JPMorgan Cracks Down on Unused Credit as Banks Free Up Capital

[Joanne98]

Feb. 10 (Bloomberg) -- JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. are among lenders cutting back on $1.6 trillion of credit lines as they face increased demand for loans that threaten to drain capital.

Banks used loan negotiations with retailers Rite Aid Corp. and Ethan Allen Interiors Inc., and with homebuilder Ryland Group Inc. in the past month to reduce credit limits and raise interest rates. After more than $1 trillion of writedowns and credit losses, lenders are moving to lessen the chance that troubled companies will withdraw funds.

While President Barack Obama demands they extend more credit, banks are reluctant to do so until they know how much they’ll need to back with more funds, according to a Jan. 23 Citigroup research report. Companies may need to issue $450 billion of bonds to replace loans that won’t be renewed when they mature in the U.S. and Europe this year, the bank said.

“For those companies unable to get credit, it’s economic Darwinism,” said Josh Rosner, a managing director at Graham Fisher & Co. In early 2007, he predicted mortgage bonds would spark a global financial crisis. “It’s a tightening of credit to rational standards.”

New York-based JPMorgan and Citigroup are among lenders scaling back Rite Aid’s $650 million bank line by $200 million after the company tried to extend it last month. That prompted the Camp Hill, Pennsylvania-based drugstore chain to obtain a new $225 million term loan arranged by Citigroup with annual interest payments of 15 percent, Kimberly Noland, an analyst at Gimme Credit LLC in New York, wrote in a report on Feb. 4.

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http://www.bloomberg.com/apps/news?pid=20601109&sid=aKRxrqAFx8Pw&refer=home

Even though this article is in Bloomberg speak. It's example ONE of why nothing we do will work. The BANKS and the CREDIT CARD companies are DETERMINED to MAKE THE CRISIS WORSE! Instead of calling this a credit crisis, it should be called a HIGH INTEREST RATE CRISIS!

I sick and tired of the banks saying they can't make money on low interest rates. Compound interest is one of the most profitable schemes on Earth. If you get a 30 year loan for say 7% interest. You will pay three times the cost of the house. This is not only profitable, it's highway robbery. Same with the CC's. They are nothing but loansharking predators.

Until interest rates are CAPPED there will be no recovery. The banks will keep on destroying the people and the businesses that employ them pushing us down into an endless cycle of poverty.

I don't know what we can do because it's obvious that the pols have decided to defend the system no matter how destructive it is. We don't have time to fire them. 2010 is to far away. JUBILEE is the only answer.

Stay put, PRODUCE THE NOTE, follow the law!

[AndyA]

1. I made a similar observation here yesterday regarding retail credit cards.

Retailers are really hurting. You don't suppose it has anything to do with their 17.99% + interest rate on credit cards do you? No wonder people aren't shopping! Even if they really needed something and were short on cash, who would agree to those terms? The federal rates are at historic lows, so banks certainly aren't paying high rates. They are just gouging the consumer.

Yes, they are responsible for this problem, and they are taking agressive anti-consumer actions that is just making a bad situation worse. They need to be smacked down, and hard. And the smack down needs to happen now.

[hobbit709]

2. Worse yet, they are penalizing people with zero or low balances.

That will really encourage people to use their cards.:sarcasm:
If they start to raise mine, I'll just tell them to kiss off. I can live without a regular credit card, The one from my credit union will do just fine and most of my online purchasing is done through Paypal or direct pay from my bank account.