What a shame. For people who handle credit responsibly, new credit card regulations that went into effect Feb. 22 actually hurt more than help.
I’ll tell you why, and what we can do.
The new rules, part of the Credit Card Accountability, Responsibility and Disclosure Act passed by Congress last May, are intended to protect cardholders and end abusive industry practices.
For example, card payments must now be applied first to the highest-interest rate balance. "Double-cycle" billing, which results in higher interest charges, is no longer permitted.
Interest rate increases on existing balances are for the most part prohibited, as are rate increases on new purchases the first year on a new card. After the first year, card issuers must give 45-day notice before raising rates on new charges.
That’s all terrific, but it does nothing for financially prudent people who pay their balances in full each month. Instead, the law is prompting card issuers — who need to make a profit to be able to grant us credit — to raise other fees for everyone to make up for an estimated $12 billion in lost revenue.
In essence, "those who manage their credit well will end up paying for those who don’t," said Nessa Feddis, an American Bankers Association vice president.
To be fair, some new rules benefit everyone, including prohibiting fees for the way bills are paid (such as by telephone) and eliminating confusing cut-off times for receipt of payments. (For a rundown of the rules, check out the Federal Reserve’s website at www.federalreserve.gov/creditcard)
Still, by making it more difficult for card issuers to charge more to those who pose a higher risk of default — and defaults are running about 10 percent — the new rules lead to an inevitable result.
"Everybody is going to feel the higher cost," said Kenneth Clayton, a senior vice president for the bankers group. Examples include more annual or inactivity fees, fewer or reduced rewards programs and, for those who carry a balance, higher interest rates.
"We seem to be going from a marketplace in which a relatively few cardholders got into deep trouble to one in which the misery is more evenly spread," said Adam Jusko, founder of IndexCreditCards.com, a card information and comparison site.
Even those with outstanding credit are being affected. "I am livid," said a reader whose Citi card will start charging a $60 annual fee (more on that later). "I canceled it immediately," he said. "Here I am with an 800-plus credit score and this is how they treat me?"
That’s the way indeed. "The new law does not address or cap non-penalty fees like annual fees or inactivity fees, which may become more common for those who do not carry a balance," said Ben Woolsey, director of consumer research at CreditCards.com, another consumer-oriented website.
"Fees, fees and more fees" are an unintended consequence of the new rules, said Bill Hardekopf, CEO of LowCards.com, another card-comparison site. Bank of America, for example, added an annual fee of $29 to $99 on some accounts, and Fifth Third Bancorp imposed a $19 inactivity fee if a card is not used in a 12-month period. Citi will begin charging the $60 fee to some customers in April but will waive it if they charge at least $2,400 a year.
What to do? Comparison-shop for the best deals — there are still many — using the sites mentioned above. As Clayton of the ABA said, "no customer is a prisoner to their card," and a customer can switch to a better one.
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The U.S. economy continued to improve modestly in February despite uncharacteristically severe weather in many regions of the country, the latest Federal Reserve report on economic conditions reports.
Nine of the Fed’s 12 regional banks — including the New York Bank which encompasses Buffalo and Upstate — reported in the U.S. central bank’s Beige Book survey that economic activity improved last month.
Two districts, St. Louis and Atlanta, reported a more mixed performance and one district, Richmond, Va., was snowed under by winter storms.
The survey is a collection of anecdotes compiled by the Fed to give policy makers a feel for conditions across the country as they prepare for the next meeting on March 16 to plot monetary policy strategy.
Among the survey’s findings: Credit conditions have not improved and businesses still are unable to obtain credit, which is a critical factor behind the sluggish pace of growth creditreport.
Also, loan demand remains weak and banks are sticking to tight standards.
There were no signs in February of an improving labor market, though the pace of layoffs slowed.
Consumers appeared somewhat more willing to spend, the survey found, and demand for services was generally positive.
Manufacturing activity was stronger, but worries persisted about whether it was a result of customers restocking their shelves and unlikely to result in sustained improvement.
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By the time it marks its first year this May, Branson Airport will be reachable by air service from seven cities — compared with one today.
Earlier this month, Denver-based Frontier Airlines announced new flights between Denver and Branson beginning in April. Then last week, Branson Airport officials announced that scheduled charter flights will begin serving five new markets in May on the newly minted Branson AirExpress.
"Things are expanding and growing like we hoped they would," said Branson Airport Director Jeff Bourk.
The $155 million privately developed airport opened last May. AirTran Airways would not discuss passenger loads on its daily flights between Atlanta and Branson, but spokesman Christopher White said the airline was "very happy" with its first year of service.
Bourk said AirTran provided a link to the eastern United States through its Atlanta hub, and Frontier will provide low-cost flights to destinations west of the Ozark entertainment venue. The new charter service, by contrast, will be more of a regional feed from Houston; Austin, Texas; Terre Haute, Ind.; Des Moines, Iowa; and Shreveport, La.
"Scheduled public charters are not unique," Bourk said last week. "What makes it unique is the relationship between … our community here and their airports out there and their communities."
Introductory fares on Branson AirExpress will start at $39 one way for the Terre Haute, Shreveport and Des Moines markets, and $49 one way for Austin and Houston travelers. It will be operated by ExpressJet Airlines using 50-seat Embraer ERJ-145 jets.
Terre Haute, which has been without commercial air service for more than a decade, is looking forward to the business, said airport director Dennis Wiss.
"No. 1, it’s activity," Wiss said. "We need the activity at the airport. We stand to make a small amount of revenue. If this model works, we hope to expand and add more flights."
In Des Moines, airport officials helped put Branson AirExpress in touch with Prairie Meadows Racetrack and Casino, which will help "mitigate some risk," said Roy Criss, a spokesman at Des Moines International Airport payday loans with no fax.
Branson provided data showing about 1,200 Iowans visit the Missouri resort area each week during its peak season from May 17 to Dec. 11, Criss said. To make the air service profitable, he said, it would have to capture only one-sixth of that, or 200 passengers a week.
A secondary benefit is that travelers would be able to connect through Branson to cities such as Austin and Houston, he said.
If the Branson charter service demonstrates strong demand, Bourk said, a commercial airline could step in and take over one or more of the routes.
"We are not an airline," he said. "That is a very important distinction. We are trying to prove these routes to other airlines. If somebody wanted to come in and take the Houston route, a major airline, we would be happy to see that happen."
The Branson Airport opened during one of the worst commercial aviation slumps in U.S. history. But Bourk said the low fares and the affordable nature of Branson had helped offset the recessionary effects.
Branson airport officials expected as many as 300,000 passenger boardings in the first year of operation. Airport officials did not provide actual figures by late Friday.
Meantime, passenger numbers have climbed 55 miles away at Springfield-Branson National Airport.
In 2009, passenger numbers grew 4 percent at Springfield-Branson, despite an 11 percent cut in its flight schedule. No other airports in the region were seeing growth, said airport spokesman Kent Boyd.
Boyd credits low fares, the growth of Allegiant Air in the market, the relatively strong performance of the southwest Missouri economy and the heightened awareness of the new passenger terminal at the airport.
Bourk said Springfield-Branson served business travelers "very well," but it is not the type of service that will bring leisure travelers into the market.
He is hoping the new charter service will help to do that.
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Seven years and two jail convictions later, the Pentagon on Wednesday unveiled its latest attempt to get a $35 billion contract for refueling planes off the ground.
But within moments, the proposal was at risk of a crash and burn after a major contractor considered withholding its bid because it believed the terms unfairly favored its competitor.
And with thousands of jobs at stake for Alabama, the state’s two senators weighed in as well, saying the latest proposal appeared to do little to satisfy Northrop Grumman Corp.’s concerns that the terms were skewed against its larger, more expensive plane.
On Wednesday, the Pentagon publicly released its final bid request for the job flexcheck cash advance. The bid involves building 179 tankers, but the job could be expanded. A final contract is to be awarded in September.
Northrop said in a statement that it would review the complex proposal before commenting. A Northrop pullout would leave Boeing Co. as the lone bidder on one of the most protracted and expensive contracts in Pentagon history.
The Pentagon’s senior leaders on Wednesday defended the proposal.
"We believe that both offers are in a position to win," Air Force Secretary Michael Donley said.
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Oil prices rebounded Friday on supply concern following strikes at French refineries, and after a report showed a dip in U.S. inflation.
What prices are doing: Crude oil for March delivery rose 75 cents to settle at $79.81 a barrel on Friday. Prices had fallen as low as $77.76 earlier in the session.
On Thursday, oil rose to its highest level in five weeks after an inventory report showed a larger-than-expected inventory drop in supplies of some refined products.
The oil market was closed Monday in the United States in observance of Presidents Day, but prices rose steadily throughout the remainder of the week. From Tuesday to Friday, crude prices gained 3.6%.
What’s driving prices: A stronger dollar kept oil prices in check early Friday, a day after the Federal Reserve raised the discount rate by a quarter percentage point to 0.75%.
But later in the session, reports surfaced about an intensifying strike at French oil giant Total SA, which began shutting operations and warned of fuel shortages. Workers have been on strike for three days to protest Total’s permanent closure of oil processing at a plant in Flanders.
A Friday morning economic report also helped put a floor under prices. The Consumer Price Index, the government’s key inflation reading, showed prices rose just 0.2% in January. The core inflation rate fell a seasonally adjusted 0.1%.
Gas prices: The national average price for a gallon of regular unleaded gasoline rose to $2.623, up 0.9 cents from the previous day’s price of $2.614, according to motorist group AAA.
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President Obama announced Tuesday over $8 billion in federal support for two new nuclear power plants in Georgia, setting the stage for what could be the first completed reactor in this country in over three decades.
The money, coming in the form of loan guarantees, is going to build two new reactors at Southern Company’s Vogtle plant facility, located some 170 miles east of Atlanta.
In announcing the grant at an electrical worker’s union hall in Maryland, Obama used to occasion to tout the benefits of nuclear power.
"Nuclear energy remains our largest source of fuel that produces no carbon emissions," said the president. "To meet our growing energy needs and prevent the worst the worst consequences of climate change, we’ll need to increase our supply of nuclear power. It’s that simple."
But Obama’s speech made clear the move is also deeply political.
The money is part of $18.5 billion in loan guarantees for nuclear power approved under the 2005 energy bill. This grant is the first slice of money to be awarded.
President Obama has increased the amount of money available for nuclear loan guarantees to over $54 billion in his 2011 budget.
The increased funding is part of an effort to win Republican support for the president’s overall energy plan, which includes building more nuclear plants as well as making fossil fuels more expensive in an effort to cut greenhouse gases and make renewable energy more competitive.
"Those who have long advocated for nuclear power, including many Republicans, have to recognize that we will not achieve a big boost in nuclear capacity unless we also create a system of incentives to make clean energy profitable," Obama said. "As long as producing carbon pollution carries no cost, traditional plants that use fossil fuels will be more cost-effective than plants that use nuclear fuel."
Passing legislation to make fossil fuels more expensive and clean energy more profitable is a centerpiece of the Obama administration’s domestic agenda.
A bill designed to do just that narrowly passed the House last summer, but faces stiff opposition in the Senate from lawmakers that are concerned about its cost to the economy, or don’t believe in global warming. The Senate is expected to take up the matter sometime this year.
The Georgia plant
Southern Company is one of a handful of power producers that has been vying for this federal funding over the last few years.
Preliminary construction work on new reactors has already begun at a few sites around the country, including the Georgia plant. But the U.S. Nuclear Regulatory Commission hasn’t issued a final permit at any of the facilities.
Winning the government loan backing is a major breakthrough for Southern, and underscores just how expensive and risky building a new nuclear facility is.
Nuclear plants have been subject to massive cost overruns in the past, and without government support even those in the industry recognize a new plant would not be built.
The Georgia expansion is estimated to cost $14 billion, and is scheduled to be completed in 2017.
When originally built late 1980s, the plant was expected to have four reactors and cost $975 million, according to the Atlanta Journal Constitution. The final price tag for two reactors was $9 billion.
The new construction in Georgia is expected to create 3,500 jobs building the plant and 800 permanent jobs once the facility is complete, according to a Southern Company press release.
Each new reactor is expected to produce 1,100 megawatts of electricity, enough to power over 800,000 homes.
Too expensive?
Opponents of nuclear power claim the plants are too expensive to build, and fear government support will distort the power market in this country for years to come.
They also fear the plants will be the target of a terrorist attack, and say there is still no plan for what to do with the waste.
Supports contend the plants will get far cheaper after the first few are built, and will be a good source for clean, domestic power.
The Energy Department has stopped building a permanent waste disposal site at Nevada’s Yucca mountain, but says the waste can be safety stored on-site in pools or concrete bunkers for many decades until another site is found.
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The question is being raised more and more: Can Toyota recover its reputation?
There is no simple answer. The automaker once enjoyed exceptional renown. In addition to being the largest and most profitable auto company on the planet, Toyota was the most studied and copied. Its production system became a benchmark and a model for competitors to emulate around the world.
On top of that, Toyota (TM) was known for always putting the customer first, hence its passion for building cars with the highest quality and reliability. The automaker obsessively studied car buyers to find out what they wanted and then provided it for them. It became a leader in new vehicle segments like crossovers, and new technologies like gas-electric hybrids.
But when a crisis arose in the form of complaints about unintended acceleration, Toyota didn’t know what to do. Rather than make a forthright statement about the problem, its history, and its proposed solution, the automaker responded with obfuscation, delay, blame-shifting, and denial.
Not until last August, when a Lexus driven by an off-duty California highway patrolman rolled over and burst into flames, killing the driver and three members of his family, did the issue reach widespread public awareness. And when the time came to apportion responsibility for the incident and outline a new direction for the company, top Japanese executives were nowhere to be seen. When president Akio Toyoda first came forward to take responsibility and promise solutions, he seemed to do so with reluctance.
Compare that to the Tiger Woods scandal. Like Toyota, Woods had a reputation for excellence that far exceeded other golfers.
Like Toyota, Woods was widely emulated for his faultless behavior and superb sportsmanship.
Like Toyota, Woods initially put out a story about his wife, a golf club, and the shattered windows of his SUV that bore little relation to reality.
Like Toyota, the news about Woods’ missteps was allowed to trickle out day by day without being effectively refuted.
Like Toyota, Woods refused to make a public appearance to apologize for his misdeeds (and still hasn’t), preferring to issue press releases instead.
And like Toyota, Woods promised to mend his ways, without offering any convincing evidence of exactly how he will do that.
Just as Toyota has seen sales crumble and its used car values plummet, Woods has been abandoned by his corporate sponsors and shunned by other golfers business cards design.
Does this mean that Tiger and Toyota have seen their reputations permanently destroyed? Witnessed the domination of their respective enterprises ended? Are about to be permanently consigned to the ranks of the disgraced and the second-rate?
The betting here is that the answer to all three questions is "no."
Tiger Woods remains one of the best golfers in history, and assuming he can regain his form and start to win again, his fans will return.
The American public has a short memory, an inclination to forgive, and a willingness to extend second-chances. History is full of examples. After declaring he was leaving politics in 1962, Richard Nixon came back and was elected president in 1968. There have lately been reports that Eliot Spitzer, who resigned in disgrace as governor of New York two years ago, is considering a comeback of his own, thanks to an understanding electorate.
The same is true with Toyota, although the reasoning is more economic and less emotional.
American customers want to buys cars they like, and if they decide they still like Toyotas, they will continue to buy them. Ford (F, Fortune 500) was rattled by the Explorer-Firestone tire crisis in 2001, but it eventually recovered because the Explorer was a popular SUV.
Rehabilitation comes down to dollars and cents. If Toyota can convince shoppers that it still offers a strong value, then they will find their way to Toyota dealers.
The critical ingredient that is still missing from the rehabilitation of both Tiger and Toyota is that convincing personal apology. Tiger hasn’t been seen in public since the night of the accident and needs to make a believable account of his behavior along with a statement of his determination to change.
Likewise, Toyota president Akio Toyoda, as well as his management team, must make a complete explanation of their response to unintended acceleration and answer a comprehensive set of questions from outside experts. Only then will its slate be wiped clean, and Toyota will be free to begin the long process of rebuilding its reputation.
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U.S. foreclosure filings rose 15 percent in January from a year earlier and exceeded 300,000 for the 11th consecutive month as modification programs failed to keep delinquent borrowers in their homes, RealtyTrac Inc. said.
A total of 315,716 properties received a notice of default, auction or bank seizure last month, or one in 409 households, the Irvine, California-based seller of default data said today in a statement. Filings fell 10 percent from December.
Bank seizures, also known as real-estate-owned or REOs, may rise to a record 3 million this year, RealtyTrac said last month. About 66,000 delinquent loans out of a targeted 4 million by 2012 were permanently modified as of Dec. 31 under the Obama administration’s Home Affordable Modification Program, according to the Treasury Department. About 787,000 mortgages are in trial programs that change loan terms, the Treasury said Jan. 19.
“It’s almost inevitable that modifications will fail,” Michelle Meyer, New York-based U.S. economist for Barclays Capital Inc., said in an interview. “Over the next several months, we should see REOs increase at an accelerated pace.”
Foreclosure filings also fell in January of last year from December, only to rise in subsequent months, RealtyTrac said.
“If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan modification programs or the new short sale and deed-in-lieu of foreclosure alternatives works,” James J. Saccacio, RealtyTrac’s chief executive officer, said in the statement.
Negative Equity
Unemployment and negative equity, where homeowners owe more than their properties are worth, are adding to the foreclosure total, said Stan Humphries, chief economist at Zillow.com. More than a fifth of U.S. homeowners had negative equity in the fourth quarter, the Seattle-based real estate data provider said yesterday in a report.
“It’s tough to come up with a program that works for unemployment-related foreclosures where the owner can’t pay, or for rate resets where the owner is way underwater,” Rick Sharga, RealtyTrac’s executive vice president for marketing, said in an interview yesterday.
The jobless rate unexpectedly fell to 9.7 percent in January, and payrolls dropped by 20,000, the Labor Department said Feb. 5 in separate reports. About 8.4 million jobs have been lost since the recession began in December 2007, with more than 4 million cut since Obama took office in January 2009.
Home Sales
Sales of existing U payday loans.S. homes rose 14 percent in the fourth quarter from the third while the median price fell 4.1 percent from a year earlier, the Chicago-based National Association of Realtors said today. The sales gain may not last when government support for housing, including the Federal Reserve’s $1.25 trillion purchase of mortgage bonds and a first-time buyer tax credit, ends as scheduled in the spring, Humphries said.
January’s total filings were down 12 percent from the July peak, according to RealtyTrac. Bank seizures climbed 31 percent from a year earlier, default notices rose 4 percent and scheduled auctions increased 15 percent.
Nevada had the highest foreclosure rate for the 37th straight month, with one in 95 households receiving a filing in January. Total filings in the state fell 18 percent from a year earlier to 11,854.
Arizona ranked second, with filings for one in 129 households. The rate for both California and Florida was one in 187 households, RealtyTrac said.
Utah, Idaho, Michigan, Illinois, Oregon and Georgia rounded out the 10 highest foreclosure rates.
California Filings
California had the most filings with 71,817, down 6.4 percent from a year earlier. Florida followed with 47,069, up 15 percent, and Arizona was third at 21,048, up 43 percent. The three states accounted for 44 percent of the U.S. total.
Illinois was fourth with 18,120 filings, up 25 percent from January 2009. Michigan ranked fifth with 17,574, up 54 percent. Texas, Nevada, Georgia, Ohio and New Jersey completed the 10 states with the most filings, RealtyTrac said.
Filings increased 23 percent from a year earlier to 6,146 in New Jersey. They rose 34 percent to 2,218 in Connecticut, and jumped 31 percent to 4,569 in New York.
Las Vegas had the highest foreclosure rate for cities with a population of more than 200,000. One in 82 households there got a filing, a 21 percent decrease from a year earlier.
Phoenix was second among the biggest cities at one in 102 households. Six California cities ranked third through eighth: Modesto, Stockton, Riverside-San Bernardino, Merced, Vallejo- Fairfield and Bakersfield, according to RealtyTrac.
Cape Coral-Fort Myers and Orlando-Kissimmee in Florida were ninth and 10th respectively, said RealtyTrac, which sells default data collected from more than 2,200 counties representing 90 percent of the U.S. population.
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JetBlue inaugurated new service between Orlando and Montego Bay, Jamaica, on Feb. 8 with a daily round-trip flight out of Orlando International Airport.
Montego Bay is the 23rd nonstop destination served by JetBlue from Central Florida. The airline offers flights to six other destinations in the Caribbean and Latin America: Bogota, Colombia; Cancun, Mexico; Nassau, Bahamas; San Jose, Costa Rica; Santo Domingo, Dominican Republic; and Aguadilla, Ponce and San Juan, Puerto Rico.
JetBlue Airways (Nasdaq: JBLU) currently serves 60 cities with 600 daily flights.
Investor Stacy Hastie says One City Centre will soon look more like 600 Washington, the new name given to the downtown St. Louis office tower, which will undergo a $29 million overhaul.
An investment entity managed by Hastie bought the 25-story building Wednesday by placing the only bid — $12.7 million — at a foreclosure sale. The sale extinguished the interest held by Pyramid Cos., which had planned to renovate One City Centre as part of its ambitious Mercantile Exchange project. Financial problems forced Pyramid to close in 2008.
Hastie is part of the effort to redo One City Centre and St. Louis Centre, a former mall that will be converted largely to parking. He said the foreclosure "is a big step forward" and means work is about to begin to move the building’s entrance to Washington Avenue. The building’s new name will reflect the reconfiguration.
In two weeks, the law firm Lewis, Rice & Fingersh will move to One City Centre, while LarsonAllen, an accounting firm, will move its St. Louis County offices to the building by June 1, Hastie said.
The foreclosure occurred a day after the Missouri Development Finance Board, a state agency, approved a $5 million loan for the One City Centre overhaul. It will be packaged with about $15 million in funds and debt from Hastie’s entities and $10.1 million in tax credits and city funds to pay for the rehab.
Less certain is the future of the Arcade building, at 800 Olive Street, which another Hastie-run investment entity bought out of foreclosure Wednesday. Hastie’s $9 million bid gave him control of the building, which Hastie plans to sell to another developer.
Earlier this week, investment entities managed by Hastie agreed to pay off the loans Bank of America made to Pyramid for the One City Centre and Arcade projects. Conversion of the Arcade into condos was under way in 2007 when Pyramid halted work. Bank of America filed a foreclosure notice in early December.
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