Magical Realism at the Border of Techies and the Poor

App for Louisiana food stamps

New Orleans    Don’t get me wrong, I am 1000% in favor of techies of all stripes and sizes trying to figure out a way to impact on the lives and fortunes of low and moderate income families. Nonetheless, when I read an article about JPMorgan Chase putting up $30 million through its foundation to create a Financial Solutions Lab to supposedly “build affordable financial services” within their financial industry, all my antennae immediately go up because for the life of me that sounds like a way for Chase to divert money into a tax exempt arm to do research and development for its core business, rather than anything to do with philanthropy. How jaded have I become?!?

The New York Times published a puff piece about the effort in a special section on something they called “fintech,” which I would recommend against ordering at a restaurant no matter how much you like seafood. They highlighted a company called Propel that seemed amazingly well intentioned and dedicated. They had thought of developing an application for a smartphone that would help lower income families apply for food stamps. They were sent with the other Chase lab rats to walk the “mean streets” of San Francisco to get a better sense of the needs of the poor. Did I really say San Francisco, one of the richest cities in the United States? Maybe they were looking to see how many lower income families had managed to stay in San Francisco…but I don’t want to get off my subject here. Anyway, Chase gave Propel a quarter of a million bucks, and they ended up switching over to develop an app to allow a low income family to be able to determine the balance they have left on their food stamp card.

I guess that’s a good thing, though in my experience most food stamp recipients can tell almost anyone within a penny how much they have on their card at any time day or night during any month you might want to ask. Or they walk to the corner store and find out, but, let’s stay positive here.

You will need a smartphone though for this app to help you. We have this nagging problem of the widening gap in internet access but according to various Pew Research surveys 74% of families making less than $30000 per year now have sometime access to the internet. 13% of families with internet access making less than $30000 can only do so with a smartphone, so for the subset of those who are also eligible for food stamps of that 13%, the app might have some value.

Of course smartphones cost money, and if a family making under $30000 can afford a smartphone, that doesn’t mean they can afford unlimited access to data of course. 48% in fact report on Pew surveys that they pretty regularly get cutoff from their smartphones because they don’t have the money to pay the bill. 30% also report that they regularly exhaust the minutes on their data plan so essentially have to cut themselves off from using their phones to access the internet.

Don’t get me wrong. I’m not saying this is a solution looking for a problem. I’m just saying that this “fintech” pretense of supposedly helping low income families who are unbanked and victimized by their lack of affordable access to the financial system is way ahead of its time until there is equal access to the internet, the cost of devices are lowered, and the FCC forces the predatory telecoms to produce affordable plans for lower income families. In fact if Chase had been willing to really be charitable and invest $30 million in a campaign to make that happen PDQ in the US, then we would be talking about a real step forward where we could let a thousand apps bloom. Until then other than providing R&D for big banks, it seems the cart has once again jumped ahead of the horse.

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LIBOR: Banking as a Criminal Conspiracy

Little Rock   Put London and banking in the same phrase, squeeze it into an acronym and snores start rising from nodding heads all around the world, and that’s too bad, because the LIBOR scandal that has erupted at Barclay’s and in Parliament will engulf the big US-based banks like Chase and Citicorp and might finally yield enough total revulsion and disgust at the greed and lack of good faith that has warped the culture of all banking institutions that reform might finally be possible, if not inevitable.

I used to hear the phrase LIBOR all of the time when we were in negotiations around banking agreements and home mortgages.  I can still remember having to ask one of my colleagues what the heck it was and then having to Google it later.  LIBOR is the London Interbank Offered Rate.   In plain English, that means that this is the rate used by banks when they loan money between each other.  An interesting article on its derivation ran this week and essentially it emerged over the last 20 or more years to replace the “prime” rate in prominence as a banking benchmark standing for the fairest lending rate fixed at a particular place in time.  The rate was arrived by consulting all of the major banks on what the rate they were using that day in lending money in major areas, throughout the high rate and the low rate, and then taking the average of the rest of the rates to equal the LIBOR for the day.

This was the gold standard of banking practice backed by the full confidence and good faith of the financial systems that this stood for something fair and certain about what constituted the real interest rates.  Results of the investigations revealed thus far have now proven that that was a total lie and what’s more, it is fairly clear that banking at the very top is certainly more of a criminal conspiracy than the MAFIA or the drug cartels might have ever imagined practicing.

Barclay’s will pay close to a half-billion in fines in Britain for their manipulation of the rates.  Unlike other criminal conspiracies, the $10 million dollar a year CEO of Barclay’s recognized no code of omerta and in trying to rationalize his own inept management (I’ll come back to this!), pointed his finger with clear evidence that the regulators turned a blind eye to the rate manipulations and other banks, like the big boys in the USA, were also involved in the interest rate fixing.   It is now clear that what was happening was the bankers and their traders were setting the average rates falsely during the financial crisis so that they seemed more financially solid than they were and with less interest rate cost and liabilities, and furthermore their own traders in some cases were gaming the rates both higher and lower, sometime against the interests of their employers in order to maximize their short term trades and therefore returns and therefore their personal rewards.

Whether subprime mortgage brokers, trading desk cowboys and cowgirls, or your regular banking shysters is it not finally abundantly clear that if you pay people based on their percentage of the kill, their systemic self-interest will bleed everything dry including their employers?  These CEOs are simply unable to surprise their employees on a banking model that is pay-as-you-go.  For all of their “not me’s” there are not enough mea culpas where they admit they simply are unable to curb the greed of their troops on a business model from the City of London financial district to Wall Street and beyond which incentivizes greed and therefore destroys institutions and makes the concepts of “trust” and “good faith” oxymoronic when it comes to banking.

Furthermore, who do you think was responsible for setting the LIBOR?   If you guessed the government or regulators, go to the back of the class.  The British Bankers’ Association was in charge and the very banks that were part of the criminal conspiracy were in fact heading up the committee that surprised the LIBOR rate setting for trillions of dollars worth of loans costing companies and governments billions and ordinary citizens thousands as well.  Unbeliveable!

Supposedly the UK Serious Fraud Office (SFO) is looking at criminal charges now, but the Wall Street Journal was pretty clear that their record to date is lame and, mostly noted by the Times, they have buckled in the face of business interests.  It is hard to believe that we will get much more from the USA side.

The least we should be able to expect is the end to the fiction that banks can self-regulate, that banks can supervise both trading and security of funds (how can we not bring back some form of Glass-Steagall?), and banking isn’t much more than criminal enterprise until government and citizens clean this mess up.  Given the low level of current interest rates and the practices of banks, it seems under the mattress may once again be a viable and secure option for handling your personal funds.

Traders crowd the sidewalks outside the New York Stock Exchange on the day of the 1929 market crash. The Glass-Steagall act followed. Photograph: Bettmann/CORBIS

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Bringing Down Bank of America: Social Media or Social Movement?

New Obank-transfer-dayrleans The queue to “count coup” on Bank of America and its decision to step back from stealing debit card fees from its customers is almost unseemly.  We expect it from politicians, and props to Senator Durbin, VP Joe Biden, and the rest of the DC gang for the pile-on, which in fact was about damn time and very helpful, but at another level it’s the old story of defeat being an unwanted child and victory having a thousand fathers, but the self-aggrandizement is particularly stark in the face of community organizations, unions, and now social movements through the Occupy forces that have made Bank of America and its corporate confederates like Chase and Wells Fargo the largest corporate targets of direct action activity.

The Times post-mortem for the business readers continued with their usual theme of trying to manage protest by promoting social media (remember Egypt which they immediately had to retract with the “real” story?) as the “organizing tool” for change with the enthusiastic, over-the-top help of www.change.org, which is a great outfit, but seems to have had no boundaries in their personal congratulations on this one.

“But those customers may have found their voice, which has been amplified by social media. “People can now use tools like Change.org, Facebook and Twitter to rapidly organize and collectively act to influence the policies of even the largest companies,” said Ben Rattray, founder of Change.org, which allows consumers to start grass-roots campaigns using its online platform.

He pointed to Molly Katchpole, a 22-year-old woman from Washington who collected more than 300,000 signatures opposing the fee by using his company’s platform. And then there is the grass-roots effort that is calling for this coming Saturday to be “Bank Transfer Day,” where customers of big banks move their accounts to community banks and credit unions.

Mr. Rattray and other consumer advocates said the outcry was about much more than fees. “Bank of America’s new debit card fee was the last straw for many consumers who are tired of banks that got bailed out that are now turning around and hiking fees,” said Norma Garcia, manager of Consumer Union’s financial services program. “There was this phenomenon with banks and others confusing passivity with loyalty. And consumers are saying, ‘You can’t take us for granted anymore.’ ”

To be fair the “powers that be” want to make sure that protest continues to operate between the straight lines, so ample praise of course in the same piece by Tara Bernard (http://www.nytimes.com/2011/11/02/business/bank-of-america-drops-plan-for-debit-card-fee.html?scp=1&sq=social%20media%20and%20bank%20fees&st=cse) :

Lawmakers also openly criticized Bank of America’s planned fee. Days after the bank announced that it would charge the fee, President Obama said customers should not be “mistreated” in pursuit of profit, while Vice President Joseph R. Biden Jr. called the move “incredibly tone deaf.” And Senator Richard J. Durbin of Illinois, the No. 2 Senate Democrat, spoke out on the Senate floor, urging consumers to vote with their feet. He had sponsored the rule, known as the Durbin amendment, that limited the amount banks could charge for debit card transactions.

On Tuesday, he took to the floor again. “What we have at work here is a very fundamental principle of our economy, the free market economy, transparency,” he said. “So people know what they are being charged. So they have a choice.””

But, speaking of “tone deaf,” how is it possible not to mention the daily protests around the country and the world around banks and the admitted traction that Occupy has picked up in hitting Bank of America hard where previous large protests by community organization networks and unions had failed to gain traction?

I don’t mind being manipulated by the media anymore than the next person, but, gee, can’t they be a little more slick about it?  I know we are not supposed to believe that direct action, social movements, and mass protests make a difference as we parse the new tools that focus on a “theory of change,” but it takes people to use tools, and when the people are in motion, as they are now, let’s at least be clear about stating the obvious no matter how much credit some might want to claim or how much others might want to deny.

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Banks Silently Step up on Remittances

24basic.1.600Atlanta On ACORN International’s Remittance Justice Campaign (www.remittancejustice.org) we have had difficulty getting any response from the big banks except in the most cursory terms.  Wells Fargo did finally reply and told us they were doing great within a small footprint of countries.  Bank of America and JP Morgan/Chase were stone silent.  Not surprisingly given the predatory nature of their pricing.

A story broke yesterday on the wire and NPR which might more clearly indicate that the big boys can actually hear the footprints coming up behind them even as they stick to stonefaced spinning.   These three banks got together on something called ClearXchange in order to try and retain some of their customers exhausted with the constant fee rip-offs and increasingly inventing other alternatives including hand-to-hand transfers through prepaid debit cards within families or utilization of the PayPal if folks are sophisticated.

Frankly, this is a Band-Aid the banks are applying when a tourniquet is called for.  They may keep a couple of their more inept and lazy customers, but folks are leaving this train station and demanding other tools that reflect modern technology, rather than ancient and pervasive greed.

The NPR report seemed to hint that Google was talking about moving into the space of money transfer utilizing phones and mobile devices.  Talking about “doing good” or something like that which used to be their motto, I could fall in love again!  I couldn’t track down the whole story on a Google search (sounds contradictory doesn’t it?) but I did find that it has been possible to move money between various Google accounts fairly seamlessly using something called Google Checkout for the last two or three years.  Obviously not widely recognized or publicized, but they could also be knocking on the right door.

In Citizen Wealth I argued that companies, even big bad boys like Wal-Mart and H&R Block could create business models with huge returns by delivering service that low-to-moderate income families need and demand.  Money transfer of remittances is precisely the service that will see the game change fundamentally in a short time.  The banks and credit unions are trying to hold on to old models that are predatory and not realizing that you can’t leave $22 billion in profits out there and not have other, easier and cheaper services eventually suck them dry.

It’s past time for remittance justice.

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Come On! Private Banks Poaching Fannie Mae

subprime mortgage securitization

subprime mortgage securitization

New Orleans On ESPN’s Sportscenter during the seasons they have a feature called “Come on!” in which they feature unbelievable or bonehead plays.  We need that in other fields of public life and politics.  Reading about the efforts of banks like Wells Fargo and JP Morgan Chase along with the various trade associations to try to get their noses under the Fannie Mae and Freddie Mac restructuring tent to shill a profit by issuing government secured mortgages, I could only thing:  Oh, come on!  How ridiculous!!  These are the same banks that just brought us the Great Recession due to their irresponsible lending and securitization schemes, and now they should somehow be allowed to profitably issue government mortgages.  Though by now we all ought to be used to the way that Wall Street thumbs their nose at all of the economic realities that all of us face, this is wildly unbelievable.

Reading the New York Times article by Louise Story, it was clear this was another predator’s ball with not only Wells and Chase at the trough, but also Goldman Sachs, Credit Suisse, and Morgan Stanley.  All of this reminds me of the scam that the Obama Administration stopped in recent years of allowing private interests to wildly profit as the middle men brokers for federally offered student loans.  Banks were making out like, well how else can I say this, bandits.  Stopping this sticky fingered scandal saved huge amounts of money, but now they are baaaaccccckkkkk with something perhaps even more outrageous.

The other backassedwards part of this is the problem of misdirected blame that still falls in the direction of Fannie/Freddie for supposedly bringing down the house by loaning to lower income citizens without looking at affordability or sustainability.  I understand the ideological need to blame the poor, but it’s important to point out that there is still no factual evidence that these loans, that should have been encouraged by the government, had anything to do with the mess.    Not only would we be throwing out the baby rather than the bathwater, but it seems we would be institutionalizing the bathwater and leaving the baby homeless, so to speak.

There’s probably a debate worth having about how many and how much of the “middle class” need to have federally guaranteed mortgages through these vehicles, but it seems obvious the we will need even firmer support for working class families in the future to have a chance at home ownership in we ever get out of this recession.  We need to slap away the hands trying to pretend this is all a cookie jar, and tell them to not only mind their own business, but maybe even try to get better at it than they have been (let’s see banks portfolio more mortgages on their own before they claim to know how to issue others), and keep federal institutions trying to solve the puzzle of adequate and affordable housing for all Americans again.

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Courts Become Gateway to Debtors Prison

NDebtew Orleans A harrowing article in the Wall Street Journal documented the success that bottom fishing debt collection agencies are having at ripping the last pennies from working families being crushed in court over relatively small claims.  I wish this were news, but of course the story is all too familiar.

The big debt predator companies are buying the debt for 3 and 4 cents on the dollar and then almost immediately going into court where borrowers are virtually defenseless.  In most cases the debtors do not appear in court since they have no representation and instead find themselves victimized by the so-called “system of justice” with more fines, court fees, penalties and an added burden of cumulative costs that may lead the original debt to increase by anywhere between 25% and 100%.  In effect judges and courts are becoming the screws for a new kind of debtors’ prison where people are on “permanent parole” and tethered to the escalating debts that are increasing even when they are being paid, little by little.

Journal reporter, Jessica Silver-Greenberg, does a service by at least naming names, not that they would feel much embarrassment over their tactics and tools:

The four largest publicly traded debt buyers—Encore, Asta Funding Inc., Asset Acceptance Capital Corp. and Portfolio Recovery Associates Inc.—purchased $19.6 billion in distressed debt last year. They typically recover three times what they spend buying debt, according to the Association of Credit and Collection Professionals, a trade group.

Behind the screen not surprisingly we find more Wall Street raptors:

Wall Street has taken notice. J.C. Flowers & Co. LLC, the private-equity firm, has a 24% stake in Encore. BlackRock Inc. owns 6.9% of Portfolio Recovery Associates, a Norfolk, Va., company. In October, the company reported its highest quarterly revenue ever.

In 2006, One Equity Partners, the private-equity arm of J.P. Morgan Chase, purchased Pennsylvania-based NCO Group, which posted $1.56 billion in revenue last year, making it the largest debt-collection company.

Analysts say that this raid on the last vestiges of citizen wealth will only become more intense in coming years given the debts of the recession.

Is there any hope for the consumer?  It seems that the Debt Protection Act says that if you haven’t paid eventually there is a statute of limitations of 5 to 7 years after you have been sued, if you can wait the collectors out and live with the consequences.

I’m not arguing that we celebrate deadbeats, but the system has to be fair and now it’s not.   Advocates and Actions has argued that we need to be ready to appear with the consent of the debtor family in court to advocate for relief from the judge, so there is at least some chance of allowing a family to get back on its feet and come back to dry land.

This is a misuse of the judicial system where no representation only equals more debt and intimidation.

Years ago when I was on the board of the GNO AFL-CIO when we would interview the countless judges that would come before us at every interview the story of a long deceased past president, Lindsay Williams of the Seafarers, would be told to one candidate after another.  Brother Williams, as the tale was told, would explain patiently to each candidate that we represent our members and what we need from a judge is an open door policy because sometimes a situation requires “not only justice, but mercy.”

These are situations that cry for mercy, but we have to organize the ability to raise up the voices to ask for both justice and mercy.

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