I recently found a great high-yield savings account. United Federal Credit Union has introduced a 6.01% APY Interest Plus Checking account on balances up to $25,000 for qualifying members. The rate is guaranteed “until at least 2010,” and the account also includes “free ATMs nationwide.”
Unfortunately, I don’t qualify for this credit union. I can’t become a member based on this list, nobody in my family is a member, and I don’t do business in their geographic area on a regular basis.
Campbell Norwood has written a book that will be of great interest to our Wallet Blog “Deals” readers. Titled Recession $urvival Guide: Low-Cost and No-Cost Strategies to Spend Less, Save More!, her book is full of low- and no-cost opportunities for stretching one’s household budget.
“I wrote the Recession $urvival Guide from the perspective of knowing that there are a lot of families in our area, and around the US, who have never dealt with economic recession. They’re scrambling, embarrassed, and don’t know what to do,” Norwood said. “My goal is that readers will be empowered to make no-cost and low-cost changes.”
Disagreements between merchants and banks concerning interchange fees for credit card purchases have prompted Democratic Senator Dick Durbin to introduce yet another piece of credit card legislation to the U.S. Senate floor. The new legislation would create a panel of judges to help facilitate a settlement between the merchants and banks. With four major credit card networks out there (MasterCard, VISA, Discover and American Express), and a wide variety of private label cards issued by large merchants, it’s hard to see why the government is being asked to step-in to settle this dispute.
We’ve already seen the government step in to help regulate the credit card industry via the Credit CARD Act of 2009. We support the CARD Act on the position that the legislation was needed to stop the deceptive practices being used in the industry, which prevented consumers from being able to accurately estimate the true costs of obtaining a credit card. However, this does not mean that government regulation is needed in all aspects of the credit card business.
The Federal Deposit Insurance Corp, aka FDIC, has voted to bar shaky banks from hiking up interest rates to attract more customer money. This change is known as Section 29 and will go into effect on January 1, 2010. Section 29 says that banks that are struggling to stay in business will only be able to offer interest rates with a top limit of 75 basis points above the national rate. The national rate is an average of all rates paid by reporting banks.
As a result, you will be getting the best interest rates from well-capitalized banks and we should expect around 3 percent of banks to be affected by Section 29. Some higher-yield banks, such as Ally, the institution formerly known as GMAC Bank, which has been advertising all over the place and boasts of high capitalization, will likely be able to continue offering high interest rates to its depositors.
At a time when everyone is looking for a way to make their money stretch further, one solution to curb rising insurance costs is to regulate insurance at the federal, rather than state, level. Such regulation would require tax payers to pay for one regulatory body (rather than fifty) and would allow the insurance providers themselves to more easily and more cheaply operate at a national level. Thus the price of insurance would go down through increased competition.
To better understand this point, we must first acknowledge that for every business, there is inherently a cost associated with operation—whether it be the cost of raw materials, the rent on a storefront, the salary of employees, etc. For insurance companies, part of their operation cost is related to staying within compliance of state regulation. As insurance is regulated at a state level, rather than the federal, the various laws that govern the operations of these companies change depending where you are in the country. It stands to reason then, that the cost of staying in compliance in Georgia, doubles if the company must also stay in compliance in Montana. A company that offers insurance policies nation-wide must pay an increased overhead so as to simultaneously stay in compliance for all of its customers in all fifty states. With only one set of regulations, however, any state insurer could make the transition to a regional or national insurer without having to incur additional costs. Thus a change in regulation would increase the number of providers in the market and would lower the overhead costs for all the insurance companies. The combination of a lower cost structure and increased competition, would bring in a better price for consumers.
The Senate’s “Cash for Clunkers” bill passed Thursday, as an addenda to the war-spending bill. It was approved by the House last week. The bill allows for trade-in vouchers of up to $4,500 for owners of gas guzzlers who want to buy or lease a new, more fuel-efficient vehicle. If signed into law by President Obama, the program is likely to go into effect in August.
Called “Handouts for Hummers” by critics, the program is less green than advocates had hoped, and will not do an extraordinary amount to limit the United States’ dependence on foreign oil. Car owners could get a $3,500 voucher for trading in an under-18 m.p.g car for one that gets at least 22 m.p.g., or $4,500 if the new car gets 10 m.p.g. higher than their existing vehicle. Truck, minivan, and SUV owners will receive a $3,500 voucher for buying a similar new vehicle that gets at least 2 m.p.g. higher; that voucher will increase to $4,500 if the new truck/van/SUV gets at least 5 m.p.g. higher than their existing vehicle.
We, at Wallet Blog, are as anxious for good news about the economy as is everyone else. We’d love to concentrate on giving money management advice for the vast fortunes the nation reaps in boom years, rather than discussing the pros and cons of economic rescue plans and the need to overhaul the financial industry. However, there’s a fine line between finding a ray of hope in this recession and simply misreading statistics.
A recent Associated Press headline read: Jobless benefit rolls drop sharply to nearly 6.7M. Good news right? Less people are receiving unemployment benefits. That can only mean one thing: all the people who’ve lost their jobs have found new employment. How could a drop in unemployment payouts be anything but evidence that the nation is finally on the upswing? After all, the AP article recounts the various highlights of this statistical evidence and calls them encouraging signs…
President Obama has come out strongly in favor of overhauling the financial regulatory system by introducing another watchdog agency known as the Consumer Financial Protection Agency. This agency will be set up to monitor the marketing of mortgages, credit cards and other loan products. President Obama’s proposal is obviously a response to the dangerous and deceptive practices recently brought to light in these industries.
To be clear, we agree that there were deceptive practices in the lending industry. The mortgage industry was allowed to operate rife with fraud. Mortgage agents would misrepresent borrowers on applications to get loans for which they otherwise would not have been approved. The excesses of the credit card industry have been blatant enough to require the federal government to step in and protect consumers. We acknowledge that the industries have been allowed to ride roughshod over consumer rights without anyone stepping up for the little guy.
ENERGY STAR is a government program to help encourage energy efficiency while reducing harmful greenhouse gases. Products stamped with the ENERGY STAR logo meet strict energy-efficiency guidelines set by the EPA and the US Department of Energy. But you might not know that when you purchase ENERGY STAR-compliant products, you might also save a bundle of money, in the form of tax credits and deductions, and rebates from the ENERGY STAR partner corporations.
ENERGY STAR offers tax credits to consumers who make qualifying home improvements or purchase electric, hybrid, or other alternatively fueled automobiles. It also offers tax credits for home builders and tax deductions for energy efficient commercial buildings.
Recently, lawmakers have been questioning Bank of America’s motives for its acquisition of Merrill lynch last September. Some are calling the merger a shotgun wedding directed by Fed chairman Ben Bernanke. Investigations are now underway to determine whether the federal government threatened Bank of America Chief Executive Kenneth Lewis into acquiring Merrill Lynch under the duress that if he didn’t, Bank of America management would be removed from their positions.
We would like to suggest two possible scenarios related to this investigation and regarding Lewis’s responsibility in the purchase of Merrill Lynch. Either Lewis truly believed that the Merill Lynch acquisition was a smart move for Bank of America, or Lewis, having his job threatened, abandoned all responsibility he had to his shareholders in order to maintain his position. In the first case, we have to question Lewis’s judgment. If his company is in financial trouble, the worst thing he could do would be to acquire another financial institution that was even worse off. Knowing what he knew about his company’s financial health, it was a ridiculous idea to put Bank of America further in danger of financial collapse by buying a company that was already collapsing.
A lot has already been written citing Alan Greenspan, ex-head of the Federal Reserve, as one of the people most accountable for the country’s current economic problems. Reportage on the tech bubble, the housing bubble, the systemic risk of unregulated Credit Default Swaps (CDS), and the extremely relaxed underwriting standards to mortgages habitually mention Greenspan’s policies as a primary contributor to these problems. The fact that the U.S. government has had to step in to fix the credit card industry suggests that regulators under Greenspan were asleep at the wheel. As head regulator, the Federal Reserve was in a position to regulate the excesses of the credit card industry for years. Now that disaster has struck, the Federal Reserve finally came up with a new set of rules in December 2008 which would take effect in July 2010, but obviously, their regulation has come too late, as the United States Congress and President have already had to step in and do their jobs for them.
For fifteen years, credit card regulators have had it in their power to prohibit the excesses of the credit card industry. At any time, they could have put rules in place that would have prevented arbitrary interest hikes or the creation of additional fees without rhyme or reason. Now, law will force credit card companies to change their practices, but the government wouldn’t have had to take this kind of action if credit card regulators had been doing their job over the last decade and a half. America is now, in essence, forced to make laws to regulate the credit card industry because our regulators completely failed to do so.
According to CNNMoney, all of the news surrounding the stock market in the past few months, “has been good news, or at least neutral news,” but nothing bad. The rationale for all of these happy feelings is that the market has the ability to prognosticate for the worst of times, and did so in March when we saw the Dow dip to around 6,500. Additionally, it’s believed that 6,500 represented a worst-case scenario that never actually happened, and that therefore we’ve seen the lowest of the low.
While this perspective fueled the three-month surge, it lacks fundamentals that can be found on page one of Investing for Dummies. Before we fall for the hype, let’s face the facts. We are in uncharted economic conditions, and face headwinds that we’ve never seen before and that cannot yet be fully understood.
Staycations are all the rage right now, and it’s no wonder: for a fraction of the cost required to go away this summer, you (and your nearest and dearest) can have a dynamite week at home! Here are my suggestions, under the subheads of On the Cheap, Party Fun, and Splurge a Bit, that will make you feel so happy that once you’re back to work, people will be envious of your new relaxed glow.
ON THE CHEAP
The thing about corporate democracy, as it has been allowed to flourish, is that it isn’t very much like a “real democracy”. Basically, in a “real democracy” that you and I would recognize, people either vote for or against something. If there are more votes for yes then yes wins the day, otherwise, no. What we don’t think about as much is the number of people who don’t really vote yes or no, but who don’t vote at all. In a “real democracy”, these people don’t really count.
On the other hand, in a corporate democracy when it comes to counting the votes from shareholders in publicly traded companies, those votes that aren’t cast, still count. Officially, the votes not voted are given over to the brokers. The brokers in charge of these votes are likely to defer their position to the suggestions made by the board of directors. Thus, whatever the directors put up to a vote, they can be assured of having it go their way because they are supported by a silent majority.
Janine Sahadi did a great job over at CNNMoney.com describing the current ideas being looked into by lawmakers to help the government pay for health care reform. From her synopsis, it looks as though the government is hoping to tax revenues that have, up until now, gone untaxed. So far, lawmakers have suggested taxing, among other things, employer contributions to health care, Medicare benefits for state and local government employees, and drinks with high fructose content.
We are fundamentally aligned with the belief that everyone ought to get health care regardless of their condition as we see this as a basic human right. However, we find it a little disturbing that all of the ideas being bandied about by lawmakers involve either raising existing taxes or creating new taxes. We are willing to do our part, of course, but shouldn’t the government be just as willing?