| Quote of the Month:
"The elusive goal of an economic "soft landing" has probably been achieved. That's the opinion of the 34-member professional forecaster panel of the National Association for Business Economics."
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November 2000
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| Economists Say to the Fed "Mission Accomplished" |
| The elusive goal of an economic "soft landing" has probably been achieved. That's the opinion of the 34-member professional forecaster panel of the National Association for Business Economics.
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| Global Growth Prospects Improving
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| Earlier this year, real GDP growth in the developed economies was percolating at 4% or better, much like the United States. However, global growth slowed sharply in the third quarter and financial markets appeared to discount future prospects as recession fears caused equity prices to slump. |
| Expect Mortgage Rates to Stabilize
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| As of the first week of November, the national average for a new 30-year fixed-rate mortgage loan was 7.90% according to HSH Associates, the Butler, NJ publisher of consumer loan rate information. This was identical to the average rate one year earlier and just above the low for the year of 7.8% reached at the end of October, but well below the 8.82% peak at the end of May. |
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| Response Rates Drop as Card Solicitations Rise |
| After nearly a year of retrenchment, the credit card industry's direct marketing machine revved up in the second quarter of this year. Solicitations for credit cards reached 992 million during the second quarter according to Mail Monitor, a tracking service of the market research firm, BAIGlobal Inc. |
| Card Issuer Profits Soared in Third Quarter |
| The table indicates that many card issuers had a stellar third quarter this year with record or near-record profits. The table displays card-related net income (in millions of dollars) for a cross section of issuers. Citigroup retained the top position in the industry in terms of receivables and total profits with $95.6 billion of managed card receivables and $476 million in card-related net income. |
| Sears Credit Drives Sears Profits |
| Speaking of card issuer profitability, Sears, Roebuck and Co. also logged a stellar performance during the third quarter as card-related operating income rose to $385 million, a 21.8% increase over the same period in 1999. Sears card revenues were up just 1.7% from a year ago to $1.07 billion, while receivables declined about 2% to $25.5 billion. |
| Freedom Card |
| Freedom Card, Los Angeles, is issuing the first credit card targeted specifically at African-Americans, Latinos and other minorities. In his article in the New York Times, Greg Winter explains this strategy by citing data from Claritas, a market research firm in San Diego. |
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| Has Consolidation Brought More Rational Competition? |
| In the Product Trends section of this month's issue we noted that both credit card profits and solicitations were up sharply in the third quarter. Analysts at Morgan Stanley Dean Witter (MSDW) believe this trend will continue over the next 12 months. |
| Credit Quality Still Good But Warning Signs Appear |
| The effects of a healthy economy and tighter lending standards have produced dramatic improvements in portfolio performance across all types of consumer lending during the past 24 months. The good news still far outweighs the bad, but some early signs of a reversal are beginning to emerge. |
| On-Line Shopping vs. On-Line Buying |
| Have you wondered why the reported growth in on-line shopping has not produced more credit sales? An important reason is that there is more shopping than buying. |
| The Future of On-Line Banking |
| What will be the effect of on-line banking on our banking industry? What strategies should commercial bankers adopt to fend off competition from on-line banks and increase their market share of financial services? |
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| IRS Seeks Credit Card Slips | | The Internal Revenue Service estimates that it is losing about $70 billion annually in tax revenues as a result of U.S. citizens' failure to report income generated from their offshore accounts in the Caribbean. Banks in that area have used the Internet and other channels to solicit accounts from U.S. citizens. |
| House Committee Votes to Limit Use of Social Security Numbers |
| With a unanimous, bi-partisan voice vote, H.R. 4857 passed out of the House Ways and Means Committee on September 28, 2000. Introduced by Rep Clay Shaw (R-FL) and titled the "Social Security Number Privacy and Identity Theft Prevention Act of 2000," the bill would place new limits on government disclosure and display of social security numbers and give the Federal Trade Commission rule-writing authority to regulate private sector exchange of social security numbers. |
| Auto Lenders Charged with Racial Bias |
| The U.S. Justice Department has intervened on the plaintiffs' side in a class-action suit filed under seal two years ago against Nissan Motor Acceptance Corp. It is expected that Justice will also intervene in a similar case filed against General Motors Acceptance Corp. (GMAC). |
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