Banks run into ownership problems in collecting on credit card debt
Here’s a good video from the Tech Ticker guys showing us that the opaque nature of asset-backed securities is catching up with Wall Street again. This is now becoming a problem in the credit card industry. Just as with mortgages, as banks have moved to a originate to syndicate model of credit creation, who actually owns and can enforce payment on the credit card assets is unclear.
Take a look.
In the next recession, this could be a very big issue yet again.
Nope… gotta call these guys out. I’m calling BS…first of all, I admit a bias against these these kind of ‘on-air talent’ who get the jobs in front of cameras puking up pabulum talking points in that chortling tone of voice, (hyuck hyuck) “E’erybody KNOWS its TRUE…” while they mouth off unqualified, spurious nonsense in the guise of an official source–simply because they’ve said it publicly.
I think you are right, Wall Street has a big problem with more of these “asset-backed” (read: debt-backed) special purpose vehicles unwinding, but what I’m hearing from these guys is the attempt to enforce the mythology that the payee is responsible for all of the derivative contracts built subsequent to the initial debt origination. Blame the guy who couldn’t pay his bills fits in nicely with the American axiom that the poor are all lazy and stupid simply because they are poor, but it is simply the age-old practice of blame the victim, shift the focus onto the powerless, and change the subject back to how much better it would be if people just paid their bills… even if they don’t really owe them. To try to put it as simply as possible, first of all its not illegal NOT to pay bills credit card bills or even any bill for that matter… just as its not illegal for service providers to withhold from those who don’t pay for their service. However, we aren’t talking about a utility or a service like the meat of the month club, we’re talking about credit, which is also saying… debt. When it comes down to it, the business model for manufacturers of credit card debt is based on unsecured loans… they take all the risk when they extend a credit line to someone based on a wet-ink signature. Just because someone owes a debt to company A, does not mean that they are responsible for all or any other contracts derived from the original contract; if they were, then they rightly should have some say on how their original debt is used, which of course, they do not.
Here is the scenario I use to try to explain the “credit crisis” to my co-workers in the local news outlet where I work: if I borrow $5 from my coworker for lunch today and promise to pay him back $10 next week on payday, but then I’m laid off tomorrow, I may go to him right then and say, “Sorry, tough times are coming, here is the $5 I borrowed from you back… deal off,” or I may come back in a week and say, “Sorry, tough times are here, I can’t pay you back at all.” Either way, I am in no way obligated to any deals my co-worker may have made with the understanding of getting %200 ROI in a week.
That is to say, if he gave me $5 and then went to someone to borrow $10 immediately and told them, “Hey, that guy is going to pay you back after payday…thanks! We’re done here;” I would be pretty suspicious if no one told me that I owed it to someone else, especially if the other party was hostile to me for some reason….(like if it were my boss). Without the coworker arranging with me for me to pay someone else, I wouldn’t feel any natural responsibility to pay the other person and would certainly protest anything compelling me to pay someone with whom I had no arrangement. This is not exactly accurate with the credit industry, but I think it serves my point.
I suppose this is long enough for a comment… this has me pretty worked up, so I’m going to have to tear the video apart on “my website” later on today. Thanks for the link!