Archive for the ‘General Money Stuff’ Category

Wall Street Is Circling The Wagons Against Elizabeth Warren as Head of Consumer Bureau

The newly created Consumer Financial Protection Bureau was an idea conceived Harvard Professor and long time advocate for the middle class, Elizabeth Warren.  Since the agency was her idea, and she is obviously the most qualified person to lead it, then her confirmation as its head should be a shoo-in.

That would be true in the real world, but in the Washington Beltway, what is up is down and what is wrong inevitably turns out to be right as long as enough lobbyist money is spent to woo political officials along the way.

Wall Street was extremely opposed  to the consumer financial protection bureau and  through their lobbying efforts, managed to get it moved within the Fed instead of outside it. Beyond that, they haven’t managed to weaken it any further, but appointing a Wall Street insider would ensure that the agency would have no teeth and be practically useless.

Treasury Secretary Timothy Geithner,  a Wall Street insider if there ever was one, is quite opposed to Warren, who has dressed him down a time or two as he appeared before the Congressional Oversight Committee that she chairs. Where no one else would ask the tough questions, Elizabeth Warren did, and when the answers given were less than candid or complete, she poured on the heat.

 

 

 

Now we hear that Senator Chris Dodd, Chairman of the Senate Banking Committee does not believe that there are sixty votes in the Senate to confirm Warren as director of the CFPB.  From the article:

I think Elizabeth would be a terrific nominee," Dodd told NPR’s Diane Rehm on Monday. "The question is, ‘Is she confirmable?’ And there’s a serious question about it.

Senator Dodd has taken a great deal of donations from the banking industry and while fighting for financial reform, he has also worked to weaken it at the behests of his donors. His remarks today are even more of an indication that Wall Street will fight tooth and nail to prevent Warren from heading the agency that was her brainchild.

Bank Of America’s Latest Checking Account Is Free If You Never Go Into A Branch

The banks hate the new regulations being put on them by the financial reforms enacted over the last few years. They hate them because they turn off the spigot of easy fee income that the fat cat bankers have come to expect as their due.

According to this article by Dan Caplinger, Bank of America will begin offering a new checking account that is completely free, with no minimum balances or other charges, so long as the customer NEVER visits a branch office. Should the customer visit a branch, for any reason whatsoever, the account would convert to one that charges a monthly fee of $8.95 per month.

Caplinger opines that the reason that banks are making these kinds of changes to their account offerings is because

Banks have been on the defensive for quite a while now, and the new legislation on debit cards and financial reform certainly isn’t going to help. Having changed from investment banks to bank holding companies less than two years ago, Goldman Sachs  and Morgan Stanley will now have to separate out their derivatives trading units. While that may not affect you much, it’s a big deal to the big banks.

New restrictions on debit card fees will also have an impact. Although Citigroup  reported that limits on debit-card-related fees likely wouldn’t have a big impact on profits because it doesn’t have a huge retail banking business, B of A said it could cost $2.3 billion annually.

As another major player in the debit card business, JPMorgan Chase () could also see substantial lost profits. Yet JPMorgan CEO Jamie Dimon summed up the general attitude toward the regulations: "If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger. Over time, it will all be repriced into the business." In other words, once you think you’ve plugged one leak in the framework of fee income for banks, new ones will pop up to take its place.

It is the same old excuse trotted out by the big banks and the big bank  lovers out there that you just can’t regulate them or else they will just find other ways to make money from fees. Please! How about offering a real service, for a change, and charging for that? Wouldn’t that be a good way to make more money?

Here’s an idea and maybe one of the banks will take me up on it: how about charging a monthly fee for a suite of bank services like access to financial advisor whose job it is to help the customer understand where his or her money is going and how to best manage it? Oh, wait a minute, that would be more expensive to implement than just dinging people with overdraft fees. D’oh!

Elizabeth Warren Predicted The Financial Collapse Back In 2004

 

Elizabeth Warren,  a Harvard Law Professor and the current chairwoman of the Congressional Oversight Committee in charge of overseeing usage of the TARP bailout funds, predicted the financial collapse long before anyone else was talking about it.

In this 2004 interview with Dean Lawrence R. Velvel where she discusses her book, The Two Income Trap,  she reveals the instability that pervades the lives of most middle class Americans and why so many end up in Bankruptcy court. She says that in order to keep up with the expenses, people with median incomes have been forced to borrow and borrow. Why? Because the median income in the United States is increasingly not enough to keep up with the cost of living. She talks about the fixed expenses that families have, such as the mortgage payment, health insurance, and educational expenses as having grown dramatically in the last generation. It is important to understand, here, that, these fixed expenses can’t be cut back.  That’s why they’re called “fixed expenses.”

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Financial Reform Passes: What Does It Mean For The Average Consumer?

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So the Senate voted today to pass financial reform, a bill aimed chiefly at reining in Wall Street from doing the kinds of things that lead to the financial collapse of 2008. There has been a lot of talk about derivatives  and credit default swaps, and while these are important parts of the reform bill, which ultimately affect each and every one of us, there are other aspects of this bill that will more directly affect average Americans.

The largest of these is the creation of a new consumer watchdog agency known as the Consumer Financial Protection Bureau. This agency will be located within the Federal Reserve but will be completely independent from it. It will have an independent director and will have the authority to make and enforce rules against unfair and deceptive consumer credit practices. This agency will regulate the practices any business that engages in consumer lending, from credit card companies and mortgage lenders to payday loan companies. The one group exempted from CFPB authority are auto dealers.

Basically, what the CFPB will do is make sure that when you sign a credit card agreement, you know exactly what you’re getting into. Even more importantly, it will ensure that if you borrow money, you can do it safely and with the knowledge that you can pay it back without going broke. Hopefully, the CFPB will put an end to the usurious practices of payday lenders, for example.

Finally, the reform bill contains new regulations with respect to mortgage lending.  Lenders will no longer be allowed to pay brokers additional fees for steering borrowers into riskier and more expensive loans if they qualify for cheaper safer ones. It also forces lenders to adopt stricter underwriting standards to ensure that no one receives a loan they can’t afford to repay and it reduces abusive repayment terms like huge prepayment penalties and other “junk” fees.

While the reform bill isn’t as strong as many would like, it does have some good aspects that will help consumers better manage their debt. I hope that Elizabeth Warren is appointed to be the director of the CFPB. 

I’m curious….what do YOU think about the financial reform bill?

ING Direct’s Overdraft Line Of Credit Saves Money

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Normally, I am pretty hard on banks and the financial services industry in general. However, when I read a story about the Internet bank, ING Direct and its overdraft policies, I had to give kudos where kudos are certainly due. It turns out that ING Direct won’t have to change one thing about how it does business in the wake of the new law effective July 1 of this year requiring banks to specifically get permission via an opt-in request for overdraft protection.

ING Direct has always offered overdraft protection on the basis of opt-in only, and only in the form of a low interest line of credit. To make people aware of the high cost of conventional overdraft protection, ING now offers up its overdraft  calculator.

Using the calculator, overdrawing your account by $100 for a ten day period will cost you $30, which is 20 cents of interest per day.  With ING Direct’s method via an overdraft line of credit, you would be charged 20 cents in total for that same $100 overdraft.

As ING Direct’s CEO, Jim Kelly puts it:

That’s $30 for 10 days equates to an interest rate somewhere north of 1000%. That doesn’t seem right. The way those transactions get stacked up — in terms of clearing checks, debit card transactions — you get three or four of those for a few dollars and end up paying $100 or $200 in fees in a day or a month.

That doesn’t seem like the value is in the hands of the consumer. It seems like all the value is going to go to the bank.

Read the complete story here.

Debtors’ Prison?

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Although jailing people for unpaid debts was made illegal in the 19th century, in some states, particularly creditor friendly states like Minnesota,  it appears that debtors’ prisons still exist.  A Minneapolis Star Tribune story revealed a disturbing practice by the debt collection industry: using the power of a bench warrant to arrest debtors for failure to appear at court hearings.

The way it starts is that the debt collector gets a default judgment, which gives them the power to garnish wages, levy bank accounts, and seize personal property in order to satisfy the judgment. As part of the process, a hearing is conducted where the debtor must reveal his income and property to the debt collector.  While the individuals in the story were not technically arrested because they owed money, the judges oftentimes set the bail at the amount of the debt.

The story also mentions a couple of other states the connection between the person’s arrest and the debt is more direct: Indiana and Illinois. In one case, an Illinois judge ordered a man jailed for an indefinite period until he could pay $300 toward a debt to a lumber yard.

While most people will not face jail time for unpaid debts and while certainly, debtors’ prisons are no longer legal, the out of control debt collection industry has never particularly cared about what is legal and what isn’t.  Most debt collectors at best straddle the law and at worst outright ignore it.  The tactics of one firm caused this Florida man so much grief that he committed suicide. His family is now suing that firm for wrongful death.

There are steps you can take to avoid the worst debt collection tactics:

1: If you are sued, do not allow the debt collector to get a default judgment by failing to file an answer in time. In most states, you have up to 30 days to file a response.  While you may file the answer yourself, consulting with an experienced consumer law and/or bankruptcy attorney  is highly recommended. If you cannot afford an attorney, there are many who provide legal services to low income individuals for free or at a very low cost. You can find one in your state by going here.

2: Consult with a credit counseling/debt management agency. A credit counselor will work with you and your creditors to arrange a payment plan that you can afford and that will have your debts paid off in a few years. Most creditors will work with debt management counselors to lower your payments to an affordable level and will stop collection efforts once they are aware that you are on a debt management plan.

3: If you have no income or your current income is so low that you can barely cover your necessities, then it’s time to file for bankruptcy. Chapter 7 bankruptcy can protect you from judgments and creditor lawsuits. To find a bankruptcy attorney you may go here or here.

From Great Depression To Great Recession

Sometimes, it is helpful to look to our past for answers to today’s problems. Amid stories like this one about how concern over the deficit are causing cutbacks in governmental stimulus to the still lagging economy, it is worth noting that during the Great Depression similar battles were fought.

I bring you now a series of Youtube videos made by an 85 year old survivor of the Great Depression. She lived through it and she can tell the story much better than I can:

 

 

 

 

 

 

There is a saying: “the more things change, the more they stay the same.”   She says she hears echos of the 1930’s in news headlines today and worries for her own children, since she has no farm in which they can take refuge during these hard times.

Goldman Sachs Wants To Settle On SEC Fraud Case

According to a New York Times story, it appears that  Goldman Sachs would like to settle the SEC case against it for a lesser charge. It would sill face fines in the hundreds of millions, but it would also maintain the ability to deny any wrong-doing and avoid the charge of fraud.

Such deals are all too common place, and basically, it would wipe the record clean for Goldman.  Settled cases simply disappear because they never went to trial, which is why companies often push for settlements. Given Goldman’s worth, a few hundred million dollars in fines is a relatively cheap way of getting out of a very sticky situation.

I sincerely hope that the SEC does NOT take Goldman’s settlement offer. It is quite obvious fraud was done here and it is about time one of these Wall Street giants was made to pay the piper his due.

Profiting From The Economic Collapse: Kondaur Capital

 

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I originally found out about Kondaur Capital  when I read this article about how Wall Street is planning on creating securities of delinquent mortgages to sell to investors.  It made me curious about the company and so I did some digging around and what I found out isn’t pretty.

Kondaur  is a debt collector who specializes in purchasing delinquent mortgages on residential property.  There is apparently a market for “bad paper” because servicers and lenders are overwhelmed with delinquent mortgages right now. Some are willing to sell off some of the notes they hold for a few for pennies on the dollar in order to get them off their books.

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The “New Normal” According To One Fed Official

Sandra Pianalto, the President and CEO of the Federal Reserve Bank of Cleveland has predicted that our recovery from the Great Recession will be slow and that the end result will be a “new normal” where Americans’ expectations for a better life are diminished.  Read the entire article on the Huffington Post here.  A full transcript of Pianalto’s remarks are included in that article.

I don’t know why this is news, exactly.  Anyone out in the real world knows that this “recovery” is slow and most Americans aren’t planning anything farther into the future than how they’re going to pay the power bill when it comes due. 

Many people are now just aiming for ‘financial security’ as their American dream.

This downward shift in expectations isn’t something that has happened overnight. True, during the bubble years, when everyone was able to use cash out of their rapidly burgeoning home equity to buttress them against the effects of low wages and a high cost of living, Americans were able to have a semblance of a stable middle class life.

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