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Keeping a Close Eye on Those ‘Green Shoots’

August 14th, 2009 at 03:09am Under Economy Report

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This is the VOA Special English Economics Report.

Signs that the recession is easing in the United States have led to a lot of talk about “green shoots.” That means early signs of economic recovery, like the way plants begin to shoot up from the ground as a sign of spring. But the extent to which economic green shoots can be found depends on where you look.

Housing prices, economic activity and employment are down across the United States. But the recession which began at the end of two thousand seven has not hurt all fifty states equally.

Ben Bernanke speaking to lawmakers on Tuesday

Federal Reserve Chairman Ben Bernanke sounded more hopeful as he appeared Tuesday before the Joint Economic Committee in Congress.

BEN BERNANKE: “We continue to expect economic activity to bottom out, then to turn up later this year.”

A big part of this prediction is based on signs that the housing market is beginning to improve. Falling prices have produced better deals for buyers, and this has helped the demand for housing. But the central bank chief warned that credit for home buying remains limited and dependent on government-supported programs.

Home prices in western states have fallen a long way and have continued to fall. Prices in Phoenix, Arizona, are now fifty percent below their highest levels of three years ago. But sales in the West increased by nineteen percent in March from a year before.

Sales of existing homes fell in other parts of the country. The National Association of Realtors reported the biggest decrease in the Northeast. There, sales fell by nineteen percent from a year ago.

In terms of unemployment, the troubles of the Detroit auto industry have hit Michigan in the Midwest especially hard. Its jobless rate was almost thirteen percent in March, the highest of any state. But western states had the highest rate as a group, almost ten percent.

Ben Bernanke expects a slow recovery, mainly because businesses are likely to limit hiring. So unemployment rates could rise even as the economy starts to recover. He also warned that the recovery could be threatened if any new problems hit the financial system.

Central to any recovery are the nation’s banks. Late Thursday, the government released the results of a special examination, so-called stress tests, of the nineteen largest banks. Some will be required to raise billions of dollars of additional capital. This is meant to protect against possible losses should anything unexpected crush those green shoots in the world’s largest economy.

And that’s the VOA Special English Economics Report, written by Mario Ritter.

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Credit Card Companies in US Face New Limits

July 27th, 2009 at 02:58am Under Economy Report

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This is the VOA Special English Economics Report.

A bill to place new restrictions on the credit card industry in the United States won final approval this week in Congress. The measure went to President Obama to sign into law with popular support, except among banks.

Credit card companies will have to inform cardholders forty-five days before they raise interest rates or change other important terms. The new act will also bar companies from raising rates on existing debts unless payment is at least sixty days late.

A motorist uses a credit card to buy gasoline in Morgantown, North Carolina

Also, companies will have to send out billing statements at least twenty-one days before a payment is owed. They will have to tell how long and how much it would take to pay off a card if the holder makes only the lowest monthly payment. And they will have to write their cardholder agreements clearly and publish them online.

These changes, however, will not take effect for nine months.

President Obama recently said it was time for credit card reform:

BARACK OBAMA: “Instead of an ‘anything goes’ approach, we need strong and reliable protections for consumers. Instead of fine print that hides the truth, we need credit card forms and statements that have plain language in plain sight.”

Credit card companies say the changes will only reduce the availability of credit. These come at a time of recession when banks are reporting billions in losses in their credit card divisions.

The president of the American Bankers Association says the legislation “changes the entire business model of credit cards.” Edward Yingling says it restricts the ability to price credit for risk — in other words, to charge more for those more likely not to repay their debts.

Lots of people pay off their credit cards in full each month to avoid finance charges. But industry experts say card providers might now start charging new fees for all cardholders. And, they say, companies could raise their interest rates.

Americans held nine hundred forty-six billion dollars in credit card debt at the end of March. That was down from last year, but still about twenty-five percent more than ten years ago.

Elizabeth Kiss is a personal finance specialist with Purdue University in Indiana. She says the main value of the new credit card act is that it “provides an opportunity for consumers to have more information.”

But, she says, consumers have to make their own informed decisions. In her words, “We need to know how using credit fits into our plans and goals.”

And that’s the VOA Special English Economics Report, written by Mario Ritter. I’m Steve Ember.

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