Bank Losses are their Gain and the Consumer's Loss

This from today’s Wall Street Journal Online:

“Five big lenders led by Wachovia and WaMu reported combined quarterly losses of more than $11 billion. But their shares jumped an average of 14% on rising hopes that battered bank stocks have fallen about as low as they can go.”

Add in 10,500 more jobs lost and dividends curtailed as the banks struggle to preserve liquidity and investors are doing the wave sending the Dow up 135 points. Now, I really need a stock market tutorial to understand this logic. Wall street myopia is giving me a headache. Most of the major financial institutions have managed to post numbers that are not as bad as what the street expected and investors are ecstatic. None of these institutions wants to own up to their true exposure to sub-prime mortgages and so they have their financial geniuses massage the numbers making even cataclysmic losses look good. Yet banks have collectively written down more than $300 billion in losses since the beginning of the year in addition to borrowing billions from the fed’s discount window.

Rest assured the banks are hungry for new revenue to stem the losses in the other segments so they are hiking fees and tightening their usury grip on credit card and banking customers. In the last few weeks, my husband and I have received new terms for just about every credit card we own. One of the credit cards that we used to finance our business raised our interest from 7.99% to 19.99% telling us that if we disagreed, we could opt-out and keep our lower rate until the debt was paid but we would have to close the account. We closed the account because we were not going to pay 12% more for money we borrowed at 7.99% just to keep the account open.

Banks don’t have to physically bring out the hammer to break our knees. We all face 30% interest rates and whopping fees if we make even one mistake on any of our cards. That hiccup will ripple through our credit reports so fast sending the interest rates on all of our other debt through the stratosphere. We used to blame the poor sod who willingly went to the loan shark and put his knees in jeopardy. Now we are all feeding at the same trough. Have we forgotten how impossible it is to pay back debt with a 30% interest rate when you can’t roll it back into a low interest home equity product? Apparently so.