MEMO TO OBAMA & DEM’S … IT’S THE CREDIT CARD RATES, STUPID! REDUCE THEM!!!

In Part 1, I wrote about the 5 things that we can do right now to get the economy moving and small businesses creating jobs I listed bringing credit card rates down to manageable  size as the # 1 key to getting the economy going.  A jobless recovery is nothing less than an oxymoron … like government intelligence!

Number 1 on the list to get the economy roiling is reducing credit card rates across the board for small business and consumers alike. Let me explain why.

Despite the propaganda of Obama Administration, there is no lending taking place for small businesses.  I know, I tried.  The SBA’s ARC program for small business was a colossal failure.  I received a list of  close to a 100 banks that were supposedly participating in the program.

After the 20th phone call to the numerous banks on the list  informing me that they were not participating, I gave up.

What the fools in Washington and the credit card companies refuse to acknowledge is that the institutional gluttony of credit card rates (that are usury by any definition) is leading to the highest default rates in history by consumers and halting growth by small businesses who are forced to rely on credit cards.

Excessive credit rates are nothing less than a tax on small businesses who are unable to obtain loans through the banks.  Unlike the government, consumers and small businesses cannot simply print more money.  We are forced to live within our means and if that means not spending and saving in order to reduce the already ridiculous credit card balances (many high because of slight of hand and tricks of the credit card companies) so be it.

Now follow the bread crumbs.

• Instead of paying 29% rates on credit cards,  small businesses could be using those dollars to purchase inventory, supplies, possibly hiring full or part time people.
• If consumers aren’t spending or spending fewer dollars than in the past, sales and profits of small businesses are reduced.
• If small businesses cannot generate sales sufficient to cover their bills, health costs, payroll, etc. many will have no other choice but to close their doors, thereby putting even more people on the rolls of the unemployed.
• If small businesses, retailers, restaurants, etc. are closing shop that means that commercial real estate will be the causality.  If commercial real estate tanks, you ain’t seen nothing yet in terms of recession and long lines of unemployed.
• If strip malls and other commercial real estate stays empty a glut of inventory on the market will stop new building and even more people will be unemployed!
• If retail space remains empty then  commercial property owners will not be able to service their debt, which will lead to more foreclosures, with will lead to more defaults!

See how this all works?  In other words, what goes around comes around … and it all starts with bringing credit card rates down to manageable size.

In Part 3 – How the Credit Scoring Companies are Putting Small Businesses at a Disadvantage & Hurting the Economy!

For more info on the commercial crisis read here from the Daily Finance:

This industry is suffering two problems: a spike in loan defaults, and a need to refinance loans in a market where there is little appetite for such refinancing. Specifically, the CRE loan default rate for August was up six-fold to 3.14 percent from the previous year. These loans were made based on optimistic assumptions about occupancy rates and rents — which are now a joke as retail stores close their doors and companies fire the people who occupied desks.

And by 2012, $153 billion worth of CMBS loans are coming due and since the property values have declined so much, about two-thirds of those loans will not be refinanced — even though the borrowers are paying the principal and interest on them. More recently, Realpoint found that the owners of 281 CMBS loans worth $6.3 billion weren’t able to refinance when the loans matured in the past three months, even though 173 of them worth $5.1 billion generated sufficient cash to service their debt.

These problems could lead to another financial crisis. After all, many property owners are likely to file for bankruptcy when they can’t refinance. This will force banks to write off the loans and take possession of the real estate. The banks will need to raise capital to offset the write-offs. And they’ll throw those properties on the market so they can get them off their books — which will further depress property prices.