Bank Loan Losses Rise to Record Levels
What’s going on in the “real economy”, the economic reality faced by all but a small percentage of Americans? As a result of job losses causing the highest unemployment level since 1983, millions of people are struggling just to survive week to week. Unemployment payments can only go so far, especially when people have become targets or predatory lenders of mortgage and personal loans as well as credit card companies. After all, our economy is based on debt. The more debt people are in, the more interest and fees the banks collect, and the more the public sinks into a perpetual downward spiral, unable to pay off the principal of our collective debt.
However, it would seem there has to be a breaking point. After years of bombarding the masses with credit offers and misleading them to take on adjustable rate mortgages, otherwise known as subprime, it doesn’t take Einstein to figure out that millions of jobless Americans would get terribly overextended.
Now, the inevitable is occurring. Banks are being forced to write off ever higher levels of bad paper. The nation’s largest lender, Bank of America, is about to report a 10% rise in bad loans totaling $7.6 billion for the 2nd Quarter. The bank expects these figures to increase in coming months. See story here. It should be noted that Bank of America was a recipient of the recent federal bailout program.
A May 10th NY Times article has even more detail on the rising level of bank write offs due to credit card and other revolving loan losses. If the unemployment rate rises above 10%, the figure could far exceed the $82.4 billion in expected credit card losses by the end of 2010. The article states “According to estimates by Oliver Wyman, a management consulting firm, card losses at the nation’s biggest banks could reach $141.5 billion by 2010 if the regulators’ loss rate was applied to their entire credit card business.”
Since the global financial system is also based on debt-oriented money, the European Central Bank also reported on June 16th that a $283 billion write off was expected in the next year and a half.
Hence, one growth area in the U.S. economy is the debt collection industry. This is problematic in many respects because this industry is known for many abuses and even fraudulent acts against consumers. Unfortunately, too few people are aware of steps they can take to protect themselves and actions they can take as provided by the Federal Debt Collection Practices Act (FDCPA). Now more than ever, Americans must learn all they can about the real nature of debt and the legal system’s role in maintaining the global ponzi scheme based on fiat money and fractional reserve banking.
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