This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

ALL BUSINESS: Financial Reform For The Masses

RACHEL BECK

NEW YORK (AP) â¿¿ The battle over financial regulation is finally over. Now comes the harder part: kicking Americans' love of credit.

The financial crisis didn't happen just because banks, credit-card companies and mortgage lenders forced consumers to take on massive debt. We willingly gobbled up the easy credit they offered and used it to buy cars and houses, take vacations and go shopping.

Then came the blowup. All that debt, matched with one in 10 Americans unemployed and plunging home prices, strangled our finances and ultimately, the overall economy.

New regulations, which President Barack Obama signed into law on Wednesday, can only go so far to prevent future financial crises like the one we are living through. Banks will still lend. And many of us will borrow too much.

"You can't legislate diligence," says Robert Lawless, an expert on consumer credit at the University of Illinois College of Law and a contributor to the blog Credit Slips. "You can't pass laws that make people be careful when they take out loans."

There are already signs that lenders are eager to lure us back. Credit-card solicitations jumped 45 percent during the first half of this year to 884 million, according to estimates from research firm Synovate.

And all that talk about limiting lending to consumers with risky credit profiles seems to be fading. Issuers mailed nearly 85 million credit-card offers to subprime borrowers during the first six months of 2010, double year-ago levels, Synovate estimates.

That kind of growth has to do with one thing: The card issuers know they can make more money off of riskier borrowers because they can charge higher interest rates and annual fees, says Synovate's Anuj Shahani.

More evidence of credit expansion came Thursday when General Motors said it would buy subprime lender AmeriCredit Corp. for $3.5 billion in a deal that will let the automaker increase lending to customers with poor credit.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,416.85 +225.48 1.31%
S&P 500 2,021.25 +19.09 0.95%
NASDAQ 4,683.4070 +45.4130 0.98%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs