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Issues That Needs to Be Resolved in The Financial Sector

The financial industry is mainly designed to supply capital into the real economy. They should provide aid wherever it is needed most in the market. It is not supposed to be an end in itself. However, certain flaws in the sector’s structure enabled it to become a powerful entity that is capable of sucking the real economy into oblivious. And because it is prone to fraud, it threatens the nation’s economic stability, even democracy itself. Among the flaws that can be seen includes the following:

It Has Become Too Big

Financial institutions should mainly act as a “middlemen” that enables capital to flow through the markets. Similar to all middlemen, it should be kept as small as possible while accomplishing its goals. If that is not the case, its structure makes it become parasitical. This is exactly what happened. Since the financial sector became larger than what was necessary, it dwarfed the same economy that it is supposed to serve.

It should also be noted that it uses the capital for its own benefit. Whatever amount remains afterwards is misallocated. Financial sector rewards the already-rich while depriving individuals who need credit and additional capital most.

Causes Crisis around the World

Although the current economic crisis generates the most attention to the faults of the financial sector, it is not the first in their list of misdemeanors. As if that’s not enough, big banks are capable of causing devastating failure to the world economy. It has become very unstable while retaining its power. The industry has enough influence to convince Congress that their accounting rules work, though it is merely an attempt to hide their losses.

Contributes to Inequality

The predation of the financial industry has become so bad that it now controls the upper one percent of the country’s income distribution. As a result, income inequality has widened. This can cause massive problems not only to the economy, but to the social welfare of the citizenry as well.

Should You Consider Lease Options

With the drastic decline in home prices in the last year, people are now speculating if housing prices have bottomed out or if it will fall further. Economic experts say that things are looking better. However, with recovery so fragile, any shake-up in the market can make matters worse. Because of these uncertainties, average Americans should need to be more prudent in their investing, particularly in buying a house.

For individuals who aren’t looking to buy immediately but are contemplating home purchase in the near future, a good option may come in the form of lease options. In many cases, the terms of lease options are negotiable. If you’re looking for more information about this alternative, a few helpful articles can be found below.

JD @ Get Rich Slowly provided a very detailed account of what a lease option is and what you situations you need to be wary of. His article titled “Use a Lease Option to Lock in Low Home Prices” informs potential buyers that it is usually not a good idea to deal with desperate landlords. Likewise, if you’re a desperate tenant, lease options may not work because you might not be able to get a loan to buy it.

Noon @ SDB Club uploaded an informative post titled “How Lease Options Benefit Sellers.” While the title sounds like this is an article for sellers, it contains the different benefits buyers and realtors can expect from the lease option as well. Basically, you can expect basic data about lease options and some tips that will let you know if this is a good alternative for you.

Chris @ Syracuse Real Estate Blog wrote a recent post titled “Lease Purchase Options.” It is a relatively helpful post that talked about knowing all your financing options before buying a house. He stated that buyers who can’t afford to pay the whole price at this point for a house should consider the lease purchase option. There are also detailed practical tips in this post. For example, the blogger tells his readers to ask the real estate agent for advice before paying.

U.S. Unemployment – Stemming Job Losses without Second Stimulus

Faced with an increasing number of job cuts despite pumping trillions in the American economy, the Obama administration is considering a mixture of tax cuts and spending programs to stem job losses in the United States. It will entail an additional stimulus without carrying the stigma of a bailout.

Implementing these proposals is another matter because the White House needs to balance the concern about unemployment with the issue of the gaping budget deficit. It is estimated to be at $1.6 trillion for 2009 and $1.4 trillion in 2010. New programs are bound to be politically sensitive. In fact, Press Secretary Robert Gibbs clarified that there “were no plans” to pass a second stimulus similar to the $787 billion approved earlier this year.

Instead, the White House is merely looking into extending the programs that are already in place. He further added that the “economic team is certainly looking at and working on any way that we can create more jobs.” Among the measures discussed include boosting the transportation spending and extending the tax credit for first-time home buyers.

According to Chris Van Hollen “If there was to be another round of stimulus, additional infrastructure would be at the top of the list.” Investments in roads and bridges would be popular among Democrats. No matter what lawmakers and the White House decide to call these programs, financial experts think of it as economic stimulus. Dean Baker of the Center for Economic and Policy Research stated that these are stimulus spending and that “there’s no two ways about it.”

At this point, the Obama administration hasn’t made any final decisions yet. Jen Psaki, a spokesperson from the White House, said that they are still exploring the “best options”. Looking for the best solution is certainly a necessity in these troubled times especially with the health care bill being pushed in Congress.

Credit Card Rewards – What you Should Know

Approximately 34 million Americans were late in making their credit card payment in the past year. As if that’s not bad enough, the default rate in 2009 is at its highest since 1991. It all points to the fact that consumers simply do not have enough money to pay back their debts. These days, missing a payment or two seems inevitable for a variety of reasons.

However, while many consumers recognize that they would need to pay higher interest payment and penalty fees, they fail to realize that they are also damaging their credit card score and even sacrificing their credit card rewards. In the last several months, consumers are heavily preoccupied with asking questions about fees, interest rates, and due date of their bill. One aspect they overlook is the rewards program offered by their card issuer.

Rewards might not be an issue for first-time card holders who don’t know better. But for individuals who had been using it for vacations, household appliances, and special occasions, loosing reward points can come as a big blow to their lifestyle. In a research conducted among major credit card companies like Citibank, Bank of America, American Express, and Capital One, it was revealed that institutions will revoke any points you earn during a billing cycle in which your account was delinquent.

Discover Cards is particularly harsh because it revokes all reward points you earn if your account is delinquent for two months. American Express is likewise strict but it revokes points on a case-by-case basis. The rules may seem harsh but what’s even worse is that all major credit card issuers reserve the right to modify the terms of the agreement at any time, for whatever reason they choose. They can even cancel the program at any time. So while consumers can now avoid the loopholes when it comes to interest payments, they are still at the losing end when it comes to rewards.  Some of the new credit card laws will prevent the issuers from making changes to your account without prior notice.

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