Europe’s largest bank, The Hong Kong and Shanghai Banking Corporation (HSBC), announced that it will scale back its US lending as a result of failed sub prime mortgage investments.  Coming off of their worst quarter ever, HSBC will be eliminating 6,100 jobs nationwide by closing all 800 of its Household Finance & Beneficial Offices here in the US.

So what happened to HSBC’s profits?  In 2007, HSBC reported profits of $19.1 billion.  Their 2008 profits came in at a much less $5.7 billion.  Unable to predict the deterioration of the US economy, HSBC purchased Household International six years ago for $14 billion.  This purchase made HSBC the largest subprime mortgage lender in the US.  Forming the Household Finance & Beneficial offices, this unit began lending money to borrowers that did not have strong credit history.  What was predicted to be a successful and profitable acquisition turned ugly in 2008, when consumer loans considered 60 or more days delinquent rose dramatically from 7.7% to 12.5%.

Stephen Green, group chairman for HSBC, stated that “In light of this, we have taken the difficult decision that, with the exception of credit cards, we will write no further consumer finance business through the Household Finance and Beneficial brands in the U.S., and will close the majority of the network.”

In official statements, HSBC has promised that despite the halt on its consumer lending practices, it will continue to help its current customers pay off their loans, helping them avoid foreclosure.

What does this mean for me?  Green also vowed that HSBC is “not turning our backs on the US“, as they will continue to issue and promote credit cards.  Simply stated, this is good for consumers!  The credit card HSBC is bringing back, Orchard Bank card, is their subprime card for bad credit borrowers.  Originally pulled from the web on December 1^st of 2008, it is available again for consumers.  With the lowest rate among subprime cards, HSBC’s Orchard Bank Card does not have outrageous upfront fees to pay. This card is designed for people who are looking to rebuild their credit.

To sum it up: HSBC’s decision to discontinue its consumer lending business actually benefits the millions of consumers who are looking to re-establish a strong credit history.  It is important to remember that you have many options when choosing a credit card company, as companies like HSBC promote specific credit cards to help people with poor credit.  Check out sites like Credit.com to learn more about the various credit card options you have as a consumer.

It may have happened to you or to a close friend. Unexpectedly, for no apparent reason, the terms and payments on your credit cards has dramatically changed!  You always paid your bills on time-you always paid more than the minimum payment and were a long time customer.  Suddenly you go to the mailbox and find that your credit line has been cut in half, even as your interest rate doubles or triples!  Recent surveys are saying this could be happening to as much as 30% of Americans with credit cards!

So what are your options if the credit card companies do this to you?

• Call the credit card company directly to see what options you have.  If you have a solid payment history with this creditor, voice your disagreement regarding the reduced limit or rate change.  Argue that you have always made your payments on time, emphasizing that you are a long-term customer
• If you are in good credit standing, you could have the luxury to shop around for a card with an even better interest rate.  You have the ability to take advantage of the fact that banks are lending again.  Balance transfer credit cards can provide time periods with low or 0% interest rates.
• People are either hesitant to borrow or have too bad of a credit situation to qualify for a new card.  If you are unsure of where your credit stands, sign up for free credit monitoring.  There are a few websites that compare credit cards based on credit score requirements.  You can use the Federal Reserve website for more information about what to look for when credit card shopping.
• Do not close your current credit card accounts.  Doing so can actually affect your credit score negatively, limiting your ability to borrow if your situation gets worse.  You also have no idea if the cards you keep will one day change their terms and limits.

So how do you know if your credit card company will spontaneously change your terms and payments?  Honestly, you don’t.  While there is a law that governs consumers’ rights with credit cards, unfortunately, most of us sign a contract with the lender that gives them the right to make these changes to our credit lines and credit cards.  Continue to monitor your monthly statements and online accounts to see if changes are coming.  Aside from rate and term changes, pay attention to news of your bank being acquired by another.

We should take action to lessen our dependency on credit cards.  We need to learn to live within our limits and buy only what we can afford.  Altered payments and interest rates is the first sign that times are changing; as a result, our old spending habits have to change.

Peer to peer lending is now all but gone; however, for a while, peer to peer lending was the last resort for many in getting a loan.  Since banks began reducing the number of loans and stopped taking new applicants, peer to peer lending communities were often times the last place to go.  One of these communities, Prosper.com, has changed the language on their application page.  It now reads “We are unable to fund your loan at this time. However, Prosper has agreements with trusted partners who will work with you to determine if you can get a loan. If you would like to proceed please fill in the application below.”

So what happened to peer to peer lending?  Well, the government basically came in and said individual people cannot judge whether or not to lend other people money.  I find this both upsetting and amusing.  I was involved in one of these peer to peer lending communities, both as a lender and as a borrower.  I thought I was a great judge of who to lend money to! If I had an issue or concern, I could always ask the borrower.  I used a loan that I received from a peer to peer lending community shortly after college to consolidate my debts into a lower rate.  I am a big fan of the entire experience-from setting up my profile and loan request, to navigating the bidding process-all the way to funding.  I received a fixed rate loan, unlike the credit cards, that I planned to pay it off in three years time, unlike the credit cards.

The more and more I look around the web, the less and less places I find that enable consumers to go and get loans.  Credit cards are disappearing left and right.  Straight up unsecured personal loans are all but gone. Peer to peer lending was the last stop for most people, and now that is gone.  With regulators finally getting involved, I guess it was inevitable.

Banks say they are lending again-it’s just that most people are scared to apply.  I have actually heard otherwise from the lending community.  Banks are just forced to be picker with the criteria of their borrowers.  It looks like pay day loans and their dangerous pitfalls are all that is left for most American borrowers who are desperate for money.

What can you do if you are in these tough situations?  Before making any move you should always know where your credit stands.  You can always sign up for a free online credit report if money is tight.  If you find out your credit is in bad condition you are going to have trouble trying to get a loan.  Debt management help may be your last resort.  Be sure to compare the companies and programs that are out there as some specialize in debt settlement, credit counseling, and bankruptcy.

After a series of hard negotiations, we are finally there-or are we?  Will the details of Obama’s stimulus  plan work the way this administration hopes?  We certainly hope so.  If not for me, then for my children, and my children’s children.  This mess is going to cost us in the long run either way, but this question remains: will the amount of money invested in this plan, and the goals it hopes to accomplish,  pull us out of this hole?

Most of the ideas that make up this plan will create jobs instantly/ The crucial question we must ask is whether or not the plan will have significant impact in the long run?  Again, I am optimistic.

Why am I so optimistic, you ask?  Let me give you an example.  The $50 billion that is set to be spent on energy programs focuses on efficiency and renewable energy.  This monetary investment in energy efficiency will create jobs, as it will require jobs that conduct  expanded research.  We will be taking a step toward  a better the future for all mankind as we strive for clean energy.  Actions like these contribute to my overall sense of optimism for the future.

Another aspect of the stimulus plan that brings a smile to my face is the $46 billion being invested in state relief for education.  Some of this money will be used to repair schools and to modernize their facilities and resources.  Again, the need for this action will bring about short term job creation.  Moreover, in both the short and long term, we are taking tangible steps towards bettering the educational environment for our children.  We will be able to provide them with the tools and resources they need to maximize their academic potential.  Giving students the best technology available to them will  ultimately better their future and the country’s future.

While Obama’s stimulus plan is a costly plan, the possible benefits America can reap as a result are too promising to dismiss.  While some of us will not  see first hand the effects of the plan, the changes it will bring about will impact all of our lives in some way.  The lawmakers behind the scenes need to carefully examine the way money is allocated to various parts of the plan.  They have to consider the short term objectives while simultaneously keeping an eye on how every action will affect us in the long term.  By no means is that an easy job for anyone-even an experienced senator.  I do not envy them, as the stakes of this plan involve an entire country’s present and future well-being.