It Figures

Does True Competition Among Credit Card Issuers Exist?

The most transparent and objective measure of competition in an industry is the profitability of the participants. Sustained above average profitability is a sign of lack of competition - think drug companies in the '80's and '90's, or MSFT a decade ago.

Given that most credit card issuers are losing money right now, and have for the last year or so, it is hard to characterize the sector as lacking competition in any economic sense.

Folks would benefit from trying to separate their personal "beefs" with these companies from their economic/investment analysis

Lower Credit Card Fees = Lower Credit Card Profits

After a several month period of adjustment the card issuers will have new profit models from which to operate. These will probably include new and higher fees, smaller credit lines, higher interest rates and reduced availability for less creditworthy borrowers. So the price of limiting sometimes egregious fees for the late and non-payers is higher costs and less convienence for all of us. And less and much more expensive credit for those who need access to credit most.

Good job, Washington!

Krugman vs. Sachs on PPIP Loopholes

If your facts are correct, this would not be the first time these two guys spoke before they thought things through. As you say, reading the docs might help too.

Are Citi, Bank of America Pushing Prices Up?

This story has a lot of misperceptions, in my opinion.

First, in a market with thousands of participants involving trillions of dollars, a single institution buying a few tens or hundreds of millions of securities doesn't move the needle.

Second, with the feds promising to finance, almost for free, private speculators to buy this paper "to remove toxic assets from the banking industry's balance sheet" in the popular terminology, how can it be bad in any way if a private entity puts it's own capital on the line in an attempt to acquire assets it deems undervalued.

Third, the author has no concept of what "insider trading" means. These banks have been telling the world that the current market prices are nuts, and are now acting on their analysis, for their own profit. Yes, they probably have better insight into the economic value of these securities, because they own similar paper and know first hand the cash flow and prepayment behavior, but this information is readily available to market participants, and the banks have made no secret of their opinions. That's why they carry them on their books at the values they do.

This is exactly what the dozens of government programs are hoping to accomplish.