Two interesting articles in today’s NYT touch upon some of our favorite themes: Indebtedness of Consumers, the poor condition of bailed out banks, and the ongoing softness in the labor market.
The first is a front page article on the Credit Card firms reducing debt for delinquent borrowers, noting “The creditors would rather have a piece of something now instead of absolutely nothing down the road,” said Adam K. Levin, the founder of the consumer education Web site Credit.com:
Borrowers still have a crushing amount of debt to deal with, however. Revolving credit, a close approximation of credit card debt, totaled $939.6 billion in March. The Federal Reserve reported that 6.5 percent of credit card debt was at least 30 days past due in the first quarter, the highest percentage since it began tracking the number in 1991. The amount being written off was also at peak levels.
After a balance has been delinquent for six months, regulations require the card company to reduce the value of the debt on its books to zero. If a borrower has not paid by this point, chances are he never will. Banks and credit card companies are discussing new programs that would, for the first time, allow credit counselors to invoke reductions of principal as a routine part of their strategy, said Jeffrey S. Tenenbaum, a lawyer for many counseling agencies. In the past, counselors could persuade card issuers to adjust interest rates and modify late fees, but the balance was untouchable.
The second piece is a bout a State bailout for companies that are seeking to layoff workers:
As companies struggle to make it from recession to recovery, many are turning to a novel but unheralded program that cuts their costs while sparing their workers’ jobs. Under the program, known as work-sharing, employers reduce their workers’ weekly hours and pay, often by 20 or 40 percent, and then states make up some of the lost wages, usually half, from their unemployment funds.
Even though 17 states have adopted the program, and many executives and economists hail it as a way to keep workers employed and companies staffed with skilled labor, only a fraction of the businesses and workers that are actually eligible are benefiting. That is largely because of inertia and ignorance, government officials say. Many companies are unaware of the program’s existence, and few states advertise it — even though the program is credited with saving hundreds of thousands of jobs in Germany, whose work-sharing program has inspired other nations.
With unemployment in the United States above 9 percent and climbing, pressure is growing on the states that have work-sharing to increase the number of companies and workers that participate, and on the 33 states that don’t have work-sharing to embrace the program.
So much for the green shoots everywhere . . .
Credit Bailout: Issuers Slashing Card Balances
NYT, June 15, 2009
Work-Sharing May Help Companies Avoid Layoffs
NYT, June 15, 2009