Beware of Pick a Pay Loans

The next wave of loans due to reset in 2010 are the “Pick a Pay” Mortgage loans. The “Pick a Pay” mortgage loans are where homeowners can choose to pay less than the full monthly mortgage payment and the difference is added on as principal.

When the loan is reset in 5 or 10 years the homeowner is locked into a higher monthly mortgage payment. This may cause a higher increase in foreclosures or bankruptcy filing because homeowners will be unable to make their mortgage payments. Many banks and financial institutions offered this loan such as Wachovia, Golden West, Countrywide, Washington Mutual, First Federal Financial Corp, and Platinum Capital Group.

However, this type of loan neglected to tell homeowners that they could risk having negative amortization and could even up owning more on their home than it is worth because the loan principal would increase between 110 to 125% of the original loan amount when the loan resets.

Mortgage loan officers are worried that is may be harder to help homeowners modify their loans because there will be a large difference in their current mortgage payment and the new mortgage payment when the loan resets.

If you are currently a homeowner and do not have a fixed interest rate that remains the same over the life of the loan please read your mortgage loan agreement and contact your mortgage company to modify your loan to get a fixed interest rate. Contact a hud counselor hud.gov/offices/hsg/sfh/hcc/hcs.cfm or call Hope Now at 888-995-4673 to get help.

Great Last Minute Holiday Gift

If you need a great last minute gift for a friend, relative or co-worker, purchase remaining copies of my self-help book, How to Get Out of Debt: Get "A" Credit Rating for Free for $7 with free shipping anywhere in the United States.

The regular retail price is $19.95 available at Borders, Barnes & Noble, Walden Books and B. Dalton. This sale price is available until all remaining inventory is sold.

This self-help book provides step-by-step information on how to repair your credit, create a flexible spending plan, and how to get out of debt.

The book also has sample letters to use to write to your creditors to repair your credit and fix errors, sample budget spreadsheets and resource information listed by state.

Visit my website at hefreemanenterprises.com/books.html to purchase a copy today!

Credit Card Tips for College Students

According to Nellie Mae, 56% of undergraduates get their first card at age 18 and 91% of final year students have a credit card. 56% of final year students carry four or more cards. The average outstanding balance on undergraduate credit cards was $2,169.

As parents you have to teach your children how to use a credit card. Credit card companies are waiting for your students to go to college and get in debt. If you don't teach them about proper credit card use they will end up in debt and it will take them years after getting a full-time job to pay the debt off.

The credit cards that are promoted with on-campus are the worst credit cards students can get. You have to do research to find the credit card with the best interest rate and terms. Visit websites such as bankrate.com or creditcards.com to comparison shop.

Here are some tips to help college students when selecting a credit card:

1. Explain how credit cards work, the advantages and disadvantages and all the fees associated with credit cards such as: interest rate, minimum payment, grace period, and the finance charges, late fees, etc.

2. Talk to your children about who will pay the credit card. Many times students assume their parents will pay the bill. Discuss this before your child goes to college to manage expectations.

3. Offer assistance to help your child compare credit card offers or talk to your local bank officer who can help you review terms and conditions and compare rates.

Here are 5 to help prevent overspending on credit cards:

1. Pay off your balance each month.

2. Keep track of your credit limit.

3. Use for emergencies only.

4. Know your payment due date.


5. Do not get cash advances.

Parents you can also write your state congressman and representative to complain about credit card interest rates and marketing practices used on college students.

6 Holiday Savings Tips

Most Americans spend the greatest amount of money during the December holiday season. The holidays should not be filled with anxiety, pressure or guilt about spending money during the holidays. If you don't have the money to buy gifts be honest. If you have a small amount of buy to buy gifts buy what you can and don't use your credit card to buy gifts unless you have the money to pay the debt off in two or three months. Here are 6 tips to help you save money during holiday shopping.

1. Buy Christmas or holidays gifts during store sales in October or November.
2. Visit local vendors, you can probably negotiate a good deal on the same items you find in the department stores.
3. Think of creative gifts to give that you can make yourself.
4. Visit the local dollar store to find gifts for children.
5. If you have to buy gifts for several family members try doing a "secret Santa" or "grab bag" so only one family member has to buy a gift for one family member and set a limit on the amount spent. That way everyone gets a gift and you don't have to worry about buying several gifts.
6. Shop online, some companies waive shipping and handling fees during the holiday season.

More Layoffs to Come

In the past several months, many companies believed to be stable have had massive layoffs which has contributed to the 10.3 million Americans who are currently unemployed. Some of the companies that had major layoffs or will have layoffs by the end of 2008 year or early 2009 are:

Citigroup (53,000)
Bank of America (35,000)
GM (32,000)
HP (24,500 over next 3 years)
Advanced Micro Devices (AMD) (16,800)
Rio Tinto (14,000)
AT &T (12,000)
Las Vegas Sands Casino (11,000)
BT Group (10,000)
Deutsche Post AG (DHL) (9,500)
Dell (9,000)
Sony Music (8,000)
Circuit City (7,300) and will close 155 stores
Merck (7,200)
American Express (7,000)
Dow Chemical (5,000)
Sun Microsystems (5,000-6,000)
Credit Suisse (5,300)
Whirlpool (5,000)
Sprint (4,000)
National City Corp (4,000)
Pepsi (3,300)
Goldman Sachs (3,260)
Motorola (3,000)
Xerox (3,000)
Dupont (2,500)
Ford (2,260)
Office Depot (2,200) and will close 112 stores
Nortel (2,100)
Chrysler (1,825)
3M (1,800)
Siemens (1,800)
eBay (1,600)
Yahoo (1,500)
Fidelity (1,300)
GlaxoSmithKline (1,000)
Starbucks (1,000) and will close 600 stores
Market Watch (850)
Viacom (850)
Texas Instruments (650)
Adobe (600)
Nokia (600)
Level 3 (450)
Palm (200+)
Legg Mason (200)
Cisco (129)
Yum Brands (Pizza Hut, Taco Bell), (unknown)
Morgan Stanley (10% of workforce)
Mattel (Fisher Price, Barbie, HotWheels) (3% of workforce)
EA Video Games (6% of workforce)

This list equals a total of 322,724 jobs that will be lost and an increase in the number of Americans who will be unemployed.

Now is the time to show that you are an asset to your company. Take training courses or go back to school to learn a new skill. Every American worker should have at least 2 skills that can be used to get a job. Also, get a part-time job if possible and use the money to pay down debt or create an emergency savings account to cover monthly bills and household expenses for at least 6 months.

If you currently do business with a company that is closing or downsizing consider how this will affect customer service: such as wait time to reach a customer service representative, proper processing of your payments, technical assistance, and other services. Also, ask the company questions on how they will ensure that their existing customers receive exceptional customer service. If you are a good customer negotiate with them for cheaper rates or discounts.

Boost for Gavel Holders

As part of the $14 billion dollar bailout plan Federal judges will also get a pay raise. The raise was identified as a cost-of-living increase which if anyone who works in the government knows, these adjustments are automatically given every year to Federal government workers also known as COLA (cost-of-living-adjustment).

So, we ask ourselves, why do the judges need a raise from the $14 billion dollar bailout plan when they get one automatically every year? Well, supposedly the COLA does not apply to judges and Congress has to vote to give judges a raise. I don't buy that one but anyway. The Federal judges will get a 2.8% raise beginning January 1, 2009.

Well, as a taxpayer and American I am tired of everyone getting raises when our country is in a crisis. I urge you to write your state congressman and representative and express your opinion about judges getting raises and the method in which raises are given to judges. I am writing my letter today.

More Jobs Lost in November 2008

If you are still asleep or living under a rock wake up! It has been confirmed that we are in a recession and have been since December 2007. Based on this announcement by the National Bureau of Economic Research we have been in a recession for 12 months and counting. According to expert economists, the recession will last at least through the middle of 2009 and the economy is getting worse by the day.

The private sector industry eliminated 250,000 jobs in November. There will be additional private sector layoffs at least through the end of the year. Citigroup plans to layoff 50,000 employees. They have had 220,506 job cuts so far in 2008. The 3 major auto companies, GM, Ford and Chrysler are on the verge of bankruptcy or failure in addition to many stores closing or going bankrupt.

Although gas prices have gone down to below $2.00 a gallon the continued job layoffs will greatly affect this year's holiday season.

If you have not already done so, now is the time to change your spending habits and your lifestyle. Buy items on sale, in bulk, eat more casseroles, soups, ramen noodles, tuna and sandwiches, for lunch and dinner, bring your lunch to work and buy only necessities. Live at least 30% below your means to ensure you are able to survive the recession. It is going to be a long winter season.

5 Reasons to Use Debit Instead of Credit

Use Debit Instead of Credit

According to The Nilson Report, debit card purchases are expected to increase 13% in 2008 to $1.2 trillion versus a 3% increase for credit card purchases or $1.9 trillion. This year, Visa debit card transactions could exceed credit card transactions.

For banks this is not good because they are not able to collect interest on debit transactions but helps their accounting department because they don’t have to report any losses when consumers fall behind on credit card payments.

However, banks also charge overdraft fees for debit card transactions when consumers do not have enough money in their accounts to cover an item purchased. Fourteen out of fifteen of the largest banks in the U.S. charge overdraft fees for consumers who exceed their funds.

Overdraft fees ranges from $20 to $35 per occurrence. Banks are responding much quicker to consumers who exceed their funds by charging overdraft fees the same day or the next day. In the past banks would wait a few days before charging the overdraft fee.

To combat this practice the Federal Reserve has proposed rules to restrict these abusive practices by banks.

Here are 5 reasons why use should use a debit card versus a credit card:

1. You don’t pay interest or finance charges

2. You can only spend the money you have in your account, however, some banks do allow you to exceed your funds but you are charged an overdraft fee

3. You can use debit cards or Visa check cards at many of the same retailers that accept credit cards

4. Helpful for those with bad credit who are unable to get approved for a credit card

5. Can be used like a credit card by swiping the card without entering a PIN

5 Ways Save Money on Heating Costs

This winter season which begins October 1 and ends March 31, gas and oil heating bills are expected to increase. According to the Energy information Administration the average American household will pay $1,182, an increase of 19.8% from last year.

Americans who live in the Northeast and heat with oil will pay on average $2,725 this winter, an increase of 37.1% since last year. The national average price for heating with oil has increased more than 198% from 2003-2004 to 2008-2009.

Americans who live in the South who heat with propane will pay on average $1,578 this winter, an increase of 18.7% since the 2003-2004 winter season. The national average price for heating with propane has increased 100% from 2003-2004 to 2008-2009.

Americans who live in the West who heat with gas will pay on average $684 this winter, an increase of 23.8% since last year. The national average price for heating with natural gas has increased approximately 60% from 2003-2004 to 2008-2009.

Americans who live in the Midwest who heat with electricity will pay on average $1,051 this winter, an increase of 4.7% since last year. The national average price for heating with electricity has increased 34% from 2003-2004 to 2008-2009. Here are 5 tips to help reduce heating costs this year.

1. Annual check. Have annual checks on your heating system before the winter season begins. It is best to get a checkup during the summer months when business is slow.

2. Insulate. Insulate your attic and any others areas that are drafty such as your attic, ceilings, walls, crawl spaces, hot water pipes, furnaces, ducts, etc.

3. Automate. Install a programmable thermostat and keep your setting on 68% Fahrenheit or lower during the winter season. Lower the temperature setting while away from home and during the day. This can save 20% on your heating costs.

4. Seal drafts. Seal any drafts around windows, chimneys, pipes, light fixtures, doors or electrical outlets which can reduce your heating costs by 30%.

5. Use a wood burning or pellet burning stove to heat your home.

Help for the Unemployed

Due to current recession and the closing of many companies, the number of people unemployed has reached new highs. The unemployment rate is 6.5% meaning over 10.1 million Americans are out of work. Generally the November and December holidays are a time to spend with family and have fun but this year the holidays won't be like past years.

Many Americans are feeling the burden of the bailout plan. However, there is some relief. On November 21, 2008, President Bush signed the Unemployment Compensation Extension Act of 2008 which extends Emergency Unemployment Compensation to 20 weeks which will help some Americans through the holiday season. For states with high unemployment rates such as Georgia it creates a second tier of 13 weeks of compensation for individuals.

Mortgage Helps for Americans

The government and mortgage industry are launching a new program effective December 15, 2008 to help homeowners' stay in their homes by renegotiating delinquent loans held by Freddie Mac and Fannie Mae. Almost 1 out of every 6 loans held by Freddie Mac and Fannie Mae are delinquent.

To qualify for the new program homeowners will have to be at least 3 months behind of their mortgage and have to owe 90% or more of their home's current value. Homeowners who filed for bankruptcy are not eligible for the program. In addition, homeowners' interest rates would be reduced so their mortgage payment is no more than 38% of their monthly income (similar to a plan IndyMac introduced in October 2008), loans can be extended for 30 to 40 years or some of the principal can be deferred interest free. Contact Freddie Mac or Fannie Mae to get more information or contact a HUD counselor at 888-995-4673.

So far, 2,795,920 people have filed for foreclosure this year. Millions of Americans need help and the government and other banks have begun implementing plans to help homeowners but in some cases it is too late. There should be a fine charged for those banks that did not help customers before the bailout plan and before these new programs have been or will be implemented.

Why are banks allowed to behave in any manner they choose and nothing is done about it. Banks should also develop programs for homeowners who lost their homes because they were unable to get help to save their homes. Is anyone concerned about the Americans who lost their homes because the banks refused to help them? We should be. I applaud the government and banks for developing plans but I fear it will not be enough. If the government can help bailout airlines and loan money to foreign countries surely they can help all Americans stay in their homes. Write your state house of representatives and congressman and express your concerns.

A Unique Option to Survive the Bailout

There are several conventional ways to save money that we hear about over and over again such as using coupons, buying things on sale, shopping at discount stores, buying online, reducing your expenses, and living below your means. All of these are great ways to save money and survive a financial crisis in normal times. Unfortunately, we are not living in normal times and it will take some creative thinking to survive the current recession.

We, as Americans will have to change the way we think about money and how we spend it. We must change our bad spending habits to ensure we have a decent life in case an unexpected expense occurs such as a medical condition, job layoff or death of a loved one. We must also position ourselves for retirement so if social security is not available we can still survive and have enough money to cover our basic living expenses.

More than 2.6 million Americans have foreclosed on their homes this year and over 960,000 Americans have filed for personal bankruptcy. These statistics are alarming. One way to prevent being one of those statistics is using a radical approach called the Voluntary Simplicity Movement or simply living.

The Voluntary Simplicity Movement started in the 1960s and has grown widely with approximately 20 million people following all or some aspects of the phenomenon. Simply living is examining every aspect of your life to determine what is most important and eliminating the rest. Simple living has various aspects such as ecological, technological, financial, etc. Many Americans cannot embrace this concept out of fear, embarrassment, and reactions by family and friends. Living below your means is how many entrepreneurs got their start and became successful. They understood the sacrifice that needed to be made to achieve their goals.

The Frugal Simplicity aspect of the Voluntary Simplicity Movement means spending in terms of needs vs. wants, cutting back in various areas of your life – reducing expenses, and being responsible with your spending. Shopping frugally and living below your means reduces stress related to debt and helps to move towards a debt free life and financial independence.

Many Americans have tried creating a budget or spending plan, use coupons or cutting back on some expenses. Unfortunately many have started with the right intentions but failed to continue performing those actions as a lifestyle choice and reverted back to their old bad spending habits.

If you have tried everything else or felt like no other option would work – don't file bankruptcy or foreclosure. Try the voluntarily simplicity movement for 30 days and track the following: your stress level after the 30 days, how much money you saved, how much debt you were able to pay down, how you felt after the 30 days. Even if you don't continue the Voluntary Simplicity Movement, hopefully you will have made a great change in your life about the purpose of money and how you can use it to create a better life for yourself. For more information visit www.simpleliving.net.

How IndyMac is Helping Consumers

Due to the current economic crisis and high number of foreclosures, approximately 2.66 million as of October 2008, many banks and financial institutions are helping consumers on a case-by-case basis. The process is very slow, resource intensive and frustrating.

IndyMac services more than 60,000 loans that are either more than 60 days past due, in bankruptcy or in foreclosure. Approximately 40,000 customers are eligible for the IndyMac program to help consumers with their mortgages. More than 3,500 IndyMac customers have had their loans modified reducing their mortgage payments on average by $380.

Establishing standard rules that a lender can apply can speed up the process and the lender will be able to help thousands of customers and restore the housing market at a faster rate.

Using IndyMac's program lenders modify a loan so that the borrower's new mortgage payment, including insurance and taxes, is no more than 38% of their pre-tax income as known as the debt-to-income ratio which was as high as 50% during the housing boom.

IndyMac can achieve this by lowering the interest rate, extending the life of the loan, deferring some principal to the latter years of the loan, or a using a combination of these methods to help customers.

To simplify the process for customers IndyMac sends loan paperwork overnight with a signature required upon receipt. The paperwork explains the customer's new loan terms, the interest rate and monthly payments over the life of the loan. The customer signs and returns the documents along with the initial lower monthly payment. The IndyMac program does not forgive debt.

IndyMac's program is now being applied to many delinquent loans owned by Fannie Mae and Freddie Mac. Bank of America has also developed a similar program that will launch in December 2008. The Bank of America plan was instituted as part of a settlement with state attorney general offices that sued Countrywide for predatory lending practices, which was acquired by Bank of America.

Bank of America hopes the program will help approximately 400,000 customers. The Bank of America plan will use a 34% debt-to-income ratio to calculate an affordable monthly payment for its customers, and may write down the principal balance of some negative amortizing loans.

Some housing economists warn that lenders should look at a borrower's other assets in addition to their debt-to-income ratio before restructuring a loan because "they will include people who shouldn't really qualify, and might exclude people who do".
"A customer with substantial additional assets and no other debt may have taken out a big mortgage that accounts for 45% of his income. The program will help this customer and not someone with a smaller mortgage and no other assets who also have student and car loans".

FDIC Chairwoman Bair thinks this foreclosure prevention program can also work for other banks.

Greenspan Takes Some Blame

On October 23, 2008, former Fed Chairman Alan Greenspan testified before a Congressional committee to discuss the current economic crisis in the country. He admitted that mistakes during his appointment worsened the current economic crisis. A quote from his testimony stated "those of us who have looked to the self-interest of lending institutions to protect shareholders' equity... are in a state of shocked disbelief."

Once appointed to his position in 1987, Greenspan immediately began pushing Congress to repeal the law implemented during the Depression that prevented banks from competing with investment banks in underwriting stocks and bonds. When Congress hesitated, Greenspan used the Federal Reserve's authority to allow banks to circumvent the law. Greenspan also opposed efforts by the Securities and Exchange Commission (SEC) to initiate modest regulation of the $1 trillion hedge fund industry.

Greenspan instituted the deregulation of the banking and financial system and the institution of mortgage ARMs in 2004. Greenspan admitted during his testimony that deregulation didn't really work and that it was flawed. Greenspan admitted that he put too much faith in the power of the free market and failed to foresee the self-destructive power of reckless mortgage lending.

However, Greenspan also placed blame on Wall Street companies that bundled subprime mortgages into 100 million dollar packages and sold them as mortgage backed securities. Global demand for the mortgage securities was so high, Greenspan said, that Wall Street companies pressured lenders to lower their standards and produce more "paper".

Greenspan also explained during his testimony that he did not anticipate the massive housing bust because we (he and other top economists) cannot see events that far in advance. "Greenspan explained that even after he realized there was a bubble, he never expected housing prices to decline so dramatically, because we had never had a nationwide decline in housing prices in the past.

Well Mr. Greenspan, if you are in disbelief how do you think the rest of the country feels.

How the Federal Rate Cut Affects You

The Federal Reserve cut the federal funds rate on October 29, 2008 by 1%, its 9th reduction in 13 months. The federal funds rate is the target interest rate for banks borrowing reserves (deposits in accounts with the Federal Reserve plus cash that is held in bank vaults) among themselves.

Changes in the federal funds rate influence the borrowing cost of banks and the returns offered on bank deposit products such as CDs, savings accounts, and money market accounts. Changes in the federal funds rate also dictate changes in the prime rate or Wall Street Journal Prime Rate.

The Federal Reserve began cutting rates to deal with the current economic recession in September 2007. Since September 2007 the rate has been reduced from 5.25% to 2%. The current rate cut is the lowest it has been in the last 4 years. The prime rate is now 4%. The prime rate is based on the federal funds rate and is a benchmark used to set home equity lines of credit, credit card rates, lines of credit, auto loans, personal loans, and some small business loans.

Rate cuts usually take several months before consumers can see the impact. The rate cut helps bank because it reduces their borrowing costs and they pay lower rates on deposits.

Consumers who benefit from the current rate cut are homeowners who are looking for fixed rate mortgages which are still low. Also, consumers who plan to stay in their homes for less than 10 years can still get ARMs to get a lower interest rate on their mortgages. All ARMs are not the same so make sure you do your homework to find the deal that right for you. Some homeowner's with existing ARMs may see lower mortgage payments the next time their mortgage resets. Contact your lender to get more information.

1929 vs 2008

Here is a quick comparison of The Great Depression in 1929 vs. The Financial Crisis (Recession) in 2008. You can voice your opinion about the conditions we are experiencing in 2008 on election day November 4, 2008.

1929 October 29, 1929 (Great Depression - Black Thursday)
1. Crisis called a Depression
2. 13 million people unemployed
3. Industrial production fell 45% between 1929 and 1932
4. Home building dropped by 80% between 1929 and 1932
5. 5000 banks went out of business between 1929 and 1932
6. Massive layoffs, unemployment rates over 25% in 1933
7. Home prices and income fell by 20-50%
8. Depositors lost $140 billion in bank deposits by 1933
9. Took 10 years to cure

2008
1. Crisis called a Recession
2. 3,720,000 people unemployed
3. Industrial production in September was 4.5% below last year’s figures
4. 16 banks went out of business and counting
5. Under 20 financial institutions have gone out of business and counting
6. Massive layoffs, unemployment rates of 6.1%
7. Home prices fell 16.6% since 2007
8. Depositors lost $2 trillion in bank deposits and counting
9. Estimated that 28 million people will use food assistance programs an increase in 26.5 million from 2007
10. Federal Reserve has dropped interest rates by more than 2.5 percentage points since August 2007
11. 2.5 million foreclosures and counting
12. 967,000 personal bankruptcies as of Aug 2008 and counting
13. Food prices rose more than 4% since last year

Another Chance for Bankruptcy Filers

Due to the financial crisis which resulted in a credit freeze and implementation of the $700 billion dollar bailout many Americans will feel the burden regarding their existing credit card accounts or when applying for new lines of credit or credit cards.

Well, thanks to several Americans who were fed up with the inaccuracies reported by the credit bureaus a recent court ruling which occurred due to a class action lawsuit that was filed against the 3 major credit bureaus, Experian, Equifax and TransUnion stated that Experian, Equifax and TransUnion violated the Fair Credit Reporting Act (FCRA) by failing to maintain accurate records related to Chapter 7 bankruptcies.

The court ruling required the 3 major credit bureaus, Experian, Equifax and TransUnion to change their reporting system by October 1, 2008 and remove old debts that were included in bankruptcies. This is a HUGE victory for many Americans who had low credit scores and were unable to get approved for loans or credit cards due to: old debts still being reported as open, old debt reported with balances, reported with an "active" status or as a collection account. Accounts included in a Chapter 7 bankruptcy will now be reported with a zero balance and with a closed status.

Based on the credit ruling the 3 credit bureaus will have to clean up credit files for approximately 6-10 million consumers who have filed for Chapter 7 bankruptcy.

Many consumers have been impacted because late accounts were reported to collection agencies that ignored the fact that the accounts were included in a Chapter 7 bankruptcy. As a result, the accounts are reported multiple times as delinquent. Each occurrence of the delinquent or unpaid account lowers a consumer's credit score.

Consumers who filed Chapter 7 bankruptcy that has already been discharged will have to request a new credit report after October 1, 2008 to see if their credit report has been updated by going to the annualcreditreport.com website or by calling 877-322-8228.

If you still find errors on your credit report due to a bankruptcy, file a dispute with the credit bureau reporting the inaccurate information. You can file a dispute online which is faster and usually takes 2 weeks for a response or you can file by mail which takes 30 to 45 days for a response.

Government Bailout Plan Funding Continues

On Friday, the U.S. government started to inject capital into some banks by helping to finance a $5.2 billion takeover of National City Corp bank by PNC valued at $2.33 per share.

The Treasury Department plans to provide funds for 20-22 additional lenders as part of its next phase of a $250 billion bank recapitalization program. The Treasury Department has already committed approximately $125 million to 9 of the country's largest banks in exchange for preferred bank shares.

The Treasury Department has also decided to let banks announce the government assistance plans which will be staggered instead of the Treasury providing a complete list of bank recipients to ease investors.

Regions Financial Corp, First Horizon National Corp, PNC, Valley National Bancorp Capital One Financial Corp and SunTrust Banks will also receive government funding.

The Treasury Department is also determining how to give assistance to insurers under its Troubled Asset Relief Program (TARP) also known as the Paulson Proposal which became law on October 3, 2008. The program is run by the Treasury Department's newly formed Office of Financial Stability Department. The TARP has 7 components:
1) Mortgage-backed securities purchase program which identifies which troubled assets to purchase, who to buy them from and how to buy them.

2) Whole loan purchase program which will work with bank regulators to identify which types of loans to purchase first, how to determine their value and how to buy them.

3) Insurance program which will determine how to insure mortgage-backed securities and whole loans (residential mortgage loan that is owed by one company sold to one or more investors who pays the seller a servicing fee).

4) Equity purchase program is a standardized voluntary program to purchase equity in a various financial institutions to encourage participation from healthy financial institutions.

5) Homeownership preservation consists of programs that purchase mortgages and mortgage-backed securities to help homeowners stay in their homes.

6) Executive compensation is a law defined requirements regarding executive compensation for firms that participate in the TARP.

7) Compliance is a law that establishes oversight and compliance structures, including establishing an Oversight Board, on-site participation of the General Accounting Office and the creation of a Special Inspector General, with strict reporting requirements.

The Power Players in the Financial Crisis

A total of fifteen banks have closed across the country this year not including other financial institutions such as AIG, Merrill Lynch and others. Americans are frantic about the safety of their money in banks and investment accounts. Many Americans have closed their bank accounts due to the current financial crisis and bank failures.

Luckily for the rest of the country all Americans have not taken their money out of the banks because the entire banking system would fail. In life there are always ups and downs. Right now individuals and the country are experiencing a huge down. Several people, companies and other entities had a role in the current financial crisis the country is experiencing. No one person or entity is to blame; however several entities can be identified as contributing or having a role in the current financial crisis. The following is a list of the power players in the current financial crisis.

1. AIG – bailed out by the Federal Government who will get an 80% stake in the company
2. Bank of America – bought Merrill Lynch in September 2008 and purchased Countrywide
3. Bear Sterns – bought by JP Morgan
4. Citigroup – tried to buy Wachovia
5. Countrywide – bought by Bank of America
6. Fannie Mae – taken over by the government
7. Freddie Mac - taken over by the government
8. Federal Reserve – passed 700 billion dollar bailout plan to boost the economy
9. Goldman Sachs – now regulated by the Federal Reserve and is able to access the it's emergency loan program
10. IndyMac – seized by the FDIC in July 2008
11. Lehman Brothers – filed for bankruptcy in 2008
12. Merrill Lynch – bought by Bank of America
13. Morgan Stanley – Federal Reserve allowed the bank to change its status to allow it to provide commercial banking products and services
14. Wachovia – purchased by Wells Fargo
15. Wells Fargo – bought Wachovia after Citigroup announced it would buy Wachovia's banking business

To ensure you make it through the current financial crisis which will probably continue until the end of 2009 or early 2010 - follow these 3 tips:

1. Keep your money in the bank. It not the timing of the market, it's the time in the market. Although you may have lost money in your savings or investment account, if you wait it out, you will gain back the money lost, however, it will take time. You can consult a financial advisor to see what options are available to you to protect your remaining money from additional losses.

2. Don't make decisions based on emotions. Don't make any drastic changes based on the recent news story, an article in the newspaper or something you heard someone say. Write down your concerns and do research, try to find and talk to others who have been through financial crises such as the Depression or a war. Wait a few days and develop some if-then scenarios and develop a plan to deal with those situations. Talk to a financial counselor or advisor about your concerns and options on how to implement your plan.

3. Change your spending habits. Now is the time to make changes in your spending habits. Find small ways to cut back on spending and reduce expenses. Start saving or save more than usual to create an emergency fund to cover bills for at least 3 to 6 months which will help when unexpected situations or expenses arise.

Financial Predictions

Here is a list of my predictions for 2008 and 2009. These are just for fun. Let's see if any of them come true.

2008/2009 Predictions

1. Gas prices will fail below $2.50 by election day and rise again after the election
2. Housing prices will continue to fall through the middle of 2009
3. The Federal Reserve will reduce interest rates at least once more by the end of the year
4. Americans will continue to fight back and express their concerns about high gas prices, health care, and the war in Iraq
5. In the coming weeks more Americans will voice their support for one candidate or the other
6. More laws will be passed in favor of same sex couples
7. The war in Iraq will continue until 2010
8. Brittany Spears will get married again
9. The number of jobless claims will continue to rise through the end of 2008
10. Mortgage companies and other financial institutions will begin to place calls requesting a payment from customers in good standing who usually make payments on time but make a payment after the due date
11. Halloween, Black Friday and Christmas sales will be less than expected
12. Many small business will file bankruptcy or go out of business by the end of 2008
13. More scandals and fraud cases will be exposed to Americans by the end of 2009
14. The current financial crisis will end in 2010