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"Even though [those borrowers] could be considered subprime, they're still creditworthy," is the deja-vu all over again message from the Financial Services Roundtable, who proudly crow, they are "starting to see an environment where issuers are feeling more comfortable to extend credit." How great is that? What could go wrong? One credit union exec notes, "lenders in general have really saturated the higher-credit-quality market, so it is only natural that as they look for growth opportunities, they expand downward," and sure enough, as one new borrower exclaimed, "my credit score is probably terrible," adding "I was surprised they'd give so much." Exceptional America is back…

 

Sure enough Americans are slamming themselves into deeper and deeper debt – at lower and lower levels of credit quality – to attempt to maintain their exuberant iPad-eating lifestyles. As WSJ reports, Credit-card lenders are courting riskier borrowers more aggressively than they have since the financial crisis in a bid to jolt revenue in a period of sluggish growth and tight regulation.

Banks and other lenders issued 3.7 million credit cards to so-called subprime borrowers during the first quarter, a 39% jump from a year earlier and the most since 2008, according to data provided exclusively to The Wall Street Journal.

 

…

 

About one-third of all credit cards issued in that period were to subprime customers, the biggest share in six years, according to Equifax.

 

"Lenders in general have really saturated the higher-credit-quality market, so it is only natural that as they look for growth opportunities, they expand downward," said Randy Hopper, vice president of consumer lending at Navy Federal Credit Union, an institution based in Vienna, Va., that is the largest credit union in the U.S.

With banks sufferening from a collapse in trading revenues (thanks to the Fed), they are desparate for any sources of revenue and subprime borrowers are especially attractive to banks because they tend to pay higher interest rates and are more profitable as long as they pay their bills (agains in a perfect virtuous circle as the subprimes are not benefitting from the Fed's reverse-robin-hood poilicies)…

The average rate for such customers was 21.1% in the first quarter, up from 20.2% a year earlier, according to research firm CardHub.com. In contrast, the highest-quality borrowers paid 12.9% on average in the first quarter, virtually unchanged from a year earlier.

 

Subprime borrowers are typically defined as those with FICO or Equifax Risk credit scores below 660 on scales that top out at 850. Such borrowers often have missed payments on debt, suffered foreclosures, filed for bankruptcy protection or have no credit history.

Even the borrowers themselves are stunned at banks willingness to blow money out the wazoo…

Stephanie Sannar said she and her husband, Toby, of Colorado Springs, Colo., sold their home for less than they owed on their mortgage in 2012. Mrs. Sannar, 42 years old, an emergency-room nurse, said her credit score fell to about 650 following this process since the mortgage was in her name.

 

Still, the couple has been receiving many credit-card offers in the mail, and Mrs. Sannar said she recently signed up for a Citigroup credit card with a credit limit of about $15,000.

 

"I was surprised they'd give so much," said Mr. Sannar. "The credit-card offers come every week."

 

…

 

Adam Wasdin, 31, of Raynham, Mass., said he has been behind on payments for about a year on four of his private student loans. He said he was surprised to see credit-card offers suddenly arrive in the mail from lenders including Bank of America and J.P. Morgan Chase over the last six months.

 

Mr. Wasdin, a distribution driver for a local newspaper in the area, said he hasn't signed up for any of the offers and is sticking with his debit card.

 

"It went from nothing to offers maybe once a month," he said. Mr. Wasdin is reluctant to check his credit score because he figures it is low given his missed payments.

 

"My credit score is probably terrible," he said.

And market participants will declare based on historical performance how this is sustainable…

Charge-offs, or losses from unpaid credit-card debt that banks have declared uncollectable, fell 13% to $27.7 billion in 2013 from a year earlier, according to data from the Federal Reserve compiled by CardHub.com. At the peak in 2009, charge-offs totaled $85.4 billion.

We are not sure how useful it is to use 2013 default rates to justify lending on a revolving basis in 2014? How did that work in 2007/8? Maybe.. just maybem, th ebanks just hit their limit…

It isn't clear how long banks will keep wooing subprime borrowers. The Fed's April survey of senior loan officers found that lenders anticipate growth in outstanding loans to their most creditworthy customers this year, but only "a smaller net fraction" of banks expect more growth in loans to nonprime borrowers.

Though we suspect not…

"You're starting to see an environment where issuers are feeling more comfortable to extend credit," said Jason Kratovil, vice president of government affairs for payments at the Washington-based Financial Services Roundtable, which represents financial-services institutions. "Even though [those borrowers] could be considered subprime, they're still creditworthy."

Onward and upward leverage… what could go wrong.

via Zero Hedge http://ift.tt/1wDb719 Tyler Durden

“In economics, [the mainstream] rely on experts who don’t know what they are talking about,” explains Professor Steve Keen in this brief but compelling documentary discussing ‘when the herd turns’. “Herd behavior is a fundamental aspect of capitalism,” Keen chides, but it is left our of conventional economic theory “because they don’t believe it;” instead having faith that investors are all “rational individuals” (e.g. willing to pay 112x for OpenTable), which he notes, means “[economists] can’t foresee any crisis in the future.” The reality is – “we do have herd behavior” and people will follow the herd off a cliff unless they are aware its going to happen. “Contrary to herd wisdom, financial crisis are not unpredictable black swans…“

 

via Zero Hedge http://ift.tt/1qgZxbH Tyler Durden

Submitted by Michael Snyder of The American Dream blog,

The number of SWAT team raids in the United States every year is now more than 25 times higher than it was back in 1980.  As America has conducted wars overseas in recent years, our police forces have become increasingly militarized as well.  And without a doubt, many of our cities have become much more dangerous places.  Thanks to relentless illegal immigration, drug cartels are thriving and there are now at least 1.4 million gang members living in the United States.  But there are many that believe that the militarization of our police forces has gone way too far.  Almost weekly, SWAT team brutality somewhere in America makes national headlines.  You are about to read about a couple of horrific examples of this below.  Once upon a time, police in America were helpful and friendly and the public generally trusted them.  But now our police forces are being transformed into military-style units that often act like they are in the middle of Iraq or Afghanistan.  The following are 10 facts about the SWATification of America that everyone should know…

#1 In 1980, there were approximately 3,000 SWAT raids in the United States.  Now, there are more than 80,000 SWAT raids per year in this country.

#2 79 percent of the time, SWAT teams are deployed to private homes.

#3 50 percent of the victims of SWAT raids are either black or Latino.

#4 In 65 percent of SWAT deployments, “a battering ram, boot, or some sort of explosive device” is used to gain forced entry to a home.

#5 62 percent of all SWAT raids involve a search for drugs.

#6 In at least 36 percent of all SWAT raids, “no contraband of any kind” is found by the police.

#7 In cases where it is suspected that there is a weapon in the home, police only find a weapon 35 percent of the time.

#8 More than 100 American families have their homes raided by SWAT teams every single day.

#9 Only 7 percent of all SWAT deployments are for “hostage, barricade or active-shooter scenarios”.

#10 Even small towns are getting SWAT teams now.  30 years ago, only 25.6 percent of communities with populations between 25,000 and 50,000 people had a SWAT team.  Now, that number has increased to 80 percent.

And thanks to the wars in Iraq and Afghanistan, police forces all over the nation are being showered with billions of dollars of military equipment that is coming home from overseas.  The following is what a recent Time Magazine article had to say about this phenomenon…

As the Iraq and Afghanistan wars have wound down, police departments have been obtaining military equipment, vehicles and uniforms that have flowed directly from the Department of Defense. According to a new report by the ACLU, the federal government has funneled $4.3 billion of military property to law enforcement agencies since the late 1990s, including $450 million worth in 2013. Five hundred law enforcement agencies have received Mine Resistant Ambush Protected (MRAP) vehicles, built to withstand bomb blasts. More than 15,000 items of military protective equipment and “battle dress uniforms,” or fatigues worn by the U.S. Army, have been transferred. The report includes details of police agencies in towns like North Little Rock, Ark., (pop: 62,000), which has 34 automatic and semi-automatic rifles, a Mamba tactical vehicle and two MARCbots, which are armed robots designed for use in Afghanistan.

But when you start arming the police like military units and your start training them like military units, eventually they start acting like military units and the results are often quite frightening.

For example, just check out what happened when a SWAT team in Florida raided the home of one young couple earlier this month…

At approximately 6:16 am on June 10th, 2014, Kari Edwards and her live-in boyfriend were seized upon by a SWAT team who smashed in the door and using flashbangs and armed to the teeth, swarmed upon the couple and even stripped Ms. Edwards naked in the process.

 

The couple says that the group entailed personnel from DHS, for whom Edwards once worked. After smashing in the door, the tactical team threw in flashbang grenades, traumatizing their cat and swarmed upon Edwards’s boyfriend and Edwards who had just gotten out of the shower.

 

“They busted in like I was a terrorist or something,” Edwards said.

 

“[An officer] demanded that I drop the towel I was covering my naked body with before snatching it off me physically and throwing me to the ground.”

 

“While I lay naked, I was cuffed so tightly I could not feel my hands. For no reason, at gunpoint,” Edwards said. “[Agents] refused to cover me, no matter how many times I asked.”

That is the kind of thing that I would expect to happen in Nazi Germany, not the United States of America.

But this next example is even more horrifying.  The following is what one mother says happened to her 2-year-old son when a SWAT team raided her home…

After the SWAT team broke down the door, they threw a flashbang grenade inside. It landed in my son’s crib.

 

Flashbang grenades were created for soldiers to use during battle. When they explode, the noise is so loud and the flash is so bright that anyone close by is temporarily blinded and deafened. It’s been three weeks since the flashbang exploded next to my sleeping baby, and he’s still covered in burns.

 

There’s still a hole in his chest that exposes his ribs. At least that’s what I’ve been told; I’m afraid to look.

 

My husband’s nephew, the one they were looking for, wasn’t there. He doesn’t even live in that house. After breaking down the door, throwing my husband to the ground, and screaming at my children, the officers – armed with M16s – filed through the house like they were playing war. They searched for drugs and never found any.

 

I heard my baby wailing and asked one of the officers to let me hold him. He screamed at me to sit down and shut up and blocked my view, so I couldn’t see my son. I could see a singed crib. And I could see a pool of blood. The officers yelled at me to calm down and told me my son was fine, that he’d just lost a tooth.

Does that make you angry?

It should.

That young child is probably going to be disfigured for the rest of his life because of the brutality and the carelessness of that SWAT team.

Yes, we live in perilous times and many of our communities would rapidly descend into anarchy if there were no police.

But that does not mean that they have to act like Nazis.  They should be able to protect us while treating us with dignity and respect at the same time.

via Zero Hedge http://ift.tt/1pUcbMb Tyler Durden

It was a little over a year ago, just as the Cyprus deposit confiscation aka “bail in” was taking place, when we asked, rhetorically, if “Spain is preparing for its own deposit levy” when an announcement by Spain’s Finance Minister, Montoro, hinted at the imminent arrival of just that.

Specifically we said:

While Spain’s economy minister Luis De Guindos proclaimed in the Senate today that bank deposits under EUR100,000 are “sacred”and that “Spanish savers should stay calm,” Spain, it would appear, has changed constitutional rules to enable a so-called ‘moderate’ levy on deposits – as under previous Spanish law this was prohibited. For now, they claim the ‘levy’ will be “not much higher than 0%” and is mainly aimed at regions in Spain that have “made no effort to collect taxes” based on new revenue expectations.

 

As El Pais reports, the minister of finance and public administration, Cristobal Montoro, defends the need for such a ‘levy’ in their constitution on the basis of standardizing taxes across regions (and is preparing a proposal on the amounts to be paid) and although it would appear that while the European Commission could previously argue that such a ‘tax’ would violate the free movement of capital in Europe, it now leaves the door open to eventually effectively taxing the deposits.

Of course, back in March 2013 imposing such a tax would immediately bring up images of parallel bank runs in Cyprus and visions of confiscated deposits, culminating in an immediate collapse of the otherwise already insolvent Spanish banking system. In other words, the timing picked by Montoro to reveal what was coming couldn’t have been worse.

Now, however, things are different.

Not only is Europe supposedly recovering, not only is the Cyprus bail in a distant memory (until it comes back front and center with a bang), but it was only a few weeks ago when the ECB – desperate to crush the same EURUSD which just two years ago seemed would implode under the weight of Europe’s artificial political and monetary union – revealed NIRP, aka ZIRP on steroids: a negative deposit rate.

Or, as Spain may have called it, a tax on deposits. Because some 16 months after it was first hinted, its time has finally come, and as Bloomberg reported a few hours ago:

• SPAIN TO CREATE A TAX ON BANK DEPOSITS: MONTORO

The details are along the lines of what is already known:

• Advances to be boosted by almost EU3.9b, Budget Minister Cristobal Montoro tells reporters in Madrid.
• Tax on bank deposits to be created: Montoro
• Tax rate on deposits to be determined: Montoro
• Montoro and regions’ budget chiefs to meet in July

Or just as El Pais reported over a year ago:

The Minister of Finance and Public Administration, Cristobal Montoro, has advanced on Tuesday that the government will impose a type “moderate” to bank deposits to compensate communities that saw their tax autonomy canceled after the Executive created a state tax 0% rate.  This tax on bank deposits, which has nothing to do with Cyprus, does not affect savers but requires credit institutions to pay for that capture deposits.

 

“The autonomous communities receive timely and therefore financially compensation shall implement a moderate rate in the state tax on bank deposits,” said the minister, adding that this kind “will not be much higher than 0%” .

 

The Minister of Finance has clarified that such “moderate” will have no tax collection effort, “but that these regions serve to offset the revenue loss to see.”  So, he assured that the amount will correspond to the amount “exact has been undermined by the cancellation of regional taxes”.

 

…

 

The Government announced in November 2012 the creation of a tax on bank deposits with type 0%, with implementation on 1 January 2013, to prevent the regions implement your own.  A week earlier, the Constitutional Court had endorsed the tax on deposits of Extremadura, which launched in 2001 and turned in the day the government of José María Aznar.

 

Thus, this tax was in force before the imposition of the 0% and in the case of Andalusia, the Canary Islands in 2010 and established, who created it in June 2012.  Only after it established Asturias.  So this type Montoro 0% justified by the need to standardize the tax system and maintain the unity of the internal market, after the European Commission will send a letter to the Government on the grounds that these taxes in the regions could violate the free movement of capital.  While leaving the door open to eventually effectively taxing the deposits.

In other words, the funding of the Spanish regions is now in the hands of those dumb enough to work hard and save their money. Because it is only “fair” that they – not the banks that year after year are bailed out by the ECB – end up with the short stick. 

But please don’t be surprised: after all as we said on June 5 when Draghi revealed that “NIRP Has Arrived” when we said that “Europe Officially Enters The “Monetary Twilight Zone.” It is all downhill from here.

And yes: coming to an insolvent country near you… everywhere.

via Zero Hedge http://ift.tt/1nNF73N Tyler Durden

While New Zealand’s stock market is the 3rd smallest among AsiaPac exchanges, it is not immune from the “glitches” even the largest exchanges have become used to in the new normal era of ‘liquidity providers’. For the 2nd time this month, equities trading in New Zealand (the entire market) is halted after a “technical fault” at the operator of the exchange. As one trader noted understatedly, “there seems to be a reasonably regular occurrence of issues, which is a bit of concern.”

 

As Bloomberg reports,

Equities trading in New Zealand was halted today for the second time this month after a technical fault at NZX Ltd., operator of the country’s stock exchange.

 

The market was closed about 10:15 a.m. in Wellington due to a problem with its FIX messaging system and will remain shut until at least 1 p.m., according to an e-mailed statement from the exchange. A problem on June 10 that postponed all trading for most of the day followed a 15-minute delay at the start of trading on April 28.

 

“It’s pretty disappointing to see,” James Lindsay, who helps oversee about $21 billion at Tyndall Investment Management Ltd. in Auckland, said in a phone interview. “There seems to have been a reasonably regular recurrence of issues, which is a bit of a concern. You just want it going. It’s not a good look.”

 

New Zealand is the third-smallest equity market among 16 major countries in the Asia-Pacific region tracked by Bloomberg News, ranking below Pakistan and the Philippines. The country’s benchmark NZX 50 Index gained 0.2 percent to 5,139.02, taking this year’s advance to 8.5 percent, before the halt.

As CNBC said – we are getting used to it now… so no problem…

via Zero Hedge http://ift.tt/1iLABqd Tyler Durden

Japan is in trouble. Normally the news that a piece of macro data had utterly and completely collapsed would be greeted by thge BFTD mentality as bad news reinforces the printing-press of central planners’ put guarenteeing future wealth for all… but not this time. Household spending collapsed 8.0% in May (echoing the plunge following the last tax hike in 1997) – more than double expectations and almost as bad as the month of the tsunami. Great news? That’s the problem… the great limiter of central bank largesse is looming as Japanese CPI spiked to 3.7% – its highest in 24 years! (and Core CPI at 3.4% – its highest since 1982) This implicitly hobbles the BoJ from further exuberance and already JPY strength (and NKY weakness) are showing.

 

Household spending collapses…

 

And inflation spikes… (with core CPI at 3.4% – its highest since 1982)

 

Now what Abe? More depends?

via Zero Hedge http://ift.tt/1m2PsgG Tyler Durden