Wachovia Corp (NYSE: WB) led the US based banks posting dismal second quarter earnings as losses piled up related to the mortgage crisis and other debt the company failed to account for. The total loss for Wachovia was $8.86 billion according to Reuters which also reported Fifth Third Bancorp (NasdaqGS: FITB) and KeyCorp (NYSE: KEY) posted losses which have many bank customers wondering if their bank will be the next IndyMac.

Regions Financial Corp (NYSE: RF) and SunTrust Banks Inc (NYSE: STI) also posted losses. A SunTrust representative stated profit available to common stockholders fell 21 percent to $535.3 million, or $1.53 per share, from $673.9 million, or $1.89, a year earlier. Regions said net income fell 54 percent to $206.6 million, or 30 cents per share, from $453.3 million, or 63 cents, hurt by losses tied to home equity loans and homebuilders.

“The banking industry is suffering from the tail end effects of a burst housing bubble,” said Gerard Cassidy, an analyst at RBC Capital Markets. “While capital markets operations weren’t hit as badly as in the first quarter, what dominates results now is good, old-fashioned credit deterioration. We’re going to see more.”

The losses incurred by US banks have had an impact on the the Forex market and the value of the US dollar. Thomson Financial reported the US dollar has dropped against major currencies as a direct result of lackluster earnings results from Wachovia Corp. At 11:20 a.m. GMT, the euro was trading at $1.5938, having dropped to around $1.5907 at around 9:25 a.m. GMT. At 8:19 a.m. GMT, the euro had traded at around $1.5935.

What does all this mean to US consumers ? For investors with stock in Wachovia, either in their portfolio or as part of a mutual fund, it means that they can expect to share the pain with the 10,750 Wachovia employees who will lose their jobs as part of a turnaround plan. Other investors will feel the pain of Wachovia cutting their quarterly common stock dividend to 5 cents per share following a May dividend cut to 37.5 cents per share from 64 cents.

“These bottom-line results are disappointing and unacceptable,” says Lanty Smith, Wachovia’s chairman. “While to some degree they reflect industry headwinds and weaker macroeconomic conditions, they also reflect performance for which we at Wachovia accept responsibility. Our company is facing up to these issues, is addressing the challenges head-on and has redirected near-term strategic priorities.”.

Tagged : Wachovia, SunTrust, KeyCorp, Fifth Third, Regions

For the average person and/or family, the three biggest financial pitfalls to avoid are new vehicles, credit car interest, and short-term loans. Any and all of these can drain a person’s or family’s coffers of much needed funds. At best, they create opportunity costs, i.e., money spent on them could be better spent on sound investments like a home or stocks (both of which appreciate in value over the long term) or on college or retirement savings. At worst, they can eventually create financial hardship and even lead to bankruptcy.

Buying brand new cars, trucks, SUVs, etc. can be a real money-eater. They all depreciate in value, some much faster than others, of course. Most vehicles depreciate the most in their first year or two of life, so the person buying a vehicle when it is new will have to absorb the bulk of its depreciation costs. With the price of new vehicles as they are today, that amount can be quite excessive. On top of that, many people have the financially disastrous habit of trading them in about every two to three years for another new one. That habit will result in the piling on of depreciation and debt.

Instead of buying new, I suggest buying a low-mileage vehicle that’s about one to two years old. There are services available now like CarFax which allow you to trace a vehicle’s history. If you look around, you can find previously-owned, former-rental, or former-lease vehicles of every type, make, and model which are in like-new shape and have less than 20,000 miles on them. You can even find them on Ebay now! Once you have found one, I suggest keeping it for least three years after paying off the loan. Ideally, I would suggest paying cash for it to avoid those used car interest rates and then keeping it for at least seven years, but I know paying cash is not an option for most people.

If you absolutely feel the need to give yourself or a family member the gift of a new car some day, I wouldn’t fault you for that. However, I suggest planning this out over several years, similar to how one would save for a college education for a child. Estimate the amount that you are saving by buying used cars instead of new ones and pay yourself that money by putting it in the bank on a regular basis. Over time that money will add up. Once you have saved enough, wait until a dealer that sells the kind of vehicle you want offers one of those deals in which you can get zero percent interest or a rebate. Pay cash for the vehicle and take the rebate. That way, you get the zero percent interest and the rebate!

Credit card interest is another item that will erode a person’s or family’s financial assets very quickly. The interest rates you pay are about 534,457,469 percent! Just kidding, but it does seem that way sometimes. Seriously though, they often run as high as 18 to 21 percent. A $20 meal will end up costing $36 when paid for over a five year period at an 18 percent interest rate! Paying only the minimum payment can result in an endless cycle of debt that will eventually be practically impossible to escape, outside of bankruptcy.

If you find yourself already in this situation, I suggest you see a professional credit counselor as soon as possible. If you are already paying more than the minimum payment, try to gradually increase this payment and suspend all new credit card charges, if possible, until you’ve paid off the balance. Obviously, the only sensible way to handle a credit card is to pay off all charges each month as they are accrued and not maintain a balance, thus avoiding all interest. A credit card is a nice convenience tool. However, if you don’t have one and you feel that you could not pay off the charges each month, then you are far better off not having one. If have one or more cards and have run up balances that you have had to struggle to pay off, you would be better off getting rid of it/them.

Short-term loans are also debts to be avoided like the plague. These include those “quick refunds” offered by many tax preparers, those “pay day” loans offered by predatory lenders popping up like cancers on seemingly every street corner, and many kinds of unsecured loans. The worst thing about short-term loans is their deceptiveness. Most people don’t realize what kind of wild interest rates they are paying. For example, $10 in interest paid to keep $200 for one week results in an annualized interest rate of 260 percent! Allowing a tax preparer to deduct $100 from your $1500 refund so you can get it instantly instead of waiting six weeks for the I.R.S. to send it to you will result in an annualized interest rate of 58 percent! I bet someone advertising those kinds of interest rates would have difficulty finding any takers, yet people take on these kinds of loans all the time as long as the interest rates are disguised.

People who are wise financially avoid most, if not all, of these biggest wastes of money. Most people who are financially independent right now got that way in whole or in part by avoiding wasteful spending.

About Today’s Guest Author
Terry Mitchell is a software engineer, freelance writer, and trivia buff from Hopewell, VA. He also serves as a political columnist for American Daily and operates his own website - http://www.commenterry.com - on which he posts commentaries on various subjects such as politics, technology, religion, health and well-being, personal finance, and sports. His commentaries offer a unique point of view that is not often found in mainstream media.

The story reprinted below is from a thread on the MyFico forums and exemplifies the dire straits many middle class, hard working Americans are finding themselves. Between predatory lenders, borderline corrupt credit reporting agencies and a political lobbyist agenda that strives to alienate the middle class from the privileged, more and more honest families are finding themselves in financial quicksand with no place to turn except to use credit to keep themselves from being dragged down into the mire.

Considering the fact a gallon of gasoline has broken the $4 per gallon average this summer, regardless of the fact crude oil made a sharp U-turn and slid to $133.50 in the afternoon hours (Kitco story here), the fact is American consumers are being blindsided by overwhelming gas prices, inflation, potential economic recession and a government that refuses to do anything about it except pretend that the crisis doesn’t exist.

The following story is indicative of the average, middle class person struggling to survive in today’s social, political, economic disaster that has not properly been addressed by our current leaders nor either of the current potential candidates (Obama and McCain) or their respective political parties, yet it the situation expressed below is a reality to countless Americans stuck in the same rut trying to keep their FICO scores above water.

After a recent post encouraging a low-scoring forum member to be hopeful, several people have asked me how I got my FICO score from 420 in April to the 600s today. Hard work, patience, and diligence, as well as asking many questions on this forum, have been my salvation. Not to say I haven’t slipped – I got so excited a few weeks ago when my FICO hit 668, and applied for a CapitalOne Auto Loan and a Best Buy card (it was my birthday), and my score started slipping downward because of those new inquiries. I need to not beat myself up over those decisions, but oh well, you can’t change the past. To set things up, I have had a contentious relationship with credit for the last few years, barely holding onto some subprime credit cards before their unmentionable fees overwhelmed me and led to the cards’ closure. I never really relied much on credit cards because I could never qualify for more than $700 on one, although I did get a $1500 Best Buy card a few years ago, which was closed/charged off after I couldn’t keep up with payments. I used to have a Dillards, Marshall Fields, and Sears card, but they all got closed due to delinquent pay patterns as well. These were all reporting well, as long as I made minimum payments each month, but I had too many, and the many minimums maxed me out, and I was never making any progress on the principal. Now the only card I have of any kind of revolving credit is my Target card. I also have moved four times in five years for employment opportunities, and each one dried up almost as soon as I arrived, usually due to downsizing. This constant moving placed my already tenuous financial status into a constant state of disrepair. It also meant that I was leaving a trail of unpaid utility bills in my wake, which eventually got sold to collection agencies. I even had a “pay to stay” rental situation which shows up as an eviction/public judgment from 2003 on my credit reports. Last summer (like a lot of people), I found myself having to choose between gas and other payments. Unfortunately, gas prices meant I delayed making my car payments. I started to get behind, and once I did, I never recovered. I tried to trade-in my vehicle for another one, but that just resulted in tons of hard pull inquiries that benefited me nothing. Then I ended up refinancing the car, but even the refinanced amount was too high, with gas prices still in the upper $2s, lower $3s, coupled with the fact that I was commuting 60-70 miles a day, 6 days a week, in an SUV that got 21 mpg tops on the highway (oy). Then I had to move to a new apartment (mine was being turned into condos, so there were all the moving expenses and utility deposits due). So nothing was really working in my favor at the moment. Ultimately, I had gotten myself into a state of mind a couple of years ago in which I just didn’t care about my credit, plain and simple. I figured that my situation was so bad, how could it possibly get any worse? That cavalier attitude led me to ignore important deadlines and settlement offers that would have kept things off of my credit report. It also relegated me to nights where the phone wouldn’t stop ringing for hours as creditors and collectors called over and over again. I resigned myself to always having bad credit and never owning a home, which made me bolder (and somewhat stupider) in my own taunts of the creditors that were calling me. I now know that some of this was due to anxiety and depression, but some was just plain stubbornness. Then in March, my 2003 Ford Escape was repo’d, and I all of a sudden discovered just how important good credit was, when I couldn’t even get into a used car for less than $3000-5000 down, and those were subprime loans in which I was paying the bank $2000-3000 to approve the loan, BEFORE the cost of the car. This became the tipping/turning point for me, and it opened my eyes to the seriousness of my situation. I began monitoring my credit at that point, and was shocked as what I found. I started out around 457 in late March, and after some more attempts to get into a car loan in April, it dropped to the aforementioned 420. I got my FICO Score through the 30-day free trial of ScoreWatch, and then did the same for TrueCredit. I have since subscribed to both of these services, but it was invaluable to have a parallel comparison of all 3 credit report accounts (TrueCredit), as well as the comparison of a FICO score and a FAKO score. As part of ScoreWatch, I became addicted to the FICO Forum, and learned most of what helped me there. I had let several of my student loans go without applying for deferrals, so they were reporting past due, but thank God not in default yet. There were several erroneous accounts that were not mine, as well as accounts that I had paid, but were showing as still open and unpaid. Far too many collection accounts with unpaid balances. I called Target and made a payment arrangement with them, just to keep the card open and active, so that it could help me later on if I needed it to, as my sole source of revolving credit and good credit-building power. The first thing I did was comb through the free credit reports I received (annualcreditreport.com), and mark any accounts I didn’t recognize as mine. Then I found any erroneous late pay notations. I disputed these sets of items right away, and several of these errors disappeared very quickly. Step one should always be getting rid of obvious errors – personal information, addresses you don’t recognize, accounts that don’t belong to you, duplicate reporting, etc. But I think the most important thing I did to monitor my success was creating an Excel spreadsheet of all of the derogatory items on my credit reports. I had columns for: • The name of the creditor • The name of the original creditor (if the account on the report was a collection agency) • The amount of the debt (even if it was zero – paid off/charge off) • Date reported • Expected date it would drop off my credit report (this takes some math and research at times) • Which credit reporting agencies reported the debt (this was a small detail, but became very important as time went on) I also made a similar chart that included all of this info for accounts that I had received correspondence about from collection agencies or creditors that had not yet appeared on any credit reports yet – this was to become my reporting prevention list. These charts allowed me to track what I owed (totally and individually), and monitor when things would start to drop off (and how many). Ultimately, it was a hard look at the reality of my situation. But when I realized that, apart from the student loans – which were now in deferral or the process of being deferred, I only owed $12000 max, it made me realize that this was too low a number to consider bankruptcy. I made a plan to set aside $100 per week in a savings account to use for credit repair – this amount has taken a bit of a beating because of a settlement with Ford I arranged, but that single settlement (if I paid them 50% of my deficiency amount remaining after the sale of the repo’d vehicle, they would consider it paid in full and remove the repo comments from my credit reports) has actually reduced my total bad credit debt to less than $5000 now! The $100 a week allows me to look at my chart and see what accounts might be paid off completely with $100-300; those accounts I attempt to Pay for Delete – See Tuscani’s sample Pay For Delete (PFD) and Goodwill (GW) letters; they will help you through hell and high water. I did the math, and if I continued my credit repair savings account, it would allow me to pay off between $2000-4000 a year, which meant that after the Ford settlement, I could get all of my bad credit accounts paid to zero (and work out PFD and/or GW plans) within a year and a half. Some sacrifices would have to be made, yes. And the collection agencies don’t like hearing me say this, but I do and I stick with it, “I have drafted a plan to get out of debt by the fall of 2008, and your account is included in that plan, but you’re not the account I am working on at the moment, so you will have to be patient, but you will get your money.” Part of my plan also involved joining the credit union at my job. Many benefits, not the least of which was automatic overdraft protection for my checking account up to $500. USE WISELY! I have also created an Excel spreadsheet and chart function that allows me to enter my daily TrueCredit scores as well as my FICO score updates, and it may not seem to be much of an increase daily, but it does continue to go up. This is more detailed than it should be, and probably not as detailed as it could be, but this has been my journey so far, and hopefully it will be enough of a shock and build enough good fiscal habits that I can keep moving steadily towards fiscal solvency. Hope this helps.

If you’ve read this far, you are probably interested in the thread this story came from. It contains numerous accounts of how the big corporations, lenders and governmental agencies are bleeding this country dry and profiteering while a generation of young Americans are laying their lives on the line for this country.

Have we become a nation of apathetic souls who have lost direction so much that we’re herded not unlike lambs to a slaughter? Is there no dignity left in being an American ?? As long as we allow these events to transpire on our watch, we will be selling out the future generations to follow us.