June 2011

Bank of America's $8.5 Billion Hypocrisy

Bank of America makes good on bad loans to investors, but never to their clients.

     Investors are pissed

. Individuals and banks that bought mortgage backed securities (banks' insurance policies should people default on their mortgages, which many have) have lost billions of dollars since 2008 and they want their money back. However, that means recouping losses from some of the biggest banks in the world, which some investors are loathe to do since it could further destabilize big banking. Others , so called "acitivist investors", aren't so careful, actively pursuing some compensation for their losses from worthless securities they bought even while the housing market was toppling. Bank of America, it seems, has shut quite a few of them up. It's also set a dangerous precedent, paying back some of the losers in the housing crisis, and not others....like most of us.

     Bank of America, one of the largest banks in the country, has recently settled with 22 large investors to the tune of $8.5 billion. This comes after an ill-advised purchase by Bank of America of Countrywide for $4 billion. Countrywide is accused of having sold $424 billion in mortgage back securities to major investors, while continuing to service bad loans and charging service fees even as the securities lost value. As Bank of America now owns the investment company, it is on the line for the losses. Although $8.5 billion is only about 2% of the investments' initial $424 billion dollar principle value, the investers consider this a victory.

Financial Inequality in America Is NOT the Price of Doing Business

Financial inequality is an eye-roll-inducing topic in this country, which is why it's still a problem.

    

There is a difference between the words "unequal", and "inequitable", which must be closely defined if the following discussion is to stay above the the morass of liberal and conservative ideologies. In money-speak, "unequal" simply refers to two entities (be they businesses, people, or piggybanks) that do not have an equal amount of money. "Inequitable", or "inequality", refers to the systemic tendency for money to end up in one entity rather than another...something we call unfair, by any other word. However, whenever anyone addresses financial inequality in this country, they are often dismissed as liberal-minded radicals, conspiracy theorists, or hopelessly misinformed. At best, the financial inequality is considered a simple byproduct of capitalism (usually followed by a charming ultimatum, "if you don't like it, go somewhere else") This kind of dismissal is exactly why the financial inequality is so drastic between the upper 7% and lower 93% of our country, and as we continue to slog our way through the present economic "recovery", it's only likely to get wider.

What's It Like To NOT Live Paycheck-To-Paycheck?

Today as I drove home from my second job, I was mentally tabulating my finances. I'll have a big windfall coming in the next few weeks, and I have learned that it's critical for me to allocate all the funds for a windfall before it arrives (whenever possible). If I find myself with a fat check in hand and no plan, guess what happens to that money?

As I mentally shuffled the imaginary money around, I suddenly realized that as of two weeks ago, for the first time in my adult life, I'm NOT living paycheck-to-paycheck. According to my hero Trent at The Simple Dollar, you pass the paycheck-to-paycheck threshold when "you are spending less than you bring in and you have at least a weekly paycheck worth of money in a savings account."

Too Big to Fail

HBO original movie shines a light on the U.S. Crash of 2008.

    

In the summer and early fall of 2008, Lehman Brothers, the 4th largest investment bank in the country, began to lose capitol. They called Treasury Secretary Hank Paulson, for support because the government had recently bailed out Bear Stearns, the country's 5th largest investment bank. It's at this critical juncture in the financial meltdown that the narrative thread is picked up by HBO's original movie, Too Big to Fail. The film boasts an all-star cast, including William Hurt, Billy Crudup, Paul Giamatti, James Woods, Cynthia Nixon, and Bill Pullman; all portraying the individuals that were the harbingers of the worst financial crisis the country has seen since the Great Depression.

Is Debt Empowering To Young Adults?

An interesting article on the BlogHer network today inspired me to cast my mind back to my own early 20s. According to researchers at Ohio State University, "people between the ages of 18-27 are actually empowered by owing money for things like credit card bills and student loans."

It sounds preposterous on the face of it. But the study looks fairly legit (i.e. they didn't seem to start out with a particular agenda in mind, and it didn't come from the Capital One Research Labs). I think it's an idea that's worth examining in more detail. Could there be deeper psychological underpinnings to overspending? Because if that's the case, then we need to address those if we have any hope of turning this ship around (both personally and at a national level).

Should You Get A Stand-Alone Freezer?

One of the more hotly-debated topics in frugality circles is the second freezer. Some people swear by them; others swear against them. This is a situation where both camps have a good point.

First thing's first: it is clearly more frugal to get a chest freezer. When you open an upright freezer, all the cold falls out the bottom. But when you open a chest freezer, all the cold stays put. Chest freezers also tend to make more efficient use of space, because everything ends up more tightly packed than it usually would be in an upright freezer.

The Great Mobile Finance Market-Grab

How companies big and small are competing for your smart phone.

      It was not a question of if, but a question of when mobile finance would become a reality for American consumers. Many smart phones and tablet computers already have mobile payment capability using special reader apps for transactions. However, the technology is not wide spread among businesses, which still depend on heavily on credit card readers that carry fees per transaction.