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
Read the rest of this entry »


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.


March 8th, 2012

An enduring debate in our country concerns whether or not the central government has any positive role to play in the life of corporations. Much has already been written about the deregulation of businesses starting around 1980, symbolized by the repeal of parts of the Glass-Steagall Act that separated investment and commercial banking, in 1999. The new documentary, “Heist: Who Stole the American Dream?” provides a summary of the evidence that government regulation of business is central to the flourishing of democracy.  Recently, Mitt Romney has criticized the government role in saving the Detroit auto companies from total liquidation, by saying that no government infusion of money was needed. On the contrary, the following blog argues that the federal bailout was necessary and successful, another example of one of government’s positive roles. Read the rest of this entry »


February 11th, 2012

[Second in a Series on Income Inequality]
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. Read the rest of this entry »


February 6th, 2012

Part 1: Summary
• Housing debt is at the center of the slow American economic recovery
• Home values are in a downward spiral endangering the entire economy
• The private residential mortgage market has inadequate infrastructure to reverse this trend
• Proposed solution-lower mortgage principle nationwide through a cooperative effort of the mortgage industry and the Federal Government.
• Consider modifications of existing mortgage agreements
If implemented, this plan would result in a win-win situation for both borrowers and creditors and benefit the entire country

Part 2: Background

 “There is widespread agreement among economists that housing debt is at the heart of the slow [economic] recovery, and that finding a way to bring it down faster would accelerate the recovery.”[1]The home values in the market are in a downward spiral which, if left unresolved, endangers the entire economy. In a recent article Joe Nocera, interviewed Laurie Goodman [senior managing director Amherst Securities], who states that there are 55 million home mortgages in the United States, and greater than 10 Million of them are reasonably likely to default, due to so many homes being “underwater” [meaning that the owners owe more on their mortgages than their home is currently worth]. This is due to the severe drop in home prices since the housing bubble burst in 2008. In addition the supply of available housing will continue to outstrip demand. It’s estimated that there could develop a glut in excess of 6.2 million houses. [2] There are fewer home buyers because multiple factors are at work.  These include the grim economic outlook, high unemployment, lack of personal savings for down payments, young adults returning home to live with their parents, and tightening mortgage lending standards.

 Goodman says that the combination of all these factors has led to a “death spiral” in the housing market initiated by supply/demand imbalance, leading to decreased home values, more home owners underwater, an increased number of defaults, more foreclosures, an increase in the supply/demand ratio, and so on and on spiraling downward!

  What can be done? Read the rest of this entry »


January 24th, 2012

Major Underlying  Cause
The distribution of wealth and opportunity in the United States has become unfair and  unbalanced

(1) The spread of the “Occupy” movement
(2) Two-thirds of Americans believe there are “strong conflicts” between rich and poor in the U.S. [source: Pew Research Center, poll dated 12/6-19/11]
(3) The financial services industry grew from 5%-6% of GDP in the 1980’s to 16%-17% in 2006. The top 1% of earners accounted for 24% of all income in 2011.
(4) Based on the 2010 census, personal consumer debt is about $2.4 trillion, or $7,800 for every adult and child in the U.S..  70% of the GDP in the U.S. is from consumer spending.

Moral Relevance of the Situation

(1) Fairness is a basic and universal moral principle, which concerns equal sharing of benefits and pains, within culturally variable limits. But the principle of fairness is violated when there is no sharing of the pain of an economic crisis. An example is the housing crisis where the lenders have little pain (because they do not modify the mortgages and can sell the foreclosed houses), and the borrowers have all the discomfort.
(2) Another example of unfairness is the reduced opportunity for upward mobility in the U.S. in comparison with Europe, because parental economic difficulties carry over to the educational access of the next generation.
(3) These problems lead to a reduction in public trust in government.

What  to Do

(1) Keep informed. Read the IPPA website ( Do not be passive.


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. Read the rest of this entry »


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


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.

FOCUS for IPPA in 2012

January 8th, 2012

At this moment in our country’s history a movement, now referred to as the Occupy Movement, has arisen on Wall Street in New York City and has spread across the country and beyond our shores. The motivating energy for the movement appears to be outrage over the severe economic inequality existing between the upper 1% and the remaining 99% of our population. The long-term mission of the movement is not yet clear or spelled out, but it appears to enjoy widespread support from many divergent groups within our country. They include the unemployed, labor unions, university students including many with massive educational debt and other citizens of all ages and walks of life. They are angered and energized by the seeming lack of interest and impotence of our government or the private economic sector to acknowledge or address the many underlying causes of this glaring inequality.
 IPPA believes that to address the complex aspects of social and economic malfunction and to better serve the “99%” it will take the implementation of a variety of significant government, private sector and cultural changes and innovative new policies. We also recognize the enormous resistance that exists in all the power centers of this country to the types of changes that will be necessary. IPPA plans to suggest on this blog site such policies that will emphasize not only economic issues but ethical considerations as well. Economic policies should be guided by more than the search for short term profit. They should also be consistent with our ethical standards: maximizing the health and psychological well-being of our families, local communities and our nation’s citizens. Call this value “social benefit”.

We recognize that such policies will not be implemented quickly or easily but for the future success of our country we believe they should be seriously considered on merit and receive honest and open debate. Our goal is also to inform the voting public of its right to expect candidates for election as well as appointed officials to embrace the value of social benefit to individuals and communities along economic considerations in the conduct of government.