Archive for the ‘transparency and trust’ Category

LOW AND MIDDLE INCOME CUSTOMERS SHOULD BEWARE OF BIG BANKS CHASING HIGHER FEES: ??Consumer Protection to the Rescue

Tuesday, May 8th, 2012

There was a recent report about some large global banks trying to steer or entice low and middle income customers, who do not normally use banks, into relatively expensive products. This has been described as a potential $ 45 Million market. These banks are responding to billions of lost income due to recent regulations placing limits on interest and fees on debit and credit cards. The banks are now competing with non-banking check cashers, payday lenders and pawnshops.1

The products the banks are offering include prepaid credit cards, short term loans, money transfers as well as check cashing and payday loans which all may carry hidden high costs. (more…)

COMMUNITY BANKS Part four THEIR UTILITY FOR GENERAL BANKING

Saturday, April 28th, 2012

Community banks need to have sufficient assets and have some branches where they can service several local communities. The New America Foundation in Washington D.C. was the first to propose (2008) as a vehicle a Community Bank Trust Fund, to be administered by the Treasury Department.8 Their study stressed that some such banks need funding sources beyond local depositors. They proposed that funding could come from a tax of about one-half of 1 percent of the dollar amount of asset-backed securities, to be collected by the SEC. As a precedent, they refer to the Federal Home Loan Banks that are required to give 10 percent of their annual net income for the Affordable Housing Program.9 This is a matter that voters should bring to the attention of their congressional representatives. (more…)

COMMUNITY BANKING Part three SERVICE FOR THE LOWER AND MID INCOME GROUP

Thursday, April 26th, 2012

Some of us need credit, especially at the end of the month, for food or gasoline, or to pay utility bills. So our first remarks concern that part of the population. Although in 2009 12% of the population had no regular bank account into which to tap, the numbers are higher for Afro-Americans (28%) and Hispanics (30%). When economists write about this group, they refer to them as “low and mid income people (LMI)”. For some, there were no banks available. The number of banking institutions dropped BY 35% from 1975-95 and that included dropping branches in low income communities. Large banks bought up community ones and the number of the latter dropped from 14,000 in 1985 to 7,000 in 20081.3 (more…)

COMMUNITY BANKS Part two

Tuesday, April 24th, 2012

Ethical Considerations That Favor Community Banks

Ethics are directly related to social relationships, and here are some reasons why the ethics favor community banks:. Community and Credit Union banking involves community relationships between borrowers and lenders. There is a good probability that they will know each other or have mutual acquaintances. The character of borrowers and lenders counts for something in decisions that contribute to trust and loyalty. There can be a mutuality of interest between creditors and those to whom they lend. Within the large, international banks, the relation is transactional, counting mainly as business deals. The future destiny of some locally invested funds within the international banks may not be known by either party.1
(more…)

THE CASE FOR COMMUNITY BANKS, RATHER THAN LARGE, GLOBAL BANKS Part one

Saturday, April 21st, 2012

The Third Essay in the sequence on income inequality.

This is the first in a series of four blog entries that seek to demonstrate the link between income equality and economic and financial policies and to show how community banks can help to alleviate income equality in the country.  This topic is rarely if ever covered in mainstream media.

“ While community banks with assets under $1 billion represent less than 11 percent of banking assets, they provide nearly 40 percent of the loans the banking industry makes to small businesses, extending credit that is crucial to job creation…They have a unique role to play in our financial system.”—-FDIC Acting Chairman, Martin J. Gruenberg, American Bankers Association, October 25, 2011.–

Summary: IPPA supports the use of community banks and credit unions for people who routinely bank as individuals or as family members. In contrast, the priority of large international banks is to provide services to corporations, many of them global. Their profits come mainly from trading, which may not benefit local depositers. We can ask if those big banks provide any local social or economic benefit. Normally, community banks have less than $1billion in assets, and, until 1994 made up 94% of the banking industry. Their officers are usually members of the local community. Below, we also point to warning flags to consider when making a choice among community banks, such as their assets and collateral and the composition of their boards. We offer compelling ethical reasons why those institutions may warrant our business, one of which is that there are community relationships between borrowers and lenders, which may foster trust. We begin by flagging the services community banks could provide to people at the lower end of the income spectrum.

CONSUMER DEBT AND ITS SOCIAL CONSEQUENCES

Saturday, February 11th, 2012

[Second in a Series on Income Inequality]
Summary
The United States, more than any other country, raises consumer spending to a virtue and sometimes denigrates saving. Some believe that it is patriotic to spend rather than save. This is the finding of Princeton history Professor Sheldon Garon, in his book “Beyond Our Means: Why America Spends While the World Saves” (Princeton University Press, 2012).  After 9/11, President Bush encouraged Americans to go to the mall, or to Disney World. Public officials have told the nation that we can have growth in our Gross Domestic Product (GDP) through debt. This essay asks the question whether or not consumer debt is always a good thing. By examining the recent nature of debt in our country, it shows that,  along with consumer spending  and  increased personal debt, has come a rapid rise, through debtor interest and fees, in the wealth of some of the lending banks, corporations, and their officers. Critics have described them as parasitic on the middle and lower income ranks. We point to the consequences of the rise in borrowing  and the income gap, for distrust of government  and reduction in social mobility. We argue for your consideration of community banks as a family banking destination. (more…)

ADEQUATE FUNDING and TOUGHER LAWS NEEDED FOR THE SECUTITY AND EXCHANGE COMMISSION [SEC] TO INVESTIGATE AND PROSECUTE WRONG DOING BY FINANCIAL INSTITUTIONS

Monday, January 23rd, 2012

A front page New York Times [NYT] article by Edward Wyatt [1], on November 11, 2011, reported that the recent SEC settlement with Citigroup was rejected by federal judge Jed Rakoff because of a lack of any admission of guilt of fraud on the part of Citigroup. This has been a strategy in past cases with the SEC and other banks, because the SEC contends it must settle most of the cases without obtaining admissions of guilt. It does not have the necessary funding to battle the “deep pockets” of Wall Street firms, who will rarely admit wrong doing. Admission could be used against them in the case of an investor lawsuit.

 Judge Rakoff claimed that the SEC “has a duty, inherent in its statutory mission’ to see that truth emerges”. He also said” in any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth”.

  Additional evidence addressing inadequate financing was reported by George Packer[2] in The New Yorker [6-27-11]. He stated that nearly three years after the financial crisis, “Wall Street still relies on reckless practices to create wealth”. He also stated that the SEC remains starved of resources. (more…)

BETTER REGULATION OF THE FINANCIAL RATING AGENCIES

Monday, January 23rd, 2012

The failure of the rating agencies to accurately audit the derivatives market played a role in the financial collapse of 2008. In spite of all available evidence of wrongdoing there has still not been adequate regulation, including in the Dodd-Frank bill passed by Congress last year. The cozy arrangement by which the rating agencies were paid by the institutions whose derivatives and other financial products they were rating is well known.
 One solution reported by Gretchen Mortenson [1] in October was suggested by Paul Volker, former head of the Federal Reserve. It was to rotate the rating agencies on a regular basis for each financial institution, which would provide a check and balance system. Another suggestion to solve the question of compensation for the rating agencies would be by taxing the banking/investment industry institutions themselves on their financial transactions. These funds would then be used by a newly formed independent Federal agency to compensate the rating agencies based on a set fee schedule, not in any way tied to a specific rating of a financial product.
  IPPA feels that both of these plans to correct insufficiencies in regulation of the rating agencies should be implemented in the very near future to ensure that both individual and institutional investors can have confidence in the audits of the rating agencies.

1. Mortenson, Gretchen NY Times 10/22, 2011

CLOSE-MINDEDNESS, RIGID IDEOLOGY AND MIND CONTROL RESULT IN UNWORKABLE DEMOCRACY

Wednesday, January 11th, 2012

IPPA has become increasingly concerned about the inability of the federal government to efficiently and effectively address our country’s severe economic, social and environmental problems. It is our belief that almost all progressive policy proposals intended to address these problems are met with obstruction in Congress as a direct result of one party’s rigid ideology and close-mindedness. We believe this can only be overcome through electing new members of congress who will be willing to compromise on our country’s important issues for the common good. This is our best hope to insure our country’s future.
One of the fine things about the United States is that since its founding, both the legal structure and the popular culture have approved some forms of the competition of ideas, speech, and action. Our assumption has been that the best solutions to problems emerge from the interaction of ideas and from the citizens’ learning from the interchange. This spirit has been strengthened by the fact that most scientific inquiry is social, involving many people. Note the number of author’s on the first page of a scientific journal paper. Authority is shared and not located in a single source. Open criticism is key, as the inquiry unfolds.
A foreign enemy of this approach is the Communist Party of China, which is Leninist in form. Leninism assumes that senior Party officials have knowledge that trumps the ideas and policy proposals of citizens and of the law courts. Dissent may be permitted in controlled situations, but when the Party speaks, at the local and central level, that is supposed to be the end of discussion. Equivocation, deviation, and dissent are dangerous. Tens of thousands of popular uprisings in China each year attest to the fact that many dissenters  do not agree with the Party’s positions.
Now our own culture is threatened by Leninists in Republican dress. Grover Norquist’s  Americans for Tax Reform (ATR) opposes all tax increases as a matter of principle. It pressures candidates for congressional office to take a “Taxpayer Protection Pledge.” If they do not, ATR attacks their candidacy and stirs up voters to do so. The pledge is that the candidate will “oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.” By November, 2011, 238 of 242 House Republicans and 47 Senate Republicans had signed the pledge.  Senate Majority leader Harry Reid describes Congressional Republicans as “being led like puppets by Grover Norquist.” Hence note the failure of the Deficit Reduction Joint Select Committee. Norquist is the Party voice, and it trumps individual opinion and discussion.  And further damages hopes for our economy to recover.
Not only is economic policy being captured by these single minded Leninists. The same is true for the Republicans’ position on women’s reproductive health. The Susan B. Anthony (SBA) List is their attempt to squash a variety of positions on the Life/Choice debate. To gain their support and avoid being attacked by the SBA List, candidates should sign the Pro-Life Citizen’s Pledge. In addition to pledging support for vague restrictions on the appointment of federal judges and for the requirement that those selected for Federal Cabinet and Executive Branch positions be pro-life, there is a third item in the pledge. A candidate is to agree to “…defund Planned Parenthood and all other contractors and recipients of federal funds with affiliates that perform or fund abortions.” Again, the Party can see to it that open discussion ends if a candidate wants its support. The citizens lose the chance to learn from the debate.
Our use of “Leninism” accurately identifies a practice that, in matters of key national policies, the Republican Party shares with the authoritarian Chinese Communist Party and the departed Soviet one.  This stifling of multiple voices damages our democracy.

NEED FOR A TRUTH AND RECONCILIATION COMMISSION

Thursday, March 5th, 2009

Senator Patrick Leahy of Vermont has proposed the establishment of a truth and reconciliation commission to investigate possible constitutional abuses of the Bush-Cheney Administration. Suspected abuses may include the use of torture, warrantless wiretapping, extraordinary rendition and executive override of existing laws. It is essential that the commission be staffed by both experienced and fair-minded people with no “axe to grind” in order to establish the facts about exactly what happened and to  determine the extent of whatever abuses did occur. The object of the deliberations is to ensure that these suspected constitutional abuses are not repeated in current and future administrations.
There is a strong feeling in the country that members of the executive branch, both in the White House and in the Justice Department, often acted as if they were above the law. These abuses must be fully exposed, not to wipe the slate clean, but to learn the truth about the recent past. The findings must insure that specific safeguards and reforms are put in place to make certain that these abuses never happen again. The commission will need subpoena power as well as the power to bestow immunity in order to facilitate complete and forthright testimony.
To encourage public support of Senator Leahy’s plan there is on online petition at http://www.BushTruthCommission.com which urges the United States Congress to establish such a commission. This effort to establish truth and transparency will go a long way to reestablishing trust in our national leadership and is completely in concert with IPPA’s core values of truth and trustworthy leadership.
Do you agree with the need for this commission or something similar and if not why not?