| Quote of the Month:
"In an excellent article ...in the most recent Specialty Lender, Tom Wanamaker poses the issue: 'Financial smart cards could modernize the credit card industry, if anyone would use them.'"
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December 2000
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| You Hoped for a Slowdown? Be Careful What You Wish For |
| For the U.S. economy, the millennium year came in like a lion but is going out like a lamb. A combination of interest rate hikes, rising energy prices, tighter credit standards and sharp declines in equity markets has finally taken the bloom off the U.S. economy.
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| Confidence Weakening Among Upper-Income Households
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| A small November gain in the University of Michigan's Index of Consumer Sentiment did not reverse what has been a downward trend in the monthly Index since January 2000. We caution that the Index in November was still higher than the average level for any prior year in the Survey's 50-year history. |
| Holiday Sales May Disappoint
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| U.S. retailers in recent days have become more pessimistic about the final sales tally for the 2000 holiday shopping season. The Commerce Department announced in mid-December that retail sales unexpectedly weakened in November just as the holiday shopping season was heating up. |
| Bankruptcies Are Poised to Rise Again |
| According to several recent forecasts, personal bankruptcies are headed sharply upward in 2001. SMR Research predicts a 10% to 20% increase in filings for 2001. |
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| Amtrak Card |
| Amtrak has issued the Amtrak Guest Rewards card: its first frequent-rider rewards program. CardTrak reports that the card permits travelers to earn two points for each mile of Amtrak travel. |
| Online Security for Credit Cards |
| As we have noted in earlier issues of Spotlight, many consumers are concerned about sending their credit card number over the Internet to an online retailer. Obviously, if consumers do not "feel good" about providing their credit card numbers online, they will be less likely to use their credit cards to shop online. |
| A Statement Stuffer for Credit Cards |
| Firms issuing credit cards might find these tips for shopping online from a recent article in the New York Times helpful to pass along to consumers. |
| Postage Paid |
| Brooks Brothers offers consumers an interesting incentive to adopt its retail credit card. When it sends merchandise by mail or express, it provides a notice of Easy Returns. |
| Be My Guest |
| American Express is offering Be My Guest dining cards. "Better than a single restaurant gift certificate, the Be My Guest Card lets recipients enjoy the dining experience of their choice." |
| Jumbo Mortgages |
| The generally accepted definition of "jumbo" would be those residential mortgages that are not "conforming mortgages," i.e., they exceed the $252,700 maximum loan size that will be purchased by the government-sponsored organizations Fannie Mae and Freddie Mac. Super-jumbo mortgages are those exceeding $650,000. |
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| MBNA Records Gains |
| MBNA Corporation has reported that its profits for the first nine months of 2000 reached $888.9 million, up 26.1 percent from the same period last year. Earnings have risen an average of 25 percent in each of the 39 quarters since its founding. |
| Banks' Performance Lags | | The Federal Reserve Bank of San Francisco's Economic Letter recently asked, "Has Bank Performance Peaked?" The genesis of Simon Kwan's question relates to the lag of the S&P Bank Composite Index behind the S&P 500 index. |
| Get Smart | | In an excellent article with this title in the most recent Specialty Lender, Tom Wanamaker poses the issue: "Financial smart cards could modernize the credit card industry, if anyone would use them." |
| More Warning Signs |
| The percentage of households' debt service burden estimated as the ratio of debt-service payments to their after-tax personal income has continued to rise. Over the period from 1996 to 2000, the percentage of total debt service payments to disposable (after-tax) incomes rose from 13.00 percent to 13.70 percent. |
| Debt Collection & Excuses in the UK |
| Barbara Buchanan recounts some of the tales of collection tactics and debtors' excuses in her article in the latest issue of Credit Today. |
| Boomerang Kids |
| For those of you empty nesters with children in college, we have a word of caution for your financial planning. A survey by jobtrak.com reports that more than 60 percent of college students plan to return and live at home after graduation. |
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| Bankruptcy Reform Ends with Pocket Veto |
| On December 7th legislation, which would overhaul the U.S. bankruptcy statutes, passed the Senate by a strong, bipartisan vote of 70-28. The "Bankruptcy Reform Act of 2000" had been in the works for three years, beginning with the 105th Congress. |
| Privacy Will Likely Dominate Financial Services Legislation |
| Let there be no doubt that in 2001 privacy legislation will command top billing in the various state legislatures as well as the 107th Congress. Federal Trade Commission Chairman Robert Pitofsky indicated in mid-December that "I will be astonished if privacy is not a major issue within 90 days of Congress returning. . . ." |
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