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Three Problems Solved by the McFadden Act

March 27, 2014 by · Leave a Comment 

Written by Phin Upham

By the middle of the 1920s, the Federal Reserve System was working full steam. It was helping to push economic growth and keep interest rates relatively stable. Even gold reserves had risen, helping to propel the Federal Reserve note to the top of the world’s currency. There were three issues that banks had to contend with in those days, which the McFadden act sought to solve.

Longevity

There was a concern that bank charters, which were set to about twenty years, would run out and the Fed would not renew them. Bankers and legislators of the time remembered that the Fed refused to re-charter the First and Second Banks of the United States. The McFadden Act re-chartered these banks seven years prior to their expiration debt, and made those charters permanent. Had they waited until the scheduled time to consider renewal, they would have been in the throes of the Great Depression.

Branching

State banks were, depending on the laws of each state, allowed to operate multiple branches within the state. National banks were not afforded the same allowances, which threatened the competitive nature of the financial industry. The McFadden Act made it possible for national banks to operate branches within any state that permitted that type of business.

Competition

The McFadden Act also revised a range of banking laws to create a more competitive atmosphere in general. The belief at the time was that banks, which had been conservative leading up to the roaring-twenties, should be allowed to operate with more risk. The Act made it legal for banks to operate subsidiaries, and expanded the size of loans that Federal Reserve lenders could make.


Phin Upham is an investor from NYC and SF. You may contact Phin on his Twitter page.

Institutional credit rating agencies

March 19, 2014 by · Leave a Comment 

Almost 97 percent of institutional credit ratings come from three agencies; Standard and Poor’s (S&P), Fitch Ratings and Moody’s. They assign institutions including nation’s governments, organizations, companies, cities and many others with a rating. Rating grades vary from the highest “AAA” (Moody’s “Aaa”) to lowest issuer default rating of S&P and Fitch “D” (Moody’s lowest grade is “C”). This rating helps or harms institutions when establishing debt obligations. Many mistakenly think that they are same as those consumer credit rating agencies (Equifax, Experian and TransUnion) where individuals get their credit report and FICO Score, but they are not. Fitch Ratings were introduced in 1924 and S&P adopted the same. Moody’s uses a slightly different rating system. Agency ratings heavily weigh on one’s ability to borrow funds in the open market. In the wake of the financial crisis rating agencies are under fire for their excessive ratings.

In 2006, the Congress adopted the Credit Rating Agency Reform Act which required the Securities and Exchange Commission (SEC) to establish guidelines for qualifying rating agencies and gave the power to regulate. The more recent Dodd-Frank Wall Street Reform and Consumer Protection Act enhanced the SEC’s authority over rating agencies and asked the agency to create and implement number of new rules.

Could multiple inquiries into your credit lower your score?

February 26, 2014 by · Leave a Comment 

Yes it could, but if it is happening over a long period of time. Let’s say that you are applying for credit at department stores when they give you a 10 percent discount. If you keep this practice over a long period of time at various stores, multiple inquiries into your credit could result in lowering or affecting your FICO score. However, if these inquiries are taking place within a short period of time, it might not affect your score. Let’s say that you are looking into buying a home and tried several lenders for a better rate. If all lenders check your credit at one time so close to each other’s inquiry, this will not have a negative impact on your FICO score. Some say it could lower your score by five points. Also, multiple inquiries from auto, mortgage, or student loan lenders within a short period of time will not affect your score negatively. Applying for credit within a short period time also represents a greater risk and therefore, it could affect your score. One clear way to avoid inquiries impacting your score to do your credit shopping within a short period of time and follow other practices to keep your score high.

Which credit card issuer is best for you?

January 6, 2014 by · Leave a Comment 

The Westlake Village, California based J.D. Power ranks and publishes an annual credit card satisfaction survey for last seven years. The latest report, 2013 U.S. Credit Card Satisfaction Study, was published on August 22, 2013. They use six factors including interaction; credit card terms; billing and payments; rewards; benefits and services; and problem resolution to gauge and rank card issuers. They indicate many cardholders lack understanding of terms, benefits and rewards that are associated with their cards. One theme that speaks volume is awareness and customer redemption of rewards is in decline year over year. More than 66 percent of cardholders were aware of rewards and benefits in 2012 and that declined to 59 percent in 2013. The survey also finds that mobile apps or text alerts to interact with their card issuer is on a gradual rise thanks to generation X and Y cardholders. For 2013, the American Express card ranked the highest followed by Discover and Chase. The American Express has held the top spot since the ranking started seven years ago. One takeaway from the study for all card holders is to find a way to understand terms and benefits of credit cards they carry.

Steps to take if your credit card information breached

December 10, 2013 by · Leave a Comment 

Article submitted by Debt Settlement Online.

Holidays are good times for many Internet fraudsters. Many of us use our credit or debit cards for holiday purchases which are larger than your day to day purchases and fraudsters on the lookout to steal as much information from these transactions. Therefore, holidays become more vulnerable time for card users.

Well, what steps can you take to protect you from a theft? Your e-mail address is more public than you think. Scammers use information gathered from your e-mail account and others to create a complete financial picture of you. When credit card breaches become more public we tend to immediately change to a new credit or debit card. It is very helpful for protecting you. Since your e-mail account provides fraudsters with a name and an address and other information, watch for phony messages especially if it is asking for personal information such as Social Security Number (SSN), birth date etc.

Look for requests for information coming from outside especially with a name of a retailer. Many do not ask for sensitive information such as SSN.

Sign up for a credit monitoring service. Many cards do offer free service for certain time period or during a suspected card breach. Take advantage of these offers.

How to beat credit card late fees?

September 23, 2013 by · Leave a Comment 

It could happen to anyone for many reasons. But paying a payment late is no fun at all. That’s why the Federal government built in some relief into the Credit Card Act of 2009 which limits the late fees to $25 for the first violation and $35 for subsequent violations. If you have missed a payment within the last six months, rules may not apply. They also do not apply to small business credit cards or any other type of late fees such as what they charge on your late mortgage payment.

When you are shopping for a credit card, look for a card that doesn’t charge a late fee at all. But they may be limited to certain number of late payments. But be aware, late payments still may be reported to credit reporting bureaus which will result in a lower credit score. Keep in mind your payment history counts for 35 percent of your FICO score.

If you miss a payment, call immediately. Regardless of what the law allow them to charge, your credit card company may be willing to listen to you and not charge a late fee if you have been a good customer for them.

Living beyond your means

August 6, 2013 by · Leave a Comment 

How can you tell that you are living beyond your means? If you are buried in debt and you are having trouble making your monthly payments, this is an indication that you are exceeding your financial capabilities. Most common mistake we make is charging things that we can’t afford to available credit cards. When it comes to paying bills including shelter, utilities and others, we struggle to make even the required monthly minimum payment. This becomes an issue when it comes to getting ahead and paying off your high interest credit cards. Paying just the minimum required amount will not be enough to get out of debt.

Another sign that tells you are living beyond your means is when you don’t have adequate savings for an emergency and you are living from paycheck to paycheck. Experts recommends at least six months of living expenses to be saved in a savings account to be used if you get laid off or to face some other calamity like unexpected medical bills. If you don’t have any savings to cover emergencies, then you are living beyond your means.

It is time for you to take a closer look at your expenses and stick to a budget. Don’t hesitate to seek help from a financial professional.

When is filing for bankruptcy makes sense?

June 18, 2013 by · Leave a Comment 

When bill collectors are calling non-stop, the only option left may be to file for bankruptcy. But selecting the right form and option need careful consideration. Mistakes can complicate the process and may not bring the desired outcome.

If you are faced with a wage garnishment, imminent foreclosure or lawsuit, filing for a bankruptcy can bring relief. But before you embark on that path, you need to consult an attorney practicing bankruptcy law or an expert on the subject. They can explain in detail what covers under bankruptcy and the correct form of filing suitable for your situation.

Making a decision to file for bankruptcy may put you an ethical dilemma. Many think it brings shame to the person and the family. But if your wages, home, and other assets are at stake, you and your whole family can suffer from not filing for bankruptcy. An expert can help you to sort out good and bad of a bankruptcy protection.

Keep in mind your creditors don’t consider some of the things that you may consider as bad. If you don’t deal with the issue, they can obtain a default judgment against you and your assets including your salary and other future earnings.

Bad money habits that can break your bank

May 3, 2013 by · Leave a Comment 

Some bad money habits without even you recognize them can lead you to more debt and eventual bankruptcy. When it comes to money matters there are few restraints that you need to practice.

Plan, Plan and Plan: When it comes to spending money, planning is the key. Having a plan can help you in many ways. Do not spend more than you earn. Have a plan in place to pay for your monthly expenses, save for retirement, creating an emergency fund that includes at least three to six months of expenses and medical emergencies.

Avoid impulse buying: Do not allow manipulative sales people to talk you into buying things you don’t need or you can’t afford. There are many spending habits that you need to recognize and avoid all time. If you are stressed, don’t go shopping to release your stress or to treat yourself.

Pay attention to your debt: If you are living from pay check to pay check and charging your monthly expenses to your credit cards, this is a sign of financial trouble. You need serious financial planning and may be even cut out your credit cards. Recognizing the problem and sticking to a budget could help you to stay out of trouble.

Three common myths about credit score

April 3, 2013 by · Leave a Comment 

Myth: Bankruptcy ruins all your credit for ever

It is true that bankruptcy stays in your credit history for several years. But don’t let that prevent you from rebuilding your credit again. After a bankruptcy, start to pay your bills on time. It will start to rebuild your credit again.

Myth: All accounts in collection should be paid in full immediately to improve credit score

Paying off an account in collection in certain instances may lower your score. If you have an account in collection and you are trying to buy a home, wait till you close escrow to pay the account in collection. In order to improve your credit score in the long run, all accounts in collection must be paid off as soon as possible.

Myth: When you shop for a mortgage, all inquiries into your credit will count as separate hits

Multiple inquiries into credit could impact negatively lowering your credit score. But when it comes to inquiries related to a mortgage, FICO disregard mortgage related inquiries 30 days immediately prior to calculating the score. Additionally, mortgage related inquiries within a 45 day period will be counted as a single inquiry by credit agencies.

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