Toxic mortgages and credit card lossesthrough defaults are rising at a rapid pace.  This was also apparent in the earnings report from JP Morgan that reported positive earnings because of non-retail banking activities.  Yet the media for whatever reason isn’t highlighting more carefully where the gains are coming from.  For example, JP Morgan which swallowed upWashington Mutual and Bear Stearns, posted losses on credit cards and home mortgages yet doubled its earnings from last year in its investment banking division.  Here is one of the key examples of why removing Glass-Steagall is such a major problem.  The recent meteoric rise in stock prices merely reflects hot money trying to find ground.  If we look at actual loan losses they are still on the rise:

Source: New York Times

And banks are not lending more as they stated initially with the request for bailout funds.  The premise was that trillions were needed or lending would completely dry up.  Lending has dried up.  Take the mortgage market for example.  Loans that are FHA insured now make up the bulk of the market.  For non-FHA loans, banks seek to have loans backed by Fannie Mae, Freddie Mac, or Ginnie Mae.  In other words, banks are unwilling to lend their own money and will only lend funds backed by the government (aka the American taxpayer).

This behavior is most pronounced with credit cards.  With rising defaults companies are using bailout funds to plug up additional losses.  Yet they are also combining the easy money to play their hand on Wall Street.  The mix of retail and commercial banking is still occurring even after our economy nearly tanked and we are still in recession nearly 2 years later.

I had an experience with the credit card companies recently that shows what is occurring.  One of my cards had a line of $10,000 but I rarely use it. If I did use it, I would pay it off every month.  Credit card companies look at people that pay off their balance every month as deadbeats.  So last month, I receive a letter stating my balance was lowered to $3,000 simply because my lack of use.  Keep in mind that this line had been open for 7 years.  So I call up the bank and they tell me I can either stay with the new terms or close my account.  This is how banks are playing the system and stealing money from taxpayers.

Don’t be fooled, they are pulling credit back: