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New York Times Chief Financial Correspondent and Columnist Floyd Norris, appearing on the "Charlie Rose" talk show Monday night on PBS, offered an insight that sort of summed up the financial crisis, the need for a rescue bill, and the reason a considerable portion of the American public doesn't like the rescue package.

Floyd Norris said: "At times it does appear that Wall Street is saying 'Bail us out or the U.S. economy is ruined.' And, if you're a citizen of the U.S., it's perfectly normal to be upset and angered by that. The problem is, what Wall Street is saying is true."

No time for perfection

The rescue bill, even the expected, revised rescue bill by Congress, will not be perfect. And yes, it will help some on Wall Street, including (unfairly) those who 'gamed' the system, or whose business mistakes, dubious securitization frameworks, or just plain greed helped create the crisis in the first place. But the nation does not have the luxury of taking six months to compose and pass a 'perfect' bill. The nation needs a rescue package, imperfect though it may be, to stabilize the financial system. And it needs it now.

Should you, the typical investor be upset about that? Sure, it's o.k. and it's a natural response to be upset, but don't let that emotion lead you to believe the nation or the financial system would be better off without a rescue bill; it won't be. And it's not possible to prevent Wall Street institutions from being involved in the solution -- at this time-pressured, critical juncture, they have to be. As The Times' Floyd Norris noted, Wall Street knows it, we know it, everyone knows it. So accept it, and move forward with the necessary work of getting a rescue plan in place.

Bill Gross of Pimco, one of the most respected bond investors in the world, thinks the credit crisis is about to get much, much worse. He also believes that the federal government is the only entity that can save the markets.

Gross's biggest concern is that financial companies will have to keep selling assets to raise cash. With home prices falling, he does not see an early end to this, and that troubles him. According to Reuters, Gross wrote "Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami."

Gross may be right, but his suggested solution is wrong. He wants the U.S. Treasury to start buying distressed assets to help build a floor for their values. Of course, the funding source for Treasury is the U.S. taxpayer.

Solving one problem by creating a larger one is rarely a good program. There is a great deal of evidence supporting the fact that taxpayers are already stretched to the limit. Job losses are up. Easy credit is gone. Gas, oil, and food cost much more than they did a year ago. The average person, who may already be unable to handle his own financial burdens, can hardly be asked to help support the purchase of assets being sold by large financial institutions.

If Gross's vision about the future of the credit markets is right, the financial system is only at the beginning of a growing disaster. But, turning to the U.S. citizen for cash is like looking through a man's pockets for a spare change. All the more valuable paper money has been spent.

Douglas A. McIntyre is an editor at 247wallst.com.

The recent challenging market conditions created much not only on traders and companies, but also cause some big names to break promises they had made to consumers. Eric Dash of The New York Times tells of one such promise that may now be repealed. Last year, Citigroup Inc. (NYSE: C) promoted the "deal is a deal" slogan, promising to millions of people that the company would no longer lift reserve interest rates on cards at any time, for any reason.

However, as Dash explains, times have changed and in the current weak environment the bank is reconsidering its decision because of financial troubles. A year ago, the company said it would no longer use the "universal default" practice where a card issuers can raise the holder's rate when that person is late paying any bill. What the bank still held was the right to raise rates every two years, when people renew their cards.

At the time, it looked like Citigroup's decision was efficient as rivals such as Chase Card Services followed the company by announcing it would abandon the "universal default."

Credit cards ... the little plastic cards in your wallet that are so convenient to rely on when you are strapped for cash. While the convenience of having cards definitely makes it easier to buy items when you are running low on cash, the flip side is that credit card debt can drown the typical household, and statistics are showing that Americans are pulling out their cards more than before.

One of the reasons why credit card usage has been on the rise is the fact that homeowners are having a harder time using home equity to get a cash infusion into their accounts. As a result, they are looking to borrow money from somewhere, and more times than not, they are turning to credit cards.

The evil with credit cards is that once you start to use them to pay for your basic necessities like food and gas, you find that in the months to come you still can't afford your basic needs but in addition, your monthly bills are racking up like crazy due to your credit card expenses. It's a scary cycle that many families find themselves trapped in.

After yesterday's selloff, stocks opened higher in anticipation of additional rate cuts by the Fed later today. Better-than-expected quarterly earnings from Goldman Sachs Group Inc. (NYSE: GS) relieved investors who have been dealing with a lot of negative news lately in the financial sector.

The world's largest investment bank reported this morning that its first-quarter profit dropped 53% to $1.47 billion. The company's quarterly numbers were dragged down by higher writedowns and lower fees from investment banking. Deterioration in the credit markets came with $1 billion in losses related to residential mortgage loans and securities and nearly $1 billion in losses on credit activities.

But despite its deep losses, Goldman Sachs managed to beat analysts' predictions, helped by stronger asset management and commodities performance. The company posted first-quarter profit per share of $3.23 per share, down from $6.67 per share reported in the same period a year ago. Analysts, on average, expected the company show quarterly earnings of $2.58 per share.

Target (NYSE: TGT) has one of the few lending businesses that is expanding. According to The Wall Street Journal, "At the end of Target's fiscal fourth quarter, which ended Feb. 2, the company had $8.62 billion of loans outstanding on its Visa cards."

That is a boat-load of money. But Target is not immune to the larger forces in the economy. The Journal quotes William Ryan, consumer-credit analyst at Portales Partners, as saying, "Target appears to have pursued very aggressive credit growth at the wrong time."

The question is why should Target be any different from American Express (NYSE: AXP) or any other credit card company? Economic data show that consumer defaults on home loans, car loans, and credit cards are rising quickly in most segments of the economy and that even well-to-do consumers are having trouble making ends meet.

Target's next earnings report may not look so great. The retailer's stock is up this year, but that can always be fixed.

Douglas A. McIntyre is an editor at 247wallst.com.

Federal reserve chairman Ben Bernanke continues to float his raft of economic strategies upon a wad of fake money. His song and dance has provided us with no real relief. Someone at some point must have convinced him that lowering interest rates is fun and exciting. He believed those lies and now it's his hobby. Has it provided any positive benefit of any real consequence in terms of the long term picture? I think not.

Today and tomorrow, the Federal Reserve Chairman shall be addressing congress. He's expected to tell them about how he has our economy under control. The fact is that it's near completely out of his hands. The one possible exception is that he's handily turned our dollars into wads of toilet paper. His major concern seems to be avoiding recession, which is an admirable goal, but someone forgot to wake the dear man to tell him recession is already here, aided by the fake dollars Bernanke keeps spewing upon the ground.

Inflation: "An increase in the amount of money and credit in relation to the supply of goods and services; An increase of the general price level; An excessive or persistent increase in wages and costs causing a decline in purchasing power."

Recession: "A temporary falling off of business activity during a period when such activity has been generally increasing."

(Source: Websters New World Dictionary, Third College Edition)

Rather than an opinion piece, which is what I generally write, this little snippet is meant more as a discussion generator than a statement of my own economic view. I earnestly invite our readers to weigh in on the matter. Inflation or recession, are we now experiencing either or both?

American consumers, the pivotal factor in the consumer-dependent U.S. economy, may have modified their spending philosophy, The New York Times reported Tuesday.

Stung by the housing market correction, stagnant wage growth in certain job segments, above-average debt levels, and a slowing economy, Americans are saving more and using credit less -- a shift that some analysts argue is a cultural inflection point of sorts, with huge implications for the economy.

Economist Steve Affinito told BloggingStocks Tuesday that while The Times' interpretative report did not "cite a large enough sample size to meet my fancy," it nonetheless provided data points that support what macroeconomic indicators are saying about consumer choices.

"We know that the savings rate has increased in the last six months, and retail sales are sluggish, at best. Take these and combine them with much tighter credit terms for home equity loans and other credit and what you get is a pull back in purchases, particularly purchases on credit," Affinito said.

Amid concern that rising credit card defaults may be the next shoe to drop in the consumer crisis that began with the subprime meltdown, Citigroup (NYSE: C) is taking steps to protect itself in the United Kingdom [subscription required].

According to the Wall Street Journal, the bank's Egg subsidiary, which offers credit cards in the region, has sent letters to 161 thousand customers telling them that starting in March, they will no longer be able to tap the company for credit. This amount to a one-time cancellation of about 7% of Egg's customers.

A Citigroup spokesman told the Journal that "Egg is sorry that some customers are upset after receiving notification that it is ending their credit agreements. Egg has decided that it no longer wishes to offer credit to these customers after conducting a one-off, extensive review of its credit card book."

It looks like the banks may be learning their lesson from the subprime mess: lending money to people who probably can't pay it back is a poor business model.

Moves like this one should be seen as bullish for investors, because it shows that the banks are finally willing to put prudence over short-term profit. Loans with bad long-term prospects can juice up earnings for a little while, but in the long run, banks need them to be paid back.

The looming recession continues to make financial headlines as the stock market swings. But the most important news is that the Fed yesterday deployed an economic stopgap of cutting interest rates -- again. Bernanke's house sliced borrowing rates between banks to the tune of 3/4ths of a percentage point to try to stimulate the U.S. economy out of the deep funk that's surrounding it.

To those with excellent credit and secure income levels (i.e. jobs), the ability to really seal in a good home refinance or auto loan will most likely start showing up soon.

The reward for those who are informed about their own finances and take steps to ensure excellent credit histories always comes into play when the Fed drops interest rates. Even if you have an ARM for some odd reason and are facing a rate change soon, the lower interest rates may not spike that payment as much.

Mark Zandi with Moody's Economy indicated that, "Consumers with good credit scores and fixed-rate mortgages should refinance immediately to lock in the new low rates .. start shopping tomorrow." In addition to mortgage rates seeing a drop for good-credit customers, credit cards may also see interest rate dips -- although an average $2,000 credit card balance may only see an annual savings of $10 to $15 per year.

The management at American Express (NYSE: AXP) must have hoped that its relatively high-end card holders might dodge much of the economic slowdown. It was not to be. According to The Wall Street Journal, "the card company said yesterday that it would take a $440 million pretax charge against fourth-quarter earnings as it sets aside more money to cover soured loans." The news and a warning from Capital One (NYSE: COF) showed that credit problems have moved beyond the mortgage market and into consumer credit.

American Express described its problems as "broad-based and sudden." So, part of the financial industry says the consumer pulled in very sharply in December, a sign that GDP may have already begun shrinking at the end of last year.

The consumer was the economy's last, best hope. He was needed to drive revenue in the retail and consumer goods markets. It appears now that his hibernation has begun in earnest.

Douglas A. McIntyre is an editor at 247wallst.com.

Consumers are still willing to run their lives based on credit, so says an Associated Press report. Consumer borrowing increased at an annual rate of 7.4% in November compared to an increase of just 1% in October - ah yes, the faux magic of a consumerist Christmas.

The truth of the matter rests in the cause for the rise. Is it because consumers are still confident in their earning potential? The more likely cause is that consumers are running out of funding options, read that -- they're running out of cash.

So why is it that mortgages are getting harder to write but consumer purchases can still be funded with just a signature? Although they're deflating in value, homes still provide significant backing for lenders to lean their bets on whereas credit cards float in the unknown. With bankruptcies at an all time high, are we setting up for the final crash?

Where are those three people who still think that Ben Bernanke has any idea what he's doing? I'd really like to talk to them. Can't they tell when a professional is taking random shots in the dark? Can't they tell when they're being led by a blind man?

Let me ask you this: if you were having trouble with your car and your mechanic tried the same repair six times but still didn't fix it, would you go to him a seventh time for the same repair or would you try another solution?

It's really not all that difficult to figure out when someone is leading you down the garden path, and it's even less difficult to know when someone is just guessing at solutions. In this case I don't think that Ben Bernanke is doing either. I truly believe that the man is completely mired in 1950s-style economic thinking and, bless his heart, the poor fellow doesn't realize that the world has changed around him.

You've been hearing and reading all the bad news about the credit industry and all the nasty things that its difficulties might mean to you, but is anyone considering the positive outcome that this major reset of the American economy could mean in the long run? Being that I'm a cynical optimist (an oxymoron, I know), I have a perspective on this mess which many people might not be thinking about.

I've been telling you since late 2006 that we have entered a world economic shake down and that the biggest hindrance to further growth in the American economy is the fact that the balance sheets of American corporations are full. I cite the sudden spate of major acquisitions in pursuit of profit creation via consolidation as support for my opinion. As modern economics are conventionally structured, the only basis for economic health is steady growth. That makes the case for the necessity of this period of down slide only too palpable.

If we as a nation can financially hold it together for the next couple of years and swallow the huge bitter pill of a recession, when we come out on the other side of this mess we shall reap the incredible rewards of the "green economy" which is now in the process of being built. Today we are planting the seeds of America's next economic boom and I'm sorry to report that most of the rest of the world has mistakenly adopted our old patterns.