Stagflation is hitting the US economy and it has many consumers pessimistic about the future. Increasing food and gasoline prices are edging their way into Americans' pocketbooks while their spending outlays even managed to spend more last month compared to December. Since income growth is slowing, this means that more Americans are likely turning to credit to get their daily allowance while saving nothing for the future. In fact, for the first time in 50 years, Americans spent more than they earned for the third consecutive month!

From the New York Times:
Rising prices are forcing Americans to spend more and save less, even as the growth of income slows. Consumer spending, which accounts for more than two-thirds of gross domestic product, was flat in January for the second month in a row, when adjusted for inflation, the Commerce Department said on Friday. Other reports showed a decline in consumer confidence and diminished business activity in the Midwest.

Americans are facing a credit crunch these days on the heels of increasing consumer goods prices and decreasing wages. The result has been foreclosures, bankruptcies, and defaults at a higher rate than we've seen in awhile. One thing that many didn't forsee is just how dependent Americans have become on credit to maintain their lifestyle. Now that many people can't afford their bills, some financial planners are reporting clients that prefer to pay their credit card bills over their mortgages! Why? Because they are living off of their credit card and would be ruined if they lost the credit.

From InternationalNews:
Seven years in the credit-counseling business didn't prepare Ann Estes for the alarming trend she began noticing last fall: As her clients' mortgage bills became unaffordable, a growing number of them began paying their credit card bills before — and sometimes instead of — their mortgages. "We've never seen anything like this," says Estes, who counsels clients by phone from her office in Richmond, Va. "Their homes are at risk, and they know it. But people say, 'I don't want to let my credit cards go because that's my cash flow.'"

Home equity lines of credit are finally beginning to dry up as banks see them as an even bigger risk than a first mortgage. The process cancels consumers' available credit and prohibits consumers from making additional draws against any unused credit line. In the past, lenders use to hike the borrowers rates as soon as they detected trouble in other accounts, but now this practice has come under scrutiny by Congress and they are being forced to cancel these lines of credit altogether. Countrywide became the first bank to do o after notifying 122,000 customers that they can no longer access their credit. This is a trend that is only likely to continue..

From CBS News:
When the real estate market was booming, millions of homeowners suddenly found themselves "house rich," using home equity lines of credit to cash in on their homes' growing values, and financing everything from remodeling projects to vacations. But now, people with a line of credit may be in for a surprise: Lenders are blocking the money pipeline, refusing to loan borrowers any more money. In this column, The Early Show's resident financial adviser, Ray Martin, explains why it's happening, and what recourse homeowners have.

The new problem facing credit card companies is the fact that they can't make enough money of poor customers to cover the costs of its good customers to whom it simply gives interest free loans. So, at least one Citigroup-owned bank in the UK has begun cutting perfect customers in an apparent attempt to profit more off of their poor customers. Egg Bank cut over 161,000 customer accounts including those who have spotless credit histories and even a few millionaires! Isn't it ironic that the UK couldn't yet learn from the USA the problems associated with lending only to those with poor credit histories..

From FinancialDirector:
Is it me or has the world gone mad? I remember my history teacher telling me that you have to study history – "it's like studying the future. Everything is always replayed," he used to say. He also used to bang on about the Americans invading our precious traditions, and their empire building. Which of course, we taught 'em. Which digression brings me to online banking outfit egg, and its recent delisting of customers it deemed to have poor credit. Since it chucked 161,000 customers off its register, it has been revealed that a "substantial amount" of those customers are, in fact, in possession of good credit ratings. And no one was safe from the exodus: even a city worker who earned £1m last year and owns £100,000 in Citibank shares – Citibank is the parent company of egg – received the dreaded letter of poor credit.

Many retailers have established private-label credit card programs designed to encourage consumers to make large purchases on credit while also making money on the interest revenues from the credit - a win-win scenario. The problem, of course, is when people start to buy things they can't afford and default on their payments. This is what happened when the housing market collapsed and wiped out home equity lines of credit that many people were using to pay off credit card bills. Now, these companies are losing big bucks on their credit card operations. The damage is spreading from just banks to retailers and other institutions now...

From CNN Money:
Home Depot Inc.'s (HD) profit-sharing gains from its private-label credit card program fell in the fourth quarter and will continue to hurt operating margins in 2008 as portfolio losses increase, Chief Financial Officer Carol Tome said Tuesday. Home Depot shares profits from its private-label credit card program with card issuer Citigroup Inc. (C), though the retailer doesn't hold any of the receivables on its books. About 30% of all 2007 sales were generated through consumers using the credit cards.

Visa announced that it would raise $18.8 billion in a record initial public offering on the New York Stock Exchange. The move comes at a time when the credit crisis continues to plague mortgages and consumer spending, but many investors are hoping that the stock will perform similar to MasterCard (which rose five-fold since its debut). The company is roughly twice the size of MasterCard, processing $4 trillion in payments every year. However, it has recently come under fire for high fees and an anticompetitive ownership structure. It will be interesting to see just how well this company does with many of its own consumers feeling the credit crunch...

From The Independent:
Visa has announced an $18.8bn (£9.5bn) fundraising that will rank as the biggest initial public offering ever seen in the US. It comes as the credit crisis continues to destabilise financial markets, and in the middle of an otherwise arid spell for stock market flotations.

There are an increasing number of experts who are insisting that the mess in the mortgage and credit markets may take a long time to unwind. Some are comparing the current crisis to the S&L crisis in the 90's that caused major problems and made loans hard to obtain for several years. However, let's not forget that the same problems back then offered enormous opportunities for investors - particularly, those like Sam Zell who invested in real estate while prices were low and made a fortune. His Equity Home and Equity Office companies are worth billions now and built primarily during the extended downcycle seem back then.

From the LATimes:
“ 'I look at this sort of like 1990 and 1991,' he said, referring to the savings-and-loan crisis. 'Against that background you had a $7 trillion economy that gave birth to the $300 billion Resolution Trust Corp. Now we have an $11 trillion economy and we’ve already seen $2 trillion of market capitalization going away' before many loans in the pools have actually defaulted, he said. "What about the people who argue that the impact of the mortgage mess will be muted because risks have been spread well beyond the banks and into many parts of the financial world? Mr. Farrell takes the opposite view. Spreading the risk beyond the banking system will make the task of fixing the mess much harder. “ 'Even if the Fed eases, it is probably not going to help the housing market,' he said. 'This repair cycle is going to take a lot longer because it is not concentrated in the banking system like it was in the 1990s. Back then, they could repair the banking system by dropping interest rates. Now they can’t bail out rich hedge fund guys in Greenwich.' "

Students loans are in trouble and it is already affecting for-profit education companies. Corinthian Colleges announced on Monday that student loan company Sallie Mae will no longer provide serial subprime private loans for current students. This could prove to be a precusor to problems at public institutions, which are not required to disclose such news publicly. Students may now be forced to find alternatives in the private loan markets from banks at much higher rates. This is bad news for low income students and those who are tight for money.

From Reuters:
For-profit education company Corinthian Colleges Inc said on Monday that student loan company Sallie Mae will no longer provide serial subprime private loans for current students, adding to worries that Corinthian students will have difficulty funding their education. Sallie Mae, the commonly used name for SLM Corp., will continue to fund all current subprime loans on the books but it will not provide new "serial," or subsequent, loans for these students, Corinthian said in a securities filing. Corinthian said it had earlier believed that Sallie Mae would provide serial loans for current students through the completion of their programs.

Fixed-rate mortgages are back up to where they were at the beginning of the year while adjustable rate mortgages continued their decline. Many fear that the increase in this spread could spark an increase in adjustable rate mortgages as they are cheaper. While this may simply be an issue of supply and demand, it could mean more problems down the road if things aren't kept in check. Also, those looking to refinance may want to do so quickly before rates continue to rise for fixed rate mortgages.

From The Wall Street Journal:
U.S. fixed-rate mortgages inched higher in the latest week, according to Freddie Mac's survey released yesterday. The national average interest rate on the benchmark 30-year, fixed-rate loan averaged 6.04% in the week ended yesterday, up from 5.72% a week ago but lower than the year-earlier 6.22%. The 15-year fixed-rate loan averaged 5.64%, up from 5.25% a week ago but down from 5.97% a year ago. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 5.37%, compared with 5.19% a week ago and 5.96% a year ago.

Credit card users are not the only one footing the bill to credit card companies- business owners are also forced to pay a fee for each transaction. This has many business owners complaining that lax standards and aggressive marketing are unfairly increasing their costs of doing business. In fact, a group of business owners from Vermont recently petitioned the state and Congress to take action to curb credit card marketing practices to not only protect users but also reduce their costs. After all, when consumers overspend, they are hurting themselves and the retailer!

From WCAX:
Anyone who has run up a credit card knows how easy it is to fall into debt. And with interest rates commonly topping out well above twenty percent annually, failing to pay the card off quickly results in a mountain of additional debt. It may be a surprise to learn that individual stores are not the ones that make money from credit cards. With interest rates on credit cards skyrocketing, a group of affected people gave Rep. Peter Welch, D-Vermont, an update. They represented consumers, banks, regulators -- and the owner of a convenience store.

Peter Annis of the Black River Quik Stop said, "When a person uses a credit card, based upon a certain margin, I'm paying that person to pump gas -- at the pump." The problem is that when a consumer gasses up and pays on credit, the retailer's payment to the credit card company can be more than the profit margin on the gas. Officials say the two largest national credit card companies, Visa and Master Card, charge stores an average of two and a half percent on each purchase. The two big companies own 80% to 85% of the credit card business, according to the banking industry.

Responsible credit card holders may finally be rewarded with a new formula being put to use by Fair Isaac - the company that calculates your FICO score. Consumers in good standing could see their credit scores rise by as much as 25 points under the new formula. This is seen as a more accurate way for creditors to get an idea of the likelihood of a default on unsecured loans. It is great news for those with good credit card histories, but may be bad news for those with a less than stellar record. It is now increasingly important for consumers to keep a rein on their credit card spending.

From CNN Money:
Finally, some good news about credit: Fair Isaac, the company that calculates consumer credit ratings for lenders, is rolling out a new formula that promises to favor responsible credit holders. Your FICO score could benefit. Fair Isaac began working on the new system in 2006 - before the subprime mess even unfolded - in an effort to better differentiate "good risk" borrowers from "bad risk" ones and give creditors a more accurate prediction of default. A consumer in good standing could see his or her score go up by as much as 25 points under the new formula.

Mortgage applicatios continue to drop as the housing market continues to contract. This is an early signal of more bad news to come since less mortgages means less buying, which means that demand is lower and housing prices will drop. Unfortunately, dropping housing prices mean declining home values and less home equity lines of credit, which means that consumer spending is due to slow even more. Meanwhile, there has been a rise in refinancing applications as many seek to lock in lower rates, save money monthly, and extend their original mortgages. This signals that more people are feeling the crunch and are finding themselves unable to meet their monthly payments. The cycle repeats.

From CBS MarketWatch:
Mortgage applications filed last week dropped a seasonally adjusted 22.6% from the previous week, as interest rates on fixed-rate mortgages increased, the Mortgage Bankers Association reported Wednesday. Applications in the week ended Feb. 15 were up 33.9% compared with the same week in 2007, the Washington-based MBA's latest survey showed.Applications for loans to refinance existing mortages were down 27.9% on a week-to-week basis, while applications  for mortgages to purchase homes were down a seasonally adjusted 11.5%, according to the survey. The four-week moving average for all loans was down 3.8%. According to the survey, refinancing applications accounted for 61.7% of all filings last week, down from 67.4% the previous week. Adjustable-rate mortgages made up 12.8% of all applications, higher than 9.9% in the previous week.

It should come as no surprise that a growing number of Americans are set to pay their taxes via credit card. Unfortunately, this can end up costing you big time unless you are able to pay it off in a timely manner. The IRS has even setup a website lising the features and benefits of paying your taxes with the plastic, which include convenience, safety, availability, security, quick confirmation, and the ability to gain rewards. However, this is a bad decision for most people who tend to spend and forget their credit card bills. Experts say that the only time it makes sense is when you have exhaused all other financing options and simply need to pay. Consumers should first consider utilizing the IRS's payment plans, however, which can offer much better terms (especially these days!).

From TheStreet:
Pay Your Taxes Via Credit Card? Pay your taxes with plastic and you'll pay the price. No doubt you use a credit card for the great majority of your purchases. This comes with obvious advantages -- if you pay off the bill in full each month. Credit cards are accepted for fast food, cell-phone bills and even for church donations these days. So it's no surprise that you can also use plastic to pay your federal taxes.

Americans are set to receive their economic stimulus check soon and already many are planning to blow it on items that they don't need. A recent survey conducted by Zogby International found that only 16% of those surveyed said that they would spend the rebate on "something they consider necessary" while only 20% said that they would save it. So, what should you do with your check? Before you go spending it on a new car, many experts recommend that you focus on paying down any unsecured debt. Unlike mortgage debt, these debts do not carry any economic benefit and can only cost you more money in the longrun!

From Bloomberg:
Now that your economic stimulus check is in the mail, what do you do with it once it's in hand? Want to stimulate your own finances? Consider using your rebate to pay down debt or to refinance. You may have to shelve plans for a vacation or a big-screen television. Yet it might get you back on a savings track and lower your monthly debt outlay. Still smarting from the bursting of a credit bubble, U.S. consumers may be in the mood to take care of some bills. Four out of 10 Americans polled said they would use the rebate to pay down debt, according to a Zogby International survey commissioned by TransUnion's TrueCredit.com, a credit-rating service. Only 16 percent of those surveyed said they would spend the rebate on "something they consider necessary." Some 20 percent said they would save it.

Credit card interest rates are on the rise again as credit card companies take action to make up for steep losses from delinquent accounts. Unfortunately, these higher rates are not only affecting those who are risky but also those with perfect credit ratings - and the interest rates could be as high as 28 percent! Consequently, it is important for card holders - especially at Bank of America and Capital One - to check their fine print in order to make sure they are covered.

From KSBY News:
Your credit card interest rates may be going up, and it's a good time to read the fine print, even if your credit is in good standing. According to Businessweek, not all, but thousands of Bank of America and Capital One credit card customers are getting their interest raised, regardless of their credit history. The increase could be as high as 28 percent.

Credit card companies are finally beginning to scale back their efforts to lend money to anyone and everyone. Recent statistics from Direct Magazine have shown that their direct mail campaigns have moved increasingly towards improving existing relationships rather than targeting new prospects. The move follows recent changes at European card companies that actually began eliminating existing clients that had shady credit records. Many expect that lending standards could also tighten soon in order to further curb losses expected in the sector. And in the end, this could slow down consumer spending and hurt the economy even further...

From MediaBuyerPlanner:
Credit card companies are increasing their mailings in order to improve relationships with existing customers, according to a report from Mintel Comperemedia. The number of credit card direct mailings to existing customers increased 16 percent between 2006 and 2007, the study found (via Direct Magazine). During that same time, the number of credit card direct mailings sent to prospects slipped 11 percent.

Many large mortgage lenders and banks are shying away from subprime mortgages, leaving much of the lending to credit unions. These institutions are not funded through securitization and thus can afford to make the loans to qualified individuals. Since many of them are not experiencing the credit crunch (thanks to consistent lending standards), the can afford to maintain the same standards and not suddenly tighten them. As a result, they may be an excellent source of funding for those looking to obtain non-traditional mortgages to stay afloat.

From the Wall Street Journal:
When it looked like Candido Rodrigues would lose his home, he was rescued by an unexpected source: a credit union. Like many homeowners caught in the credit crunch, Mr. Rodrigues, a social worker, faced rising interest rates on his subprime mortgage. Eventually, he couldn't afford the $2,800 monthly payments, not even with a second job. Banks weren't willing to refinance the mortgage. They gave him lots of excuses -- not enough equity, not enough salary. He didn't expect a credit union would either -- he wasn't even a member -- but it refinanced his home on terms that allowed him to stay afloat.

Students could face big problem come fall as many lenders are predicting that college loan rates will increase while loans themselves will be much harder to come by thanks to difficulties in the credit market. The subprime mortgage crisis has driven investors away from asset-backed securities that are a critical source of capital for many student lenders. And recently, the market for auction-rate securities, an investment vehicle tied to student loans, has frozen almost completely. It'll be interesting to see how this plays out...

From the Wall Street Journal:
Amid a widespread tightening of credit, some student lenders predict college loans will be harder and more expensive to come by for the fall. Without a break in the credit crunch -- such as stepped-up lending by major banks -- the situation could become far worse, these lenders say, leading to many students being unable to fund their educations. "There is no question in my mind that, unless something changes in the marketplace, there will be a shortfall of funds available to make student loans," says Mark Valenti, president of the Connecticut Student Loan Foundation, a nonprofit lender based in Rock Hill, Conn. "I've been doing this since 1978, and I've never been more nervous."

News keeps getting worse for those who own homes in bubble regions like California and Florida. A recent study found that homes in those prices remain substantially overvalued compared to the incomes of those living in the area. This means that home prices - which have already been dropping through the end of last year - are set to continue dropping well into this year and perhaps over the next few years. It may be awhile before there is an opportunity to start buying...

From the Wall Street Journal:
If you own a home in a former bubble region like California or southern Florida, there's bad news… and really bad news. And they suggest that it is still way too early to go bargain hunting in these markets, although -- of course -- there is always the occasional deal around. The bad news is fresh market data published Monday night by real-estate Web site Zillow.com. They show prices, as expected, kept slumping through the end of last year. A new report from Zillow.com shows home values dropped nationwide by 3%. Chief Financial Officer Spencer Rascoff discusses which cities saw the largest declines. But the really bad news is that, even after a year of misery and falling prices, homes in many of these regions still aren't cheap. They remain wildly overvalued compared to average personal incomes.

Oil prices may be in danger of rising after Venezuelan President Hugo Chavez renewed his threat to cut off his country's oil supply to the United States. The move comes after the U.S. decided to back Exxon Mobil's effort to win compensation from Venezuela for $12 billion in assets that were seized (nationalized) by the government.

From Reuters:
The United States backed Exxon Mobil Corp's effort on Wednesday to win compensation from Venezuela for seized assets in a case that has prompted the OPEC nation to threaten to cut off oil supplies to America. Venezuelan President Hugo Chavez, a foe of the United States, says Exxon court victories that resulted in $12 billion in Venezuelan assets being frozen over the seizure is part of an "economic war" to unseat him directed by the Bush administration.

Student loan costs may be set to rise as borrowers are looking for even more security for their investment. Securities tied to these loans, which was considered a safe investment, now appear to be affected by the credit crunch. Auctions of these securities auctioned on Thursday failed to generate interest from investors, leaving roughly $2 billion on the table. Unfortunately, banks can't afford to pick up the slack these days and keep the securities, so they may have to raise student loan prices in order to make the interest rates on the securities more attractive to investors. Bad news for students...

From the Wall Street Journal:
Securities tied to student loans, another seemingly safe corner of the credit markets, are succumbing to the credit crunch. Wall Street's financial-engineering machine bundles together long-term student loans and uses them as collateral for short-term investments owned by money-market investors. Since Thursday, auctions of these securities conducted by Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Citigroup Inc. have failed to generate investors' interest, leaving roughly $3 billion of such securities in a sort of limbo. Under normal conditions, the banks would step in when investor demand is weak -- just as a specialist on the New York Stock Exchange intervenes to keep trading liquid in a stock. Because big banks are already bloated with other kinds of loans and bonds they are trying to get rid of, they have been allowing the auctions to fail.

The Bush administration and six mortgage lenders announced a plan plan to bail out many homeowners that are now in danger of losing their homes in foreclosure. The so-called "Project Lifeline" would grant qualified individuals experiencing problems with loan modifications and beneficial refinancing. Borrowers who are more than 90 days late and fit the criteria would be sent a letter giving them a step-by-step approach that "may" enable them to "pause" their foreclosure for 30 days while potential loan modification is evaluated. Additionally, the new effort is set to help all mortgage - not just subprime - which signals that the government is finally realizing how large the problem really is.. let's hope that it works!

From the Wall Street Journal:
The Bush administration and six major mortgage lenders unveiled their latest response to the continuing turmoil in the housing market, offering to "pause" the foreclosure process for seriously troubled homeowners. Although the announcement of "Project Lifeline" was couched in tones of optimism, officials cautioned that it is only an incremental step that would not guarantee help for every homeowner facing the loss of their home.

"No program can bring every struggling borrower into the counseling and evaluation process, and we cannot help those who choose not to honor their obligations," said Treasury Secretary Henry Paulson. "None of these efforts are a silver bullet that will undo the excesses of the past years."

The White House came out today saying that the current economic crisis to merely a "short-term uncertainty" while Wall Street appears to be pricing for a recession. The report put out by the White house, known as the Economic Report of the President" argued that the current problems with the housing market and credit crisis and fairly marginal events that should pass with the help of the proposed economic stimulus package. The view is confirmed by some high-profile investors, such as Warren Buffett, who believes that the sell-off in the stock market is overdone, while many other experts argue that the U.S. is set for a prolonged downturn. The fact is that the housing market will continue to see ARM loans reset through 2010, but the number of bad loans and effects remain to be seen.

From the Wall Street Journal:
President George W. Bush said that the economic stimulus package passed last week by Congress will help the U.S. economy deal with short-term uncertainties. Mr. Bush made brief remarks before signing the annual Economic Report of the President, which was drafted by his Council of Economic Advisers. "This report indicates that our economy is structurally sound for the long term, and that we're dealing with uncertainties in the short term," Mr. Bush said. He is to sign the stimulus package into law on Wednesday. "It's going to help to deal with the uncertainties," Mr. Bush said.

Americans appear to finally be curbing their spending habits as credit card delinquencies continue to rise and credit dries up. The number of consumers borrowing from their credit cards dropped dramatically, according to a report yesterday put out by the Federal Reserve. Earlier this month, we also saw data from Mastercard that suggested that people are shifting their spending from discretionary items to staples like groceries and gas. Combined, these things point to a consumer that is finally starting to slow down. However, it may be too late for many as credit card delinquencies rise more than ever before. Those that find themselves in such debt should contact a debt settlement company that can help reduce and consolidate their outstanding unsecured debt. Call 866-559-DEBT (3328) for a free consultation.

From the Wall Street Journal:
Credit-card delinquencies are rising across the nation, a sign that some Americans are at the end of their rope financially. And these mounting delinquencies, in turn, have prompted banks to tighten lending standards, keeping people who have maxed out their cards from finding new sources of credit. The result could be a sharp pullback in consumer spending that would further weaken the slowing U.S. economy. Such a pullback may already be taking shape. Yesterday, the Federal Reserve reported an abrupt slowdown in consumers' credit-card borrowings. In December, Americans had $944 billion in total revolving debt, most of it on credit cards, a seasonally adjusted annualized increase of 2.7%. That was off sharply from seasonally adjusted growth rates of 13.7% in November and 11.1% in October. And it reflects the volatility in consumers' spending habits as economic growth sputters.

Congress finally approved a $168 billion aimed at increasing consumer spending by issuing rebate checks to more than 130 million households. Taxpayers should look for checks of up to $600 for individuals, $1,200 for married couples, and $300 credits for each child. Millions of people who do not pay income taxes (such as retirees or veterans) would receive rebates of $300 for individuals and $600 for married couples. The amounts would phase out for incomes above $75,000 for individuals and $150,000 for married couples. This is good news for those who need the extra money to pay bills, but it may be a costly $168 billion for the economy to absorb right now.

From the Wall Street Journal:
Congress approved a $168 billion bill to boost the economy, paving the way for more than 130 million households to start receiving rebate checks this spring. Under the final bill, most taxpayers would receive checks of up to $600 for individuals, or $1,200 for married couples, amounts that would begin to phase out at incomes above $75,000 for individuals and $150,000 for married couples. Millions of people who don't pay income taxes but have incomes of at least $3,000 would receive smaller rebates of $300, or $600 for married couples. This group would include Social Security recipients and military veterans receiving disability payments, as well as their surviving spouses -- a provision generated by the Senate. People receiving rebates would receive $300 credits for each child.

Target retirement funds are quickly becoming the funds of choice for financial advisors and others looking for an easy way to optimize their portfolio allocations automatically with no additional work. Those who are setting up Roth IRAs or other retirement accounts may want to check out these options as they can eliminate the need for a financial advisor at all and make it much easier to keep everything in order!

From CNN Money:
Target retirement funds aren’t for everyone, but they’re a good option for many people who don’t want the hassle of rebalancing their portfolio says Money Magazine’s Walter Updegrave. I think going with a target fund can protect us from our worse impulses - namely, the urge to dart in and out of different sectors of the market, move from stocks into cash or bonds, buy into the hot fund du jour, etc. By putting your portfolio strategy on autopilot, I think you’re less likely to engage in self-defeating behavior.

The residential housing market may have some more downside before things even out, according to the National Association of Realtors. The organization increased their projected declines in home valuations for the first quarter again this month and projected further declines going into 2008. This is a drastic change from their projections just a few months ago that housig prices would be flat in 2008 and begin to rebound. As foreclosures continue to increase, more and more pressure is being placed on housing prices amid rising supply and decreasing demand.

From CNN Money:
In a fresh sign that the nation's housing crisis will worsen, home prices are likely to decline in 2008 for the second straight year, the National Association of Realtors said Thursday. The Realtors, in its monthly economic and sales outlook, is forecasting a 1.2% drop in prices of existing homes sold this year. Only a month ago, the association was forecasting that prices would be flat in 2008 and that the home market would rebound in the last half of the year.

The Federal Reserve released another one of its key surveys last night that indicated that credit continues to tighten across all parts of our economy. The mortgage market and commercial real estate markets have seen the largest tightening, but there have still been some serious problems in other types of consumer and corporate loans. Notably, funding for private equity and strategic takeovers has all but completely dried up while even auto loans are difficult to find at good rates for consumers. In the end, it may be awhile before demand starts to pick up once more.

From FXStreet:
Yesterday night the Federal Reserve released the Senior Loan Officer Opinion Survey. The report conveys a survey of the lending standards for the prior three months to January. Generally, the report indicated a tightening of overall credit in all parts of the economy. In particular the mortgage credit market and commercial real estate have been facing some serious tightening. At the same time overall demand for loans has been weakening.

The Federal Reserve has decreased interest rates several times this year by as much as 2.25% since September, meaning the lenders are now paying less than ever to borrow money that they can re-loan to realize a profit. One of the largest lenders in the United States - credit card companies - have seemingly ignored the rate decreases as they have actually increased the cost to borrowers! Those who have experienced such rate increases may want to shop around for a new credit card that offers fairer terms to users that follow trends in the industry.

From The Motley Fool:
Our friends at the Fed recently lowered interest rates sharply -- and then did so again. My Foolish colleague Chuck Saletta doubts Fed Chairman Ben Bernanke's wisdom, while Matt Koppenheffer sees merits in his actions. And while you probably know that the rate cuts will affect those taking out or refinancing mortgages, you may not know that the credit cards in your wallet could be affected, too. Given a total drop of 1.25% in just the past few weeks, and 2.25% since September, you'd think that your trusty credit card-issuing bank would have lowered your credit card rates accordingly. In some cases, you'd be right -- but not in all.

Credit card companies use a number of tricks to levy fines on your account and collect as much as possible. The Consumerist showed yet another example of this practice when they allowed automatic withdrawls to continue even after accounts have been closed and the have ceased sending statements. In this case, a $38 late fee was imposed... for nothing.

From Consumerist.com:
When Capital One "closes" your credit card account, they'll continue to allow automatic withdrawals even though the account is closed. But they won't send you a statement—you know, because it's closed!—so that you'll end up with late fees. Quenten experienced this first hand when he closed his account recently, and now Capital One has sent his account to collections over a $38.00 late fee for two 38-cent charges that he never knew about.

One of the UK's largest credit card issuers was recently forced to withdraw credit from seven percent of its consumer base (161.000) people in order to increase its liquidity amidst a credit crunch that has affecting many others in the industry. So far, however, it appears that the other players are content without cutting back on their consumer accounts. For better or for worse, many are still letting consumers spend money they don't have...

From Reuters:
Egg’s move to withdraw credit from seven percent of its customer base - a total of 161,000 people - serves as a stark reminder of the severity of the credit crunch, and how it is impacting the man and woman on the street. A quick ring-around other main players in the credit card market - Barclaycard, MBNA, Halifax and Capital One included - did not uncover any other plans to mass-close accounts. But few can deny that the liquidity crisis is continuing to have an impact on consumers.

Many people have rushed to refinance their home loans after the Federal Reserve continued to lower rates. The WSJ reported a surge of 22.1% last week from the previous one while applications are up 70.7% year over year. Unfortunately, these are almost all from existing homes rather than financing for new home purchases, but it does represent people at least interacting again with the real estate financing sector. Is it time for you to refi? Well, rates are lower than they have ever been before...

From The WSJ:
Homeowners' applications to refinance loans surged again in the Mortgage Bankers Association's latest survey of filings, rising 22.1% last week from the previous one. According to the survey, refinancings accounted for 73% of the total number of mortgage applications filed during the week ended Friday, up from 66% the previous week. Applications for new mortgages to buy homes decreased by a seasonally adjusted 17.7% on a week-to-week basis. Overall, applications for mortgage loans rose a seasonally adjusted 7.5% last week, compared with the previous week. And applications rose 70.7% from the year earlier.

Bush unveiled his new $3.1 trillion budget today that may hurt many retirees and increase the national debt but promises to increase support for troops stationed abroad. The proposed budget is largely a political exercise since the Democratically controlled Congress will be responsible for approving it, but it does illustrate the many problems facing our country going forward. Many Democrats complain that the budget will trim health benefits for retirees why skyrocketing our national debt even more than it already has under the direction of President Bush. Bush responded by saying that it is a budget that achieves some important objectives.

From LATimes:
President Bush unveiled a $3.1-trillion budget today that would boost military spending and trim health benefits for retirees. The proposal was immediately tagged by Democrats as "irresponsible." The first spending plan in history to top $3 trillion would freeze or eliminate many domestic spending programs yet still rack up a $407-billion deficit for fiscal 2009, which begins Oct. 1. The Pentagon is the only department for which Bush proposes a significant increase; its budget would grow 7.5% to $515 billion. "It's a good budget," Bush said after meeting with his Cabinet. "It's a budget that achieves some important objectives. One, it understands our top priority is to defend our country, so we fund our military as well as fund the homeland security."

"When President Bush took office, the national debt stood at $5.7 trillion," said Rep. John M. Spratt Jr. (D-S.C.). chairman of the House Budget Committee. "Today it is $9.2 trillion and rising, projected to increase to $9.7 trillion by the time President Bush leaves office -- up by $4 trillion in eight years. This is the legacy our children and grandchildren will inherit from the fiscal policy of this administration."

Many people are tempted to get store cards when they shop, but it might not be worth it for many. BankRate notes that these cards often charge higher interest rates and often have stricter terms that can end up costing you a lot more in the long run. Also, having multiple credit cards can damage your credit score - especially if you carry a balance on all of them. As a result, most people may be better off sticking to one card that they can track and pay off regularly.

From CBSNews.com:
How many times have you gone to a store and have the clerk at the counter say you can get 10 percent off your purchase if you sign up for that store's private credit card? It's pretty tempting, but you'll want to think twice before signing up. According to the folks at bankrate.com, these store credit cards charge interest rates that are substantially higher than those of a regular credit card. You also want to remember that having too many credit cards can damage your credit score. All that said, if there is a store you find yourself shopping at all the time, it may be worth it to get the card, because sometimes they offer deals such as a discount on purchases when you first sign up. And remember -- closing these credit cards can also hurt your credit score, so be careful not to do that too frequently, especially right before you apply for a car loan or mortgage.

The United States has recently decided to give its citizens more money to spend in order to help spur the economy and turn the nation around, but many are skeptical as to the success of such programs. Indeed, the US has countless other problems that stand in the way - consumer spending cannot be relied on to solve problems like it has in the past. The fact is that this nation has been converted into a nation of debt - both in terms of its citizens and the government itself. Broad policy changes and tax hikes are needed in order to pull out of this mess...

From EdmondSun:
Responding quickly to save us from tumbling into a recession, President George Bush and House leaders have proudly unveiled an economic stimulus package worth some $150 billion. If approved, the plan will distribute checks to households across the country this summer. The resulting spending spree will spur the economy into a new era of prosperity. Yeah, right.