Friday November 14, 6:23 pm ET
Wall Street ends turbulent week sharply lower
NEW YORK (AP) -- Wall Street ended a turbulent week with another astonishing show of volatility Friday, with stocks plunging, recovering and then plunging again as investors absorbed another wave of downbeat economic news. Hedge fund selling in advance of a Saturday deadline contributed to the market's gyrations, which set back the Dow Jones industrials almost 340 points to 8,497.31 and helped the major indexes fall sharply for the second straight week.
Jumat, 14 November 2008
Kamis, 13 November 2008
Loan calculator and amortization
Calculate your payment and more
alculate your monthly payment for mortgage, auto or home equity loans. Click on the "?" next to the input box for an item to get help on that item.
Visit on http://results.myhpf.co.uk/framedresults.asp?Keyword=loan
alculate your monthly payment for mortgage, auto or home equity loans. Click on the "?" next to the input box for an item to get help on that item.
Visit on http://results.myhpf.co.uk/framedresults.asp?Keyword=loan
Selasa, 04 November 2008
Help on loans, budgets, investments, more
By Jean Chatzky
TODAYShow.com contributor
Q: Should I pull out my money from my employer's 401(k) retirement account now? I want to retire in four years. I am over 59, and will put the money in a money market paying 5.53 percent at my credit union. — Phyllis, Calif.
A: If you don't need the money for daily living, then no, don't pull it out of your 401(k), where it is protected and can grow tax deferred. What I think you are saying is that you want to move the money to a safe place — there is a lot of confusion over this. People think that a 401(k) or an IRA is synonymous with stocks, but it's just the basket for your contributions — you can invest the money any way you like. At your age, you should only have about 40 percent of the money in stocks. The rest can be in safer places, and you can move it to the money market option within your 401(k).
Q: My son just graduated with his master's and now owes tens of thousands of dollars in government student loans. Should he consolidate these loans? If so, should he consolidate by loan type? Or should he just lump them all together? — Donna, Del.
A: Donna, whether your son should consolidate has to do with the type of loan that he actually has. Federal Stafford and PLUS loans borrowed before July 1, 2006, are variable rate, meaning that the interest rates reset each year. Loans borrowed after July 1, 2006, are fixed-rate. The interest rates on those don't change.
The benefit of consolidating federal loans is that you can lock in the interest rates on those variable rate loans, and right now, interest rates are very, very low. So if your son's loans are variable, he'll probably save some money by consolidating and locking in today's rates. Lumping them together also makes things a bit easier on the administrative front, because he can pay one bill each month and be done with it. Many lenders have ducked out of the federal loan consolidation market, so the best place to consolidate is the Federal Direct Loan Consolidation program at loanconsolidation.ed.gov. One thing to note: Private student loans can't be consolidated with federal loans.
for more visit http://www.msnbc.msn.com/id/27198870/
TODAYShow.com contributor
Q: Should I pull out my money from my employer's 401(k) retirement account now? I want to retire in four years. I am over 59, and will put the money in a money market paying 5.53 percent at my credit union. — Phyllis, Calif.
A: If you don't need the money for daily living, then no, don't pull it out of your 401(k), where it is protected and can grow tax deferred. What I think you are saying is that you want to move the money to a safe place — there is a lot of confusion over this. People think that a 401(k) or an IRA is synonymous with stocks, but it's just the basket for your contributions — you can invest the money any way you like. At your age, you should only have about 40 percent of the money in stocks. The rest can be in safer places, and you can move it to the money market option within your 401(k).
Q: My son just graduated with his master's and now owes tens of thousands of dollars in government student loans. Should he consolidate these loans? If so, should he consolidate by loan type? Or should he just lump them all together? — Donna, Del.
A: Donna, whether your son should consolidate has to do with the type of loan that he actually has. Federal Stafford and PLUS loans borrowed before July 1, 2006, are variable rate, meaning that the interest rates reset each year. Loans borrowed after July 1, 2006, are fixed-rate. The interest rates on those don't change.
The benefit of consolidating federal loans is that you can lock in the interest rates on those variable rate loans, and right now, interest rates are very, very low. So if your son's loans are variable, he'll probably save some money by consolidating and locking in today's rates. Lumping them together also makes things a bit easier on the administrative front, because he can pay one bill each month and be done with it. Many lenders have ducked out of the federal loan consolidation market, so the best place to consolidate is the Federal Direct Loan Consolidation program at loanconsolidation.ed.gov. One thing to note: Private student loans can't be consolidated with federal loans.
for more visit http://www.msnbc.msn.com/id/27198870/
Minggu, 02 November 2008
Mich. lawmakers want federal help on car loans
WASHINGTON - Michigan lawmakers asked the government on Thursday to make it easier for car buyers to get loans, in hopes of helping U.S. automakers ride out the financial crisis.
The state’s congressional delegation want Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to use their powers under the $700 billion bailout to buy troubled assets quickly from auto finance companies.
Democratic Rep. John Dingell also said automakers were considering asking the Fed for access to a program that provides low-cost credit. from http://www.msnbc.msn.com
The state’s congressional delegation want Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to use their powers under the $700 billion bailout to buy troubled assets quickly from auto finance companies.
Democratic Rep. John Dingell also said automakers were considering asking the Fed for access to a program that provides low-cost credit. from http://www.msnbc.msn.com
Kamis, 30 Oktober 2008
Personal Finance to Avoid Crippling Deficits and Bad Credit Scores
What is Personal Finance?
Though literally speaking, personal finance may mean arranging finance to meet your personal needs, personal finance is the implementation of the rules of financial economics in making personal financial decisions. It takes into account the sources of income or finance including mortgage loans, channels of expenditure, savings for emergencies, old age, payday payments and so on. Personal finance includes keeping income records, budgeting based on those records, preparing and net worth statements, credits, savings, investments, estate planning, insurance, taxes and so on.
Origin and the History of Personal Finance
The concept of personal finance and its management owes its origin in the hoary past when there were no hard currencies to quantify income, purchases and sales. Earnings were received in commodities and the same were exchanged in buying, selling and meeting personal needs. People were advised to look about their personal finance by making hay while the sun shone and store grains for the rainy seasons.
After the introduction of currency, services and products started being exchanged with money. Since carrying large amounts of even paper money is both cumbersome and insecure, we now have the plastic money called credit cards.
The Origin of the Credit Card
The origin of credit cards, however, has a different story. It was not initially introduced as a convenient and securer substitute for carrying large amounts of money, though this advantage came about as a natural corollary. Credit cards, in their earlier avatar as dog-tag style metal plates appeared in the United States just before the beginning of First World War. They were introduced by the department stores for their favorite customers. Later on gas credit cards were issued for automobiles that could be used all over the country. One reason for the explosion of the credit card was the increased mobility of an average person. Credit cards and the easy mobility mutually promoted each other. A gas merchant in California would hesitate to accept a personal check from a customer but would willingly take an American Express or MasterCard.
Diners Club Cards
Nineteen fifties brought in Diners Club Cards. The Diner Club cards were introduced by Francis McNamara, an operator of a small loan company. He issued credit cards made of cardboard. It bore the holder's name and account number on the front and a list of 28 restaurants and Manhattan nightspots where his credit cards could be used. He charged an annual fee of five dollars. Later on he expanded this network of cards to the national level and covered restaurants, hotels and air travel expenses. In 1951, Franklin National Bank of New York too entered into market with a credit card that could be used to buy a variety of merchandise. Other banks notably the Bank of America in San Francisco joined the fray with its BankAmericard which later evolved into its present day Visa Card. Visa was followed by the Master Card of today. The credit card business exploded exponentially when by the end of 1960s many banks started mailing out credit cards to anyone with a name and an address with a good and even bad credit. The explosive proliferation of credit cards and the easy availability of finance have created more urgent need to regulate the personal finance than ever before.
Though literally speaking, personal finance may mean arranging finance to meet your personal needs, personal finance is the implementation of the rules of financial economics in making personal financial decisions. It takes into account the sources of income or finance including mortgage loans, channels of expenditure, savings for emergencies, old age, payday payments and so on. Personal finance includes keeping income records, budgeting based on those records, preparing and net worth statements, credits, savings, investments, estate planning, insurance, taxes and so on.
Origin and the History of Personal Finance
The concept of personal finance and its management owes its origin in the hoary past when there were no hard currencies to quantify income, purchases and sales. Earnings were received in commodities and the same were exchanged in buying, selling and meeting personal needs. People were advised to look about their personal finance by making hay while the sun shone and store grains for the rainy seasons.
After the introduction of currency, services and products started being exchanged with money. Since carrying large amounts of even paper money is both cumbersome and insecure, we now have the plastic money called credit cards.
The Origin of the Credit Card
The origin of credit cards, however, has a different story. It was not initially introduced as a convenient and securer substitute for carrying large amounts of money, though this advantage came about as a natural corollary. Credit cards, in their earlier avatar as dog-tag style metal plates appeared in the United States just before the beginning of First World War. They were introduced by the department stores for their favorite customers. Later on gas credit cards were issued for automobiles that could be used all over the country. One reason for the explosion of the credit card was the increased mobility of an average person. Credit cards and the easy mobility mutually promoted each other. A gas merchant in California would hesitate to accept a personal check from a customer but would willingly take an American Express or MasterCard.
Diners Club Cards
Nineteen fifties brought in Diners Club Cards. The Diner Club cards were introduced by Francis McNamara, an operator of a small loan company. He issued credit cards made of cardboard. It bore the holder's name and account number on the front and a list of 28 restaurants and Manhattan nightspots where his credit cards could be used. He charged an annual fee of five dollars. Later on he expanded this network of cards to the national level and covered restaurants, hotels and air travel expenses. In 1951, Franklin National Bank of New York too entered into market with a credit card that could be used to buy a variety of merchandise. Other banks notably the Bank of America in San Francisco joined the fray with its BankAmericard which later evolved into its present day Visa Card. Visa was followed by the Master Card of today. The credit card business exploded exponentially when by the end of 1960s many banks started mailing out credit cards to anyone with a name and an address with a good and even bad credit. The explosive proliferation of credit cards and the easy availability of finance have created more urgent need to regulate the personal finance than ever before.
Rabu, 29 Oktober 2008
Regulation and the Mortgage Crisis
by Jack M. Guttentag
When a presidential election falls in the middle of a financial crisis, it is not surprising that we are besieged with misinformation. Much of it is finger-pointing about responsibility for the absence of effective regulation that would have stopped or moderated the crisis. This article aims to provide some perspective on this issue.
Political responsibility for inadequate regulation: There are two sectors where more extensive regulation might have made a difference. These are the investment banks and the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac. Both sectors were major players in the events leading up to the crisis.
In 2004 the SEC adopted a rule that pretty much allowed the investment banks to regulate themselves. While a number of other factors were involved in this decision, the commission's belief at that time was that self-regulation would be more effective than SEC regulation. This policy was consistent with the free market ideology of the Republican administration.
A Defeat in Congress
In 2003, efforts to bring the GSEs under tighter regulatory control were defeated in Congress. This was primarily the work of Democrats, who feared that tighter regulation would crimp the ability of the GSEs to meet affordable housing goals.
I call it a tie. I also hasten to add that, had both financial sectors been subject to regulation, an only slightly less severe crisis would have occurred anyway, for reasons explained below.
Deregulation, meaning the scrapping of existing regulations, was not a factor in the crisis. The only significant financial deregulation legislated in the past three decades applied to commercial banks. Restrictions on where they could branch, and on their involvement in investment banking, were both removed. Most economists, including me, believe that these actions made the banks stronger than they would have been otherwise.
A Weak Defense
Regulation in itself is a weak defense against financial crises. One major reason is that it tends to look backwards, similar to generals fighting the last war. The savings and loan industry was subject to very extensive regulation in the 1970s, but that did not prevent the subsequent crisis. The problem was that the wrong things were regulated.
The regulatory system was geared to preventing S&Ls from taking on too much default risk because, historically, that had always been the major problem. The exposure of S&Ls to interest rate risk was not controlled. The associations were allowed, even encouraged, to make long-term, fixed-rate mortgages financed with short-term deposits. When market interest rates exploded in the early 1980s, the cost of deposits jumped, income from mortgages barely changed, and the industry began to bleed red ink.
The policy changes that were introduced following the S&L crisis were largely designed to prevent another crisis of that type. Among other things, associations were authorized (and encouraged) to write adjustable-rate mortgages (ARMs) on which rates would adjust with the market. This would make S&Ls as well as banks less vulnerable to swings in market rates.
A Vulnerable System
However, ARMs carry more default risk than fixed-rate mortgages, and as the years passed, interest-only and option ARMs evolved that carried substantially more default risk. As the system became increasingly secure against an interest rate shock, it became increasingly vulnerable to a default shock.
Preventing a default shock through existing regulatory tools is extremely difficult. The core tool is capital requirements: the amount of capital including reserves that firms are required to have to cover the risk of losses from future defaults. The problem is that nobody knows how large future default shocks will be.
Regulators have no better foresight than the firms they regulate. The statistical models used by both are based on past experience. A change in the underlying structure of the economy can make such past history irrelevant, which is exactly what has happened. Nobody anticipated the severity of the current crisis because, relative to past history, it is off the charts.
But doesn't that simply mean that regulators, who are not motivated by profit, should err on the side of caution? To a degree, yes; if that were not the case, regulation would be utterly pointless. But capital requirements that are higher than needed to meet potential future shocks not only reduce profits, they also impose social costs, to which regulators are sensitive. Larger capital requirements reduce loan volume and raise interest rates, a fact well understood by the congressmen who resisted tightening regulatory controls on the GSEs.
Better regulatory tools are needed. We should take a hard look at applying the system used to regulate mortgage insurance companies to mortgage lenders. Under this system, lenders would be required to allocate a portion of every dollar they receive in interest above some base rate to a reserve account that would not be touchable for 10 years except in an emergency. The higher the interest rate, the larger the payment to the reserve account.
Can we prevent a crisis like this one from happening again? Yes -- the next crisis will almost certainly be different.
When a presidential election falls in the middle of a financial crisis, it is not surprising that we are besieged with misinformation. Much of it is finger-pointing about responsibility for the absence of effective regulation that would have stopped or moderated the crisis. This article aims to provide some perspective on this issue.
Political responsibility for inadequate regulation: There are two sectors where more extensive regulation might have made a difference. These are the investment banks and the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac. Both sectors were major players in the events leading up to the crisis.
In 2004 the SEC adopted a rule that pretty much allowed the investment banks to regulate themselves. While a number of other factors were involved in this decision, the commission's belief at that time was that self-regulation would be more effective than SEC regulation. This policy was consistent with the free market ideology of the Republican administration.
A Defeat in Congress
In 2003, efforts to bring the GSEs under tighter regulatory control were defeated in Congress. This was primarily the work of Democrats, who feared that tighter regulation would crimp the ability of the GSEs to meet affordable housing goals.
I call it a tie. I also hasten to add that, had both financial sectors been subject to regulation, an only slightly less severe crisis would have occurred anyway, for reasons explained below.
Deregulation, meaning the scrapping of existing regulations, was not a factor in the crisis. The only significant financial deregulation legislated in the past three decades applied to commercial banks. Restrictions on where they could branch, and on their involvement in investment banking, were both removed. Most economists, including me, believe that these actions made the banks stronger than they would have been otherwise.
A Weak Defense
Regulation in itself is a weak defense against financial crises. One major reason is that it tends to look backwards, similar to generals fighting the last war. The savings and loan industry was subject to very extensive regulation in the 1970s, but that did not prevent the subsequent crisis. The problem was that the wrong things were regulated.
The regulatory system was geared to preventing S&Ls from taking on too much default risk because, historically, that had always been the major problem. The exposure of S&Ls to interest rate risk was not controlled. The associations were allowed, even encouraged, to make long-term, fixed-rate mortgages financed with short-term deposits. When market interest rates exploded in the early 1980s, the cost of deposits jumped, income from mortgages barely changed, and the industry began to bleed red ink.
The policy changes that were introduced following the S&L crisis were largely designed to prevent another crisis of that type. Among other things, associations were authorized (and encouraged) to write adjustable-rate mortgages (ARMs) on which rates would adjust with the market. This would make S&Ls as well as banks less vulnerable to swings in market rates.
A Vulnerable System
However, ARMs carry more default risk than fixed-rate mortgages, and as the years passed, interest-only and option ARMs evolved that carried substantially more default risk. As the system became increasingly secure against an interest rate shock, it became increasingly vulnerable to a default shock.
Preventing a default shock through existing regulatory tools is extremely difficult. The core tool is capital requirements: the amount of capital including reserves that firms are required to have to cover the risk of losses from future defaults. The problem is that nobody knows how large future default shocks will be.
Regulators have no better foresight than the firms they regulate. The statistical models used by both are based on past experience. A change in the underlying structure of the economy can make such past history irrelevant, which is exactly what has happened. Nobody anticipated the severity of the current crisis because, relative to past history, it is off the charts.
But doesn't that simply mean that regulators, who are not motivated by profit, should err on the side of caution? To a degree, yes; if that were not the case, regulation would be utterly pointless. But capital requirements that are higher than needed to meet potential future shocks not only reduce profits, they also impose social costs, to which regulators are sensitive. Larger capital requirements reduce loan volume and raise interest rates, a fact well understood by the congressmen who resisted tightening regulatory controls on the GSEs.
Better regulatory tools are needed. We should take a hard look at applying the system used to regulate mortgage insurance companies to mortgage lenders. Under this system, lenders would be required to allocate a portion of every dollar they receive in interest above some base rate to a reserve account that would not be touchable for 10 years except in an emergency. The higher the interest rate, the larger the payment to the reserve account.
Can we prevent a crisis like this one from happening again? Yes -- the next crisis will almost certainly be different.
Loans
. This article focuses exclusively on monetary loans, although, in practice, any material object might be lent. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.
The borrower initially does receive an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt. A loan is of the annuity type if the amount paid periodically (for paying off and interest together) is fixed.
A borrower may be subject to certain restrictions known as loan covenants under the terms of the loan.
Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding. Bank loans and credit are one way to increase the money supply.
Legally, a loan is a contractual promise of a debtor to repay a sum of money in exchange for the promise of a creditor to give another sum of m
Types of loans
Secured
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan.
A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security — a lien on the title to the house — until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter — often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.
A type of loan especially used in limited partnership agreements is the recourse note.
A stock hedge loan is a special type of securities lending whereby the stock of a borrower is hedged by the lender against loss, using options or other hedging strategies to reduce lender risk.
Unsecured
are monetary loans that are not secured against the borrowers assets. These may be available from financial institutions under many different guises or marketing packages:
* credit card debt
* personal loans
* bank overdrafts
* credit facilities or lines of credit
* corporate bonds
The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.
The borrower initially does receive an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt. A loan is of the annuity type if the amount paid periodically (for paying off and interest together) is fixed.
A borrower may be subject to certain restrictions known as loan covenants under the terms of the loan.
Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding. Bank loans and credit are one way to increase the money supply.
Legally, a loan is a contractual promise of a debtor to repay a sum of money in exchange for the promise of a creditor to give another sum of m
Types of loans
Secured
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan.
A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security — a lien on the title to the house — until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter — often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.
A type of loan especially used in limited partnership agreements is the recourse note.
A stock hedge loan is a special type of securities lending whereby the stock of a borrower is hedged by the lender against loss, using options or other hedging strategies to reduce lender risk.
Unsecured
are monetary loans that are not secured against the borrowers assets. These may be available from financial institutions under many different guises or marketing packages:
* credit card debt
* personal loans
* bank overdrafts
* credit facilities or lines of credit
* corporate bonds
The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.
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