BofA why me?
Yesterday I received a letter in the mail from Bank of America. Now it wasn't thanking me for being great customer over the years or thanking me for my excellent ability to manage my credit. This letter indeed was informing me that they reviewed my account and lowered my available credit by 50%...
I don't want to mention the first words that came out of my mouth but to say the least I was not a happy camper. Why did BofA punish me?
It's hard not taking these things personal but it's the actions from a few that makes us pay a price. Using the power of Twitter I found @BofA_help and posted my disappointments. David contacted me through that Twitter account and asked me to send him my phone number so I did..don't worry I have LifeLock!
David called, we had a great conversation about how this credit mess is effecting customers like myself. The good news it it was only effecting about 10% of BofA customers, the bad news it BofA has a boat load of customers! I know I wouldn't have used the available credit that BofA had issued but it was the idea that they took it away that upset me. Why do good customers get punished? Well in my simple explanation you can't get blood from a turnip!
My hat goes off to David, having to deal with all the issues that arose from the current economy can't be fun.
Technology today can trigger alerts when your credit card is used for online purchases or if charges go over a given predetermined target. So why did this mess catch the financial institutions with their pants down? Was it greed or just sloppy management?
Unfortunately we all will pay the price for this credit mess. A very successful friend told me the secret to financial success is "Spend less than you make".. simple but effective!
Whats in your wallet?
Scott
www.fdipays.com
Showing posts with label mortgage mess. Show all posts
Showing posts with label mortgage mess. Show all posts
Friday, April 17, 2009
Thursday, April 9, 2009
Best explanation of the financial mess we are in!
This came from a friend of mine so don't give me the credit for this information, I know we all can relate to this explanation..
Enjoy the read....Derivative markets .... an understandable explanation
Heidi is the proprietor of a bar in Detroit. In order to increase sales, she decides to allow her loyal customers- most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
Word gets around about Heidi's drink now pay later marketing strategy, and as a result increasing numbers of customers flood into Heidi's bar and soon she has the largest sale volume for any bar in Detroit. By providing her customers' freedom from immediate payment demands, Heidi gets no resistance when she substantially increases her prices for wine and beer, the most consumed beverages. Her sales volume increases massively.
A young and dynamic vice-president at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit.
He sees no reason for undue concern since he has the debts of the alcoholics as collateral. At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then traded on security markets worldwide. Naïve investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Despite this, their prices continuously climb, and the securities become the top-selling items for some of the nation's leading brokerage houses.
One day, although the bond prices are still climbing, a risk manager at the bank (subsequently fired due to his negativity), decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. Heidi demands payment from her alcoholic patrons, but being unemployed they cannot pay back their drinking debts. Therefore, Heidi cannot fulfill her loan obligations and she claims bankruptcy. DRINKBOND and ALKIBOND drop in price by 90%. PUKEBOND performs better, stabilizing in price after dropping by 80%. The decreased bond asset value destroys the bank's liquidity and prevents it from issuing new loans.
The suppliers of Heidi's bar, having granted her generous payment extensions and having invested in the securities, are faced with writing off her debt and losing over 80% on her bonds. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 50 workers.
The bank and brokerage houses are saved by the Government following dramatic round-the-clock negotiations by leaders from both political parties. The funds required for this bailout are obtained by a tax levied on employed middle-class non-drinkers.
Finally an explanation that is understandable. And everyone lives happily ever after ! ! ! ! !
Scott Sebenaler
www.fdipays.com
Enjoy the read....Derivative markets .... an understandable explanation
Heidi is the proprietor of a bar in Detroit. In order to increase sales, she decides to allow her loyal customers- most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
Word gets around about Heidi's drink now pay later marketing strategy, and as a result increasing numbers of customers flood into Heidi's bar and soon she has the largest sale volume for any bar in Detroit. By providing her customers' freedom from immediate payment demands, Heidi gets no resistance when she substantially increases her prices for wine and beer, the most consumed beverages. Her sales volume increases massively.
A young and dynamic vice-president at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit.
He sees no reason for undue concern since he has the debts of the alcoholics as collateral. At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then traded on security markets worldwide. Naïve investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Despite this, their prices continuously climb, and the securities become the top-selling items for some of the nation's leading brokerage houses.
One day, although the bond prices are still climbing, a risk manager at the bank (subsequently fired due to his negativity), decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. Heidi demands payment from her alcoholic patrons, but being unemployed they cannot pay back their drinking debts. Therefore, Heidi cannot fulfill her loan obligations and she claims bankruptcy. DRINKBOND and ALKIBOND drop in price by 90%. PUKEBOND performs better, stabilizing in price after dropping by 80%. The decreased bond asset value destroys the bank's liquidity and prevents it from issuing new loans.
The suppliers of Heidi's bar, having granted her generous payment extensions and having invested in the securities, are faced with writing off her debt and losing over 80% on her bonds. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 50 workers.
The bank and brokerage houses are saved by the Government following dramatic round-the-clock negotiations by leaders from both political parties. The funds required for this bailout are obtained by a tax levied on employed middle-class non-drinkers.
Finally an explanation that is understandable. And everyone lives happily ever after ! ! ! ! !
Scott Sebenaler
www.fdipays.com
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