Government Relief Needed After Failed Auto Bailout
Dec 12th, 2008 | By Rob | Category: Congress, credit card debt
Well, it looks like today is the day that a few senators have finally said that bailout nation has gone too far with its proposal to bailout the United States automakers. In my opinion, it’s unfortunate that the government was negotiating among themselves how quickly they could lower the salary of well paid American workers. I guess we will soon see whether 1 in 10 American jobs is indeed tied to the automobile industry. I hope that the government will charge itself with new legislation to preemptively assist the region and workers that will be effected by their inability to assist these icons of American industry.
While the government was quick to provide rebate checks for consumers to spend and stimulate the economy, and has extensively debated bailout of American businesses in order to stave off bankruptcy and loss of jobs (as well as hold hearings to parade business leaders before them for a one day walk of shame), they haven’t produced the type of groundbreaking legislation that would put real money in the pockets of consumers struggling with debt, or at the very least, ease concerns about the financial crisis and corresponding loss of jobs that
The focus of many has been on the problem of keeping American real estate out of foreclosure to stabilize housing prices, as well as keep American families in their homes, by renegotiating failed mortgages. But data this week suggested that roughly half of consumers receiving modified mortgages returned to delinquent loans.
The United Kingdom, on the other hand, has been negotiating with its credit card companies to assist consumers and has reached an agreement to limit increases of interest rates on troubled borrowers. I’ve now read three different news stories and received three different accounts of what the agreement with British credit card issuers does, so I’ll simply point you to a few links about the conclusion to the negotiations and leave it at that.
- Wall Street Journal - U.K. Card Firms Ease Up
- Associated Press - British Credit Card Companies to Ease Rate Hikes
These actions were taken by the United Kingdom government after average credit card interest rates increased despite the decline of the Bank of England lending rate and the bailout of British banks. It also was necessary to stop the cycle of pushing consumers having problems into bankruptcy because credit card issuers were quick to reprice risk on consumers having problems with making their credit card payments.
Let’s hope that the U.S. government can undertake similar negotiations with credit card companies. Given the inability of the legislature to act over the auto bailout, it seems unlikely that legislation revamping the practices of banks issuing credit cards will be modified through a legislative proposal. And with some predicting that 2.5 million American jobs could be lost through the bankruptcy filing of American automakers, a modification of lending practices and debt that is hampering the balance sheets of American families seems necessary. Otherwise, the banks may need TARP II to help them through the problem of unpaid credit card debt.
And for those that would say that the debtors have made their bed, let them lie in it, I would remind them that many of the banks might not be here if not for their bailout by the American consumer’s tax dollars.
