Sequestration: So Much For The Tired & The Poor

by Lynn B. Johnson on May 13, 2013

Budget CutsWhen sequestration’s automatic budget cuts went into effect on March 1 of this year, many were unclear as to how these cuts would affect daily life and social programs. We were told that although the sequester would reduce the federal budget deficit by $1.2 trillion dollars over 10 years —as required by the Budget Control Act of 2011, which was enacted in part to resolve the debt-ceiling crisis— the cuts would not go into effect immediately.

Well, it’s two months later and few people seem to be talking about where these cuts are headed, so Wallet Blog did some investigation.

Surviving the Sequester: Quick Tips for Laid-Off or Limited-Hours Workers

by Lynn B. Johnson on March 6, 2013

Budget CutsIf you are one of the many government workers who has been laid off, might be laid off, or has had your hours slashed, you need to be thinking of a new plan, pronto. The U.S. economy added 741,000 jobs between September 2012 and January 1, 2013. The CBO estimate of jobs that will be lost due to sequestration is 750,000. That means you’re going to have a lot of company in the unemployment line.

Unemployment Benefits

Hey Investors, You Up for a Dip in a Dark Pool?

by Odysseas Papadimitriou on January 31, 2013

They’re three of the most tried-and-true, commonplace expressions:  1) Look before you leap; 2) Don’t swim within 30 minutes of eating; and 3) Buy Low, Sell high.

While decidedly trite, we were raised on such sayings, and they typically don’t lead us astray.  But do they hold true in the post-Great Recession world of finance, which is marked by things like “shadow banking,” “floating-rate demand notes,” and “dark pools” that are not only unclear to most consumers, but could also get you in over your head and ultimately eat your lunch if you aren’t careful?  That remains to be seen.

AIG Shareholders Give U.S. Taxpayers the Middle Finger (And Other Unbelievably True Stories from the Week in News)

by John Kiernan on January 9, 2013

AIG shareholder suitHold on – is this the news, a dream, or some sort of Oscar Wilde-type satire?  That’s along the lines of what I was thinking last night while watching Anderson Cooper and Erin Burnett report a pair of stories seemingly straight out of The Twilight Zone or Ripley’s Believe it or Not.

I mean, could AIG actually be SUING the U.S. government (as well as you, me, and every other taxpayer by extension)?  Are U.S. politics really so flawed that rape is actually LEGAL in California if the victim is single and the perpetrator impersonates her boyfriend?

Why You Can’t Comparison Shop For Life Insurance

by Odysseas Papadimitriou on January 2, 2013

There’s always a lot of talk about resolutions this time of year.  It’s a New Year, after all, and that means many people are embarking on new beginnings or striving for self-improvement.  It’s not all about losing weight or giving up cigarettes either.  A number of the most popular New Year’s Resolutions are financial in nature, and one in particular – taking out a life insurance policy – raises some important questions about how certain aspects of the personal finance landscape operate.

It’s understandable why people would factor life insurance into their resolutions.  I mean, New Year’s is when many of us finally address long-shirked obligations (plus, barely surviving New Year’s Eve can have that effect on you).  Parents in particular want to make sure their loved ones are provided for, not burdened financially, if they pass away.  Well, anyone who’s ever taken out a policy knows that while you can try to shop around for the best rates, offers aren’t finalized until your paperwork and physical exam results are processed.

How Can a U.S.-Made Prescription Drug Cost Hundreds More Domestically Than Abroad?

by Odysseas Papadimitriou on December 20, 2012

prescription drug pricesJust a few weeks ago, my wife and I welcomed into the world our first child, Achilles Spiro Papadimitriou.  He obviously takes after his papa when it comes to having an exceedingly Greek name (just check out my byline), and my hope is that he can channel his namesake, Achilles of Greek mythology, when it comes to strength, bravery, leadership, and general badass-ness.  Anyway, that’s beside the point.

You see, Achilles recently had some trouble with his eyes (I know, surprising it wasn’t a leg tendon), and our experience getting him medication raised some very interesting questions about our country’s medical system (I know, U.S. healthcare is flawed, surprise surprise).  To make a long story short, there was some sort of snafu with our insurance and Achilles didn’t show up on our account, so we had to pay for the medicated eye drops he needed out of pocket.  No biggie, right?

Could Consumer Dispute Resolution Have a Class Problem, Not an Arbitration Issue?

by John Kiernan on December 5, 2012

supreme courtHow can we fix arbitration?  That’s the question we posed last week after The Pew Charitable Trusts released a study that revealed how disturbingly prevalent mandatory arbitration clauses are in the fine print of checking account agreements.  The thing is, after exploring the issue a bit further and talking to some of the country’s foremost experts on arbitration and consumer disputes, a new question arose:  Is the arbitration process actually broken?

Don’t worry if you’re a little lost right now because a bit of background is certainly in order.

Consumers are Being Scored on More than Just Their Credit

by Odysseas Papadimitriou on November 14, 2012

big brotherFor starters, let me just say that if you’re a bit of a conspiracy theorist or have been known to be paranoid, you might want to stop reading right now.  They’re watching you, after all.

Who are they, you ask?

Can Campaign Spending Solve All of Our Financial Woes?

by Odysseas Papadimitriou on November 6, 2012

election 2012The idea has been floated more than once over the last few weeks:  How about we take all the money that candidates have spent on advertising time, polls, yard signs, and general campaigning and just use that to pay down the deficit?  While those who suggest this wacky plan do so knowing that it will never actually take effect, there is something to be said for directly allocating our money where we need it most and getting rid of those annoying ads that have dominated the airwaves of late.

This, of course, begs the question of exactly how much has been spent on major political campaigns and what it could fund if appropriated elsewhere.  It can be fun to dream, after all.

Finally, Debt Collectors are Being Held Accountable

by Odysseas Papadimitriou on October 24, 2012

debt collectionThe tables, it seems, have turned.  We as consumers are all too familiar with being the subjects of debt collection efforts, and now it’s the debt collectors’ turn to face some scrutiny.  Not only has the controversial Patient Protection and Affordable Care Act (better known as Obamacare) implemented some new rules that require hospitals to curb unfair collection practices against patients if they want to receive their federal tax exemption, but the Consumer Financial Protection Bureau (CFPB) also published a rule yesterday giving itself the ability to oversee the nation’s largest debt collectors.

Roughly 30 million Americans have debt subject to collections, according to the CFPB, which estimates the average amount owed to be around $1,500.  These statistics are worrisome both because they speak to our country’s obsession with overspending and in light of the negative repercussions of severely delinquent debt.  You see, in addition to the inconvenience and stress of having debt collectors pester you, your debt burden will grow as interest continues to accrue, you’ll incur more and more credit score damage as delinquency increases, and you could eventually default and even get sued.  To complicate matters, debt collectors are notorious for misleading consumers, overstepping the law, and making mistakes that cost people like you and me a lot of money.

What is Reverse Redlining (And is Morgan Stanley Guilty of It)?

by John Kiernan on October 17, 2012

What do you call a card-carrying member of the American Civil Liberties Union (ACLU) who shows up at your door?  Well, if you’re a Morgan Stanley executive, you might not call him anything given the shock of hearing the words, “You’ve been served.”

morgan stanleyThe renowned advocacy group filed suit against the investment giant in New York district court on Monday on behalf of five Detroit residents, alleging that Morgan Stanley violated federal civil rights laws by engaging in a process known as reverse redlining.

Does the US Aid Foreign Tax Evaders?

by Odysseas Papadimitriou on September 26, 2012

internal revenue serviceThe financial upheaval of the last few years, a growing national debt, and the recent crackdown on Americans using offshore accounts to evade taxes, have all brought more and more scrutiny to the issue of international banking secrecy of late.  But while this has naturally resulted in growing frustration over the stubbornness of tax havens like Switzerland, Luxembourg, and Bermuda, one important question remains:  Are we hypocrites?

Could the United States be withholding information about bank accounts held by foreign nationals from their own governments – the exact thing we rail against other nations for doing?  Are we therefore party to tax evasion in nations around the world?

Why are Small Businesses Still Paying for the War of 1812?

by John Kiernan on September 19, 2012

As a small business owner, it’s easy to use a given state’s low corporate tax rate as a reason to base your operations there.  By doing so, however, you’ll be failing to take into account taxes assessed on a local level, which can cost you big time.

Take Virginia, for example, which has a tax rate of 6% that the state proudly showcases on its website as being one of the lowest in the nation.  What you won’t find in this glowing write-up is information about how you’ll also be footing the bill for a war long since concluded.  You see, the Virginia Business, Professional and Occupational License (BPOL) tax started as a way to raise money for the War of 1812, but now this tax on the gross receipts of Virginia-based companies serves primarily as a thorn in the side of small businesses and a way to fill the coffers of local municipalities.

How Foodborne Illness Impacts the Economy

by Odysseas Papadimitriou on September 12, 2012

foodborne illness and the economyEver see the movie Contagion?  If so, you’ve got a sense for how a chef failing to wash his hands after touching some contaminated pork and then shaking hands with a customer can end up making people sick clear across the world.  Sure, the events in the film might be a bit sensationalized, but foodborne illness is a real threat, both to our health and that of the economy.  And interestingly enough, modern media actually both exacerbates the problem and could help provide a solution.

When an outbreak occurs in this the era of Facebook, Twitter, and streaming news on cell phones, millions of consumers know about it immediately and are likely to swear off the product involved for the foreseeable future.  Therefore, not only will the farm at which it originated almost certainly go bankrupt as a result, but the entire industry will suffer as well.

Is Mortgage Tax Relief On Its Way Out?

by John Kiernan on September 5, 2012

The Republican National Convention is now behind us and the Democratic version is set to conclude Thursday, and while this might have you thinking there will be an entertainment void in the coming weeks, the truth is that the real fun starts when these idealistic celebrations are in the rear-view mirror.  I’m referring to the beginning of the debate season (though I would have accepted the start of the NFL regular season as well), when we can hear the candidates mix it up and offer retorts to each other’s grandiose claims.

The debates usually give ordinary citizens like you and me a chance to ask the candidates questions as well, and one question that I’m sure a lot of people would like answered is what will become of the mortgage forgiveness tax break that has helped lower the financial burden on so many people since 2007.

Next Man (Or Woman) Up: New Fed Chairman Will Face Long, Hard Road

by John Kiernan on August 29, 2012

federal reserve sealA couple of things occurred to me while watching coverage of the Republican National Convention this week (I’m an Independent, if you’re wondering): 1) What would Will McEvoy make of all this? and 2) The impending election season means forthcoming political turnover, and that could have a significant effect on our finances.

Quickly, I answered that first question for myself (he’d probably yell at everybody) and moved on to my second notion. Soon thereafter I realized that elected officials aren’t the only ones that will have some measure of control over our wallets in the near future. I mean, has anyone thought about the role Ben Bernanke’s successor will play in shaping financial policy as the next chairman of the Federal Reserve, an appointed position.

Should We Be Worried About Corruption & Ineptitude With Student Financial Aid?

by Odysseas Papadimitriou on August 8, 2012

college financial aid Financial literacy in the United States is clearly lacking right now, and what are our institutions of higher learning doing about it? Setting a terrible example and bleeding their most financially vulnerable students of much needed aid money, that’s all.

Don’t believe me? A new report from the US Public Interest Research Group (PIRG) confirms the dirty practice. The report, titled The Campus Debit Card Trap, revealed that while the federal government has long mailed students financial aid checks, nearly 900 colleges and universities have struck affinity partnerships with financial institutions in order to tie campus records to bank accounts, effectively turn student IDs into debit cards, and disperse aid to more than 9 million students through these cards. This might sound great in theory, but a closer looks reveals significant drawbacks to the supposed convenience the new system offers.

How High Fees and Conflicts of Interest Are Hurting Your 401(k)

by John Kiernan on August 1, 2012

401k feesWhether you love or hate your job, the freedom to retire is inescapably appealing. In fact, it’s the American Dream – work hard in order to attain the requisite financial freedom to retire to a comfy home with a white picket fence, pursue your interests irrespective of earning potential, and provide for your family. Unfortunately, the changing dynamics of retirement accounts, Social Security, and the economy at large may be making this dream harder to realize, if not turning it into a nightmare for many folks.

Not only does the aging American populous put Social Security in jeopardy, but the increasing reliance on 401(k)s instead of pension plans has also made many Americans’ safety nets less reliable, especially since a lot of people do not fully understand these plans or their true effectiveness.

Upcoming Changes to Gift-Tax Exemption May Cost Your Children Millions

by John Kiernan on July 25, 2012

gift tax exemptionParents, if your children have unexpectedly started cleaning their rooms, adhering to curfews, and making you breakfast in bed, there’s good reason to be suspicious. Kids, start doing those things immediately and casually mention that you saw something on the Web about an upcoming change to the gift tax exemption. This holiday season could result in a lot more value changing hands than usual, which means we can expect a lot more sucking up in the coming months.

All kidding aside, New Year’s marks an important date for the way wealth in the United States is passed down from generation to generation. This is when the federal lifetime gift-tax exemption will revert back from the roughly $5 million threshold now in place thanks to the Tax Relief Act of 2010 to the standard $1 million. In other words, through December 31, 2012 you can give another individual (presumably a loved one) up to $5.12 million without it being taxed, but come New Year’s, amounts over $1 million may be taxed at rates upwards of 50%.

Should Small Business Owners be Worried About Their Money in December 2012?

by John Kiernan on July 18, 2012

FDICThe countdown to December and the date that could alter our future is on. Have you started thinking about what you’ll do if the prognosticators are right? Do you have contingency plans? Will you remove your money from the neighborhood bank? After all, the impending elimination of Federal Deposit Insurance Corporation (FDIC) insurance on small business bank accounts is no joke (raise your hand if you thought I was talking about the Mayan prediction that the world will end on 12/12/12).

The fate of FDIC insurance on business accounts has certainly garnered less mainstream attention than the latest, greatest doomsday prediction, but with the more than 27 million small businesses in the United States employing half of all private sector employees, according to the U.S. Small Business Administration, it’s certainly significant nonetheless.

It’s Time to Bring Shadow Banking into the Light

by John Kiernan on July 11, 2012

shadow bankingThey exist in the shadows, operating outside the law and making monumental moves with the fate of society resting in their hands. They are thrust into the headlines only during times of trouble, yet are unquestionably a major part of history. Their importance must not be overlooked by politicians and regulators any longer. No, I’m not referring to the Illuminati, Batman, or even the CIA, but rather the entities that comprise the so-called shadow banking system, which played a significant role in causing the Great Recession and are finally on Washington’s radar.

For those of you who don’t know, the shadow banking system is the collection of financial institutions and investment vehicles that are not subject to the same laws and regulations as traditional banks and bank accounts given that they do not allow you to make deposits. It includes hedge funds, money market funds, and many securities. It’s also common for investment banks to engage in shadow banking practices in order to keep certain transactions off their balance sheets and therefore hidden from regulators and investors alike.

Why We Need a Return to Direct Democracy This Independence Day

by Odysseas Papadimitriou on July 3, 2012

athenian-democracyBy now, I think we’re all a little sick of the stagnate politics in Washington, where politicians on both sides of the isle seem unwilling or unable to compromise and appear more concerned with electability and party reputation than the true good of their constituencies. That’s why we as Americans need to get back to the basics – the basics of democracy, that is – and take back a measure of control over the decisions that are made on our behalf. At the end of the day, inefficient decision making leads to wasted money and resources, which is the last thing our wallets need right now.

I’m sure you would have never guessed it, but I am Greek. In fact, I hail from Athens – the birthplace of Democracy. Democracy looked a bit different back in 507 BC, when a wise man by the name of Cleisthenes first introduced a political system called “demokratia,” which translates to “rule by the people.”

Are Austria & Luxembourg Hurting American Taxpayers?

by Odysseas Papadimitriou on May 23, 2012

austria and luxembourg tax evasionHow do you say “wrench” in German, French, and Luxembourgish because those are the primary languages spoken in Austria and Luxembourg, and a wrench is exactly what these two nations recently threw in European Union plans to increase national budgets by cracking down on tax evaders.

Tax evasion has long been problematic in the EU and around the world due to a combination of the EU’s lack of authority to tax its member states and the secret banking policies that allow foreign nationals to anonymously stash cash in countries like Switzerland with no questions asked. To compensate, the EU in 2005 enacted a law that requires all EU members and a number of non-EU countries to withhold taxes on the interest gleaned from foreign nationals’ savings accounts and then distribute the funds to the account holders’ respective governments. Most countries are also required to share information identifying the individuals behind the accounts, but there are a few notable exceptions, including Switzerland, Austria, and Luxembourg.

How’s a Little Medical Bill Transparency Sound?

by John Kiernan on May 16, 2012

medical expense transparencyImagine entering a restaurant and being told to wait for a table by a surly host, who shrugs off your repeated contention that you have reservations before handing over a questionnaire about your history as a restaurant patron and instructing you to complete it. Then, when you’re finally led into the dining room, you’re given a menu written completely in French that lists a whole bunch of foreign-sounding dishes, but no accompanying prices. You inquire and are told that the bill will be worked out at the end of the meal. Now, is that something you’re likely to put up with?

Of course you would, but not in a restaurant setting. We as Americans reserve such treatment for our doctor’s offices.

U.S. Sanctions on Iran Underscore Need for New International Banking Regulations

by John Kiernan on December 27, 2011

In a recent article about the negative effect Swiss banking secrecy and hypocrisy have on the rest of the world, we suggested the creation of a revamped banking community, in which member nations would share information about bank accounts held by foreign nationals with their respective governments and member banks would require that identifiable individuals be behind every account (even corporate accounts). These rules – defiance of which would result in economic ostracism – would help prevent tax evasion, money laundering, drug trafficking, and other criminal activities. In formulating this idea, we did not specifically consider the effect such a system could have in curbing terrorism, but recent sanctions levied by United States against Iran as well as banking institutions doing business with the country have indeed made this utility clear.

The U.S., together with Britain and Canada, announced on Monday Nov. 22, 2011, new sanctions against Iran – targeted to the country’s petrochemical sector and organizations with terrorist ties – that are designed to put increased pressure on the Iranian economy and thereby limit nuclear development as well as funding and training for terrorist groups around the world. The Obama administration hopes that by designating Iran as a “primary money-laundering concern,” companies will break off ties with Iran in order to remain in good standing with countries like the U.S. that are opposed to its practices.

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