A few weeks ago Congress passed the Credit Card Bill of Rights Act, a bill designed to curb many standard credit practices used in America today.  The bill was passed overwhelmingly by Republicans and Democrats alike, on a 90-to-5 vote in the U.S. Senate.

The bill is aimed to protect the 78% of American families that hold credit cards, about half of whom have credit card debt averaging $5729.  New York Senator Charles Shumer claims the legislation is a victory for “the little guy.”  The Bill of Rights will require credit card companies to give 45 days notice and a simple explanation before raising interest rates (currently they can raise interest rates substantially whenever they deem it necessary) as well as place a limit on penalty fees.  The bill further restricts credit lenders to only being allowed to raise interest rates if a payment is over 60 days late, instead of the status quo where they can raise rates for paying even a single day late.

On the face of it, the reform bill seems to guarantee consumers a form of protection against predatory practices.  The problem is that these practices have traditionally provided a significant amount of income for credit card companies, income that they are not likely to give up.  Analysts are predicting that, to make up for this loss of profit, credit card companies will raise rates across the board, even for customers who pay on time.  Nessa Feddis of the American Bankers Association stated “History has shown that when the government imposes price controls, consumers have fewer choices and pay more.”

Do you think credit card rates will rise?  Should Congress have passed this legislation?

At Efinancialblog we keep a watchful eye on all things financial, especially the insurance industry.

The recent federal intervention in the financial services industry is well known when it comes to banks.  An underreported fact is that, as of last month, the Treasury Department has also extended bailout funds to help bolster America’s insurance companies.  While federal bailout funds were originally approved to help banks alleviate toxic loans, the Treasury Department has used such funds to help industries such as the auto industry and now the insurance industry significantly strengthen their financial status.

One such insurance company is The Hartford Financial Services Group Inc. Hartford announced that the Treasury Department determined they were eligible for $3.4 billion from the Troubled Asset Relief Program.  Additionally, Allstate Corp., Ameriprise Financial Inc., Principal Financial Group Inc. and Prudential Financial Inc were also determined to be eligible for bailout money, though the amounts have not yet been disclosed.

Some insurance companies are reporting surpluses, such as MetLife, and have declared that they are not going to ask for bailout money.

While they are not banks, insurance companies have been negatively affected by the financial crisis.  Stock portfolios for many institutional investors have decreased significantly in value and life insurers own roughly 18% of all corporate bonds in America.  Moreover, life insurers have seen their own stocks drop dramatically, so there was reason to be concerned they could fall below federal requirements for liquid assets.  These are the factors that made the insurance companies eligible for bailout money.

Treasury Secretary Timothy Geithner told a congressional oversight panel recently that the TARP fund Congress approved last October now has $110 billion left in the fund that has not been committed.

Do you think bailout money should be used for insurance companies?  How should the Treasury spend the last 110 billion dollars?  As always, your comments are welcome!

One of the hottest debates of the moment among economists, not to mention readers of this blog, is how quickly the American economy will recover from the current recession. Two polarizing views surround the issue. On one side of the question is the position that our economy will recover quite quickly. On the other side of the ring is the longer term, wait-and-see theory of our economic recovery.

Let’s start with the long, hard road. Despite the expectation of a major stimulus package, which is expected to be one of President Obama’s first acts in office, the market has not responded in any meaningful way. A part of this less than rosy forecast is that contraction within various markets is still likely to occur. Why? Corporate budgets have already been set for the year. Combined with a recession occurring in the rest of the world, US exports will remain low this year which will hurt corporate capital. Finally, fears arising from job loss, which may persist even as the economy improves, could keep people from increasing consumption. All of these factors suggest a slower recovery since anything and everything we attempt to do to fix the problem will take a long time to take effect.

Here’s the bright side to the dark side, at least if you believe the more dire economic forecast. Some economists think that because the economy is doing so poorly, this means it will recover quickly.

“Generally the sharper the recession, the sharper the recovery,” said Lakshman Achuthan, managing director of the Economic Cycle Research Institute.

The other side of the coin resembles a faster V-shaped recovery. When would a V shaped recovery, the term for dramatic fall and then dramatic rise in an economy,  take place? What has been occurring is that businesses are backing off  production at a much higher rate than demand is slowing down. They are expecting to not be able to sell as much as normal, which is a reasonable belief. What happens if demand starts to go up or remains at a higher level than production? Companies will start to amp up their production which will increase their need for workers and bring more money into the economy. This could potentially happen with the stimulus package that the Obama administration is likely going to come out with. Thus, economic recovery will occur much faster than we all expected.

Which theory makes more sense to you? How fast do you think the economy will recover?

Throughout history, nations have relied upon and gone to war over, the resources they need to run their economies. These resources have evolved from water, to farmable land, to the ever more volatile resource of oil. Energy is the life force of a modern economy.  In the current equation, oil adds up to both convertible heat in a building furnace or combustion in an automotive engine to drive transportation.

Like all finite resources, our oil supply is subject to the market forces of supply and demand.  The commodity is on a trajectory to skyrocket in price, be it in the short term or long, and must be weighed against more economical alternatives.

Just as important as the economic impacts are the environmental benefits. The right energy policy can spark the dynamism of our economy through long-term investment in renewable energy. We can create potentially millions of jobs, starting with a 21st- century economic recovery plan that puts Americans to work building wind farms, solar panels, and fuel-efficient cars. At the same time, we can reduce the carbon emissions that threaten to warm the planet through the creation of greenhouse gases in the ozone layer.

Shifting from an oil based economy would also cut our dependence upon foreign entities for our economic survival. Imagine all the money Americans would have saved this summer if gas was less than $4 a gallon. If we do not need as much gas, the money saved could be funneled into our national economy, increasing our economic strength. Energy = economy if you do the math.

How do you think America’s energy policy has affected our economy? How could new energy sources  transform the economic landscape?  Energize us with your ideas!

In the past week, the Dow Jones Industrial Average, one of the barometric indicators of upward or downward pressure in the American stock market, has been rising and falling like a red balloon caught in a windstorm. Many feel as tossed and tumbled as that helpless balloon, asking themselves “What’s next?” and “When will the wind change?”

According to the Chairman of the Federal Reserve, Ben Bernanke, the key is for that metaphorical balloon to settle back down to earth. “Stabilization of the financial markets is a critical first step, but even if they stabilize as we hope they will, broader economic recovery will not happen right away.” This is promising news for mid-to-long-term investors who have held on the wind tunnel that is the US economy the past two weeks, and suggests that stock market investors might be better off keeping that long term view.

At the very least, bank depositors can rest assured about their savings in FDIC protected accounts The Treasury has used much of the first 250 billion dollars, endowed to it by the government bailout, to make direct investments n banks to provide necessary liquidity and reinforce financial stability.

Given the likely recovery of the economy, and the government’s historic investment in banks, why is the market fluctuating like a balloon? There is a cycle to the way the stock market tends to behave, although even that can be less than predictable. The conventional wisdom, is that people who are fearful of the economy sell their stocks. As stock price drop, the price attracts a number of new investors, which causes, in turn, a n upturn. As the world turns, and news headlines worsen about the economy, stock prices can sink again. It is a cycle that is often described as more psychological than anything else.

Do you believe that “confidence” in the economy is the single biggest issue confronting the turnaround? Are you of a mind to conserve or spend? Is our national economic drinking glass half-empty or half-full? Comments are open.

Over these last several, angst-ridden days, the red hot political topic has been the financial crisis that looms large over the American landscape. The $700 billion dollar bailout authorized by Congress begs a great many questions of the American taxpayer and, so far, this “perfect financial storm” has provided precious few answers.

Will the $700 billion relief plan bridge the chasm, or does it address just the tip of a titanic iceberg? Should the American taxpayer be held responsible for Wall Street institutions or is the rescue effort a question of survival, fundamental to buttressing America’s economic foundation? Is there a stimulus to energize market confidence and is it psychological, political or financial?

The actions of the U.S. Treasury and the Federal Reserve appear on the face of it to be justifiable. The entities which the government has moved to protect have been those whose failure would trigger a chain reaction in both our domestic and the world’s global economy. As some would theorize, when a debt-fueled investment bubble bursts, financial institutions look to divest their bad debts. When every financial portfolio has the same goal, at the same time, turmoil can ensue.

Economists also calculate that the problem can only be solved if someone is willing to buy up, or pay off the debt that banks and investment companies are desperately trying to liquidate. The U.S. Treasury seems to be the ideal actor to perform this function, since it is, practically speaking, the only institution with enough buying power to handle the size of the transaction. The US government is also the only administrative body capable of organizing such a monumental effort at a systematic level.

Another looming question is the issue of regulation. Lawmakers of both parties have made it clear they do not want to give Wall Street a “blank check,” nor do legislators wish to sanction excessive amounts of money that may go end up as executive salaries or severance packages. Finally, the trillion dollar question is whether the bailout is merely a band-aid? How can the government and the fragile , fractured mortgage market protect future homeowners who see the value of their assets diminish and face default and foreclosure.

These are the hot topics that confront all of us in the days ahead. We invite your comments.

Given the recent and adverse news coverage regarding American International Group Inc. (AIG), and the fact that AIG is one of many companies which Efinancial allows to compete for your business, we wanted to take this opportunity to proactively address questions regarding an American General Life Insurance Company policy obtained through Efinancial.

Insurance is a highly regulated industry. All insurance companies doing business in the United States are regulated by state law, and required to maintain enough capital and surplus to satisfy their obligations to their policyholders. Although various companies owned by AIG are part of a larger insurance holding company system, each company is individually responsible for the liabilities associated with the business that it sells.

Consistent with those responsibilities, American General Life is well capitalized to meet or exceed local regulatory capital requirements and fully committed to meeting the needs of their policyholders across the U.S.

The National Association of Insurance Commissioners (NAIC) released this statement to the press recently: “We have a very strong message for consumers: If you have a policy with an AIG insurance company, they are solvent and have the capability to pay claims”.

We hope this helps clarify the current situation and provides greater assurance if you have made a decision to secure quality term life insurance from American General Life.