Monday, November 24, 2008

What About Us?


I was in a “projection” meeting last week and here we were talking about what the projected spend for next year might be and how “xxx” more people will be out of jobs by this time next year. Several friends of mine have gotten second jobs to be able to make ends meet.. No bonuses or raises for us this year I’m afraid. Companies are drastically slashing bonuses, severance packages and pay raises next year to cut costs amid mounting concerns of a prolonged economic downturn possibly going well into 2010.


While many of us understand the need for cutbacks I think companies risk an employee backlash and lowered morale if cuts hit middle-income earners while sparing executives. If they’re going to cut back should start at the top and dwindle down. Isn't that the way it should work? Isn’t it the middle-income earner that is always the one affected ? Most highly paid executives don’t have to worry about losing their home or not paying on there car. It’s the middle to low income earners that live from pay check to paycheck.

In yet another bad sign that the economy is nose-diving is that car loan delinquencies are on the rise again, making it a huge risk for banks to dole out loans and leaving it to the dealership to work directly with the consumer. Can we say screwing you over? Isn’t that the mentality that got us to where we are? I’m also thinking that a great percentage of these delinquencies are turning into repos and that will definitely affect the car loan industry. How we the people do our jobs if we can’t get to work. Several million of us (myself included) do not live near a bus route and if you have to work more than 1 job you bet you’re ass that will make it next to impossible to take the bus home because those people live rurally.


If loan delinquencies keep rising, banks are going to be tougher on the consumer when it comes to car loans.. I read this morning that GMAC recently stopped making car loans to anyone with a credit score below 700. I think with the stagnant raises from employers and the high gas, and food prices consumers thought they’d eventually make the extra buck to cover the new car. They were wrong.


On Sunday the Federal Government agreed to give Citibank $306 billion to keep it from going under. Apparently it’s the first to be shared by the FDIC and the Treasury Dept. Importantly, the agreement calls on Citigroup to take steps to help distressed homeowners.
The agreement also puts restrictions on executive compensation, including bonuses. Specifically, Citigroup will modify mortgages to help home owners prevent foreclosure along the lines of an FDIC plan that was put into effect at IndyMac.

This plan allows struggling home borrowers pay reduced interest rates for approx five years. Rates are reduced so borrowers aren't paying more than 38% of their pretax income for their home. Even though this sounds all fin and dandy, but how is this going to help us if it can’t be put into place now? What about those homeowners that have families and are 2-5 months behind on their mortgage? How is this going to help them if we can’t help them now? That’s the thing, all of this needs to happen now or we are all going to lose everything that we've worked so hard to afford, keep and maintain.
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