Financial Answers “IN SIMPLE LANGUAGE”

This follow up piece from my blog article of January 27, 2010, titled “The End of American Life As You’ve Known It” is still questioning why the Supreme Court of the United States is exposing you to more corporate control.

If you read my previous blog article-if you didn’t, please read it first-you will remember that the Supreme Court has given a blank check to corporate America and unions to use as much money as they want to influence our elections.  This, in effect, will give corporations control over the electoral process not you.

This has caused an enormous uproar among the American populace.  Surveys are showing that approximately 80% of Americans are against this Supreme Court ruling.  This breaks down to about 85% Democrats, 76% Republicans, and 81% Independents that are against this ruling.  This survey shows that almost all Americans are against this ruling.

With that said ask yourself this question, “Who does the Supreme Court of the United States of American represent in legal matters”?  Does the court represent the voices of the people of the United States as stated in the first amendment and I quote, “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press, or the right of the people peaceably to assemble, and to petition the government for a redress of grievances”.  Or does the Supreme Court include a non- living entity, a corporation, as having the same “freedom of speech” as we the people as the first amendment “ONLY” mentions?

Reverse Your Decision

Of all of the people who were polled about how they felt about the Supreme Court decision, 72% said they supported a reversal, by congress, of the Supreme Court’s decision.  Such congressional leaders as Senator Chuck Schumer have jumped on the bandwagon to get congress to reverse the court’s decision.

Even Senator John McCain predicted that the American public would not accept this ruling… Senator McCain was one of the original sponsors of campaign finance law.  And he was right about the American public.

Campaign Finance Laws

As far back as the 1890’s, legislatures were aware of the enormous influence that deep money pocketed corporations could have on the influence of elections and politics.  That’s why the Tillman Act of 1907 was passed to ban direct corporate contributions to federal political candidates.  Think about this for a minute.  Corporations usually have huge treasuries…deep pockets if you will.  You are a shareholder of this corporation and yet its leaders are spending, in fact, some of your own money to promote a candidate that you are deeply opposed to. 

You can’t or won’t be able to do anything about that because the Supreme Court has now given “free speech” and a blank check to corporations to do what they want to do whether it hurts or helps you.  The Supreme Court, at least five of the justices, doesn’t seem to care about you.

After numerous attempts by corporations to get around the Tillman Act of 1907, congress added additional protection to prevent corporations from taking advantage using their huge treasuries by adding additional prohibitions in its Taft-Hartley legislation in 1947.  These prohibitions barred corporations and unions from using their general treasuries from making independent expenditures during elections to fund candidates they wanted to promote.

What congress did do, unfortunately, is allow the creation of separate accounts to fund political action committees commonly called “PACs”.  These PACs could only be funded by employees and shareholders who put in their own money, not money from the corporation’s general treasury.

With the passing of this Supreme Court ruling, all of these former laws and rules will go by the wayside as corporations will now have the ability to directly influence political candidates.  And what about foreign corporations?  What role do you think they will play in our future elections?  The First Amendment is in the Constitution of the United States of America not a foreign country.  Yet this foreign countries will be able to, more than they currently do, affect the outcome of who sits in the White House and congress. Why is the Supreme Court, at least five justices, interpreting the law in favor of a non-person rather than what the first amendment has definitively expressed…we the people.

Is this what you want?  Call your congressional representative and let them know how you feel.

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Here’s the moment we have all be waiting for. Drum roll please…H.R. 627.  The new credit card law, called the “Credit Card Accountability Responsibility and Disclosure Act of 2009” or the “Credit Card Act of 2009”, is taking affect on February 22, 2010.

Anyone with a credit card, which is probably most people, are hoping for the new law to help improve their lives by giving you more flexibility in interest rates, payments, and the way you are treated by credit card companies.

There is a lot of information on the internet about the new law.  The problem is like every new law; it is interpreted differently by different people.  Since I did not want to add to the confusion, I went to the source, the government site listing the credit card law, and printed it out and read it.

After getting a headache and eye strain from trying to decipher what the lawyers had written, I felt it was better if I didn’t try to interpret the new Credit Card Act of 2009 but rather give you a brief idea of what was in it.  So here goes!

This is a partial list of the titles and sections that comprise the new Credit Card Act of 2009.  It starts off with TITLE I – CONSUMER PROTECTION and lists Section 101 as “Protection of credit cardholders”.  This, I feel is a good start because credit cardholders have not had much protection from the likes of the predatory lending practices of some of the credit card issuers.  Let’s hope that this will help to prevent or minimize those practices.

TITLE II – ENHANCED CONSUMER DISCLOSURES begins with Section 201 which is “Payoff timing disclosures”.  Hopefully this will help to clarify the mystery that most credit card companies had in their “fine” print information disclosures that only a Harvard lawyer could understand.  And even then I am not so sure.  Maybe this new section will help you and me to better understand what the credit card companies are talking about regarding paying off credit card balances.  Time will tell.

Where Can I get More Information?

If you would really like to find out more information on the new “Credit Card Act of 2009” and how it may affect your situation than here are three links that will be a good start for you.  Remember there is a ton of information out there so you will need to do your homework.  Here are the links:

• www.creditcardactof2009.org – an overview of the act.
•  http://files.ots.treas.gov/25308.pdf – a short government summary.
•  http://en.wikipedia.org/wiki/credit_card_act_2009 – general information on the act.

These three sites should give you a good overview of what the new Credit Card Act of 2009 is all about and how it can help you to better understand what choices you now have.  Good luck with your credit card situation.

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It never ceases to amaze me how certain industries continually try to take advantage of baby boomers.  These baby boomers-I am one of them- are constantly being preyed upon by unscrupulous companies in various advertising schemes that really bugs the hell out of me.  Just watch your television and take note to all of the advertising that is directed at boomers and you’ll see what I mean.

Now you may be thinking that as a baby boomer you should be aware of what is available to you so you can keep abreast of the various products and services that are available to make your life easier and more comfortable.  I don’t have any issues with that at all.  It is the dirtbag companies out there that target you and me and try to take advantage of us with their misleading and deceptive advertising.

Since this is a financial blog, I will give you an example of a financial product that is being deceptively marketed to us…life insurance.  Now I don’t hate all life insurance companies.  I think that life insurance can be a very important part of someone’s life planning. Life insurance has prevented many families from suffering hardships when the major breadwinner of the family dies unexpectedly… life insurance companies have their place.

With that said, let’s talk about the dirtbag life insurance companies that specifically target baby boomers with their expensive products.  Let me give you a specific example of one life insurance company that is constantly advertising on television with ads that make it sound as though they were doing you a favor.  They act as though they are actually providing you with something that was low cost and beneficial to you and that you “must” have in order to protect, at least, part of your financial well being in the event that your spouse died.

Here’s What I’m Talking About

So what am I talking about?  Remember seeing the television commercial with a husband and wife and the wife is asking the husband when he is going to fix various things around the house?  And the husband says he will get around to the chores but first he has to buy life insurance.  The wife looks surprised and says “life Insurance”?  The husband then explains to the wife how easy it is to get this life insurance and how inexpensive it is.  This is the part that bugs me.

Again, I don’t have any issues with life insurance but I do have an issue with any product that is sold without making the facts clear and understandable.  This example is such an issue.  The husband tells the wife that the insurance can be purchased without a medical exam.  Okay, that’s good.  Then he explains that the insurance is only $.35 per day per unit and how cheap that is to protect them from high funeral costs.  Sounds good on the surface, but let’s look at the numbers.

First of all, a unit is $1,000 of life insurance coverage.  $.35 per day times an average of 30 days per month equals $10.50 per month per $1,000 of life insurance coverage.  Now I don’t know about you but $1,000 doesn’t buy much today so you would need a lot more insurance.  Let’s say you need $10,000 of coverage since the average funeral is between $6,000 and $8,000.  So it costs $10.50 per month per unit times 10 units equaling $105.00 per month times 12 months in a year or $1,260 per year for a $10,000 life insurance policy.  Does that sound inexpensive to you?  If you pay on this policy for just 8 years you would have paid $10,080.00 for $10,000 of coverage.  Does that make any sense?  Who’s taking advantage of whom?

Of course the insurance company will say but you don’t have to take a medical exam so we are totally at risk and what if you should die after the first year or two?  Then who is the winner?  You will have to decide the answers to these questions for yourself.

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We have been hearing more and more about how the economy is turning around and things are getting better.  Now I don’t want to be the purveyor of bad news but there are things that you need to be aware of.

Maybe the economy is turning around in some areas but in others it is as bad as or worse than we thought.  Case in point is that many banks are still having a difficult time staying in business.  Last year, 2009, an estimated 140 banks had to be closed.  So far this year, 2010, 15 banks have failed.  That just doesn’t sound like things are turning around.

Some of these banks are of significant size.  The Los Angeles based First Regional Bank failed with almost $2 billion in deposits and approximately $2.2 billion of assets.  Not exactly a small country bank.  This will potentially cost the Federal Deposit Insurance Corporation (FDIC) around $825 million in insurance to protect the depositors.

Besides California, several banks have failed in Georgia, Florida, Washington, and one bank in Minnesota.  What’s troubling about the two bank failures in Georgia is the fact that last year, 2009, Georgia had 25 bank failures the highest in the nation.  I haven’t found any evidence to explain why Georgia is having so many bank problems.

This is important for you and me to know because the FDIC continues to raise the cost of the premium our banks pay to cover the cost of the insurance that protects our deposits.  This FDIC insurance cost, like everything else in business, is passed along to us in the form of new banking fees and/or higher banking fees.  That is the capitalistic way of doing business.

Since we are all aware that unemployment is still hovering a little over 10% based on Washington, D.C. estimates…although anyone with any sense knows that it is probably double that when you factor in the people who don’t collect unemployment benefits anymore and have given up looking for a job.

In 2008, we only had 25 bank failures and in 2007 we only had three.  Unfortunately the number of bank failures is predicted to continue to go up in 2010.  I am still wondering why the government keeps telling us that things “are” better and getting better. Do you know of “anyone” who feels like things are getting better?   I believe that they will get better but not for at least another year or two.

Another Big Hit is coming Our Way

What I am more concerned about is the lack of information and discussion about the pending tsunami that is currently heading our way.  I have not heard much talk about the $500 billion of commercial real estate loans that are coming due in the next several years.  I think we all see the empty stores, shopping malls, and office buildings all around us. 

Those commercial properties still have mortgages on them and must meet their payments on their loans just like everyone else.  That is extremely hard to do for any extended period of time when the commercial property is vacant with no rental income coming in.

Also the credit card crunch may be right around the corner when millions of Americans can’t continue to make even the minimum payment on their credit card debt.  Sorry folks but we are not out of the woods yet.

So again not to sound like a doomsayer but rather a realist, you need to “really’ know what is going on so you can prepare and protect yourself.  I just wish the United States government would stop treating its citizens like naïve children and let us know what is truly going on.  I don’t know about you but I am a big boy and can handle the truth.

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

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I’ve tried not to get too political with In Simple Language because I want to keep it as a financial and information learning tool.  However, what is taking place today in the United States is so important to every American’s survival that I have to voice my opinion and inform those of you who are not aware of what is taking place.

When 911 happened nine years ago, the U.S. Government came out with the Patriot Act which, in effect, took away many of the rights that Americans enjoyed for a long time.  Maybe this was justified because of this horrific act of war.  Americans will have to live with the results of the Patriot Act in the meantime.

This latest act by the United States Government, namely the Supreme Court of the United States, gives me more cause for fear than anything previously done by our government.  Some may argue but I feel the Supreme Court is nothing more than another branch of our bloated government.

So what am I talking about?  The Supreme Court of the United States has ruled that unions and corporations-inanimate entities-can spend unlimited amounts of money on advertising in promoting for or against political candidates.  Now if you think about this, this is totally insane.  You and I have been watching as big corporations have been taking advantage of all of us over the years and it has been getting progressively worse rather than better.  Now these monster organizations will be able to control, even more than they already do, who is elected to what office. 

I think we can all agree that our political system is so broken that unless you have tens of millions of dollars to spend it is next to impossible to be elected to any political office of any consequence at the federal level.  This new Supreme Court ruling will now allow corporate America to “totally” have a say in who is going to hold what position in Washington, D.C… in effect controlling America.

Your fair and impartial representation in America has been eroded slowly but surely over the last couple of decades.  This ruling will break our backs and put us under the yoke of corporate America, not only with our financial lively hood (jobs and paychecks) as it now is, but will also now control “who” will represent us in all our matters.

The Supreme Court Says…

The Supreme Court has justified this ruling by saying it is a violation of the First Amendment free speech rights to not allow corporations the right to free speech.  Here is what the First Amendment of the U.S. Constitution says, “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press, or the right of the people peaceable to assemble, and to petition the government for a redress of grievances”.

Now it seems to me, although I am no constitutional attorney, the Supreme Court has read more into the constitution than they probably should have.  If I am not mistaken, where does it say freedom of speech is for non-living entities or non-humans or inanimate objects or corporations or anything other than” the people”?

Now in defense of the Supreme Court, this ruling was passed by a 5 to 4 vote so it seems that at least 4 of the justices have not lost their minds or don’t need their wallets lined with corporate money.

President Obama is upset and so are 24 states who are questioning the ruling because of its effect on their state laws. 

This is a serious problem to all of us if we allow corporate America to dictate to us through their “deep money pockets” who we should or shouldn’t vote for.

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

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This has often been cited as being a victimless crime, which we can argue back and forth forever.  But is it really?  What I am talking about is “insider trading”.  Insider trading takes place when someone has information about a company or companies that puts them in a position of advantage over everyone else, namely the general public. This information is about a company or companies selling or buying another company or companies or merging with another company. Insider trading causes the value of the stock of the company to change one way or another and gives the person with the insider information an advantage from which they can buy or sell stock and make money…usually a large amount of money. This is illegal under the SEC (Securities and Exchange Commission) regulations.

Let’s take the recent case of Raj Rajaratnam, founder, of the Galleon Group who was recently arrested on insider-trading charges.  This was a high profile case in all of the financial publications and it involved large amounts of money being made by Rajaratnam and his company because of their insider information.

Look at how pervasive insider trading has become over the last five years… the New York Stock Exchange has referred approximately 150 suspected cases to the SEC in 2008 alone.  This is 57% more than four years previously in 2004 when the latest corporate meager craze began.  The SEC brought 60+ cases to court in 2008 which was more than 30% higher than in 2007.  Do you think we have a problem here?

It’s Not Just the United States

All too often Americans only hear about what is going on in America.  It seems that this insider trading problem is in every country where stocks are traded.  If we look at Great Britain we see that the United Kingdom’s Financial Services Authority shows that 30% of the reported mergers in that country have shown unusual stock trading in the days before the deals are finally getting done.  Coincidence?  You tell me.  There are many more examples of this taking place all around the world.

As another example of insider trading in the United States look at the recent deal of Dell Inc. purchasing Perot Systems for $3.6 billion.  The SEC charged a Perot employee with insider trading.  Adobe Systems Inc.’s $1.8 billion acquisition of Omniture, a software company, resulted in Omniture’s stock rising almost 20% before the deal was even announced.  In March of 2009, the announced merger of Merck & Co. Inc. and Schering-Plough Corp., the two pharmaceutical giants, is being looked at by the SEC for insider trading.

And on and on the stories keep popping up.  Is there a problem with insider trading?  Based on my own personal experience in the financial services world for over 30+ years there is no doubt in my mind.  And as far as insider trading being a victimless crime I don’t buy it for a minute.  Insider trading is just another example of the select few who get to take advantage of you and I, the general public, by being able to buy stock at a lower price in quantity thusly driving up the price which causes us to have to pay more. Not only do we pay more but the insider’s can now make a fortune off the inflated price of the stock that you and I are forced to pay if we want the stock.  This additional cost to you and I is also reflected in the costs of the mutual funds that you and I have in our 401k, 403b, and 457 plans.

Insider trading is a crime and impacts the public’s trust and wallet adversely and should be enforced as stringently as any law.  What do you think?

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

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We have all been touched in one way or another with situations like the Bernie Madoff multi-billion dollar Ponzi Scheme in which so many people lost most, if not all, their investments.  This type of financial advisor deception has caused tremendous hardships for a lot of people that were retiring or approaching retirement and it happens more often than you are aware of.

 In previous blog articles dated August 25, 2009 (How Well Do You Know Your Financial Advisor) and November 3, 2008 (Did You Do Your Homework?), I talked about how you need to protect yourself by knowing who you are dealing with.  Well that is easier said than done.  You can go to the FINRA (Financial Regulatory Authority Inc.) web page at www.finra.org and use their “broker check” system to find out such things as complaints against your registered financial advisor.  Or whether your financial advisor has any criminal convictions, liens or bankruptcies. 

The problem with the FINRA site is after two years FINRA doesn’t list the records of any registered representatives that have been suspended…meaning that the licensed representatives financial license i.e.: Series 7, 6 etc., was taken away from them.  

Why is this important if their licenses have been taken away from them and they can’t act as a financial representative anymore?  The problem begins with the fact that some of these representatives go to work for someone else who does not care or doesn’t check on whether they are properly licensed or not.  That means that you have no way of knowing whether this individual you are dealing with is legitimate or some dirtbag ripping you off.

 Honest, Hardworking Individuals

There are approximately 650,000 registered representatives in the United States and most are honest, hardworking individuals with the best interests of their clients first and foremost.  However, like every other profession on the face of this beautiful planet, there are those unscrupulous dirtbags that have only one thing on their minds…how to take advantage of and rip off as many people as they can.

So what can you do to protect yourself?  The first thing I would suggest is go to the FINRA website and see how it works.  Then I would contact FINRA stating that you would like to see them get rid of this “two year rule” and have the records of all present and past registered representatives become a permanent record that could be checked forever if necessary.  Or at least extend the accessibility of the registered representatives out, for say, at least ten years after their license is revoked or voluntarily surrendered because of an occupational change or retirement.

Do yourself a favor. Before you believe everything you read on the “FINRA broker check” site keep in mind that many times wrong or misinformation is posted to the wrong individual.  If there is something “adverse” about your financial representative listed see if you can talk to other people that also deal with your financial advisor and get their opinion.  If you feel that that is still not enough to make you feel comfortable than speak directly, face to face, with your financial advisor.  Listen to their explanation and watch their body language.  Then you can make a more informed decision if you want to continue doing business with this person or initially hiring this person to work as your financial advisor.  Do your homework.  Sleep at night.

This rule change would go far in helping to protect you from unscrupulous people that are trying to rip you off.  What do you think?

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

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With the way the financial services industry has been in turmoil the last year or so, it is a wonder that anyone knows what’s going on.  Especially, when company names are somewhat similar and confusing.

I think we can all remember the name AIG (American International Group) or what I referred to in previous posts as the Arrogant International Group.  This is the company that the United States government loaned $160+ billion to bail their conniving butts out of trouble lest the company would have gone bankrupt.  Also not to mention that the United States Congress’s many lavish benefits were being held and administered by AIG.  Coincidence?  You tell me.

Now do you remember this bunch of dirt bag insurance executives? 

ING not AIG

ING Groep NV, the Dutch financial conglomerate and global supermarket of various financial services, was ordered broken up by European financial regulators.  Now this is no small company.  As of this writing, ING’s global asset management business had $600 billion plus.  It also has a broker-dealer network of about 8,700 financial representatives and financial advisors.

This is significant to you because if you are dealing with any of ING’s broker-dealer firms such as Financial Network Investment Corp, Primevest Financial Services Inc., or Multi-Financial Securities Corp. your account and financial advisor may become part of another company.

If you are dealing with any of these three firms call your financial advisor and ask them to let you know what is going on.  Especially if your financial rep is thinking of moving their book of business, which is your business, to another broker-dealer. What that could potentially mean to you is transferring your account and possibly lots of paperwork for you. 

This is certainly not a bad thing but you should know what’s going on.  It is your money after all isn’t it?  An informed investor is a wise investor.  Be proactive in managing and investing your money. 

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

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In an article I posted May 14, 2009 titled “So What is this BAB I’m Hearing About” I mistakenly stated that these bonds are tax free.  THEY ARE NOT TAX FREE.  Nobody hates to get misinformation more than me so I apologize to all of my readers for this unintentional error and thank those of you who pointed out my mistake to me.  Keep up the good editing work.

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