The Sub-Prime Issue in Everyday Terms

HT: Greg Mankiw

Japanese Post Office

From BBC Article:

"Japan has started the privatisation of its postal service, forming the world's largest commercial bank in the process.

"Under a 10-year plan, Japan Post is being split into four firms to run its banking and insurance operations, mail deliveries and post offices.

"Japan Post's banking unit has 400 million accounts and assets of 349.8 trillion yen ($3 trillion; £1.5 trillion), the world's largest.

"The banking and insurance units should float on the stock exchange by 2010."

Seller Concessions

If you're interested in economics and finance, you should read Another Look at “Sellers’ Concessions” in Real Estate over at Freakonomics; it's a good read.

More Details on Wal-Mart Financial Services

From MSNBC:

"The world's largest retailer will begin offering a prepaid Visa debit card, which users can reload with more money. The card won't require a credit check or bank account, a feature sure to appeal to Wal-Mart customers who may not have a checking account or other options for non-cash payments.

"Wal-Mart also will add hundreds of in-store centers bundling the financial services it already offers, such as payroll check cashing and money transfers. The number of so-called MoneyCenters will rise from about 225 now to 1,000 by the end of 2008.

...

"The reloadable prepaid Visa card, dubbed the Wal-Mart MoneyCard, will be rolled out nationally in partnership with General Electric Corp. subsidiary GE Money and with prepaid card company Green Dot. It can be used anywhere that accepts Visa debit cards and can be reloaded at Wal-Mart stores or Green Dot locations, Wal-Mart said.

...

"Wal-Mart says that it saved customers about $250 million last year by charging fees that are lower than those at other outlets. Payroll check cashing, for example, costs a fee of 1 percent or a maximum of $3.00."

Wal-Mart Financial Services

From MarketWatch article:

"Wal-Mart Stores Inc. plans to unveil new financial services Wednesday as it retrenches from its failed attempts to launch a charter bank.

"Following up on a promise to bring financial services beyond its check-cashing, express bill payments, money orders and money transfers to its customers, the world's largest retailer is expected to roll out mortgages and home-equity loans or lines of credit.

"Wal-Mart also is likely to announce that it will increase the number of stores in which it operates MoneyCenters , the financial-services only counter, from the current 170.

...

"Beefing up financial services also bows to comments Chief Executive Lee Scott has made in recent outings, including the annual meeting, of wanting to "add value" to his customers' lives by developing all sorts of low-cost programs and services.

Increasingly, retailers are adding financial services. Home Depot and Best Buy, for example, have long had credit plans while Costco offers a number of financial services, including auto financing and insurance. And just this week Kroger Co. added new products to its personal-finance site that include mortgages, home equity and pet insurance."

Those Darn Lenders!

From an MSNBC article:

A high-ranking Treasury Department official on Wednesday chastised mortgage lenders for too-often failing to verify the income of borrowers with blemished credit histories, blaming the practice for rising defaults and foreclosures.

Comptroller of the Currency John C. Dugan said federal banking regulators need to give the industry guidance for improvement in this area, though he did not offer a specific remedy.

So, in other words, people misrepresent their incomes to get bigger mortgages, then default, and it is the lender's fault that these "unfortunate" people lose their homes? What about the other people who are involved with the mortgage companies that are essentially victims of fraud (granted, the companies perhaps didn't do enough to protect themselves - but that doesn't suddenly mean that they are the offending party and the borrower the victim)? Should the Treasury recommend tougher criminal penalties for people who lie on their applications, default, and thereby hurt the company, its employees and shareholders?

Just In Case Target Tries It Too

Wal-Mart recently tried to get into the banking business, a move that would have been a serious threat to the banking industry precisely because it would have been service with a very attractive value proposition to consumers. Wal-Mart eventually abandoned the effort.

Apparently, that wasn't good enough, because the House has now passed a bill to limit any future attempts at such an enterprise:

Big retail stores like Home Depot and Wal-Mart would be barred from owning specialized banks known as industrial-loan companies under a House bill passed late Monday.

In a victory for the banking industry, the House approved a bill that would prohibit the Federal Deposit Insurance Corp. from granting new ILC charters to commercial companies. The vote was 371 to 16.

Bonus: One of the big opponents to companies such as Wal-Mart getting into the banking industry is House Financial Services Chairman Barney Frank, who a) has apparently been complaining about high credit card transaction fees charged by banks, and b) is featured in this video (HT: Club for Growth) about Democrats wasting taxpayer money flying around in military jets.