I usually like Politico but this Lisa Lerer article is one of the worst I have read on the issue. It is badly sourced, lacking in nuance and makes completely unsubstantiated claims. Lerer claims that TARP Oversight Chair Elizabeth Warren is "drawing fire from the right" but does not even attempt to define "the right."

She goes on only to cite the opposition of financial services lobbyists who are frustrated that someone is finally calling them on their greedy and nonsensical tactics. Lerer does point to two members of the oversight panel, former Republican Sen. John Sununu and Republican Rep. Jeb Hensarling - not signing onto a commission report. But it takes quite a leap to transform that quiet refusal into "fire from the right."

Read more »

How much do you pay per month on your credit card balance(s)? The minimum suggested? The full balance? Somewhere in between? Does the "suggested minimum" payment (a legal requirement) have an effect?

It may not seem so, but psychologists have determined that those minimum payment numbers may cause card holders to pay less than they normally would if a number wasn't suggested. From the Economist:

Mr Stewart presented 413 people with mock credit-card bills of £435.76 (about $650) that were identical--except that only half mentioned a minimum payment of £5.42. Participants were asked how much they would pay.

Among those inclined to pay the bill in full, the presence of the minimum payment hardly made any difference. However, those who wanted to pay just part of it handed over 43% less on average when presented with a minimum payment. In the real world, this would roughly double interest charges.

I for one am more well-intentioned about paying off my bill every month than I am successful at it. But I always try to pay the max I can afford, regardless of the suggestion. I also try not to use my credit card very often. "Balance-sheet solvent" is a good place to be these days, considering how long that line for government bailout money is at this point.

Never been more proud to be an American.

Wow.

Thousands of volunteers across the country are preparing for today's historic election. Here in Wisconsin, field workers are preparing to give rides and make reminder phone calls to voters while lawyers throughout the state are reviewing election laws, preparing to take the day off from work to make sure that every vote gets counted. But reports from Florida and Virginia that voters have had to wait for up to eight hours in order to vote are provoking concern and outrage that perhaps even the best organized campaign in American history won't be able to make sure that all of its supporters see the inside of a voting booth. Who are the most likely to be unable to wait for hours before casting their ballots? Voters with employers who don't see the value of their employees making their voices heard. Voters who might actually want to elect political representatives who would fight for universal health care and higher minimum wage laws: voters who aren't rich.

Read more »

K-Mart has a new ad: Pick out your Christmas presents today, pay a little now and a little as you go along, then pick up your paid-for presents in time for holiday giving. If we needed evidence of the constriction of consumer credit, here it is. K-Mart is advertising the layaway plan that department stores used for decades before the free flow of credit turned the layaway plan into a relic.

Read more »

A diarist at Daily Kos found an interesting article from the AP reporting that the Sheriff in Chicago (Cook County) has decided unilaterally to halt his foreclosures "because many people his office has helped throw out on the street are renters who did nothing wrong."

The Sheriff will not proceed on evictions unless banks can show by affidavit that the occupants of the homes in question are either the actual owners or have been properly notified as to the foreclosure procedures against them. The Sheriff, Tom Dart, indicates that a 120 day notification period prior to eviction for renters is often ignored by banks. Often, tenants have no idea that the home or building they live in has been foreclosed prior to their eviction:

Read more »

Colonel Ken Allard is no whiner. He's military tough, a firm believer in personal responsibility. But he has been so badly treated by Bank of America that he decided to go public, here and here. Along the way, he picked up stories from other folks about their treatment at the hands of B of A.

I like the colonel. He has the sort of "I'll fix it myself" view of injustice that makes me root for him. But as I read his story, I wondered: how many people will be cheated, scammed, tricked, ignored and generally infuriated before someone says it is time to put some basic supervision in place?

Read more »

At a Harvard panel discussion yesterday, economics professor Ken Rogoff made an interesting point: The liquidity crisis isn't real. Or, to restate it: Any liquidity crisis is caused by the promise of a government bailout. Ken said that his many friends in investment banking said that there is plenty of money to invest in financial services, but right now it is "sitting on the sidelines." Why? Because the financial services industry does not want to pay the terms demanded. As he put it, why do business with Warren Buffett who will negotiate a tough deal, if you believe that the government will ride in soon with cheaper cash?

Read more »

Not technically a bail out per se, but Jeffrey Ely (via Sullivan) has a great idea that should warrant more discussion:

True just sending money is not incentive compatible. But there is no reason to bail out homeowners. Just intervene in any mortgage default. Seize the property and continue making the mortgage payments. In the short run rent the property back to the homeowner.

This is what I have been advocating to my colleagues. I don't know why it is not under discussion. Before going with the arbitrary implememtation that Paulson is proposing now there should be some convincing argument that it's more efficient than this alternative. It is clearly the most direct approach and therefore should be the default (so to speak.)

Read more »

As if the mortgage crisis weren't bad enough already, voters who lost their homes to foreclosure last year may be disenfranchised in the November election. A CBS News report this summer explained how voters with outdated addresses on file may face hurdles when they go to cast their ballots this November.

Read more »

Yesterday, the Wonk Room highlighted a new report by the Center for American Progress called Green Recovery, which lays out a plan to spend $100 billion over two years to create approximately 2 million new jobs, focused in particular on the construction and manufacturing sectors, which have been particularly hard-hit recently. According to the Bureau of Labor Statistics job report released on September 5, the manufacturing lost 64,000 additional jobs in August, and construction has shed approximately 388,000 jobs since peak employment rates in February 2006, though losses in that sector have slowed considerably since the first half of this year.

The CAP report was prepared by Dr. Robert Pollin and University of Massachusetts Political Economy Research Institute economists, and would focus investment in six separate strategies:

Read more »

Richard Thaler and Cass Sunstein recently wrote this piece calling on regulators to emphasize disclosure and transparency by requiring electronic disclosures. The authors suggest that machine-readable disclosures containing general information about credit terms and individualized consumer information would make consumers better shoppers. The authors' basic point that regulators should think beyond paper disclosures is a good one. The prior paper disclosure forms were ineffective and the proposed paper forms will not guarantee that consumers only enter into feasible loans.

The authors' more ambitious claim is that "government should not decide which pricing practices are permitted; it should simply require suppliers to make their pricing observable." In support of disclosure over regulation in the mortgage context, Thaler and Sunstein argue that low-income borrowers are the principal beneficiaries of "financial innovation."

Read more »

Yesterday, Businessweek published an insightful piece by Chris Farley. He points out that while the respective tax plans of the two presidential candidates have dominated policy debates, it's actually rapidly rising medical costs that are increasingly dominating the economy.

Farley writes: "When it comes to fiscal policy, taxes are a subsidiary issue. The crucial long-term fiscal problem facing the U.S. and its aging population is health-care spending; what happens to taxes will largely be shaped by changes in the health insurance market." He reports that total health-care spending in the U.S. by both public and private sources is expected to expand from 16% of GDP to a staggering 40% of GDP in 2040.

Which of the two presidential candidates is most likely to implement a plan that effectively reigns in these costs and ensures high-quality coverage for all Americans?

The NY Times ran an editorial on Friday lamenting how employees are borrowing more and more from their 401(k)s to pay for medical bills, mortgage payments, and stints of unemployment. The Times reports that this trend is exacerbated by the "401(k) debit card," which holders use like any other debit card, except the money comes as loans from their 401(k)s rather than as deductions from a checking account.

What the article, like the Democratic Party, neglects is the inadequacy of a retirement system reliant largely on 401(k)s. In her new book, When I'm 64, economist Theresa Ghilarducci demonstrates that we can have a system in which workers save for their own retirements without the risk and inequity of 401(k)s.

Read more »

Yesterday was the 73rd anniversary of President Roosevelt signing the Social Security Act into law. Eric Rauchway has a great post highlighting how important the program has been, and how prescient FDR was about its importance.

My favorite bit:

After Roosevelt's own statement, the best early comment on the act's significance is probably Benjamin Cardozo's explanation in Helvering v. Davis, as the Court upheld the law:

But the ill is all one, or at least not greatly different, whether men are thrown out of work because there is no longer work to do or because the disabilities of age make them incapable of doing it. Rescue becomes necessary irrespective of the cause. The hope behind this statute is to save men and women from the rigors of the poor house, as well as from the haunting fear that such a lot awaits them when journey's end is near.

Social Security deserved that poetry. Along with the Civil Rights Act and the Voting Rights Act, it assuredly rates among the single acts of Congress that have done the most good most effectively for the most Americans.

(via Matthew Yglesias)

Check out today's NY Times article about how people are increasingly making decisions to marry and divorce based on their need for health care insurance.

Read more »

This is the first opportunity we have to see the new 2005 Chapter 11 provisions in action for big retailers--and they don't work. This week, Businessweek takes a look at the dysfunctionality of the 2005 amendments. The article explains that under (1) the new 210 day cap on the amount of time bankrupt companies have to decide whether to keep a lease and (2) the requirement that bankrupt companies pay cash to utility companies and other suppliers, many retailers are simply liquidating, instead of engaging in the longer and often value-preserving process that the old law facilitated.

Read more »

All the recent talk of tire gauges and energy plans had me thinking this morning about one of my greatest disappointments with the current administration. True, the list of disappointments is very long - epic, even - but one in particular has come to mind this week. In the days immediately following September 11th, our country was united in a way that we had never been in my brief lifetime, and will probably never be again. Our country, at that moment - and I can only speak for myself here - felt as if it was ready to do whatever was asked of it going forward to make sure that what had happened would never again happen, and that some measure of justice would be achieved.

That moment, particularly from the perspective of someone in my generation, was a huge inflection point in our lives. It felt like - and indeed was for many - a fork in the road. And it was the moment when the President and the leadership of our country should have stepped forward with a plan that would have allowed us all to take an active part, however small that part might have been, in placing ourselves and our country in a stronger, more secure position in the world. Instead of a plan, though, we were asked to pay fewer taxes and shop more. And here we are, almost seven years later, with $4.00+ gasoline and an unprecedented consumer debt level (not to mention the banks, the record deficit, the national debt, the cost of two wars, etc., ugh).

Read more »

Not the upbeat topic I had been hoping for with my inaugural post here, but it is difficult not to hold a dour view for our economy in the near future considering the current climate, and this raft of recently updated economic indicators does not give much reason for a brighter mood.

On July 29, the updated (and widely reported) S&P/Case-Shiller Housing Index was released for May, revealing a 15.8% drop in home prices across its 20 city index since May 2007, which represents the largest decrease ever for the Case-Shiller. This report is not all bad, however, as the index posted only a 0.9% drop since April 2008, which is one of the smallest decreases ever and may indicate some slowing of the price slide. Seeking Alpha delves into this issue in greater detail, and they highlight that the losses are very much regionally based, as seven of the twenty metropolitan areas actually posted modest gains in home values over the past year. Most losses, which were heavy, were sustained in Los Angeles, Miami, Las Vegas, and other areas of aggressive subprime mortgage lending.

Read more »

A Public Citizen report* released this week shows that Chamber of Commerce-sponsored "studies" purporting to show that pre-dispute mandatory binding arbitration agreements are fair to consumers are about as credible as "studies" showing global warming isn't real.

The report offers a needed check on sham research that threatens to distort an important policy debate. And it comes at a key time, with one bill that would curb some binding arbitration agreements having passed a House Committee yesterday, and the more comprehensive Arbitration Fairness Act poised to come up for a Committee vote soon.

Read more »

The New York Times ran an excellent story this week showing how the Obama campaign is promising that 2+1 can equal 4.

Obama's plan for universal health care relies on two sources of funding: reversing some Bush tax cuts and improving the system's efficiency (through such measures as producing electronic records and reducing administrative costs). The essential problem seems to be that, while the plan would produce savings, they would accrue over a decade or longer, not fast enough to cover the massive up-front costs.

On the one hand, I applaud how the campaign is emphasizing that a universal system will actually be cheaper. But Obama is telling Americans that W. was right all along: new taxes, even on the wealthy, aren't necessary for us to have an amazing social benefit (think national security or Medicare Part D). Obama's plan also resembles Republican efforts to privatize Social Security. Both camps fudge the arithmetic to advance an ideological goal. (I happen to like Obama's agenda and despise Bush's.) To be fair, Obama's math seems unrealistically optimistic, whereas Bush was outright lying. But that's largely beside the point.

Read more »

Last week, the Bush Administration announced that the "fundamentals" of our nation's economy are "very strong," revealing yet again a lack of appreciation for the struggles middle class families are now facing. And McCain said almost exactly the same thing last month.

Even though inflation may be down, unemployment "relatively low," and corporate profits "healthy," middle class families are not having an easier time making ends meet. Professor Warren highlighted the economic realities confronting families in testimony before the Joint Economic Committee this week. Her numbers powerfully show that our economy's "strong fundamentals" have not translated into increased standards of living for working Americans.

Read more »

In 2002, the Ohio State alumni association, acting with the university's approval, signed a contract to give MBNA the email addresses, mail addresses and phone numbers for 55,000 undergraduate students in exchange for a guaranteed minimum-payment and credit-card royalties from the affinity credit cards that the bank would sell to students. Under the contract, the credit card company was allowed to conduct at least five direct mail marketing campaigns each year in addition to three annual phone solicitations. While the credit card company also received information about faculty, staff and the parents of students, the company was explicitly prohibited from contacting these groups by phone. The credit card company was also allowed access to the university campus, where it could use a variety of marketing tactics to pursue students in-person.

Ohio State is far from unique; This week, Businessweek reveals that financial relationships between university alumni associations and the credit card industry are pervasive, explaining, "Some of the country's best-known and largest schools have multimillion-dollar credit-card deals, including the Universities of Michigan, Minnesota, and South Florida. Private schools also have these typically secret deals, but information about public institutions is more readily obtainable under disclosure laws."

Read more »