On Monday, the stock market hit a new high, ‘breaking’ 14,000. Good News?

This despite the housing market drop, problems in the mortgage marketplace, steep increases in foreclosure filings as well as in bankruptcy filings, the sharp increase in monthly mortgage payment ‘delinquencies, ’ the impending ‘reckoning’ when the ARM mortgage interest rate adjusts, the proverbial iceberg of asset-backed commercial paper credit problem (specifically, those assets being packaged consumer-owed mortgages and credit card debt sold to investors) and the steep decline in the value of the U.S. dollar.

As I reported previously, the numbers are stark and troubling. (See the details at this publication’s online column archive, or e-mail me for copies.) Yet, the stock market has hit a new high this week.

For experienced investors — and a growing number of newbie investors — it doesn’t matter whether the market is heading up or down. The opportunity presented for them to make a fast buck, indeed, bundles of bucks, made relatively quickly, feeds their desire.

The higher the interest return rate, the bigger the return yield to them.

That was the tempest that made commercial credit paper so attractive and opened the market to packaged consumer-owed mortgages and credit card debt.

Effectively, the desire for ever higher returns has set up individual and institutional investors for the fall now under way.

Unlike fall foliage, it isn’t pretty.

As more and more people fall behind on mortgage and credit card payments, they increasingly are bewitched by the cacophony of legal services offered in radio advertisements “to start your life again” by filing for personal bankruptcy.

And, debt solution advertisements hawk “learn what your credit card company doesn’t want you to know.”

We have all heard these and the numerous variations on the radio.

But the human behavior continues, and government doesn’t really help! In fact, government has made matters worse. And, government continues to do so.

Here are a few examples for you to digest, but please do not choke as you read the facts. You will see the connectedness of the examples, two sides of the same coin, as well as “how the screw turns.”

The investor side:

Politicians know that while residential housing impacts the general economy and affects millions of voters, it also impacts many major investors who also are major campaign donors.

These major individual investors, fund managers and the numerous special-interest groups they represent are now in limbo given what has been unraveling as recapped above.

So last week, federal politicos announced they will pursue “legislation to help the many homebuyers at risk” of losing their home.

Read that to mean those investors holding so called asset-backed commercial paper which is, in fact, packaged consumer-owed mortgages and credit card debt. And, understand, it is a federal bailout of large investors that will put still more burden on the back of hard-working American taxpayers.

The consumer side:

During the ‘80s, the late penalty fees on credit accounts were $5 or $10. In the early 1990s that generally remained the case.

In 1996, following the Smiley vs. Citibank case, the ceiling on late penalty fees was lifted. Late fees soared, reaching upwards of $30. And so did revenue generated by late fees and over-the-limit fees. In fact, gross revenue from fees doubled for credit card issuers.

Since then, we have seen such fees rise to $39. Duncan MacDonald, a lawyer who worked on the Smiley case, predicts “penalty fees could rise to $50 in another year”.

Last year, federal regulators “required banks that issue credit cards to increase minimum (monthly) payments” in order to “cover all fees and interest incurred during the month” and to cover “at least 1 percent of the principal on the loan.”

Some consumers tell us their minimum monthly payments have doubled.

Yet another new practice is called universal default. Increasingly, consumers are finding universal default as a standard clause in credit card agreements.

Effectively, if a consumer misses a payment, or is late with a payment, for one single card, the consumer is subject to a rate increase by every other card issuer using “universal default.”

As we see here, the screw turns … and turns … and turns … and turns.

What we need are leaders who are carpenters. Leaders who understand that every turn of the screw is one turn closer to cracking everything.