The strangest thing

Listening to an interview with New York Times reporter David Enrich on NPR the other night, I heard a story that boggles my mind. When Donald Trump declared bankruptcy on six different enterprises, US based banks stopped lending him money. So, he went to German based Deutsche Bank for business loans.

Even there, Deutsche Bank’s investment bank soured on Trump and refused to lend him any more money. Then, its real estate mortgage bank soured on him and was owed US $50 million after refusing to lend him more. But, after bank leadership mandated no more lending to Trump, the story became even more bizarre.

Trump’s son-in-law, Jared Kushner, introduced him to a private wealth manager in New York for….Deutsche Bank. She arranged a $50 million dollar loan from Deutsche Bank’s private wealth group to pay back the outstanding loan with the real estate mortgage bank group within Deutsche Bank. Robbing Peter to pay Paul does not adequately define what happened. And, this is after Deutsche Bank leadership mandating no future loans with Trump. Enrich was unsure if this loan was still outstanding.

Having worked for a very conservative bank in my past, this is a quite surprising story. As a retired consultant, I am aware of one bank that had to be sold due to one very big loan defaulted. I am also aware of several banks who overextended themselves during the housing crisis that no longer exist. But, for Deutsche Bank to permit one part of the bank to pay off a loan from another part for a persona non grata individual, is quite strange and not in keeping with good stewardship.

It should be noted Deutsche Bank has been investigated and fined for money laundering for members of Russian oligarchy. It is also why there is interest in Trump’s financial dealings with this bank by the US Congress. Enrich noted Deutsche Bank is the “Rosetta Stone” to digging into Trump’s finances. This is why Trump has threatened to sue the bank to prevent such release.

Lesson to Leaders – We need you not to cheat

Paraphrasing a quote from Friedrich Nietzsche, the German philosopher: It matters less that you lied to me, as it matters more that I can no longer trust you. In any relationship, this quote describes the unfortunate epiphany when one realizes that another party has lied to them. Trust is built over time, day by day, brick by brick. Yet, a lie can bring the whole building down and cause you to re-earn that trust. Today, I want to focus on leadership letting us down by not shooting straight with us. Oftentimes, when a leader lies or cheats, it is to protect his job or gain a huge return.

Many of the companies who failed us under the financial crisis – Bear Stearns, Lehman Brothers, Wachovia, Merrill Lynch, Washington Mutual, AIG and so on, either no longer exist, were bought by someone else or received a huge bailout to make it through. Some of the bigger ones who survived, such as Bank of America, JP Morgan Chase and Citigroup, are still dealing with issues they perpetuated or acquired from one of the above companies. At the heart of these problems were companies trying to make huge amounts of money off selling mortgage loans to people who could not afford them, packaging the bad loans in bundles and selling them off as reasonable assets. One of the fallacies of spreading risk by bundling is if all of the risk is crap, it won’t be better when bundled.

Yet, the leaders of these companies failed to be good stewards to the customers, fellow employees and managers, shareholders and regulators. If you read “Crash of the Titans” about Merrill Lynch and Bank of America, you will realize that only a handful of people in Merrill knew what was going on, but the CEO lied to his other direct reports and lied to his shareholders when questioned. As a result, the shareholders and public were misled. If you follow-up on Lehman Brothers, who went under, you will see that the CFO moved $50 million to the onshore books from the offshore books for the regulators’ eyes and then moved it back again. This was reported by “60 Minutes.” Yet, to this day, no one from Lehman has gone to jail.

In each of these cases, you will find cheating and lying at the heart of the story. As I have said in earlier posts, the banking industry used to be one of the more trusted professions, but these liars and cheaters (let’s call them what they are), breached this trust. Some conservative leaders balk at the requirements of Dodd-Frank regulations which introduced accountability and the creation of the Consumer Finance Protection Agency initially run by now Senator Elizabeth Warren. This agency has already fined financial companies over $600 million (as of last summer) and counting for malfeasance and misrepresentation. So, the answer to those who balk is “tough, these foxes brought it on themselves and we have to guard the henhouse.”

Unfortunately, this plays out in spades in political circles. We have legislators who are so beholden to their funders, they are less inclined to tell you what they think, as they must go along with what the funders think. Please refer to my previous post on “The Routine Bigger Conspiracies” for how this misrepresentation can manifest itself on some bigger issues. It goes even further when we look at the job preservation motivation. Legislators worry more about keeping their job than doing their job. This is the very reason nothing has happened on gun control laws. They are failing to do the right thing because of a huge funding source in the NRA.

Recognizing that the GOP congressional leaders seem too zealous on the Benghazi episode, when you set aside the unhealthy motivation of “gotcha politics,” there are legitimate questions that need to be asked and answered. If the President had been less concerned with spin-doctoring from the outset, some of these questions would not exist. The real answer would seem to be “we failed to read the risks correctly and we did not have protection in place and people died.” The same goes for Senator Mitch McConnell who had a report buried in October (as reported by the New York Times) that showed trickle down economics failed to work. As this was key talking point of the GOP Presidential candidate, it seemed to be politically motivated.

I have also noted on several occasions over my disdain over the previous administration’s fabrication of a story of Weapons of Mass Destruction based on faulty data. People would say they did not know, but that is not true as Scooter Libby, who worked for Karl Rove, went to jail for something Rove later said he knew about as well. As you recall, Libby leaked the name of Valerie Plame to the press, who was a CIA operative and whose husband (and former ambassador) reported at the behest of the CIA that there were no nuclear building materials being sent to Iraq by Libya. This report was misused by Bush/ Cheney and when the ambassador complained in the press, Libby leaked Plame’s name to discredit him. In essence, this is one of the smoking guns that showed Bush/ Cheney lied to the American people and many Americans have paid the ultimate price for this deception.

And, it also flows to state and local politics. To give some brief examples, in NC the Speaker of the House knew he did not have enough votes on a bill, so he sent everyone home at midnight only to call everyone back in from a 1 am vote. He knew others would leave, so he alerted his crowd to pass the word to stay and the yea votes now outnumbered the no votes. On a bill to move the potential to frack for natural gas, one of the legislators voted yes incorrectly and rushed forward to say she needed to change her vote. It was not allowed and the bill passed by one vote. Last week, a NC Committee Chair knew he did not have enough votes, so he took a voice vote – all in favor say “aye” all opposed say “no.” He purposefully heard the loudness differently than others, bragged beforehand he would find a way, and said it passed.

We citizens, customers and shareholders need you to do business in the right way. When you cheat, we seem to be the ones who get screwed. As I told one the Committee Chair, I do not care if you disagree with me, but I do care if you cheat. I said I did not know your name last week, but now I do. Please help us hold people accountable. When you hear that someone does not want regulation, I can assure you it the voice is echoing what is told to them by those who are regulated. We need less bureaucracy, but make no mistake, the foxes need regulation. Someone has to hold people accountable, because it is obvious that market and legislative practices will not.

A Few Financial Tidbits from an Old Fart

Recognizing there are many places for financial advice, as an old fart, I thought I would offer some specific examples on ways to save money. Some of these are in reaction to various conversations I have had with my children, nieces and nephews, but regardless of age, it does not hurt to validate your thinking from time to time. Please take these for what they are worth, examples of lessons learned, pitfalls avoided and plans executed when I was prescient enough to listen to someone else beforehand.

  • Don’t have too many credit cards. I have one debit and two credit cards – you will pile up too much debt otherwise and expose yourself to identity theft with too many. Pay down your largest interest rate first and close it out. Don’t just cut up the card, cancel it as identity theft can still occur – trust me on this.
  • If you are working and have access to a 401(k) or 403(b) plan, for God’s sake use it. If there is a match, find a way to contribute up to the maximum match percentage. You will retire from some place and the cash provides cushion if you are laid off (company’s do that and it has happened to people who are better at their jobs than you are). You are throwing money away otherwise.
  • Do not play the lottery. I repeat, do not play the lottery. You might as well throw the money out the window. Lotteries are a regressive tax – it means people who can least afford to pay taxes, contribute to the lottery. Use the money instead in the 401(k) or 403(b) plan.
  • Avoid payday lending. In the bible, usury is a sin. In Dante’s Inferno, there is a level of Hell for payday lenders of the day. These guys are a step away from legbreakers. You will go into a death spiral of debt if you succumb.
  • If can’t get a job, try volunteering for a charity group. The networking is good as people will see your energies on showcase in a good way. Plus, the psychic income is rich. By working, you will avoid depressive thoughts and can use your energy in a positive way. Some non-profits may be able to figure out a way to get you some income. Plus, you can see ways to tap services if needed.
  • If you have some money to invest – think dividend paying stocks with low P/E (price to earnings) ratios. Take the price per share of the stock and divide it by the earnings per share. If 20 or under, it may be worth the effort. These companies may also have Dividend or Customer Purchase plans you can access online. This means you buy the stock without a sales charge driectly from the company.
  • You do not need to own the newest gadget or thing. Companies do this to get you to buy something. I am not impressed by who owns what. Most people are not. If people are more impressed by your gadgets than you, then you may want to hang around a different crowd.
  • Be smart with your fast food purchases. Do not buy the drinks there as the margins are huge on liquid. Get out of your car and go inside. You are wasting a ton of gas waiting in line and it may be faster if the line outside is long. Read the calorie chart – the Affordable Care Act is requiring disclosure. This will help you be less of a train wreck later on. And, please do not supersize as you will become what you eat – supersized.
  • Better yet, eat more meals at home and yes, eat the leftovers. The savings are huge. I will never die of food poisoning in my own house, so I usually have to be quick with the leftovers before my wife tosses them.
  • Avoid eye level purchases in stores, especially if you are woman. Not to be sexist, but the highest margin items in a grocery store are at the eye level of a 5’5″ woman. Also avoid out-of-place stuff at the end of an aisle or by the cashier. The stuff by the cashier is lethal. While we are at it, do not go inside a convenience store when you pump gas unless it is to use the restroom. Their margins are huge inside on purchases.
  • Reduce water usage by not running water while you shave, brush your teeth, etc. Also, get a lower flush toilet or put a small enclosed container of rocks in the tank as this will reduce the water usage. Use the energy saver setting on dishwashers.
  • Shut off electrical devices overnight. This will save energy plus it will slow the deterioration of modems, routers, computers, etc. And, it will reduce a fire hazard.
  • Go generic on all prescriptions (some generics are the same pill). Use the store brand ibuprofen, decongestants, etc. as they work just as well. Not all pills are the same as one of my sons breaks out in a rash with one generic, but the brand is fine, so use trial and error.
  • Get a second and third opinion on surgeries or diagnosis. Especially, back surgeries. Sometime surgeries can do more harm than good. If you need one, make sure you get all the answers to your questions and have exhausted other options.
  • Walk to errands. Take a couple of shopping bags and walk to the store. You will be healthier, plus you will buy less because you cannot carry it all back.
  • Don’t drink so much. I don’t drink anymore, but have drunk enough for a lifetime before I quit almost six years ago. You would be amazed at how much you save, plus the better health pays dividends. My last straw was a friend who died at age 59 because of alcoholism. I can tell most people drink more than they tell people. So, find ways to cut it back. Trust me, I know.

That is all I have for now. I hope this was useful. I am sorry about the preaching on the last item, but that is a big-ticket savings item. I welcome other ideas as I want to learn how to save more as well. Please provide additional suggestions below.

Pay-day Lending – there is a reason they spam you

I am quite certain my fellow bloggers are inundated by spammers who love your blog or post without commenting on anything specific. One of the more popular spammers comes from various pay-day lending groups. When we talk about bad types of capitalism, pay-day lending ranks close to the top. It is the worst form of usury as people in need get preyed upon by these folks. The pay-day borrowers do not realize they are paying an interest rate north of 200% as it is so easy to do.

Yet, what happens are the people in need set themselves up for a death spiral that is hard to pull out from. They begin a journey of paying more and more interest to pay off the use of funds a few weeks before their pay check. These lenders were outlawed in NC, which just meant they moved across the border to do more sales. I have heard people who say they provide a useful purpose, yet in essence they don’t. People are getting immediate money for a need coverable by their pay check. Yet, end up paying more than double or triple the amount they borrowed. And, it does not stop. You are beholden to the pay-day lenders for a long duration.

The lenders used to set up shop just off the military bases. This is unfortunate as they would prey on married couples who are separated by an ocean with one distracted  by war. The one at home needed the money and did not have the counsel of two heads asking is this the right path forward. In the volunteer charity work I do with homeless families, quite often the families are paying interest rates of 23% on a car loan. This type of car payment puts a huge bind on their budget and we help them get away from this loan and into a better one. Yet, for the pay-day lending, you have to multiply the 23% loan interest rate by a factor of 10 or more.

If you do not believe me, let’s do a simple exercise. If I have bi-monthly take home pay of $1,100 and need to get it now, the pay-day lender will give me $1,000. That will likely include a processing fee of some sort, but let’s say it is $0 and the rest due is interest plus the loan. So, the next pay-day, the lender takes my $1,100 payment to settle the loan. That is a 10% interest for a 1/2 month time period. Since there are 24 such time periods in a year, using simple interest, that is a 240% annual rate of interest.

If that is not bad enough, come the end of the 15 day period, I find I need my paycheck, so I reborrow it. So, I give them my paycheck, they take out another an extra $100 (I am rounding to make the math easier) on the interest I owe and they loan me $900 rather than $1,100 in take home pay. So, now I owe $2,200 on the use of $1,900. Assuming I could pay it back in 15 days, that would be a 1/2 month loan rate annualized to the tune of 379% per annum. However, I cannot pay the full loan back as my next pay check is only $1,100. So, I borrow yet again. The take out $200 more in interest due on top of the next $100, so I get $800. So, now I owe $3,300 on the use of $2,700.

I used a fictitious interest rate for the ease of the math. Yet, I also did not factor in a processing fee either. Yet, the purpose of the illustration is to show how fast you can get in over your head. Even if you did not borrow against a portion of your paycheck, you can soon end up owing the entire amount. A key problem is the people in need are the least likely to run the numbers. They just need the cash.

I am presuming the audience reading this is fairly astute, much more so than the average Joe’s and Josephine’s. If you have friends or relatives who are going down this path or who are considering it, help them look at other options. There are an increasing number of microloan possibilities whose lenders do not prey upon the borrowers. There are some other financial assistance programs that go under varying names. There may be some co-lending options as well. The dilemma is the pay-day lending is a vicious cycle that is difficult to break. So, help people avoid that cycle and try to get out of it if they can.

I do not begrudge anyone making a reasonable profit. Yet, I do find fault with people making an excessive profit off the backs of people who can least afford it. If you have a story about pay-day lending, please feel free to share it. Others need to see how this death spiral can affect people.

Some good news for our journey

Since we seem to highlight all of the troubles in our world, especially in the height of a political campaign, the good news stories sometimes get overshadowed or are downplayed, which I find amusing in its own right. So, here are few that caught my eye over the past few days. I will organize them around a few overarching themes.

US Economy

We have seen the unemployment rate dip for the first time below 8% to 7.8% in a long while. This issue has been downplayed by people from an opposing political view, which I view as the second team rooting for the first team to not play well, so they can get into the game. Some have even called foul on the numbers. As I mentioned in a comment on someone else’s blog when non-partisan bureaucrats agree with your point of view, they are non-partisan, yet when they don’t they are biased. The unemployment decline is part of an overall trend over the past many months of a slow recovery.

Yet, to note a couple of other data points I saw today, courtesy of the Associated Press the 2011-12 deficit fell by $207 Billion as reported by the Treasury Department for the latest fiscal year close. It is still high at over $1 Trillion and we must deal with it, but the reason for the fall was encouraging – tax revenue rose by 6.4% as more people got jobs and received income. Corporations also contributed more tax revenue than in the 2010-11 fiscal year. That is more good evidence of our recovery out of the abyss.

Housing has also continued to improve, but I wanted to highlight two other stories in the paper today. The Charlotte Observer reported both Wells Fargo and JP Morgan Chase had record profit third quarters largely due to the refinancing of mortgages. Banks usually recover first and are a leading economic indicator. Just this year, the Wells stock price is up 24% and the JPMC stock price is up 25%. Bank of America is up 64%, but they had more problems to deal with as their price had fallen further. The overall stock market per the S&P 500 is up 13.6%, with the Dow up 9%. My blog friend Vincent Mudd at www.vincentmudd.wordpress.com shows how much the stock market has climbed over the past four years along with some other measures. These are very positive signs, especially with stock market performance like bank performance usually leading recoveries before for significant job growth.

Alternative Energy

Yesterday, Interior Secretary Ken Salazar announced the set aside of 285,000 acres in the western US for the purpose of creating 17 new solar energy zones.  These zones are primarily in six states – California, Nevada, Arizona, Utah, Colorado, and New Mexico. These zones are for large-scale solar power plants. I reported earlier that similar activity is being undertaken around the globe and country. It was reported earlier this week in NC that Apple, Google and others are leading a push for solar powering of their new electricity intense data centers. Several 15 – 20 MegaWatt sites are sprouting all over the place. I noted in an earlier post that the state of the art photovoltaic solar panel is being made in Durham, NC by Semprius which is owned largely by Siemens, a German company. This panel is a significant improvement over previous panels and helping to lower the cost of solar energy.

In some undertold news, wind energy is now being produced in 38 states. I like to say this as some who represent the fossil fuel lobbying efforts portray these industries as futuristic. They are here and are working. And, they are creating jobs. Germany is ten years ahead of us and, while I love Siemens, it is not ironic that they are the largest owner of Semprius based here in the states. I would add if you are looking to invest in US-based alternative energy, note that GE is one of the largest makers of wind turbines. And, none other than Warren Buffett and T. Boone Pickens are big investors in solar and wind energy.

Global Society

The shooting of Malala Yousufzai, the 14-year-old educational activist in Pakistan is a terrible tragedy. The Taliban has sworn if she does not perish, she will again be a target. Her alleged crime was speaking out in favor of educating girls. Yet, what I had hoped would happen seems to be happening. Regular Pakistanis and leaders are denouncing the Taliban for this uncalled for violence. Yesterday, Islamic clerics have condemned the shooting. This may the lightning rod the world has been waiting for.

Islamic extremism can only be solved by the rest of the Islamists. They have to say enough is enough. This is not easy when your life and lives of your family are impacted by standing up against the worst kind of thugs. The bright spot we have not highlighted enough in Libya after the embassy bombings of last month is the group condemnation of the bombing by a growing number of Libyans. This is what it will take. The leadership has to follow suit or these countries will be destined to hold themselves back. One has to only look to Turkey to see how passionate religion can co-exist with secular governance. Turkey is thriving.

This is one brave little girl and I hope she survives. To do what she did at age 11 is stunning. I hope this terrible incident will change the course of history. The reaction by the saner people in Pakistan seems to indicate it might.

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That is all I had for now. We should celebrate the steps forward as we do tend to highlight the fall backs. As imperfect people in an imperfect world, we do tend to make our mistakes. So, please join me in spreading the good news.

To be honest, both disappointed me

Unlike my friend Hugh, I watched the Presidential debate, but wish I hadn’t because I could not sleep afterwards. I agree that Governor Romney came across better based on his assertiveness and the President was unusually timid, but I was disappointed in both candidates for various similar and different reasons. Style is important, but words matter, which is the reason for my insomnia. Let me summarize my thoughts by what I see as the similarities and differences.

The similarities

As a true independent voter who will and has vote(d) for candidates from both parties, my main frustration is both candidates and parties are misleading the American people about solving the deficit. We must have an adult conversation about raising taxes on everyone, not just the upper income earners under the Obama plan. This is in concert with reducing spending. Otherwise, the math will not work. To my GOP friends, Romney can be as assertive as he wants, but his tax plan will increase the deficit, so says non-partisan economists, not the economists on his payroll. Plus, more on this later, but he did a big 180 on his position during the debate, so if you read what he said, you would walk away with a different impression.

Obama at least is talking about raising some taxes, but it is not enough. I am a huge supporter of Simpson-Bowles as a starting point and he is giving lip service to it. Please note, Congressman Ryan voted Simpson-Bowles down, so he should not be telling anyone what a great budget steward he is. And, Romney said he had his own plan, which non-partisan economist say will increase the deficit. Folks, we must raise taxes and cut spending. Both parties need to get real and stop misleading the American public. As a reminder, we are one of the least taxed countries in the world, so says the Paris based Organization for Economic Cooperation and Development.

The differences

Please know there is no such thing as a perfect candidate or president. Neither are nor will be. Yet, here is where my other frustrations lie, in general about the campaign, and specifically to the debate. Governor Romney, bless his heart, is a moderate leader for an extreme party. Because of this and due to some faulty premises underlying the GOP platform he has changed his opinion on several occasions. During the debate he made some more adjustments to make himself sound more believable to us independent voters. I mentioned the first one above where he moved away from reducing taxes on the upper income earners to jump-start the economy to making enough adjustments to come up to a deficit neutral budget. This was at the same time he was doing subtraction by addition saying he is going to reduce the deficit, by increasing military spending, adding back the mysterious Medicare cutback and eliminating Obamacare which the Congressional Budget Office (again one of those non-partisan economists) said will increase the deficit.

He also flipped on his regulation stance where he said not all regulations are bad and said there are parts of Dodd-Frank that should remain. This was likely news to his GOP followers. More on this later, but the President missed a huge opportunity to talk about the refunds that his Consumer Protection Bureau under Dodd-Frank have obtained for consumers totalling over $500 million for fraud and aggressive telemarketing  by three credit card companies – American Express, Discover and Capital One – in the last three months. Romney also talked about how he supported education, although his stance has been to make cuts in education and he has spoken on several occasions about doing this.

Finally, he continues to be all over the place on the Affordable Care Act trying to define a sensible talking position against something that he created for Massachusetts that is patterned after a GOP idea that Senator Jim DeMint supported as late as 2007 for the whole country. Just two weeks ago he said he would continue parts of the ACA and then reversed that position. That Etch-a-sketch is getting a workout. I find it funny that the resolution to our federal budget woes under Romney is to push things like healthcare reform to the states who don’t have any money either, plus we lose some economies of scale.

My frustration with our imperfect President is he missed many opportunities to hold Romney’s feet to the fire. The President did do a mea culpa on several fronts and noted we should be doing better, but he did not aggressively defend himself. He could have done better. Yet, this will also shock GOP voters – the President can actually run on his record. I would encourage you to read the blog of www.vincentmudd.wordpress.com which looks at 18 measures of whether we are better off than four years ago. His conclusion is we are with most of the measures showing improvement. And, even Vincent’s measurements short change the President as do the GOP talking points, as many of the recession job losses turned up in the first few months of his presidency and those are directly traceable to the financial crisis started before he took office.

Yet, his record shows the following with respect to the economy:

  • the stimulus did not fail – it saved us from a depression, added 200 basis points to the GDP and added 2.5 million jobs, so says six non-partisan economists like Wells Fargo, JP Morgan Chase, the CBO and others.
  • the US auto industry and about one million jobs were saved and the US was paid back for the loans with interest.
  • Dodd-Frank is not perfect, but it helps govern banks that continue to show poor stewardship. There is bad banking news on a weekly basis. Plus, as noted earlier, the Consumer Protection Bureau is doing precisely what it needs to do to rein in aggressive and fraudulent practices.
  • more people got Pell Grants and the community colleges have been training even more people.
  • the Affordable Care Act has allowed 3 million adult children to remain on their parents’ healthcare plans and preventive check-ups are now more available and preexisting conditions and lifetime limits are eliminated.

Finally, the President is at least aware that we have a global warming problem and is doing something about it. This above all things is reason not to vote for Romney because we are already ten years behind Germany on eco-energy planning and we cannot fall further behind. We must have a bi-partisan eco-energy plan that lasts the term of the next president.

Let me close with these statements as a true independent voter. I live in North Carolina. As a citizen of NC, I will be voting for Republican Pat McCrory for Governor as he is a moderate and collaborative leader and former mayor of Charlotte for fourteen years. I will also be voting for Democrat Barack Obama for President for the reasons noted above and for my disappointment in the GOP party platform. I will also be voting for Democrat Jennifer Roberts over he GOP challenger for Congress. She is former Board Chair of the Mecklenburg County Commissioners and is also a proven collaborative leader, while her opponent is a walking conflict of interest.

I am weary of the rhetoric and mistruths and am ready to vote. Yes, the President is not perfect, but he has done a better job than the GOP has given him credit for. He has actually earned your vote, but in our day and age of truthiness, you have to look past the carnival hawkers to see the real truth.

Those Gosh Darn Regulations

Those gosh darn regulations sure do get in the way of guy making money. I hate that when it happens. Take for example, that new Consumer Financial Protection Bureau that was created under that evil Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. You know the one that was inspired by the so-called financial crisis created by Wall Street by packaging a bunch of bad mortgages that people should have known better to get into. The law that put that power-hungry Elizabeth Warren in charge as the bureau came of age. I don’t care if she grew up poor and was a waitress paying her way to college.

Well, for the third time in three months, the Consumer Financial Protection Bureau has reached agreement with a major credit agency to refund money to customers due to fraudulent marketing practices and late fee assessments. Yesterday, according to Lindsay Wise of McClatchey Newspapers “American Express has agreed to refund $85 million to 250,000 customers after an investigation uncovered numerous violations of consumer protection laws, ranging from illegal late fees to age discrimination against credit card applicants.” They also failed to report customer disputes to credit bureaus and misled customers regarding paying down debt and money for signing up for new credit cards. In addition to the $85 million refund, American Express was fined a civil penalty of $27.5 million.

This is all the result of an investigation conducted by the Consumer Protection Bureau working hand in hand with the FDIC, the US Comptroller of the Currency and the Utah Department of Financial Institutions. About one week ago, it was announced that Discover Bank would refund $200 million to 3.5 million customers and pay $14 million in penalties. The charges on Discover Bank related to deceptive telemarketing tactics to sell add-on products. These two settlements and fines are on top of the one assessed in July on Capital One Bank who agreed to pay $210 million in refunds and fines to settle similar charges on pressuring customers to buy add-ons.

By my count that is over $536 million in refunds and fines that have been assessed against these three companies in three months. How is a guy to make a buck when he has to treat people fairly and not use deceptive marketing practices? I am so glad Mitt Romney is running for office as he and his Republican mates like Senator Richard Shelby of Alabama, the Senate Banking Leader, will get rid of these intrusive regulations which are hurting our businesses. We all know we should live in a buyer beware society where we can get the economy moving. That is what Ron Paul tell us. We do not need “no stinking badges” to help us govern our free markets. I should have every right to mislead people into buying my products and services.

The fact that a telemarketer misled the author’s 82 year old mother a few years ago into buying a Medicare Advantage policy she already had and making her give me her Social Security information over the phone is just buyer beware stuff. The fact the author had to help his mother change all of her banking information and unwind the transaction again is an onus that should be placed on him and his 82-year-old mother. This business person does not need stinking regulations and a Consumer Protection Bureau to tell him what he can and cannot do. That is un-American and definitely anti-business. Thank God for Governor Romney, Senator Shelby and the GOP. They will rectify this matter and take our country back to where it needs to be.

The above can also be entitled “A Day in the Life of a Republican Businessman.” Thanks for reading and vote accordingly.

Outside Looking In – the World View of our Election

With one convention down and one to go, an article written by Fred Kaplan of Slate called “The amazing chutzpah of Condi Rice” caught my eye. In short, he was taking issue with both the comments and source of such at the GOP convention by former Secretary of State, Condi Rice regarding the deteriorating view of the US by others in the world. On the latter point, he notes that Rice was ” a top advisor in the most disastrous, reputation crippling foreign policy administration in decades.”  On the former point, he noted the global view of the US is in a much better place than it was when George W. Bush left office. Per a recent survey by the Poll Research Center:

  • 60% of British citizens have a favorable view of the US as compared to 53% in 2008, the last year of Bush’s term.
  • 69% of French citizens have a favorable view of the US compared to 42% in 2008.
  • 52% of German citizens have a favorable view of the US up from 31% in 2008.
  • 72% of Japanese citizens have a favorable view of the US up from 50% in 2008.
  • Only the three Arab countries measured – Lebanon, Egypt and Jordan did it decline.

I am a recurring viewer of the BBC World News America, along with PBS Newshour, both of whom give a great perspective of the world and the “outside looking in” views of the US. I have seen Katty Kay, one of the BBC anchors based here on talk shows and she knows more about the issues than almost every US politician as she sees the issues with less bias and in a more holistic way which is refreshing. Outside of PBS Newshour, American news anchors tend to talk about the game of politics and steer clear of the substantive issues. Plus the real issues are less tantalizing (Clint Eastwood trumps Marco Rubio, e.g.)

This outside in view is helpful to describe the next point made by Kaplan regarding the world view on the election. According to a another Pew Poll as reported by CNN, global attitudes toward President Obama as a leader make Rice’s comments dubious:

  • 87% of the Germans, 86% of the French, 80% of the British and 74% of the Japanese have confidence in Obama .
  • More striking than that, 92% of the French, 89% of the Germans, 72% of the British and 66% of the Japanese want Obama re-elected.

Kaplan cites “The facts are these. Obama’s foreign policy, while hardly perfect, has been quite successful. He hasn’t caused any outright catastrophes. He ended the Iraq war. He approved his generals’ plans for escalating the war in Afghanistan, but when it did not work, he backed off instead of plunging deeper into the big muddy. And, some things Republicans wish everyone would forget – he ordered the killing of Osama Bin Laden and decimated al-Qaida.” He noted that the GOP needs to steer clear of foreign policy as their argument is weak. Kaplan has focused on the military issues, since he is a “War Stories”columnist for Slate.

If we look at some additional issues the world sees, then we can get an even better glimpse of the over-whelming support for Obama. One of the major concerns I have noted like a broken record is how can we trust a party who denies the existence of one of the greatest challenges facing the US and world? Global warming is here and is man-influenced. The data and number of scientists who cite this are overwhelming. The GOP is the only formal body in the world that denies global warming is happening. Individually, many GOP politicians say under their breath what they cannot say as a group, given the Oil and Gas industry heavy influence and funding of the party. The rest of the world clearly contrasts Obama’s position (such as the mpg and advocacy for alternative energy) versus the Romney and GOP positions of double-downing on fossil fuels and gutting the EPA.

The other issue is Obama coming down hard on the Wall Street crowd with the Dodd-Frank Bill and Consumer Protection Agency. The travails of the financial sector led by the US brought the world down and is a gift that keeps on giving – see JP Morgan Chase, Barclays, Bank of America and Wells Fargo stories over the past few months and weeks. For a party to continue to cry foul over the mismanagement and some criminal activities of banking leaders is beyond me. Bankers have earned every bit of scrutiny they are getting basically throwing out the window their reputation of financial stewardship. When I hear Senator Richard Shelby of Alabama (Senate Banking Leader) complain of the onerous regulations, my reaction should be the same as every American not sitting in a Bank board room – “tough shit.” You brought this one on yourself.

In America, these views get masked, though, by the political machinations. My friend Hugh Curtler (www.hugcurtler.wordpress.com) cites that in today’s world if you state a lie enough times it becomes the truth to some. The “failed stimulus,”  “we are Taxed Enough Already” and  “job-killing Obamacare” are examples of such a repetitive strategy, yet are not true. Yet, the world can see the forest for the trees hence the overwhelming support for Obama. As an Independent Voter, I see what they see – an imperfect President who has done a pretty good job as President. The stimulus worked per leading economists and the President has seen over 3 million jobs created on his watch. I also see a GOP that offers very few constructive ideas of our key problems of the day. To me, this choice should not be as close as it is in America. I greatly fear a GOP white house coupled with control of one or both of the houses as it will truly take our country back-wards and the rest of the world with it.

Another Big Hairy Audacious Lie – That Failed Stimulus

In follow-up to an earlier post and on the eve of our two major political party conventions, I thought it would be good to provide some context on another big hairy audacious lie, the one that is in many commercials – that gosh darn “failed stimulus.” Let me begin with a question – what do Macroeconomics Advisors, Moody’s Economy.com, IHS Global Insight, JP Morgan Chase, Goldman Sachs and the Congressional Budget Office (CBO) have in common? They all agree that the Obama stimulus bill increased GDP by at least 2 percentage points. The stimulus bill saved the country from a second depression and per the above six economic forecasters, made the difference between contraction and growth saving creating over 2.5 million jobs.

In a very well written article on this subject by Michael Grunwald, a senior national correspondent at Time magazine, he notes the stimulus was much more effective than Obama was given credit for and it in fact,as time passes, will be viewed in much more favorable light. Grunwald does note the $787 million stimulus has been a political failure, in that the effort has been viewed negatively because it was not a panacea and the opposing party has shined a spotlight on this fact. Yet, from an economic standpoint it did much more than that.

Per Grunwald, “For starters, the (American Reinvestment and) Recovery Act was the biggest, most transformative energy bill in history, financing unprecedented government investments in cleaner coal, energy efficiency, advanced biofuels and the refineries to brew them, and factories to manufacture all that green stuff in the United States. The stimulus was also the biggest and most transformative education reform bill since the Great Society, shaking up public schools with a “Race to the Top” competition designed to reward innovation and punish mediocrity. It was a big and transformative health-care bill, too, laying the foundation for Obama’s even bigger and more transformative reforms a year later. It included America’s biggest foray into industrial policy since FDR, the biggest expansion of anti-poverty initiative since LBJ, the biggest middle class tax cut since Ronald Reagan, and the biggest infusion of research money ever.”

That does not sound like a failed stimulus to me. Could it have been better? Absolutely. Did it focus too much on some less worthy projects that were “shovel ready?” Yes. Did it fail? Per these six economic forecasters, no it did not. I mention the number six as on “Real Time with Bill Maher” on Friday night, a Romney advisor discredited the forecast when Maher rebutted his “failed stimulus” assertion. Maher correctly noted the stimulus package worked and that the use of “failed” was a campaign ploy. In politics, if you do not like the message, shoot the messenger. Yet, we are talking about six economic forecasters not one messenger, one of which is the CBO. The CBO is interesting in that they do their absolute darndest to be non-partisan in their projections. The only time their work comes into question is when one political party does not like their answer. Yet, when they do like their answer, the CBO is the greatest thing since slice bread.

I have said in earlier posts, one of the President’s key mis-steps has been not managing expectations. Housing based recessions on average take six years to run their course. That is based on a study of housing based recessions over time in multiple countries. On average, we should see the light at the end of the tunnel at the end of 2013. Yet, the impact of Europe’s crisis and China’s slowdown continue to dampen our recovery which has been a slow climb. So, it could be a little longer than the average. Pollsters ask the question are you better off than you were four years ago? Well, if they have any equity assets, the market is about 80% higher than it was back in October, 2008 when the banks mismanagement brought the house down on many. There are about 3 million jobs more than there were at the time of Obama’s first budget in October, 2009 and homes are beginning to sell better.

People tend to have short memories about when and how things transpired. We are not out of the woods and people are still hurting. We have to get more people back to work and keep them in their homes. Yet, over all the US is in a much better place than it was when the President took office on January, 2009 irrespective of what people say and believe.  As an independent voter who votes for Republicans and Democrats, we need to give our imperfect President some kudos where they are deserved. There are many that did not agree with the GM and Chrysler bailouts, but both companies are with us today and hundreds of thousands of their and supplier jobs are still intact. There has been an increase in jobs, but more is needed.

What we need is for honest dialogue with the American people. We need Congress and the President to work together and discuss openly the real facts of the situation. I have provided my view of the Independent Voter’s Platform in an earlier post. It is not perfect, but at least it tries to ignore the political bullshit and the lobbyist and funders efforts to define our future. To be honest with you, I could care less what the GOP position is on abortion, birth control, gay rights, same-sex marriage, etc. We need to move beyond those issues because America has moved beyond those issues. I feel like we have some extreme parts of the GOP that are like acting like those in “The Crucible.” This is one of the reasons I left the GOP back in 2006. So, whether Romney or Obama carry the day, the President needs to focus on the economy, eco-energy and education more than anything.

So, when you hear the word “failed stimulus,” remember two things. First, very smart, non-partisan economists would beg to differ. Second, think of that woman on the commercial where her Ragu loses in a taste test to Prego and she wonders what other bad decisions she has made in her life? Maybe, just maybe what she has been told about global warming being a hoax is a lie. Maybe, just maybe what she has been told about being taxed enough already is a lie. And, maybe, just maybe what she has been told about reducing taxes on the top end will trickle down to her is a lie. Folks, we need the facts and we need collaborative solutions.

We Just Ran Out of Options

On Sunday, “60 Minutes” re-aired an updated version of its story on homeless families in central Florida. According to “60 Minutes,” one out of every four homeless children in the country are in Florida. During the story, one of the very mature teenagers said “we just ran out of options” when she told the story of how they came to live in their van. This story touched my heart as it did many others, as many reached out with money and help the first time it aired, so there were a few positive outcomes for the homeless children in the area, both the ones highlighted and others.

I have shared before that one of my passions is helping homeless families. I have been volunteering in some capacity for over 13 years. Yet, this is not about me – I only share this experience for context. There are three Americas in existence today – those who are comfortable, those who are above poverty living paycheck to paycheck and those in poverty. The US has one of the worst economic distributions in the world, meaning the distribution of wealth is highly tilted toward the wealthy. When people say the President is making certain issues a war between economic classes, this is misguided commentary. The war is over. The wealthy were decisively victorious.

These three Americas came to be, in my mind, when the Regan tax cuts in the early 1980’s dramatically reduced tax rates for the higher end. This “trickle down economics” which George H.W. Bush called “voodoo economics” when running against Reagan did not work, unless you were on the high-end. The disparity in income and wealth became extremely pronounced. Also, with the outsourcing of US jobs and welfare reform in the 1990’s, we paved the way for a diminishing middle class and increased poverty class. As referenced in an earlier post called “The Big Hairy Audacious Lies” the minimum wage jobs in the service, restaurant and retail economy actually perpetuate poverty.

But, I digress. This is about families who ran out of options and now live in a vehicle, in a shelter or on the street. If you see a family living in a hotel, that is usually the final step before outright homelessness, as the cost is too burdensome. Yet, the key comment I want to make for people who still believe the parent or parents are bums, no matter what I say, a significant number of these parents work or are employable, but have been impacted by the economy. Florida is significantly impacted by the recession as it had a lot of overbuilt commercial development and housing construction that ceased.The people highlighted in the “60 Minutes” episode are running through every option to find work, find suitable living space and find a reasonable life. The shelters are overcrowded, so like Joseph and Mary found, there is no room in the inn.

So, what do we need to do to help. First, do your best to walk in their shoes and convince others that the majority of homeless people out there are not the image embodied by the panhandler. We need to help the panhandler, as well, but the people whose picture I want in your mind are the homeless families and children. Where I live, we have courses for volunteers called “Poverty Simulation” and “Class (Economic) Matters.” The goal is to get people not in poverty to see what it is like to have to find options for food, shelter, transportation and income on a daily basis.

Second, irrespective of what people may think of the parents (again I am speaking to the people who believe the parents are bums), let’s help the children. There is data that shows homeless children have a greater propensity to become homeless adults than children who are housed growing up. Let’s break the cycle of homelessness for these kids. They did not choose to be homeless. If we break the cycle, they will benefit and the community will benefit as we replace someone in need with a taxpaying citizen who brings their intellectual capital to bear. I mention this last comment, as the second place prizewinner of the Intel Science award last year was a homeless girl.

Third, let’s help the families and children climb the ladder out of homelessness, not push them up the ladder. We have to empower the parent(s) and children to climb each rung. We have to make this a community effort, not just something good for the givers. There is a great book by Robert Lupton called “Toxic Charity” whose key themes are twofold – (1)  the efforts to help have to be more about the people in need and not the donors and (2) there needs to be buy-in from the families and community to help make the changes sustainable.

I volunteer with an agency that uses this empowerment model for homeless families. It provides temporary shelter before the family is placed in an apartment of their choosing from a short list. It provides rental subsidies based on the ability of the family to pay and provides active social worker and career development support. It is a milestone based program, so the families have to be saving, creating a budget, attending classes on making better decisions, etc. The significant majority of these families are employed. If they are not working, they are employable and just recently lost a job. The “secret sauce” is our volunteers who help the families by mentoring children, aiding with budget help and sitting for kids while the parents get a GED or go to a career development class. The volunteers do not proselytize and sign a statement that they will not. The idea is not to do for the family what they can do for themselves. We have to help the family maintain their dignity and sense of self-worth as they climb the ladder out of poverty.

So, let’s help these families climb out of poverty and homelessness. Giving money and food is wonderful, but we need to find places for people to live and work. Some call our model a “Housing First” model. We do migrate people to housing soon, but not out of the box unless they are ready. The executive director likens getting a homeless family ready for housing to sending a child off to college. There are many ducks that have to be placed in a row, so having the temporary shelter as we ascertain why people are homeless is important. It also allows the family to stay together in their greatest time of need.

Homeless people are not all alike in what they need. Migrating employable homeless families into rental or subsidized housing in mixed use neighborhoods is terrific and we need to do more of that. Getting a roof over the families head in a stable environment is major step on the ladder and enables the family to succeed in climbing the rungs. Yet, there are more chronic homeless – disabled vets and non-vets, people with mental and/ or substance abuse issues – where the homeless need to be in a group setting. So, as your communities reach out to help, note that one size does not fit all. Yet, at the heart of the matter, is getting people off the street and having them pay rent based on their ability to pay.

The cost of helping the homeless in this manner is far cheaper than models that shelter them on an emergency basis or worse through incarceration. The shelters need to be  temporary. Getting people in housing, providing measurable subsidies, and getting them the tools to help themselves ends up being more cost-effective. It also allows them to maintain their dignity and help themselves in a sustainable way. Sustainability is the key and will pay dividends for all including the community. Quoting a minister whose church helps those in poverty and homeless in a major way, “We cannot measure the intellectual capital that resides in these children. If we help them, we may be unlocking an enormous amount of potential.” I could not have said it better myself. Let’s help people climb their ladders.