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Wednesday, November 7, 2007

World Bank Sees Big Gains From Easing Trade Flows

“Reducing the cost of moving goods across borders could boost the incomes of developing countries more than a new world trade pact that cuts tariffs and agricultural subsidies, World Bank officials said Monday.

‘The bottom line is logistics can make you or break you as a country in today's globalized and just-in-time world,’ Uri Dadush, World Bank Development Prospect Groups Director, said at a briefing to discuss the Bank's first survey of how efficiently countries move goods.

World Bank researchers asked more than 800 logistics professionals to assess the performance of 150 countries in areas such as custom procedures, quality of infrastructure, ability to track and trace shipments and delivery timelines. …The study showed a country's supply chain is only as strong as its weakest link, said Danny Leipziger, World Bank Vice President for Poverty Reduction and Economic Management. …”
AP adds that “Singapore, a major global and logistics hub, ranked first in …Connecting to Compete: Trade Logistics in the Global Economy, a study based on a world survey of freight forwarders and express carriers, [that] indicates that making it easier to connect firms, suppliers and consumers is crucial in a world where predictability and reliability are becoming more important than costs, the Bank said. …

Among the seven most industrialized nations in the survey, Germany was third, Japan sixth, Britain ninth, Canada 10th, the United States 14th , France 18th and Italy 22nd out of a total of 150 countries covered. The Bank said there are also significant differences among developing countries with similar incomes. …Another finding of the survey is that developing countries where trade has been made central to their economy perform better than others with similar incomes. …”

Monday, November 5, 2007

Mortgage bank

A Mortgage bank specializes in originating and/or servicing mortgage loans.
A mortgage bank is a state-licensed banking entity that makes mortgage loans directly to consumers. Generally, a mortgage bank utilizes funds from the secondary mortgage market such as Fannie Mae, Freddie Mac, or other large mortgage servicing companies. They require secondary market funds because a mortgage bank is a non-depository institution, which means they do not receive income from deposits, as a savings bank does.
A mortgage bank can vary in size. Some mortgage banking companies are nationwide. Some may originate a large loan volume exceeding that of a nationwide commercial bank. Many mortgage banks employ specialty servicers such as Real Time Resolutions, for tasks such as repurchase and fraud discovery work.
Their two primary sources of revenue are from loan origination fees, and loan servicing fees (provided they are a loan servicer). Many Mortgage bankers are opting not to service the loans they originate. By selling them shortly after they are closed and funded, they are eligible for earning a service released premium. The secondary market investor that buys the loan will earn revenue for the servicing of the loan for each month the loan is kept by the borrower.
Unlike a federally chartered savings bank, a mortgage bank generally specializes only in making mortgage loans. They do not take deposits from customers. Their funds come primarily from the secondary wholesale market. Examples of the secondary market lenders most known are Fannie Mae, and Freddie Mac.
A mortgage bank generally operates under the different banking laws applicable to each state they do business in.
For a complete list of mortgage bankers by state, check with the state banking or financial department of each state individually. Whereas a federal bank may operate under federal law, a consumer may have additional rights under the applicable state banking law in terms of consumer protection.
Mortgage Bankers can be very competitive in mortgage lending as they specialize in only lending, and do not have to factor in subsidizing any losses in other departments such as traditional banking. At the same time they often do not have the same access to low cost adjustable rate mortgages which are typically associated with federal banks and access to federal money.

Credit union

A credit union is a cooperative financial institution that is owned and controlled by its members. Credit unions differ from banks and other financial institutions in that the members who have accounts in the credit union are the owners of the credit union.
Credit union policies governing interest rates and other matters are set by a volunteer Board of Directors elected by and from the membership itself. Only a member of a credit union may deposit money with the credit union, or borrow money from it. As such, credit unions have historically marketed themselves as providing superior member service and being committed to helping members improve their financial health.
Credit unions may be viewed as non-profit organizations, or alternatively as for-profit enterprises charged with making a profit for their members (who receive any profits earned by the cooperative in the form of dividends paid on savings, which are taxed as ordinary income, or reduced interest rates on loans).
This debate reflects credit unions' unusual organizational structure, which attempts to solve the principal-agent problem by ensuring the owners and the users of the institution are the same people. In any case, credit unions generally cannot accept donations and must be able to prosper in a competitive market economy.
In the United States, credit unions typically pay higher dividend (interest) rates on shares (deposits) and charge lower interest on loans than banks.[1] Credit union revenues (from loans and investments) do, however, need to exceed operating expenses and dividends (interest paid on deposits) in order to maintain capital and solvency. Often credit unions have a lower cost of funds due to a higher proportion of non/low interest bearing deposits, than typical commercial banks.
Credit unions offer many of the same financial services as banks, often using a different terminology; including share accounts (savings accounts), share draft (checking) accounts, credit cards, and share term certificates (certificates of deposit) and online banking.
Credit unions exist in a wide range of sizes, ranging from volunteer operations with a handful of members to institutions with several billion dollars in assets and hundreds of thousands of members.

Banking in the United States

United States Banking began in 1781 with an act of United States Congress that established the Bank of North America in Philadelphia. During the American Revolutionary War, the Bank of North America was given a monopoly on currency; prior to this time, private banks printed their own bank notes, backed by deposits of gold and/or silver.
Robert Morris, the first Superintendent of Finance appointed under the Articles of Confederation, proposed the Bank of North America as a commercial bank that would act as fiscal agent for the government. The monopoly was seen as necessary because previous attempts to finance the Revolutionary War with paper currency had failed; after the war, a number of banks were chartered by the states under the Articles of Confederation, including the Bank of New York and the Bank of Massachusetts, both of which were chartered in 1784.
The Bank of North America was succeeded by the First Bank of the United States, which the United States Congress chartered in 1791 under Article One, Section 8 of the United States Constitution, after the Constitution replaced the Articles of Confederation as the foundation of American government. However, Congress failed to renew the charter for the Bank of the United States, which expired in 1811. Similarly, the Second Bank of the United States was chartered in 1816 and shuttered in 1836.

Bank robbery

Bank robbery is the crime of robbing a bank. It is also called Bank Heist especially in the United States. It is usually accomplished by a solitary criminal who brandishes a firearm at a teller and demands money, either orally or through a written note. The most dangerous type of bank robbery is a takeover robbery in which several heavily armed (and armored) gang members threaten the lives of everyone present in the bank. A bank robbery can also take place during off hours when thieves try to break into the vault and get away with money.
According to the Independence Hall Association in Philadelphia, the first bank robbery in America happened during the night of August 31 or the early morning of September 1, 1798 at the Bank of Pennsylvania at Carpenters' Hall. The vaults were apparently robbed of $162,821, or approximately $1.8 million in 2006 dollars. Because no forced entry evidence existed, authorities assumed it was an "inside" job. Several suspects were immediately imprisoned and prosecuted, but the real culprits were Isaac Davis and a partner. Within days of the heist, Davis' partner fell victim to a plague of yellow fever that ravaged Philadelphia that summer.
(Claims of notoriety aside, it is important to note that theft which lacks intimidation or threat of violent confrontation is not truly a robbery, but a burglary. These two concepts are often confused in common discussion of bank crimes.)
During the American Civil War, raiders from both Union and Confederate armies would rob banks in enemy-controlled towns. These robberies were at the time regarded as legitimate acts of war, but many of the raiders carried on robbing banks in the post-war era, giving rise to the famous robber gangs of the late 19th century.
Due to modern security measures like security cameras, armed security guards, silent alarms, exploding dye packs, and SWAT teams, bank robberies are now much more difficult. Few criminals are able to make a successful living out of bank robbery over the long run, since each attempt increases the probability that they will be identified and caught. Today most organized crime groups tend to make their money by other means, such as drug trafficking, gambling, loan sharking, identity theft, or online scamming and phishing. Bank robberies are still fairly common and are indeed successful, although eventually many bank robbers are found and arrested. A report by the Federal Bureau of Investigation [1] states that, among Category I serious crimes, the arrest rate for bank robbery in 2001 was second only to that of murder.
A further factor making bank robbery unattractive for criminals in the United States is the severity with which it is prosecuted. Accounts at all US banks are insured by the Federal Deposit Insurance Corporation, a corporation of the federal government, bringing bank robbery under federal jurisdiction and involving the FBI. Federal sentencing guidelines for bank robbery mandate long prison terms, which are usually further enhanced by the use or carrying of loaded firearms, prior criminal convictions, and the absence of parole from the federal prison system. As with any type of robbery, the fact that bank robbery is also inherently a violent crime typically causes corrections administrators to place imprisoned bank robbers in harsher high-security institutions.
Ever since the "glory days" of the great bank robberies during the 19th century, bank robberies have become ingrained into American popular culture. Numerous films, books, and songs have been written about the crime, which is the crime of choice for villains everywhere in comic books, pulp adventure and crime stories, and even cartoons. The incidence of bank robberies is less pronounced in many other countries despite less security. It is believed that the cultural differences may be the reason.

Profitability

A bank generates a profit from the differential between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities. This difference is referred to as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending activities has been cyclic and dependent on the needs and strengths of loan customers. In recent history, investors have demanded a more stable revenue stream and banks have therefore placed more emphasis on transaction fees, primarily loan fees but also including service charges on array of deposit activities and ancillary services (international banking, foreign exchange, insurance, investments, wire transfers, etc.). However, lending activities still provide the bulk of a commercial bank's income.
In the past 10 years in the United States, banks have taken many measures to ensure that they remain profitable while responding to ever-changing market conditions. First, this includes the Gramm-Leach-Bliley Act, which allows banks again to merge with investment and insurance houses. Merging banking, investment, and insurance functions allows traditional banks to respond to increasing consumer demands for "one-stop shopping" by enabling cross-selling of products (which, the banks hope, will also increase profitability). Second, they have expanded the use of risk-based pricing from business lending to consumer lending, which means charging higher interest rates to those customers that are considered to be a higher credit risk and thus increased chance of default on loans. This helps to offset the losses from bad loans, lowers the price of loans to those who have better credit histories, and offers credit products to high risk customers who would otherwise been denied credit. Third, they have sought to increase the methods of payment processing available to the general public and business clients. These products include debit cards, pre-paid cards, smart-cards, and credit cards. These products make it easier for consumers to conveniently make transactions and smooth their consumption over time (in some countries with under-developed financial systems, it is still common to deal strictly in cash, including carrying suitcases filled with cash to purchase a home). However, with convenience there is also increased risk that consumers will mismanage their financial resources and accumulate excessive debt. Banks make money from card products through interest payments and fees charged to consumers and transaction fees to companies that accept the cards.
The banking industry's main obstacles to increasing profits are existing regulatory burdens, new government regulation, and increasing competition from non-traditional financial institutions.

Challenges within the banking industry

The banking industry is a highly regulated industry with detailed and focused regulators. All banks with FDIC-insured deposits have the FDIC as a regulator; however, for examinations, the Federal Reserve is the primary federal regulator for Fed-member state banks; the Office of the Comptroller of the Currency (“OCC”) is the primary federal regulator for national banks; and the Office of Thrift Supervision, or OTS, is the primary federal regulator for thrifts. State non-member banks are examined by the state agencies as well as the FDIC. National banks have one primary regulator—the OCC.
Each regulatory agency has their own set of rules and regulations to which banks and thrifts must adhere.
The Federal Financial Institutions Examination Council (FFIEC) was established in 1979 as a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions. Although the FFIEC has resulted in a greater degree of regulatory consistency between the agencies, the rules and regulations are constantly changing.
In addition to changing regulations, changes in the industry have led to consolidations within the Federal Reserve, FDIC, OTS and OCC. Offices have been closed, supervisory regions have been merged, staff levels have been reduced and budgets have been cut. The remaining regulators face an increased burden with increased workload and more banks per regulator. While banks struggle to keep up with the changes in the regulatory environment, regulators struggle to manage their workload and effectively regulate their banks. The impact of these changes is that banks are receiving less hands-on assessment by the regulators, less time spent with each institution, and the potential for more problems slipping through the cracks, potentially resulting in an overall increase in bank failures across the United States.
The changing economic environment has a significant impact on banks and thrifts as they struggle to effectively manage their interest rate spread in the face of low rates on loans, rate competition for deposits and the general market changes, industry trends and economic fluctuations. It has been a challenge for banks to effectively set their growth strategies with the recent economic market. A rising interest rate environment may seem to help financial institutions, but the effect of the changes on consumers and businesses is not predictable and the challenge remains for banks to grow and effectively manage the spread to generate a return to their shareholders.
The management of the banks’ asset portfolios also remains a challenge in today’s economic environment. Loans are a bank’s primary asset category and when loan quality becomes suspect, the foundation of a bank is shaken to the core. While always an issue for banks, declining asset quality has become a big problem for financial institutions. There are several reasons for this, one of which is the lax attitude some banks have adopted because of the years of “good times.” The potential for this is exacerbated by the reduction in the regulatory oversight of banks and in some cases depth of management. Problems are more likely to go undetected, resulting in a significant impact on the bank when they are recognized. In addition, banks, like any business, struggle to cut costs and have consequently eliminated certain expenses, such as adequate employee training programs.
Banks also face a host of other challenges such as aging ownership groups. Across the country, many banks’ management teams and board of directors are aging. Banks also face ongoing pressure by shareholders, both public and private, to achieve earnings and growth projections. Regulators place added pressure on banks to manage the various categories of risk. Banking is also an extremely competitive industry. Competing in the financial services industry has become tougher with the entrance of such players as insurance agencies, credit unions, check cashing services, credit card companies, etc.

Sunday, November 4, 2007

MySpace Gets Social With Google

Internet social networking leader MySpace is joining Google Inc.'s platform for sharing applications across the Web - a concept that threatens to undermine the rapid growth of their common rival, Facebook Inc. Google trumpeted the MySpace coup Thursday in a meeting with reporters, two days after revealing its plans to create a distribution network for interactive applications known as "widgets." The programs - created by a hodgepodge of independent software developers and other Web sites - make it easier to share music, pictures, video and other personal interests on social networking sites. MySpace, owned by News Corp ., was conspicuously absent from the initial list of Web sites that agreed to host the widgets from Google's "OpenSocial" platform. That raised questions whether MySpace might try to build its own proprietary platform, much like Facebook has already done. But MySpace and Google executives said they began discussing an open-ended system that culminated in OpenSocial more than a year ago. The formal announcement about the alliance was timed to coincide with a party that Google is throwing for software developers Thursday evening in Mountain View. Google also disclosed for the first time that another popular social networking site, Bebo.com, will host widgets supplied from its platform, which is trying to create a common coding standard for the applications so they work on hundreds of Web sites. Other previously disclosed participants networks include social networks Friendster, hi5, LinkedIn, Ning and the Google-owned Orkut. All told, OpenSocial's potential audience is expected to exceed 200 million people. But OpenSocial was an unimpressive alternative to Facebook's platform until MySpace confirmed its participation, said Gartner analyst Ray Valdes. "This is more likely to get developers' attention," Valdes said Thursday. Although Facebook has been growing faster, MySpace remains the Internet's biggest social network - a hangout where people look for dates, share their passions, make new friends or just connect with familiar faces. In September, MySpace's U.S. audience totaled 68 million compared with 30.6 million for Facebook, according to the latest data from comScore Media Metrix. Google's one-size-fits-all approach contrasts with Palo Alto-based Facebook's, which relies on unique coding that has prevented widgets developed for its sites from working at other places on the Web. Facebook's formula has been highly effective so far, spawning more than 8,000 widgets in the five months since the platform started. Including visitors from outside the United States, Facebook says it now has 50 million members and has doubled in size since May. Facebook's booming membership encouraged Microsoft Corp. to pay $240 million for a 1.6 percent stake in Facebook last week - a deal that valued the 3-year-old startup at $15 billion. Now, it looks like Google and MySpace are forming a tag team to duel Facebook and Microsoft. "This clarifies the battle lines, but it's not just a two-way conflict," Valdes said. That's because other large Web sites like longtime Google rival Yahoo Inc., online auctioneer eBay Inc. and Internet retailer Amazon.com Inc. haven't picked a side yet. It's also possible that those Web sites might introduce competing platforms for social networking widgets. Because social networks are attracting so many users, they are emerging as potentially lucrative advertising channels. Google already has been placing text-based ad links on MySpace, just as Microsoft has been doing at Facebook. The partners share the ad revenue with each other. Social networking widgets are expected to yield a myriad of other moneymaking opportunities, but for now Google has no plans to insert ads in its OpenSocial network. MySpace CEO Chris DeWolfe is confident that OpenSocial will transform his site into a hotbed of communal applications. "OpenSocial will become the de facto standard for developing applications right out of the gate," DeWolfe said. Facebook was invited to join OpenSocial, said Vic Gundotra, a vice president of engineering for Google, and Schmidt said the door remains open. "Everyone is invited to join," Schmidt said. "There has been no effort to discriminate or exclude." Facebook didn't get any notice about OpenSocial, according to company spokeswoman Brandee Barker. "When we have had a chance to understand the technology, Facebook will evaluate participation relative to the benefits to its 50 million users and 100,000 platform developers," she said.

Financial crisis may lead to unexpected changes in the global economy

LONDON- The crisis plaguing the financial market could lead to some unexpected changes in the shape of the global economy, according to Roger Bootle, economic adviser to accountants Deloitte.
The effects of the crisis are likely to be seen in a re-pricing of risk, lower appetite for lending and borrowing, slower economic growth, interest rate cuts and a significant fall in the dollar, he said.
While most of these are already starting to be seen, Bootle predicts even wider implications.
"The end result could be an increase in the political pressure on countries such as China to alter their exchange rate policies. The upshot is that the financial crisis may trigger events that lead to unprecedented changes in the shape and dynamics of the world economy," he said.
The financial crisis was sparked by the fallout in the US sub-prime market, but its origins run deeper. The seeds of the crisis were sown by two developments that occurred years before -- namely the sustained period of ultra-low global interest rates in the early 2000's and an excessive appetite for risk, he added.
As the risk element becomes better balanced, the heady-returns generated by some asset classes in recent years may be a lot harder to find in the years to come, even if the world economy were to remain strong.
Bootle sees the US economy taking a hit, with GDP growth likely to slow to just 1.7 pct next year and US interest rates falling to 4.25 pct. The euro-zone and the UK are not expected to escape unscathed. Economic growth in the euro-zone is set to slow from 2.7 pct this year to about 2.2 pct next year. Meanwhile, the UK is seen experiencing a slowdown in growth from 3 pct to about 2 pct, prompting interest rates to fall to 5 pct by the end of next year, said Bootle.
"This combination of events is likely to result in a significant fall in the dollar. This will increase the political pressure on the super-saving nations, such as China, to alter their exchange rate policies and to boost domestic spending," he added.

Saturday, November 3, 2007

THE STEEP APPROACH TO GARBADALE

Banking is all about trust. We trust that the bank will have our money for us when we go to get it. We trust that it will honor the checks we write to pay our bills. The thing that's hard to grasp is the fact that while people are putting money into the bank every day, the bank is lending that same money and more to other people every day. Banks consistently extend more credit than they have cash. That's a little scary; but if you go to the bank and demand your money, you'll get it. However, if everyone goes to the bank at the same time and demands their money (a run on the bank), there might be problem.
Even though the Federal Reserve Act requires that banks keep a certain percentage of their money in reserve, if everyone came to withdraw their money at the same time, there wouldn't be enough. In the event of a bank failure, your money is protected as long as the bank is insured by the Federal Deposit Insurance Corporation (FDIC). The key to the success of banking, however, still lies in the confidence that consumers have in the bank's ability to grow and protect their money. Because banks rely so heavily on consumer trust, and trust depends on the perception of integrity, the banking industry is highly regulated by the government.

Use Credit Card Travel Rewards This Holiday Season

For most of us, the holidays mean travel. Don’t be a grumbling grinch about it. Use your credit card travel rewards to make the most out of that 300-mile trip to see Great-Aunt Bertha. Jason Giacchino has several tips on how to spend wisely during the holidays, one of which is to “develop a buying strategy.”
It’s a great idea. Gas purchases and hotel stays can rack up rewards to help you enjoy a little post-holiday stress release. Check out Mr. Credit Card’s post on Kiplinger’s recommended list of credit cards for various categories.
The Capital One Platinum Plus MasterCard came out on top in the travel card category, according to Kiplinger’s. Mr. Credit Card agreed with this choice, as well as the magazine’s choice on best gas card, the BP Rewards Visa. That card offers 5% rebates on BP purchases and 2% on other travel and dining expenses. But Mr. Credit Card makes a good point - not everyone uses BP to fill up. I certainly don’t; I think their gas tends to cost more than competitors.
For non-BP users, Mr. Credit Card recommends the American Express Simply Cash Card. It is a business credit card that pays 5% rebates on gasoline and certain types of business expenses. The site mentions that a person can obtain a business credit card without actually owning a business; they will simply be treated as a sole proprietor. It’s worth a try!
For those who will need to fly instead of drive, Kiplinger’s has a recommendation on that too. Here’s what Mr. Credit Card had to say about the magazine’s choice, the Citi Premierpass Card Elite Level.
While this is a very good card, I think there are just too many types of travel reward cards to simply pick one. What they failed to mention is that this card will only suit those who travel a lot because you can earn points from the dollars you spend and also from the miles you fly. For those of us who are not really frequent flyers, then this card may not be suitable. Plus, Citi’s ThankYou Network airline reward system could get complicated as they have “fixed options” and “flexible options” for redeeming points for airline tickets. Check out our review of Citi’s Rewards for more details.
Something else to keep in mind is that the Platinum Plus MC (best travel card) is for consumers with “excellent credit,” according to MasterCard’s web site. If you can get it, go for it - and happy traveling!

Posted in Capital One credit cards, Citi, Featured, Article, business credit cards, American Express Credit Cards, Credit

Money Saving Tips That Aren’t Boring

Sometimes I feel like a broken record with the repetitive nature of posting on debt-reduction tips. After all, how many times do you care to read the same underlying message that cutting back on some of the things you love can put more money in your proverbial pocket? This is why I was particularly amused when I stumbled upon a blog post by Selena Maranjian that began with the following:
Money-saving tips can be boring, especially since we often don’t want to do them.
She had my attention! She goes on to say:
Giving up smoking is a classic one. If you smoke a pack a day and each pack costs you $5, you’re spending nearly $2,000 per year on tobacco. Invest that for 25 years and, if you earn an annual average return of 10%, you’ll end up with nearly $20,000 at retirement — just from that one year’s worth of not smoking. Imagine how much you could accumulate if you gave it up for several years!
Quitting smoking is much easier said than done, though, and that’s where the problems begin.
Consider this …Here are some ideas from advisors Dayana Yochim and Robert Brokamp that aren’t quite so difficult to impliment:
• Give your cash a shot of adrenaline. If your current checking or savings account pays anywhere near the national average APY of 0.34%, stop letting your short-term money languish. On a $5,000 balance, you could easily earn 2.13% to 4.05% (that’s $106.50 to $202.50 over the next year) just settling for the national average rates.” You could do even better than that — some banks are offering more than 5% interest on savings accounts (which could net you $200 more than you’re currently getting). Savings: $200.
• Overlooked deductions, credits, and itemization opportunities [on tax returns] cost the average taxpayer more than $400 a year. Yikes! This can be a biggie. Every situation is different, so some people could end up saving $1,000 or more by being more comprehensive with their tax returns. For example, you may be able to deduct your job-search expenses, charitable contributions, and medical expenses. You may even qualify for $1,000 or more in education-related credits. (Learn much more here: Tax Center.) Savings: $1,000.
• Slash your car and homeowner’s insurance by as much as two-thirds. Raise your deductible to $1,000 from $250 (15% to 30% savings), purchase auto and homeowner’s insurance from the same company (15%), and keep a claim-free record (5% to 35%) for $245 to $560 in savings on a $700-a-year policy.” Wow — got that? These savings (which could amount to $1,000 or more for someone like me with a policy that costs more than $1,000 a year) are there for the taking and will only cost you a few phone calls. No long-term suffering, no subsisting on salads made of lawn clippings. Understand that a higher deductible will cost you more out-of-pocket during the years when you have a claim, but most of the time, you’ll end up ahead of the game. Savings: $750.
• Save on airfare with Farecast.com, a free service that predicts the direction of prices for travel from most major airports. Farecast touts an accuracy rate of roughly 75% and, for $9.95, allows you to lock in low fares. If you save just $100 each on four flights this year, that can make a big difference. And this, too, is painless money saving with little inconvenience. Savings: $400.
• Tend to your credit rating. Be diligent about paying your bills on time and using credit responsibly. Check your credit report regularly to make sure that there aren’t any errors (if there are, you can fix them). By having a super-duper credit score, you’ll likely be able to snag the best interest rates available when you borrow money. On a $200,000 mortgage, getting a 6.5% 30-year loan instead of an 8% one can mean you pay $1,264 per month instead of $1,468 — a savings of about $200 per month, or $2,400 per year. That’s a big deal. Savings: $2,400.
• Look for small ways to save, too. For example, I rarely buy sodas when I dine out. If I dine out four times per week and forego four $2 sodas, that’s $8 per week not spent, at little inconvenience to me. For the year, it’s a whopping $400. Savings: $400.

Wednesday, June 27, 2007

Money Center Banks: Overview

As of early 2007, commercial banks in the US had total assets of $9,700 billion, and total liabilities of $8,900 billion. Almost 90% of each were due to domestically-chartered institutions.The ten largest banks control assets of $4,900 billion, $3,700 billion being domestic assets. With the exception of HSBC, all of the top ten are entirely US-owned institutions.2006 saw feverish M&A activity in the US, with a total deal value of $1,500 billion; activity in Europe was also intense. While private equity firms are increasingly involved, money center banks are still generating substantial revenues through these deals. The regulatory framework for large banks is due to change, with Basel II compliance likely to demand greater capital reserves, and increase costs. As banks grow larger, the requirement that none should hold more than 10% of the nation's deposits is being seen as restrictive. The fate of this federal cap on deposits may affect banks' organic and inorganic growth.Citigroup, Deutsche Bank, Bank of America, and HBSC Holdings are all leading players in this sector. They are continuing to adjust their financial product portfolio to client demand, with asset-based loans, for example, showing a rapid increase in popularity. M&A is a common strategy for players to expand, especially into lucrative overseas growth markets.

Tuesday, June 19, 2007

Consumer Financial Services: Overview

At the end of 2006, outstanding consumer credit (excluding loans secured on real estate) in the US amounted to $2,390 billion, an increase of 2.6% on the previous year. This marked a slowdown from the annual growth rates for consumer during the 2001-2004 period. The main creditors were commercial banks, who lent 30% of these funds, while finance companies accounted for a further 22%.In 2006, home mortgages outstanding exceeded $10,000 billion, up by 10% on 2005. Home ownership rates are currently historically high in the US, although there has been a slight downturn in 2005 and 2006 since the peak of 2004, and by late 2006, hitherto soaring house prices were beginning to slow down their rate of increase.At the end of 2006, outstanding consumer credit (excluding loans secured on real estate) in the US amounted to $2,390 billion, an increase of 2.6% on the previous year. This marked a slowdown from the annual growth rates for consumer during the 2001-2004 period. The main creditors were commercial banks, who lent 30% of these funds, while finance companies accounted for a further 22%.In 2006, home mortgages outstanding exceeded $10,000 billion, up by 10% on 2005. Home ownership rates are currently historically high in the US, although there has been a slight downturn in 2005 and 2006 since the peak of 2004, and by late 2006, hitherto soaring house prices were beginning to slow down their rate of increase. A strong stock market performance is encouraging the growth of margin loans, secured on investments rather than real estate. During the 2005-2006 period, the prime rate of interest was increasing, which in principle should dampen demand for consumer credit. More stringent legislation introduced in 2005 has greatly reduced the number of individuals having recourse to bankruptcy to deal with unsustainable debt. Leading players in the industry include Fannie Mae, Freddie Mac, American Express, and Countrywide Financial. The US has a large number of banks and related institutions when compared to Japan or Europe, and a long-term trend for consolidation persisted in 2006. Mortgage facilitators such as Fannie Mae are committed to extending home ownership among lower income- and minority groups in the US through the development and marketing of appropriate financial products. For credit card providers, a focus of investment has been the upgrading of transaction security, and the offering of innovative hardware, such as RFID-enabled cards.