corresponds to an APR equal to the Prime Rate plus 23.99%."
This is a variable rate. As of October 13, 2008, the Prime Rate plus 23.99% is an APR of 28.49% and a DPR 0.0781%.

Late Fees
We are changing the day upon which late fees may first be assessed as a result of late payment. If you have not paid the Amount Due on this statement before the 10th day after the Closing Date of your next statement, you will be assessed a $35 late fee (Iowa $15). For billing periods that begin on or after December 2, 2008, we are replacing the Late Fees section of your Agreement with the following:
- "If any portion of the Amount Due on a billing statement is not credited to your Account before the 10th day after the next Closing Date, we may assess a fee of $35 (Iowa $15). In addition, if any portion of that Amount Due is not credited by the following Closing Date, we may assess an additional fee in that same billing period of the greater of $35 or 2.99% of any amount past due (Iowa $15). If any amount past due is not credited to your Account by successive Closing Dates, we may assess a fee equal to the greater of $35 or 2.99% of any amount past due (Iowa $15)."

Transactions Made in Foreign Currencies
Effective January 11, 2009, the bolded clause in the Transactions Made in Foreign Currencies section of your Agreement is replaced with the following:
- "in each instance increased by 2.7%."

Electronic Funds Transfer (EFT) Agreement
Effective December 2, 2008, we are adding a sentence to the last paragraph of the "In Case of Errors or Questions About Your Transactions" section of your EFT Agreement. The following is added after the third sentence:
- "You authorize us or an agent to debit your Bank Account for this amount."

(Photo: TheTruthAbout...)

U.S. Approves Plan to Help Citigroup Cope With Losses [NYT] (Photo: Spencer E Holtaway)

The Times says that in September of last year, Citibank held a meeting to discuss the looming mortgage crisis. Citibank's CEO at the time, the since-canned Charles O. Prince III, asked Thomas G. Maheras, who oversaw trading at the bank, "whether everything was O.K." Maheras assured him that it was, and kept assuring him until it was too late.

From the NYT:

For months, Mr. Maheras’s reassurances to others at Citigroup had quieted internal concerns about the bank’s vulnerabilities. But this time, a risk-management team was dispatched to more rigorously examine Citigroup’s huge mortgage-related holdings. They were too late, however: within several weeks, Citigroup would announce billions of dollars in losses.

Normally, a big bank would never allow the word of just one executive to carry so much weight. Instead, it would have its risk managers aggressively look over any shoulder and guard against trading or lending excesses.

But many Citigroup insiders say the bank’s risk managers never investigated deeply enough. Because of longstanding ties that clouded their judgment, the very people charged with overseeing deal makers eager to increase short-term earnings — and executives’ multimillion-dollar bonuses — failed to rein them in, these insiders say.

Now, of course, the losses at Citibank — over $65 billion so far — threaten to dismantle the entire bank.

The article, which is 5 pages long, goes into detail about the relationships between the executives responsible for designing the strategy that ran Citibank into the ground. They lay a large part of the responsibility at the feet of Robert E. Rubin, a top adviser at Citibank and the Secretary of the Treasury during both Clinton administrations.

When he was Treasury secretary during the Clinton administration, Mr. Rubin helped loosen Depression-era banking regulations that made the creation of Citigroup possible by allowing banks to expand far beyond their traditional role as lenders and permitting them to profit from a variety of financial activities. During the same period he helped beat back tighter oversight of exotic financial products, a development he had previously said he was helpless to prevent.

And since joining Citigroup in 1999 as a trusted adviser to the bank’s senior executives, Mr. Rubin, who is an economic adviser on the transition team of President-elect Barack Obama, has sat atop a bank that has been roiled by one financial miscue after another.

Interesting stuff.

Citigroup Saw No Red Flags Even as It Made Bolder Bets [NYT]
(Photo: cmorran123 )

...opt-out of "courtesy overdraft fees" so that if you use your debit card and don't have enough money for what you're swiping it off, they will actually decline your card. However, you have to remember to never swipe as credit, only as debit.

Reader Jon thinks he's got it figured out. Opt out of courtesy overdraft screwing, and then ask for a debit-only card. "Voila," he writes, "you have a checking account and debit card immune to shady courtesy overdraft fees." However, since Chase now owns WaMu, I'm betting you have to already have a WaMu account for this to work.

(Photo: thekateblack)

The Office of the Comptroller of the Currency, which regulates national banks, said no to the plan. The sticking point was a clause that would let banks defer paying income tax on the forgiven debt until the rest of the debt was paid off.

From Yahoo:

The agency "does not consider any plan that defers the timely recognition of loss as prudent, and any such proposal cannot be viewed favorably by us," Timothy Long, senior deputy comptroller for bank supervision policy, said in a letter to the two groups dated Monday and made public Wednesday.

"The timely identification, reporting and management of credit losses, along with adequate loan-loss reserves and capital levels, provide the public with ... confidence" in the banking system, Long wrote.

Credit card charge-offs are up 48% from last year.

Regulators nix credit card debt forgiveness plan [Yahoo!] (Thanks, J.D.!)
(Photo: afagen )

[House Financial Services Committee Chairman Barney] Frank said the Fed shouldn't reveal the assets it holds or how it values them because of ``delicacy with respect to pricing.'' He said such disclosure would ``give people clues to what your pricing is and what they might be able to sell us and what your estimates are.'' He wouldn't say why he thought that information would be problematic.

[Bloomberg] (Thanks, James!)
(Photo: Meg Marco )

866-878-7962 [800notes] (Thanks to jurijuri!) (Photo: Getty)

• Average NSF (non sufficient fund) fee: $28.95, a 2.5% increase from last year
• Average ATM surcharge is $1.97, up 1%
• The minimum balance required to avoid fees on interest checking accounts at a brick and mortar bank: $3,461.84, up 4%
• The average minimum required to open an online checking account: $650.81, up $517.48

...know the rules on your account regarding fees, like minimum balances and to minimum activity. Know if, without notifying you of the insufficient funds, the bank will let you withdraw or debit more on the card than is in the account, and then charge you a fee. Never try to "game the float" by writing a check or passing a charge you can't immediately pay for with the money sitting in your account. Make fewer and larger ATM withdrawals to avoid racking up fees.

Banking fees continue to soar [Bankrate]

Massive Effort to Save Mortgages [WSJ] (Photo: respres)

It would cost between $40 billion and $50 billion, sources said.
The program is being discussed as members of Congress are voicing frustrations that the $700 billion rescue program thusfar has been aimed at helping banks, but not homeowners.

While Treasury and FDIC officials have reached an agreement on the principles of the program, the White House is resisting, according to the sources, who declined to be identified because the negotiations are ongoing.

Treasury, FDIC Crafting Plan to Rework Millions of Mortgages [Washington Post]

The Americans would beg and plead with the Filipinos to not unblock the account, and over and over again they would. Says our insider, "if US security had been able to intervene from the get-go, he would never have been able to do so much financial damage. For the rest of his life, the true owner of that account will be dealing with the effects of this crime." It's not the outsourced place's fault, though. They're just following orders. It's whoever designed the laminated binder they were blindly following that should really be held accountable. Read the whole messed-up story below.

Our insider writes:

A guy calls up on the direct number, his voice is distinctive: deep, but nasal, like he has a cold. I ask for his name and account number. He tells me his name but says he doesn't have his card with him. Step two: I ask for his social security number. He "ums" and "uhs" for a second and I'm certain I hear a faint rustling of papers in the background. The number he gives me isn't linked to any account on file. As soon as I tell him this, he hangs up. It was odd, but I wrote it off. Calls came at a snails pace and it wasn't unusual to have 20 minutes in between them. So when a couple of minutes later I got another one, it was strange. Once again it was a call from the direct number. I ask for name and number and the voice is strikingly similar. The name he gives is different but again he has no number. I ask for the SSN and again I can hear papers rustling while he stalls. This time an account pops up. He fails verification of the mother's maiden name and immediately hangs up. By this point I'm laughing about it with my co-workers because he seems such an inept thief. As the nights go on, we start to get more calls from him. I say "we" because this was the only call center that the phone number goes to and there were only about 15 of us on staff at any given time. He had the same mannerisms for every interaction and it became such that as soon as any of us got one of these calls we immediately put him on hold (usually making up some innocent sounding excuse) and tried to put him through to security. The problem with the Philippine security department quickly became apparent.

The US security department had access to LexisNexis. If you're not familiar with it, it's basically a encyclopedia of everybody's life. Previous addresses, family member's names, jobs, schools, anything and everything that could be linked to your name and/or social security number. As an example of how incredibly (and frighteningly) thorough it is, when my now 30 year old brother was a tot, he liked to respond to junk mail with a fake name; this fake name came up as a former occupant of my parent's address when I got a chance once to do a search on myself (we had it in collections). Chase didn't trust the Philippine department to have it though. In fact, the only information they had the ability to verify was what was on the account: name, social security number, mother's maiden name, and recent purchases if they felt like being that diligent.

Here's the part of the story where some poor guy's account get's completely f-ed. This thief had been bounced to the out-sourced to security so often that he must have made a check list of any possible questions they would ask him. Through whatever means, he managed to get the answers to these questions. Now when he called, he could give us the information we were asking for, but by this point we knew his voice so well that we still tried to get him to security. It worked like this: We put him on hold and dial the extension for security. We get a security rep and start to explain the situation; we tell them he was able to give the right information, but that we know is the same guy that's been calling for weeks and we are certain he is not the account holder. They begrudgingly take the call. Minutes later another one of us gets a call from a security rep saying they are giving us a customer who has been cleared by them. And here the thief was back in our department. For those of us who had come to know him, the fight waged on night after night.

Chase is a revolving door. If you work there longer than a year, you're considered to have seniority. The few of us who knew this account was being raped could do nothing to protect it. Some newbie wouldn't know about the situation and would let the thief have his way with the account. The US security department became aware of the issue and put blocks on the account as well as incredibly long notes that explicitly said to not remove the block for any reason at any time. But sure enough, over and over, the guy would call in overnight, talk to the out-sourced security, and the block would be removed. Again, they were only able to verify with him with information that he was already known to have, yet that never seemed to deter them from clearing him.

Things got quiet for a while, and we thought maybe he'd finally been stopped from unblocking the account. Turns out that he'd actually been caught, but only after more than $40,000 in fraudulent charges on this one account. I cannot stress enough that if US security had been able to intervene from the get-go, he would never have been able to do so much financial damage. For the rest of his life, the true owner of that account will be dealing with the effects of this crime.

I wish I could this was the only time I saw the security department failing at securing an account. There was a consistent problem with the overt cultural difference. A man calls in and says he's the cardholder "Angela" and you find yourself trying to explain to security that Angela isn't a man's name and the odds of it really being his name are slim. And they just see it as cut and dry: He says he's Angela, so he must be.

To be fairer than Chase deserves, I'll note that I've been out of there for almost two years, so it's quite possible that it's all ponies and rainbows now. I'm gonna go ahead and assume though that it's run as poorly as ever.

(Photo: brycej)

Times reporter Joe Nocera listened in on a Chase employee-only conference call and one employee asked, "Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?"

Translation: When are we going to start making loans?The executive moderator replied:

Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase.. What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.

Later, the same executive said,

We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.

Translation: We'll use that $25 billion as a war chest to buy other banks, and hoard it in case times get tougher.

"Read that answer as many times as you want," wrote NYT, "You are not going to find a single word in there about making loans to help the American economy."

Furthermore, a new tax break allows banks to immediately deduct any losses they that are on the books of the banks they acquire.

What is the government doing to make banks use the money for loans? Apparently, jack, except for asking really really nicely. If this continues and banks don't use their government handout to open up loans, this bailout will be the single greatest ripoff in American history, and those responsible are naive if they don't think they'll have a giant bloody revolution on their hands—and I mean that in the literal sense.

So When Will Banks Give Loans? [NYT] (Photo: Getty)

Citibank Executive Responsive Office in NYC
(718) 248-6433

Citibank Executive Response Unit
Rudy Guerrerro
(210) 677-7284 direct line

Remember to be nice, professional, and succinct. In customer service, karma happens very fast and you get what you give. (Photo: thecornballer)

I have a card with one bank (that I am trying my hardest to pay off ASAP) that is 24% APR. It is killing me. A week or two ago, you had an article about a woman who paid off all her credit card debt over the course of 20 months or so. Good for her and it was a good story. One thing about it had me wondering though. She said that she negotiated with her lenders to get lower interest rates on her cards. How do you suggest I do that?

Here's what:

24%?! Good god man, get the heck out of there. You tell them to lower it or you're transferring the balance to another card with a better rate and canceling the account. Find a better credit rate at billshrink or bankrate. You may even qualify for an 0% balance transfer.

Here's what you say:

"I think I've been a good customer. I'd like to stay with you, but I really want you to lower the rate on my card. Can you help me?"

If they say no, ask to speak to a supervisor and say the same thing. If they still say no, plug in your research into the following statement:

"____ and ____ and ______ credit card companies are offering me rates of ____ and _____ and _____. Can you match them or do better? Otherwise, I think I might have to take my business there. I really want to pay off this debt, but it's hard to get ahead with the interest rate you're charging."

Skeptical? CBS News approached 10 random shoppers in a mall and had them read the first script. 6 of them were able to get their rates lowered right on the spot.

(Photo: Getty)

The words painted on a wall near the front door are hard to make out but it appears to declare: "Brought to you by Deutsche Bank... Eat it."

Details are sketchy, but NBC says:

Williams said his financial troubles began when he got behind on his mortgage payments then signed a deal that promised to help him stay in his home. The deal failed.

Just last week, Williams said he found out that his home had been sold without his knowledge to a bank and he had to get out.

The front yard of Williams' home is strewn with boxes, furniture and trash cans. There's even some of the home's air conditioning duct work lying on the lawn. That's not the only part of the property left in shambles. The inside of the house is just as messy.

Obviously, we have no idea what really happened, but it sounds like Mr. Williams may have fallen victim to a foreclosure "rescue" scam. The FTC says:

Fraudulent foreclosure “rescue” professionals use half truths and outright lies to sell services that promise relief and then fail to deliver. Their goal is to make a quick profit through fees or mortgage payments they collect from you, but do not pass on to the lender. Sometimes, they assume ownership of your property by deceiving you, the homeowner. Then, when it’s too late to save your home, they take the property or siphon off the equity. You’ve lost your home to foreclosure despite your best intentions.

Whatever the real story is, the house is in pretty bad shape.

If you're facing foreclosure, be sure to acquaint yourself with rescue scams and avoid them. If you've been taken in by such a scam, report it to the Federal Trade Commission and your state Attorney General. If you're looking for help with your mortgage, the FTC recommends first contacting your lender. If you need more assistance, they also recommend speaking with a credit counselor through the Homeownership Preservation Foundation (HPF), a nonprofit organization that operates the national 24/7 toll-free hotline (1.888.995.HOPE) with free, personalized assistance to help at-risk homeowners avoid foreclosure.

Take This Home And Shove It [NBC Bay Area via Buzzfeed]

Sarkozy bank account raided in internet scam [Daily Telegraph] (Photo: malias)

Here's a quick summary of the list:

1. Oil! Oil prices have dropped 50% in 3 months. Maybe this means that you won't have to burn your furniture to stay warm.
2. Car makers are waking up. They've realized that you want more fuel efficient cars. Finally. Also, don't forget about 0% financing. Assuming you have good credit, of course...
3. Low interest rates. Kiplinger's says "The interest rate on a traditional 30-year fixed-rate mortgage is averaging 6.5%, the highest it's been since the summer of '07, but still not too far from the historic low of 5.8% reached in 2003-05 and 1963-65."
4. Real estate is less expensive. If you have the money for a down payment, perhaps a deal can be yours.
5. Your bank savings are safe. FDIC insurance is now $250,000. FDIC insures small business non-interest bearing accounts, and a temporary program is in place to guarantee Money Market Mutual Funds, says Kiplinger's.
6. Stocks are cheap. Bonds are looking good. "Triple-A-rated tax-free bonds, an extraordinarily safe investment, are paying 5%-plus for ten years and 6% for 20. That's more than the Treasury offers for bonds of the same maturity."
7. Technology is awesome and cheap. You can buy a big TV and use it to keep you from crying all the time, apparently.
8. We grew a lot of stuff. "The fall harvest is shaping up as one of the best ever, despite the destructive weather and floods in the Mississippi River corridor since last spring. Exports of U.S. farm products will increase more than 40% by value this year."
9. New government. Whoever wins, it will be someone new.
10. Holiday bargains. If you still have some money, you can expect some crazy deals. "Both brick-and-mortar and online retailers are gearing up to offer huge discounts to boost sales." Just try not to get trampled, especially if you have substandard health insurance.

10 Things That Are Going Right [Kiplinger's]
(Photo: taberandrew )

The NYT explains:

Treasury Secretary Henry M. Paulson Jr. outlined the plan on Monday to nine of the nation’s leading bankers at an afternoon meeting, officials said, in which he essentially told the participants that they would have to accept government investment for the good of the American financial system. This capital injection plan will use a huge chunk of the money authorized for Troubled Assets Relief Program.

Citigroup and JPMorgan Chase were told they would each get $25 billion; Bank of America and Wells Fargo, $20 billion each (plus an additional $5 billion for their recent acquisitions); Goldman Sachs and Morgan Stanley, $10 billion each, with Bank of New York Mellon and State Street each receiving $2 to 3 billion. Wells Fargo will get $5 billion for its acquisition of Wachovia, and Bank of America the same for amount for its purchase of Merrill Lynch.

The result of this "capital injection"? The US government will own preferred shares in all, yes all, of the major US banks, and will be paid dividends. The injection will not be voluntary, says the NYT.

Expect a press conference by President Bush tomorrow morning, announcing the plan.

U.S. Investing $250 Billion in Banks
(Photo: donbuciak )

Let's dive into the text and see what renter protections Congress cooked up:

SEC. 109. FORECLOSURE MITIGATION EFFORTS.

(b) Coordination- The Secretary shall coordinate with the Corporation, the Board (with respect to any mortgage or mortgage-backed securities or pool of securities held, owned, or controlled by or on behalf of a Federal reserve bank, as provided in section 110(a)(1)(C)), the Federal Housing Finance Agency, the Secretary of Housing and Urban Development, and other Federal Government entities that hold troubled assets to attempt to identify opportunities for the acquisition of classes of troubled assets that will improve the ability of the Secretary to improve the loan modification and restructuring process and, where permissible, to permit bona fide tenants who are current on their rent to remain in their homes under the terms of the lease. In the case of a mortgage on a residential rental property, the plan required under this section shall include protecting Federal, State, and local rental subsidies and protections, and ensuring any modification takes into account the need for operating funds to maintain decent and safe conditions at the property.

Renters are explicitly allowed to keep any legal rental subsidies, so even if grandma's nine-room penthouse Park Avenue suite is foreclosed, she can keep her rent-controlled rate of $32 per month.

SEC. 110. ASSISTANCE TO HOMEOWNERS.

(b) Homeowner Assistance by Agencies-

(3) TENANT PROTECTIONS- In the case of mortgages on residential rental properties, modifications made under paragraph (1) shall ensure—

(A) the continuation of any existing Federal, State, and local rental subsidies and protections; and
(B) that modifications take into account the need for operating funds to maintain decent and safe conditions at the property.

The bailout bill is full of goodies to help keep people stay in their homes. If you're facing eviction, read our post explaining the bailout bill, and then immediately call your local HUD office to discuss your options.

Text of H.R. 1424: Emergency Economic Stabilization Act of 2008 [GovTrack]
PREVIOUSLY: Chicago Sheriff Halts Foreclosure Evictions, Won't Toss Innocent Renters
What Does The Bailout Mean For You?
(Photo: Getty)

If you have a friend who's working overseas, let her know to watch out for this:

I'd like to tip you about a scam going around Japan right now, and possibly Asia (I live and work in Japan), and maybe other places. It's a fax from being sent to foreigners, and in my case to schools. I've received it once and many of my friends have too.

The form is attached [pdf], claiming to be from "Internal Revenue Service IRS.gov", and prompts the recipient to complete form W-8BEN, which is a tax withholding form. Sure, sounds legit at first, but scroll to the 2nd page (page 1 of the fax) which has a W-8BEN "Substitute Form" that asks for personal info including your bank account number, SSN, and a copy of your passport among other things.

Then it asks the person to fax the form back to +1-206-888-1766 within one week to get a ficticious w-9095. Please inform your readers that this is a scam! I (nor my boss) don't know how this person got the fax numbers, and one of my friends recieved this even though she's from England so perhaps they are trying random numbers.

If you receive one of these faxes, report it to the Treasury Inspector General for Tax Administration at ustreas.gov/tigta.

The Times says that if Wells Fargo is successful in a deal with Wachovia, it would elevate what is essentially an overgrown regional bank into a national player.

A deal with Wachovia would elevate Wells Fargo to a prime position in the American banking industry, with the largest nationwide deposit and branch franchise in the country. Together, Wells Fargo and Wachovia will have $1.42 trillion in assets, 48 million customers and 280,000 employees.

The combined bank will be present on both coasts in the fastest-growing markets, playing on the same field as JPMorgan Chase and Bank of America, two of the nation’s largest banks.

Wells Fargo Wins The War For Wachovia [NYT]

Crisis explainer: Uncorking CDOs from Marketplace on Vimeo.Basically, the CDO manager has a champagne bottle filled with mortgages. Every month when the debtors pay their mortgages, it fills the bottle with payments. The cork pops off and he pours the bubbly over a tray of glasses, each one representing a tranche of increasing risk.

The glasses at the top, rated AAA, get paid first and the least amount, and the bubbly flows down to AA, BBB, BB and equity, the tray at the bottom.

The party gets bad when people stop paying their mortgages. Now the bubbly only reaches the first levels, and the BB and the equity don't get paid at all. To make it worse, we have a SECOND CDO manager.

His bottle, instead of being filled with the mortgages, is filled with the BB-rated securities. When a few people stop paying on the first bottle, that means his bottle has no juice at all. He has a whole champagne glass tower with glasses rated AAA through BB like the first one, but it's not getting filled up at all. Then the champagne towers fall over and crash and Wall Street evaporates and there's runs on the bank some wisenheimer paints the Wall Street bull's balls blue. That's CDOs for you.

If you enjoyed that one, he also made another video explaining Credit Default Swaps, which are what brought AIG down.

Crisis explainer: Uncorking CDOs [Marketplace]

Cook County Sheriff Tom Dart said he understood he was flouting the law in refusing to have deputies carry out the rising number of eviction requests, but mortgage holders must be accountable.

"These mortgage companies only see pieces of paper, not people, and don't care who's in the building," Dart said.

By halting the evictions, he's preventing about 500 notices that were scheduled over the next 6 weeks.

Mortgage foreclosure cases filed in Cook County are likely to exceed 43,000 this year, compared to some 18,000 in 2006, the sheriff said.

The president of the Illinois Bankers Association, Linda Koch, points out that they have to have the ability to "take over collateral upon default" or they won't make loans—which of course is absolutely true, but may not be the most realistic, or humane, or in this case enforceable, position at this moment in our country's history.

Update: I have edited the headline to include a reference to renters, because my original post didn't explicitly mention this and it's important to the story.

"Sheriff in Chicago halts foreclosure evictions" [Reuters]
(Photo: Getty)

“But when presented with the evidence that the financial crisis about to hit the United States would affect every single American up and down the economic food chain, this president decided that it was important that the government take robust action. That’s why we worked with Congress to establish the rescue package.”

Ms. Perino said the “capital injections” into the banks would involve “an equity stake” for the federal government but would not amount to a takeover.

“Secretary Paulson is looking at all the different tools to figure out which ones should be used at what time and how robustly and how much money to put into each,” Ms. Perino said, referring to Treasury Secretary Henry M. Paulson Jr.

The plan allows the government to take an ownership stake in banks — even healthy ones. In exchange, the banks would get an injection of cash that (in theory) would strengthen their balance sheets and convince them to start lending again.

The Times also says that the recent coordinated global rate cut hasn't seemed to help much:

Never before has the Fed issued an announcement on interest rates jointly with another central bank, let alone five other central banks, including the People’s Bank of China.

Yet the world’s markets hardly seemed comforted. Credit markets on Wednesday remained almost as stalled as the day before. Stock prices, which had plunged in Europe and Asia before the announcement, continued to plummet afterward. And stock prices in the United States went on a roller-coaster ride, at the end of which the Dow Jones industrial average was down 189 points, or 2 percent.

Even serious free-market type Republicans are starting to warm to the "cash injection" idea:

“The problem is the uncertainty that people have about doing business with banks, and banks have about doing business with each other,” said William Poole, a staunchly free-market Republican who stepped down as president of the Federal Reserve Bank of St. Louis on Aug. 31. “We need to eliminate that uncertainty as fast as we can, and one way to do that is by injecting capital directly into banks. I think it could be done very quickly.”

Administration Is Considering Cash Injections Into Banks
(Photo: Getty)

The article also points out that more people are investing in gold, which at least makes sense. But may we suggest you consider moving your cash over to a credit union before you glue it behind the wallpaper in your bedroom? Just make sure you ask the credit union manager about their Texas ratio first, so you don't inadvertently put your savings at a greater risk.

"Savers Banking on Shoeboxes" [New York Post]
(Photo: Brian Branch Price | New York Post)

(Photo: Zach Klein)

Executive Customer Relations general line: 704-386-5687

Nancy M. Condos
VP/ Customer Advocate
Executive Customer Relations
Office of the Chairman
nancy.m.condos@bankofamerica.com

Martha Dominguez, Executive Customer Relations Specialist: 714-792-4264

Corporate Headquarters: 704-386-5972 / 704-386-5681
Operator: 800-900-9000 (press 0 twice)

Corporate Headquarters (Bank of America):
Bank of America Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255

You can always write the CEO:

Mr. Kenneth D. Lewis
100 N. Tryon Street.
Mail Code NC-1-007-18-01
Charlotte, NC 28255

Several other readers have and they've gotten satisfactory resolutions to their complaints.

RELATED:
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Bank Of America Manager Escalation Line

(Photo: Spirda Webster)

You got other European countries mad at Ireland for guaranteeing deposits, fearing that money from their country would rush in. European stocks are at 20-year lows. Trading in Russia and Brazil was halted to stop steep stock selloffs. Australia drastically cut interest rates and shoveled $480 billion into its money markets, and Japan added $1 trillion to theirs. Iceland could be the first to fall, with the government stepping in Monday to assume sweeping powers. Bet you're feeling smart now you didn't fall for that 15.5% return on snow wolves scheme they were running.

That bailout plan we fretted so dearly about, "looks like a pebble tossed into a churning sea," says the New York Times.

(Illustration: Getty)

She writes: "This morning I made my very last payment on $14,300 in credit card debt and a personal line of credit for a home improvement project that was completed a few years ago. I paid it off over the last 20 months thanks to applying some of the stuff I learned at consumerist.com. It was tough. It took discipline, but I did it!

Instead of making a bunch of changes at once, I did things a little over time. It looked something like this. It's maybe not in the order that makes the most sense to a financial planner or in the order that someone else would do things; I just know that it worked for me.

MONTH 1: NEGOTIATING BETTER CREDIT CARDS RATES:
I called every single credit card company and tried to negotiate for a lower rate. I was successful with a lot of them. In once case the rate went from 14% to 7.99%. If they would not lower the interest rate, I politely thanked them and then transferred those balances onto lower rate cards. I canceled each card as it was paid off.

RELATED CONSUMERIST POST: Sample Script To Get Your Credit Card Rate Lowered

MONTH 2: GO CASH-ONLY:
I cut up every single card except one for emergencies. I actually put my remaining credit card in a big plastic cup full of water and stuck it in the freezer. That way, I'd really have to work at it to get that card. Cash only was the rule. If I did not have the cash, I did not need it. It's still in the freezer 20 months later.

RELATED CONSUMERIST POST: Paying Cash-Only, Family Spends $1,800 Less

MONTH 3: START DEBT-SNOWBALL:
It really works. I first heard about this method on consumerist and set myself up to pay off the lowest balances first. I used an Excel spreadsheet I downloaded here. I liked this one because it was easy to add extra one-time payments. I know that it would probably save me more money to pay off the higher interest rates first, but it was very, very satisfying to get stuff paid and DONE with. I cannot even begin to explain how highly motivating it was to finally pay something off. It was worth whatever little amount extra it cost me extra to pay the smallest balances off first. It makes for that good "light at the end of the tunnel" feeling. I also set up automatic payments on payday through the online bill pay to make this a seamless process. For the first couple of months, I just started off with just $50 extra because that's all I could afford. Once I started living more frugally, I applied more to the snowball.

Make extra payments to the snowball. They really do help, no matter how small. Every single extra penny that came my way went toward paying down the debt. At the end of the month, if I had anything left over in any of the budget categories, I immediately applied that as an extra payment. The nice thing about online bill pay is that it's just so easy to make as many payments as you want. Sometimes it was $100, sometimes it was $10 or even $3 one month, but every little bit helps. I purchased a printer that was almost free after rebate and applied the rebate to the debt. I did a few side jobs helping a caterer do some prep work; I sold some books on half.com, cleaned out my garage and made $300 from a yard sale, grandma sent me money for my birthday and Christmas, you get the idea. The point is, every single extra penny went right to the debt.

RELATED CONSUMERIST POST: Use Snowball Method Spreadsheet To Pay Off Debts

MONTH 4: SET UP BUDGET:
I made a budget and figured out where exactly my money was going.

RELATED CONSUMERIST POST: On The Money's Budget Calculator Helps Guide Your Monthly Spending

MONTH 5: CUT BACK EXPENSES:
I figured out what I could cut back on or go without. Not only did I figure out what I was giving up would save me I also diligently applied that amount to the snowball. It also really helps to figure out what something is costing you per year. I had no idea I was spending $600 a year just on manicures!

Here's what I gave up:

Cable TV. Got a cheap netflix plan and a roku player instead. Savings: $17/month, $204 a year
Land line phone. Savings: $27/month, $324/year
Gardener. Savings: $40/month, $480/year
Got slower DSL. Savings: $10/month, $120/year
Manicures. Did my own. Savings: $50/month, $600/year
Public Radio Membership. Sorry KQED and KALW, but I have to come first right now. I'll continue to support you later. Savings: $11/month, $132/year
Gym Membership. Savings: $30/month, $360/year
Lunches at work. Savings: $120 month, $1440/year
Starbucks. Savings: $60/month, $720/year

Total extra towards snowball: $365/month, $4,380/year.
Just like that.

RELATED CONSUMERIST POST: 5 Expenses You Can't Afford If You Have Credit Card Debt

MONTH 6:
I worked on cutting my spending in other ways.

I am an avid reader and I realized one of my biggest expenditures was new books. I gave up my Amazon habit and switched to the library. My local library allows you to browse the catalog online and request books be sent to the branch of your choice. I work 2 blocks from a branch so I just picked up things there. I also used paperbackswap.com, bookmooch.com and swaptree.com to give books I no longer wanted and in return get books I wanted. It only cost me the price of shipping books to other users via media mail. I saved unknown hundreds and hundreds of dollars by making this simple switch.

For example, in September, I spent $36 on postage to send out used books, books that would otherwise just be sitting around and in return I received about $300 worth of books had I bought them new at retail price. For those who are into DVDs and CDs, swapadvd.com and swapacd.com are also awesome sites. (Other than being a member, I'm not affiliated with any of those sites)

I stopped buying anything new. If I really, really needed something, I would ask first on freecycle http://www.freecycle.org/ and search craigslist for used items for sale. For example, my hairdryer stopped working about 6 months ago. Instead of running out to buy a new one, I posted an "Item Wanted" listing on the yahoo group and had a new and FREE hair dryer within 24 hours.

Food Budget: I ate the kind of things I normally eat; I just made some simple substitutions. I ate at home instead of eating out. I brought my lunch to work instead of eating out, but I did let myself eat out on Payday Friday. I used coupons and only bought very small amounts of perishable items so there was no waste. I stocked up on items like toilet paper when there was a really good sale, but was careful not to buy too many perishables. Nothing went to waste. I gave up paper towels and used rags instead. I shopped at the grocery outlet instead of Whole Foods (aka Whole Paycheck)

Instead of buying new clothes (except for bras, panties and socks) I shopped for things at thrift and consignment stores.

I know it sounds like I gave a lot of stuff up, but I don't see it that way - I kept thinking about what I was GETTING instead, which is freedom from debt. I still gave myself a small budget for entertainment and frugal dining out once in awhile, and please, nothing could induce me to give up my hairdresser!

You'd be surprised how much you can actually do for FREE if you just look around.

Free Theatre: Lots of theatres need volunteer ushers. You work in the theatre for an hour or so before the show, maybe stuffing envelopes or something. You help seat people before the show and then you get to see the show for free. You often get good seats too. I saw 3 or 4 free show a month this way. You often have to wear black
slacks or skirt and a white shirt, but that's a small price to pay for free theatre.

Artist's receptions: You get to mingle and talk with people, see some (hopefully) lovely and interesting art, plus get fed wine and cheese.

I also used squidlist to find cheap and free things to do.

HOW IT FEELS
I was disciplined and determined and I did it! Thank you consumerist! As of today I am debt free (except for my thankfully low fixed-rate mortgage) and I feel like a huge weight has been lifted from my mind. My spirit feels lighter. I am FREE. I am doing a happy dance! My plan is to continue to live frugally and start building up a savings
now. I will never, ever be in that much debt again. I never want to feel the stress an anxiety of owing so much.

Oh yeah, all during this time, I also put just $40 per month away into a savings account (ING) which I set up as an automatic $20 deduction every payday. I now have $800 to spend guilt-free and after 20 months I'm ready for a vacation. So, as my prize for getting debt free, I just booked a $295 flight to Cancun a bit later in October. I really deserve this vacation for a job well done and best of all? It's NOT going on a credit card.

Thanks, consumerist!

-trixare4kids"

Excellent work! We're proud of you, trixare. You really buckled down and make the right decisions to aggressively attack your debt. For anyone who's in debt, even if you just adopt a few things, there's a lot in here to get you further down the path towards true financial freedom.

(Photo: lemonjenny)

Credit Crisis Drives Stocks Down Sharply [NYT]

From the NYT:

In response to the falling value of their homes and high gasoline prices, Americans have become more frugal all year. But in recent weeks, as the financial crisis reverberated from Wall Street to Washington, consumers appear to have cut back sharply. Even with the government beginning a giant bailout of the financial system, their confidence may have been too shaken for them to resume their free-spending ways any time soon.

Recent figures from companies, and interviews across the country, show that automobile sales are plummeting, airline traffic is dropping, restaurant chains are struggling to fill tables, customers are sparse in stores.

When the final tally is in, consumer spending for the quarter just ended will almost certainly shrink, the first quarterly decline in nearly two decades.

The Times says that when the government releases the numbers this month, they are expected to show that consumer spending shrank by 3%, which would be the steepest decline since 1981 and the only decline since 1990.

Consumers are apparently buying more groceries, enjoying fewer meals out, and spending less on clothes, school supplies, and air travel. Nintendo Wiis, however, are still flying off shelves.

“My view is that when consumers get concerned about their nest egg, or their country, they need entertainment,” said Bo Andersen, president and chief executive of the Entertainment Merchants Association, which represents distributors and retailers of home entertainment products.

Full of Doubts, U.S. Shoppers Cut Spending [NYT]
(Photo: robinryan )

UPDATE: Now the block has been blocked! Madness continues apace.

Citibank previously teamed up with the FDIC to pick off Wachovia's banking operation for $2.2 billion. Four days after the deal was announced, Wells Fargo loaded up the stagecoach, buying Wachovia as a whole for $15 billion. The FDIC shrugged its shoulders, glad not to have pay $42 billion to secure against losses, and let Wells Fargo proceed with the takeover.

Citigroup raised the stakes in the merger battle on Saturday afternoon, asking Justice Charles E. Ramos of New York State Supreme Court to issue an emergency order blocking the deal between Wachovia and Wells Fargo.

Representatives from the banks met at Justice Ramos’s home in Cornwall, Conn., late Saturday afternoon for more than three hours of oral arguments, according to people briefed on the situation.

In the unusual weekend session, Citigroup presented Justice Ramos with a 16-page complaint naming both Wells Fargo and Wachovia, and their boards, as defendants. But it has not yet filed the suit formally because the courts were closed.

Late Saturday, after several hours of intense legal jockeying, Justice Ramos issued an injunction effectively blocking the Wells Fargo deal, pending a hearing scheduled for Friday.

Wachovia hasn't seen the judge's order yet, but that didn't stop them from debasing Citibank's lawsuit as nothing more than a "pointless legal maneuver."

Wachovia customers can sit back and feel loved. Your accounts are safe, and for the moment, your banking experience will remain the same as it ever was.

Citigroup Says Judge Suspends Wachovia Deal [The New York Times]
Citi: Wells Fargo blocked from buying Wachovia [AP]
PREVIOUSLY: Giddyup! Wells Fargo Rides In And Steals Wachovia From Citibank!
(Photo: So Cal Metro)