What does this mean for current card holders?
In the next several months you should be getting letters in the mail from your credit card companies explaining new changes to your terms & conditions. You will see higher interest rates and fees because they will no longer be able to change the APR’s on existing balances under the new bill.

What does this mean for new credit card offers?
It will be much harder to get approved for a credit card. They are tightening up who they allow credit. If you do get accepted, you will see a lower credit limit than what you would expect. For those who are 21 years and under will need to show they have an independent source of income or will need a cosigner. This is particularly good because credit card companies would prey on college students often getting them into debt before they graduate. Under this new bill it also helps protect young people from being irresponsible.

How does this effect the communication between the consumer and the credit card company?
Credit issuers will no longer be able to raise interest rates on existing balances. In a case when a payment is 60 days late they are allowed to raise the rates as high as they want. Not much has changed here right? The only difference is they are required to inform you 45 days in advance and explain the reason for the increase. In addition, your statements will be sent at least 21 days before your payment is due.

To help card holders stay away from debt, statements will clearly show how much it’s costing you to borrow and how long it will take to pay off a balance if you are making the minimum payments. If you can avoid it, never pay the minimum, always pay more. If you are paying the minimum payments now, you will see when these updated statements come, that by paying only the minimum payments, you are often further in debt the next bill cycle.

Photo: AP

This was awesome. Very good and easy to follow visual example of how we got into this big mess. Leads to so many questions. Who holds the money? What next? How do we come out of this?

By David Goldman, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) — GMAC LLC is still counting a crucial vote Monday that could determine if the auto finance company turned bank can stay afloat.

GMAC bondholders had until midnight last Friday to accept a bond exchange for corporate equity that would provide GMAC with necessary capital.

The company, which provides auto loans to General Motors’ customers and dealers, has been trying to convert 75% of its $38 billion of issued debt into preferred stock holdings to raise $30 billion in capital necessary to become a bank.

But bond holders have been reluctant to make the exchange. Earlier last week, GMAC said only about 58% of its bond investors were committed, so it extended the deadline to Friday – the fourth such extension.

“The offer did expire on December 26, at 11:59 p.m., as planned,” said GMAC spokeswoman Gina Proia. “We have not yet finalized results. We intend to make them public in the near term.”

The company is currently 51% owned by Chrysler’s parent company Cerberus Capital Management and 49% by GM. General Motors (GM, Fortune 500) and Chrysler were set to receive $4 billion each in emergency aid from the Treasury Department’s Troubled Asset Relief Program.

GM said Monday it was hammering out the details of its federal loan. “GM continues to work with the federal government on the final stages of the loan agreement and we remain confident a timely signing of the federal loan agreement will occur prior to our needs,” a GM spokesman said Monday afternoon.

GM has previously stated that GMAC’s viability is critical to the automaker’s recovery. GMAC has lost $7.9 billion over the past five quarters, mostly from risky subprime mortgage bets made by its Residential Capital division. The holdings plummeted in value when the housing market began to decline in 2007.

Despite lacking sufficient capital, GMAC won approval from the Federal Reserve last Wednesday to become a bank holding company. The Fed cited “emergency conditions” for its approval, saying the company was important to the future success of GM.

As part of the conditions outlined by the Fed, Cerberus must reduce its stake in GMAC to 33% and GM’s share must drop to less than 10%. Cerberus will distribute the remainder of its stake to its investors and GM’s share will go into an independent trust to be sold off within three years.

The status change would give GMAC access to much-needed funds from TARP and other government bailout programs.

According to a recent note from CreditSights analyst Richard Hofmann, GMAC requested a TARP capital investment and may get as much as $6.3 billion. The analyst also said the company could issue up to $17.5 billion in government-backed debt through the FDIC Temporary Liquidity Guarantee Program to shore up its capital position.

And even if it cannot raise the $30 billion that the Fed mandates for bank holding company status, analysts think the Fed will be satisfied with the effort.

“The Fed pointed to GMAC’s successful efforts to raise additional capital in approving the company’s bank holding company application,” said Hofmann. “With the primary regulator on board, the capital raise machinations seem almost a moot point.”

Don’t be shy if you don’t know exactly what it means. Here is an article that explains it “like you were a 8 year old.”

By DAVID SCHECHTER / WFAA-TV

DALLAS – The federal bailout is running a staggering price tag. Some estimate it is as high as $8.5 trillion.

Much of that money is handled by a part of the United States government few of us really understand, the Federal Reserve.

What exactly is the Federal Reserve and what do they do? The answer to the latter part of the question is apparently a lot of things.

Below the Dallas Federal Reserve building is billions of dollars in cash, which is the people’s money supply.

But, the most important job for the Reserve right now is to stabilize the US economy.

“Think of the thing as one giant lawn,” said Richard Fisher, president of the Dallas Federal Reserve branch. “The object is to keep it green and verdant and beautiful.”

Running with that, the lawn is the economy and the Reserve is in charge of maintaining a stable money supply – or a consistent amount of water available to grow the lawn.

Typically, the Reserve stabilizes the money supply by lowering or raising interest rates.

“We have the spigot,” Fisher said. “That’s the typical tool we use that turn on by lowering interest rates, or we tighten.”

The financial system, banks and the like, act as the hoses. But, right now they’re are all twisted up and not letting the money through.

“When we would cut interest rates, we wouldn’t see the efficiency of the flow because the sprinkler system was out of whack,” Fisher said.

So, the Reserve is now trying to untwist the financial hoses by injecting huge sums of new money into the financial system. In some cases, the Reserve has taken the unprecedented step of laying new hoses of its own, new programs that stimulate lending for things like cars and credit cards.

“The grass is not brown,” Fisher said of the “lawn” right now. “But, it’s certainly not a vibrant green we would like to see it be. It’s a little spare.”

Who knew gardeners wear suits?

I thought this was really interesting how everyone laughed at this guy and he was dead on.

Here is another article about it: Does being right matter?

Oct. 17 (Bloomberg) — Warren Buffett said he’s buying U.S. stocks and, if prices stay attractive, his personal investments, as distinct from his stake in Berkshire Hathaway Inc., will soon be wholly in American equities.

This is an excellent article that I read today and one of the few that is not panicking in the current market.

Going a little to far? or not far enough?

Oct. 7 (Bloomberg) — The Federal Reserve will create a special fund to purchase U.S. commercial paper after the credit crunch threatened to cut off a key source of funding for corporations.

The Treasury will make a deposit with the Fed’s New York district bank to help set up the special purpose vehicle. The central bank will also lend to the program at policy makers’ target rate for overnight loans between banks. The Fed Board invoked emergency powers to set up the unit, the central bank said in a statement released in Washington.

What does this mean for Wells Fargo and Wachovia share holders?

Wachovia shareholders get 0.1991 shares of Wells Fargo common stock for each share they own. Wells Fargo expects charges related to the acquisition of about $10 billion, and the company said it will issue as much as $20 billion of new securities, mostly common stock.

What happens to a company’s stock if they are bought out?

This deal values Wachovia at $7 a share. You can expect that the price of Wachovia stock to jump to at least that. My guess is that Wachovia, and Wells Fargo shares will go up in value with Wachovia’s in a steeper climb.

What do you think?

Source: bloomberg – Wells Fargo Agrees to Buy Wachovia for $15.1 Billion

WaMu is the 13th bank to fail so far this year and this is JPMorgan Chase’s second major purchase this year. Earlier this year JPmorgan acquired investment bank Bear Stearns, in a deal also forced by the government. JPMorgan Chase will acquire $307 billion in assets and $188 billion in deposits from the WaMu-JPMorgan deal.

What does this mean for WaMu customers?
According to Federal regulators, the transition for WaMu customers would be “seamless.”

FDIC Chairman Sheila Bair said, “There will be no interruption in services and bank customers should expect business as usual come Friday morning.”

The WaMu-JPMorgan Chase deal will not have an effect on the FDIC deposit insurance. Your deposits will still be covered up to $100,000.

I can’t help but think, which bank is next to fall?

Sources:
JPMorgan buys WaMu
Bailout in chaos, feds seize WaMu