Nickeled and Dimed By Both Wall Street and Main Street

bank_feeNew Orleans   In the wake of the Great Recession and general financial meltdown we all like to think we’ve got our eyes peeled to all of the slick shenanigans devised by Wall Street wheeler-dealers.  With billion dollar bank settlements still regularly reported in the daily papers and with a new governmental body, the Consumer Financial Protection Bureau, in place that has our backs, we can finally relax.  Not!  I’m increasingly convinced that it’s not the big heist that will get most of us, but the fact that we’re now nickeled and dimed every day and in almost unimaginable ways once we relax even the tightest grip from our hard earned money.   The answer in banking to new regulations and restraints and lower interest rates seems to be rather than the big score, just to suck us dry, bit by bit, day by day.

When we worry about the unbanked, we keep looking for ways to achieve citizen wealth or income security with more safety and less cost.  Generally, most of us would believe that it’s better to put your money in a bank than to wad it up and hide it under your mattress or in a crack in the wall.  I’m just not sure that’s true anymore.

Minimum service fees are so expensive that their main purpose seems to be to suck the money out of your accounts in exchange for nothing.  In the wave of support for credit unions a couple of years ago, some of us opened accounts in the local credit union in our neighborhood, called ASI, because they seemed committed to the area.  The whole point of a credit union used to be savings.  You put some money in, and they get to invest it, but you were able to build a relationship for the future.  Boy, is that old school, gramps!  Once you discover there are minimum balance fees ever month and quarter, a couple of hundred necessary to open the account, becomes not an inducement to savings and security, but a bank donation, because when you’re not watching, it’s gone in a couple of years.

And, not just credit union accounts either.   For years Local 100 had a petty cash account with JP Morgan Chase in Little Rock.  We had forgotten we had it, until a visit to the office several years ago stumbled on a statement.  They were sucking out $20 or more a month to maintain an account with hardly $300 bucks in it.  Over a two year period we wrote, called, and cajoled Chase to close the account and transfer the money out to Capital One where we had our main account.  They delayed.  They promised.  They assured us.  We never saw a dime before it was gone.  For a couple of hundred here or there, the small fry and the big boys know you won’t sue, so they make what’s called a “business decision” to simply steal your money figuring they can get away with it.

It’s not just bank accounts either.  They treat anyone small, even their shareholders the same way.  This week I got a weird letter from Citi, as in Citibank, Citicorp, etc.  They wanted to know how I was going to pay $45 bucks and change for some kind of investment account they had me in.  It’s a long boring story, but 30 odd years ago on an office bet among other things I bought 10 shares of Citi for less than $100 with no brokerage fee.  It goes up and down as they get caught doing good or evil, and now it’s worth $700 or so, many decades later.   This is not Warren Buffet look out time, if you know what I mean, but what was a $45 annual charge all about?  They had an 800 number for questions, so I called.  What a hustle!  So, it seems after having signed us little fish up on one of their accounts, she told me they had started attaching a fee a year or two ago, unbeknownst to me.  So, I said, take me out of this now.  Not so easy, cowboy, she said.  I would still have to pay $45 for last year and $45 for this year out of my small holdings.  Well, all you’re doing is holding my certificates.  Send them to me, I’ll hold them myself.  Oh, no, dude, she claimed they would cost something on the order of $500 apiece, which surely is a big fib!  She claimed they could transfer my shares electronically to a depository of some kind, but that would also cost about one-hundred-and-a-half and when I asked what that outfit would charge annually, she would neither give me the name nor the cost for 5 minutes or more.  Oh, and to transfer out, I would have to sign a form and get it notarized by my bank, which she would supposedly mail to me.  Come on, man!  My Citi shares are hardly worth anything with miniscule dividends, but as a small fish to a Wall Street shark the message was clear, I was either going to have to agree to let them blood suck me for fifty or more every year or they were going to try and take a third or more of the little I had with Citi so that they could bleed me out now.

Modern finance, whether Wall Street or Main Street, is about billions and billions of dollars in transaction costs ripped from the hands of all of us small fry, not shrewd deals gaining value and building the nation’s economy.   We’re the grease on their wheels.  While the government and others try to watch them at the front door, they are stealing us blind and with impunity out of the backdoor in every nook, cranny, and alleyway they can find.

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Banks Creating Unbanked Millions

money-under-bedLittle Rock       I hate to say “I told you so,” but of course, I in fact did tell you so, when I recently warned that banks for any reason or no reason at all can refuse to continue to allow you to have a checking account or bounce you out of their customer line.  A recent article in the Times confirms that in fact the level of what used to be called the “unbanked” has risen by 10% since 2009 according to the Federal Deposit Insurance Commission (FDIC).

            And, yes, “unbanked” does sound like the “undead.”  You may be walking and talking, but you are also doing a lot more of it and paying a premium to pay your bills, transfer money, and handle daily affairs because banks won’t let you have an account.   This is actually a fairly new phenomenon.  Only a couple of years ago if we were meeting with bankers and said that we needed to continue to reduce the level of the unbanked among lower income Americans, all of the bankers at the table would reflectively nod in agreement.

            No more it seems.  Big data is dunning the poor.  Minor mistakes, like a one off overdraft can lead to people being blacklisted.   According to the Times:

The largest database, founded in the 1970s, is run by ChexSystems, a subsidiary of FIS, a financial services company in Jacksonville, Fla. Subscribers — Bank of America, JPMorgan Chase, Citibank and Wells Fargo among them — “regularly contribute information on mishandled checking and savings accounts,” ChexSystems says on its Web site. “A consumer may dispute any information in their file and ChexSystems will facilitate the resolution of the dispute on the consumer’s behalf,” the company said in a statement. A rival, Early Warning, which is owned by Bank of America, BB&T, Capital One, JPMorgan Chase and Wells Fargo, says roughly 80 percent of the 50 largest American banks pay a fee to subscribe to its deposit-check service.

The banks claim this all began as an attempt to stop fraud, but that’s not really true.   Bankers have been honest with us for years that the old school checking account part of their business was a money loser and in fact a loss leader.  Here comes big data that can collect every misstep by a poor Joe or Jane along the road, and wham, that’s all it takes to push them into all of the financial predators lying in wait for the poor. 

Good luck with resolving the disputes as well, that is if you know there is one.

The article claims that, “Banks are required to provide a reason for rejecting an applicant,” but I’ve read some of the documents that banks put out, and I’m not sure that is really true, and if true, it’s certainly not enforced.”

But all of these financial institutions are federally or state chartered.  The FDIC insures each account for a hundreds of thousands of dollars.  There is huge governmental leverage here that should be reminding banks that they are in the service business not just the get-rich-quick-business.   If they want to stop fraud, good on them, though they might spend more energy supervising some of their own practices, and trying to hard handle someone whose check clears faster than the bank gets around to recording their deposit.

 

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No-Mo’s: Stealing Homes through Foreclosure No Modification Programs in AZ and USA

New Orleans    Finally the fog is lifting around state and federal foreclosure modification programs and the real program is clear.  In the way of acronyms and abbreviations that abound in such programs like Fannie Mae and Freddie Mac, the largest of the mortgage guarantor agencies, the real program is called “No-Mo,” which stands for No Modifications Program.

It turns out according to letters released in Congress that the guardian of Fannie and Freddie, Edward DeMarco, missing yet another deadline for revealing any other program than No-Mo, had also presided over killing programs that would have accelerated foreclosure modification programs that had been approved by the agencies and were in testing trial runs with both Citibank and Wells Fargo.  DeMarco substituted the No-Mo program for these efforts to actually keep families in their homes.

In responding to two Congressmen, he gave as his rationale the following answer:  “These pilot programs…ended due to complex operational issues, involving system changes, accounting considerations and the interest level of Fannie Mae’s partners.”  Let me translate that into English.   “Accounting considerations” means that the banks did not want to restate their balance sheets to correctly reveal the current market value of their real estate portfolios which would have exposed them to be the “ghost” banks they are.  “Interest level of Fannie Mae’s partners” is a euphemism for saying that the banks did not want to modify the loans and Fannie was unwilling to push them to do so, despite that being the stated Obama Administration policy.   So, as many of us have known, the real policy has become No-Mo, no modifications.

Arizona Advocates and Action brought a good example to me the other day of how extreme the No-Mo program is being implemented in Arizona where foreclosures have risen to epidemic levels.  There the state government, which has pretty much been a bellwether of what NOT to do on most every program these days has even come up with the absurd proposal that $55 million of the money negotiated by the various state attorneys general for foreclosure modifications and principal reductions should in fact be used for prison construction.

Can you believe it?!?  Only in Arizona could the government have figured out a way to create No-Mo on steroids.

Possibly there is an even darker side emerging in the shadow of the subprime scandals that triggered so many of these foreclosures.  A message from the British Columbia headquarters of ACORN Canada came to me last night on a newly enrolled member in Kamloops who was facing foreclosure.  The mortgage, if you call it that, came from a company called Interior Equities, which is surely misnamed, and even in these days of 3 and 4% interest rates was carrying a 12% rate!  Reading their website it also became clear that signing up for one of these mortgages meant taking on a much discredited adjustable rate mortgage (ARM) and giving Interior In-equities the right to alter the interest rate every month.  This is a modern example of the old Wild West practice of claim jumping, where you simply steal someone’s property.

One there is No-Mo at the federal level it encourages states to steal relief monies and companies like Interior In-equities to steal property.  When can homeowners get a break?

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Blowing the Students’ Keg: California, Quebec, and Chile

Student Strike in Montreal March 2012

New Orleans   This fall will undoubtedly see a huge number of students mobilized by the November election, but I’m starting to believe that the student army that is going to be activated this fall is going to be marching to a different tune for a change:  their own self-interest.  The evidence may be isolated, but once one begins looking, it is not hard to see signs of stirring that could interject student issues around education, opportunity, jobs, costs, and debt into the middle of political debate.

This is not merely a question of the tactical maneuvering between American political parties and Congress around student loans and debt, because the outcome being debated largely postpones the problem rather than looking at the core issues.  In student strikes in Northridge, California, Quebec, and Chile triggered by rising costs we are starting to see the core issues confronted, and students are not stepping down or wearing out.

A piece written by Martin Luckas in The Guardian on the “Maple Spring” in the streets of Montreal expresses the issues at stake eloquently as a fundamental challenge to the increasingly entrenched policies of neo-liberalism:

The fault-lines of the struggle over education – dividing those who preach it must be a commodity purchased by “consumers” for self-advancement, and those who would protect it as a right funded by the state for the collective good – has thus sparked a fundamental debate about the entire society’s future.

Luckas’ point is well taken.  The students in California engaging in a hunger strike now are partially incensed that administration is getting raises, including a 25% hike to $400,000 per year for the new Northbridge president, even while classes are being cut, fees increased, and teachers ghettoized as adjuncts without benefits.   How is this fight different than reading about the complaints of shareholders to a $15 million package for the head of Citibank, when everything about the bank is on life support?  One of the major themes of neo-liberalism is essentially “corporatizing” all debate about all public policy.

Student self-interest where debt is competing with ambition and opportunity and jobs are still in scant supply could be the match that lights a much better fire!

Students for Quality Education in California Strike against Fee Hikes

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Elizabeth Warren’s Two-Income Trap

NElizabeth-Warren-Sheriffew Orleans With the passage of Dodd-Frank and the advent of the coming Consumer Protection Finance Agency there was a huge hubbub from business and others opposing the appointment of Harvard Law Professor and bankruptcy expert Elizabeth Warren to run the agency.  Supposedly she was opposed by Treasury Secretary Timothy Geithner, the bank bailout Wall Street buddy-boy, which made me like her in a kneejerk sort of way:  anyone who was his enemy was surely my friend!  She had a hardscrabble personal story that started in red dirt Oklahoma with a father pushed over the financial edge, and knowing that country also biased me towards her, even though her being at Harvard stuck in my craw.  All of that is over now.  I read the book she wrote with her daughter, Amelia Tyagi, called The Two-Income Trap:  Why Middle-Class Mothers & Fathers are Going Broke, and now I’ve gotten my head together on the true facts and her core arguments, and I totally get it.  Count me as a fan!

I also get why so many were lined up against her:  first, she’s an equal-opportunity offender zinging left, right and in-between on the issues whether banks or unions, and, secondly, she’s an iconoclastic feminist arguing a totally womanist line with women and children in front, but questioning the normally unchallenged assumptions about women in the workplace.  That’s a deadly set of variables for any political calculation.  No doubt she only got this far because most people – like me! – didn’t ever bother to read the book!

Some examples:

  • She zings Citibank before the meltdown for an average mortgage interest rate of about 17% and in a tell-all story relates the tale of a one-day consulting gig she did for them about bankruptcy and families in which she argued that Citi should simply not lend to people overstretched, and a senior executive dismissed the entire argument because jacking the overextended with more products and predatory interest rates was essentially their golden goose and business model.
  • She tells a moving story of a meeting with Hilary Clinton as a former First Lady and how quickly Clinton got the importance of opposing the passage of a proposed new corporate-backed bankruptcy law and committed her support to the fight, but then once elected as a U.S. Senator from New York, turned around completely to support her new constituency on Wall Street rather than women.  She everything but says that Clinton and senior Senator Chuck Schumer were bought and paid for by campaign contributions.
  • She comes out for universal school vouchers and total school choice for good reasons perhaps, but based on the fuzziest of political and economic premises about what would really create “equity” in school offerings, all of which must have driven the teacher unions up a wall.

Generally she drives the hammer hard on the nail.

Over-consumption is roundly dismissed as the economic trigger of the debt crises, which she argues sprang directly from middle class parents trying to find two critically essential things for their children:  good schools and safety.  In the midst of a national education crises and too often random urban crime, both parents were not only forced to work, but also ended up doubling down on inflated house mortgages in the best school districts:  the two-income trap.  Unfortunately, doing so eliminated in the Warrens argument, the historic bench strength of having a reserve worker ready (the wife) that could go to work in a crisis brought on my job loss, medical bills, or family breakups.  Folks were already stretched over the line so tautly that the least twist and they were pulled under.

I can’t say how happy I was to read this book and find out that Elizabeth Warren is fellow traveler on the citizen wealth bus.  I could go on and on, but every once in a while it’s such a pleasure to go back to the first sources and find with total surprise that someone is even better than I could have imagined.

Props to President Obama for stepping up and finding a way for Warren to work in the White House and make the Consumer Financial Protection Agency happen!  The beginnings always prejudice the ends, so she’s in the right space, regardless of whether or not she can run the show.  Better to have a toe smasher than a tiptoe dancer protecting the financial futures of desperate families!

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Bank Conflicts of Interest on Foreclosures and Modifications

Arizona Advocates and Action

Arizona Advocates and Action

New Orleans My god, pinch me!  Unbelievably the august New York Times in its editorial today has bellied up to the right side of the bar in pointing out the obvious and long noted (including by me!) conflicts of interests enjoyed by banks in the foreclosure game where they often pretend to be chicken, but are usually fox.  The Times being the Times can’t quite get it all right.  They put the horns on the Federal Reserve as a sleep-at-the-switch regulator of this mischief and mess, when the Treasury Department and the Administration both deserve at least equal billing of this horror movie showing at homes all around the country.

But let’s not quibble and count our small blessings when they come:

That is a big reason that the Obama administration’s antiforeclosure effort, with its voluntary participation by banks, has fallen so short.

Here is the background. The big banks — Bank of America, JPMorgan Chase, Citibank, Wells Fargo — service most of the nation’s home mortgages for investors who own the loans. They are paid a fee by the investors and also make money from fees on delinquent loans.

Servicers are obligated to manage the loans in the best interest of the investors. That means modifying a troubled loan, if reduced payments would bring in more money over time than a foreclosure. Or foreclosing if a borrower cannot make the payments on a modified loan.

If only it worked that way in practice.

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