2009 - %3, September

Overdraft Hell

| Wed Sep. 9, 2009 10:19 AM EDT

The New York Times has a nice front page piece today about overdraft fees on debit cards, and for the most part it's the usual horror show: the fees are outrageously high; banks deliberately arrange them so that you always pay the maximum number of fees, not the minimum; an enormous fraction of their operating profit now comes from overdraft fees; and they actively adopt policies designed to encourage overuse of debit cards.  And naturally this hits the hardest among those who are the most financially stressed in the first place: 93% of all overdraft charges come from 14% of bank customers, most of them lower-income consumers.

That's all blood-boiling stuff, but it's also been pretty well covered over the past year or two.  However, I did learn a couple of new things from this piece.  First, I always figured that as bad as the overdraft racket was, at least you could opt out if you want and just have the bank turn down any debit that would take your account below zero.  Nobody ever does it, but in theory you have the option.  Right?  Wrong:

Ruth Holton-Hodson discovered that the hard way. She keeps close tabs on the welfare of her brother, who lives in a halfway house in Maryland and uses what little he has in his account at Bank of America to pay rent and buy an occasional pack of cigarettes or a sandwich.

When the brother, who has a mental illness that she says requires her to assist with his finances, started falling behind on rent, Ms. Holton-Hodson found he had racked up more than $300 in debit card overdraft fees in three months, including a $35 one for exceeding his balance by 79 cents.

Ms. Holton-Hodson said she spent two years asking bank employees if her brother could get a card that would not allow him to spend more than he had. Though Bank of America does not typically allow customers to opt out of overdraft protection, it finally granted an exemption.

“I’ve been angered and outraged for many years,” she said. “When there is no money in his account, he shouldn’t be able to pay.”

Go ahead and try to defend that.  I dare you.  And then there's this:

In 2005, after intense industry pressure, the Federal Reserve ruled that overdraft charges should not be covered by the Truth in Lending Act. That meant bankers did not have to seek consumers’ permission to sign them up, nor did they have to disclose the equivalent interest rate for the fees.

Well, of course the Fed ruled that way.  Just because banks are charging the equivalent of 3,000% interest on these fees is no reason to force banks to disclose that fact to customers.  That's our Fed!

But maybe the worst aspect of the whole thing is the almost unbearable smarminess of the bank lobbyist who blew off the whole subject with this: “Everyone should know how much they have in their account and manage their funds well to avoid those fees,” Scott Talbott told the Times.  There's a circle in hell reserved for this guy.

UPDATE: Some practical reform suggestions here.

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Billions To Be Lost in Auto Bailout?

| Wed Sep. 9, 2009 10:13 AM EDT

The Congressional Oversight Panel, assigned to oversee the TARP bailout and chaired by Harvard prof Elizabeth Warren, has released another of its monthly reports, this one on the federal bailout of GM and Chrysler. No surprise, the panel finds that once again the taxpayers are not getting the best deal. The money shot, so to speak:

Although taxpayers may recover some portion of their investment in Chrysler and GM, it is unlikely they will recover the entire amount. The estimates of loss vary. Treasury estimates that approximately $23 billion of the initial loans made will be subject to “much lower recoveries.” Approximately $5.4 billion of the loans extended to the old Chrysler company are highly unlikely to be recovered.

In other words, the taxpayers could lose up to $20 billion on the deal. But that's not all. It turns out that the Treasury Department has not legally justified—at least, in public—its use of TARP dollars for the auto bailout:

[B]ecause of the unprecedented nature of the assistance provided to the automotive industry, the Panel also recommends that Treasury provide its legal analysis justifying the use of TARP funds for this purpose. This analysis will inform policymakers‟ and taxpayers‟ understanding of the potential for Treasury to use its authority to assist other struggling industries. Treasury must be clearer, more transparent, and more accountable in its TARP dealings, providing the American public with the information needed to determine the effectiveness of Treasury‟s efforts.

Shouldn't this have already been done? Yet looking at this and previous COP reports, it does seem as if the Treasury strategy has been bailout first, answer questions later.

The report also notes:

The Panel recommends that, to mitigate the potential conflicts of interest inherent in owning Chrysler and GM shares, Treasury should take exceptional care to explain its decisionmaking and provide a full, transparent picture of its actions. The Panel recommends that Treasury use its role as a significant shareholder in Chrysler and GM to ensure that these companies fully disclose their financial status and that the compensation of their executives is aligned to clear measures of long-term success. To limit the impact of conflicts of interest and to facilitate an effective exit strategy, Treasury should also consider placing its Chrysler and GM shares in an independent trust that would be insulated from political pressure and government interference.

Again and again, this panel has to remind Treasury to be transparent. The big question is, why does Treasury always need such a reminder?

You can follow David Corn's postings and media appearances via Twitter.

Eco-News Roundup: Wednesday, September 9

| Wed Sep. 9, 2009 6:00 AM EDT

Here's what's Blue Marble-ish in our other blogs (and around the web) today:

The buck stops here: Used to be you could make a living working a facotory job in Janesville, Wisconsin. Then GM went bust. Now the town is left to pick up the pieces.

Cautious optimism: Why Kevin Drum agrees with TNR's Jon Cohn on the state of health care reform.

Earth in the balance: Researchers find that the benefits of the Waxman-Markey climate bill outweigh the drawbacks 9-to-1. [Treehugger]

Sun share: Meet the families who bought into the country's first solar farm co-op. [Wall Street Journal]

We're Still at War: Photo of the Day for September 9, 2009

Wed Sep. 9, 2009 5:30 AM EDT

Iraqi children try to cool off by swimming in a canal in Nassir Wa Salam, in western Baghdad, Sept. 2, while Pfc. Matthew Burks, an infantry grenadier from Colorado Springs, Colo., and other Soldiers from B Company, 2nd Battalion, 8th Cavalry Regiment, 2nd Brigade Combat Team, 1st Infantry Division, and Iraqi army soldiers patroll the area looking for insurgent activity. (US Army Photo by Staff Sgt. Mark Burrell.)

Need To Read: September 9, 2009

Wed Sep. 9, 2009 5:30 AM EDT

White House photo.White House photo.President Barack Obama attended the investiture ceremony for Supreme Court Justice Sonia Sotomayor yesterday. This week, the Supreme Court is deciding whether restrictions on corporate money in federal elections are really all that necessary. Tonight, the president will address Congress (and the nation) on health care reform. Here are today's must-reads:

  • Marc Ambinder, Official Voice of Center-Left JournoWisdom: How Obama Survived August (The Atlantic)
  • Health Care Reform's Prospects Are Better Than You Think (NYT)
  • Our Own Kevin Drum Could Have Told You All This On Friday (MoJo)
  • Paul Krugman: Why The Public Option Matters (NYT)
  • The Max Baucus WellPoint/Liz Fowler Health Plan (FDL)
  • Consumers Paid Off Record Amounts of Debt in July. This Is Apparently Bad for the Economy (LAT)
  • What's Really Behind the Van Jones Attack (MoJo)
  • DOJ: Blackwater Contractor Saw Iraq As 9/11 Payback (MoJo)
  • No, I'm Not Linking to Sarah Palin's Op-Ed (It's In the WSJ)

I post articles like these throughout the day on twitter. You should follow me, of course. David Corn, Mother Jones' DC bureau chief, also tweets. So do my colleagues Daniel Schulman and Rachel Morris and our editors-in-chief, Clara Jeffery and Monika Bauerlein. Follow them, too! (The magazine's main account is @motherjones.)

Brazil Preps for More Forest Fires

| Tue Sep. 8, 2009 11:13 PM EDT

What will the Brazilian Amazon turn into once global warming makes it drier and fires become more frequent? Woods Hole Research Center and the Amazon Environmental Research Institute (IPAM) are trying to answer that question by fast forwarding to the future. How? Setting a forest on fire.

IPAM and Woods Hole have been experimenting with fire in Brazil since 2004, in a 370-acre farm in the state of Mato Grosso, Western Brazil. The area is divided in three blocks: The first is the control block, which is never burned. The second is burned every three years, and the third is burned every year. This year’s burn happened from August 28th to 31st.

They hope the burn will help determine whether this forest will survive the increasing number of wildfires—or just turn into degraded scrub or grassland. In order to figure that out, they measure forest structure, which animals and insects survive, what blossoms after a fire, and how the soil fares.

IPAM researcher Oswaldo de Carvalho Jr. says that, in the every-year burn area, degradation is already obvious. “Diversity has decreased, and other species, like common grass, start invading,” he says. Woods Hole researcher Jennifer Balch documented that trend in her field notes. “This year we were really able to capture the grass-fire cycle,” she writes. “Grass invasion via fire leads to higher fuel loads and a more intense future fire, if ignition sources are plentiful in the landscape.”

The group is also trying to answer another question: What are the carbon consequences of this high-frequency burning? So far, they have calculated that combusted organic material from the initial burn has released more than 19,000 pounds of carbon—the same as 9.5 plane trips across the US—per acre.

After a few more years of burning, Carvalho says the scientists will want to take the reverse approach. “We will study how the forest will restore itself without the fire,” he says. He believes that once they understand that, they can help the fire recovery more efficiently—an important lesson to learn to prepare for the dry years ahead.

Guest contributor Gabriela Lessa is a journalist and blogger spending the summer in her native Brazil. Watch for her regular environmental dispatches on The Blue Marble.

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Tough Choices

| Tue Sep. 8, 2009 9:12 PM EDT

One of the common features of the healthcare reform bills currently on the table is that they include a personal mandate combined with insurance subsidies.  What this means is that you're required to buy health insurance if you don't get it from your employer, but the government will help pay for it if you can't afford it.

But what's the right level of subsidy?  The draft bill introduced by Sen. Max Baucus today provides subsidies for families earning up to 300% of the poverty level, or $66,000 per year.  That's a problem: health insurance can easily set you back $15,000 or more, and requiring families with modest incomes to suddenly add a $15,000 item to their annual budget may be more wishful thinking than serious policy.  What's more, politically it's likely to prove to be very, very unpopular.

Much better would be 400% of the poverty level, or $88,000 per year.  There would still be some unhappy families, but a lot fewer of them.  It's a big difference.

Now, compare this to the much discussed "public option."  This would be a federal insurance plan offered in addition to private insurance, and the idea behind it is that the competition would help force down insurance prices across the board.  That would also make a big difference to a lot of families.

Ideally, we'd like to have both in the final bill.  But what if we can't?  So here's the question for the day: if someone put a gun to your head and forced you to choose between (a) a public option and (b) a higher subsidy level, which would it be?  Please show your work.

Why Sarah Palin Backfired: Parenting Makes Moms Liberal, Dads Conservative

| Tue Sep. 8, 2009 8:22 PM EDT

So this is why father thought he knew best. Parenthood pushes mothers and fathers in opposite directions on political issues. Mothers become more liberal and fathers more conservative with regards to government spending on social welfare issues like health care and education.

Researchers from North Carolina State U used data from the 2008 presidential election to evaluate the voting behavior of men and women with children living at home. The findings:

  • Women with children in the home were more liberal on social welfare attitudes and on attitudes about the Iraq War than women without children at home.
  • Men with kids were more conservative on social welfare issues than men without kids—though they did not differ in their attitudes towards the war in Iraq.
  • There was no evidence of a 'Sarah Palin effect'—even when looking exclusively at Republicans. The self-professed hockey mom and working mother of five did not attract votes of parents, especially mothers.

Smart moms.

I mean, it wasn't Father Jones, now was it?

The researchers also evaluated the data for elections going back to 1980 and found the trend is strengthening for dads to become more conservative, while the trend is holding steady for moms to become more liberal.

Which means the Republican party which calls itself the family-values party might as well call itself the daddy-values party. Or maybe the white-daddy-values party. Or the red-state-white-daddy-values party.

The research was presented at the annual meeting of the American Political Science Association.

On "Hardball": Corn vs. Buchanan on Palin and Obama-Hating

| Tue Sep. 8, 2009 6:16 PM EDT

On Hardball, David Corn and Patrick Buchanan battled over whether conservatives have gone too far in opposing—or hating—Barack Obama. The conversation became heated, as the subject turned to Sarah Palin and her continued insistence that the health care reform bill under consideration in Congress actually will include "death panels." (Various experts have said that is not the case.) After Buchanan spoke admiringly of Palin—even though acknowledging that the bill does not truly include "death panels"—Corn noted that what Buchanan likes about Palin is her demagoguery. Did Buchanan then flash a you-got-me smile? You be the judge:




You can follow David Corn's postings and media appearances via Twitter.

Art vs. Artists

| Tue Sep. 8, 2009 4:49 PM EDT

Aside from constructing a remarkably baroque but (I hope!) properly positioned shelf for my computer mouse — all in an effort to reduce the increasing pain in virtually every joint in my right arm — I also read Tyler Cowen's Create Your Own Economy this weekend.  I don't really trust myself to blog an overall reaction to it, so instead I offer up this excerpt for discussion.  It's a comparison of traditional culture, in which the artist produces a sustained, integrated performance of some kind, to modern culture, which we increasingly create ourselves by stitching together bits and pieces:

Today we don't usually receive comedy, tragedy, and the sublime all in ready-to-consume, prepackaged form.  As I've stated, we're more interested in this idea of assembling the bits ourselves.  For all its virtues, it takes well over three hours to hear Don Giovanni straight through, perhaps four hours with intermission.  Plus the libretto is in Italian.  And if you want to see it live, a good ticket can cost hundreds of dollars plus travel costs.

So we instead pick up cultural moods and inputs we want from disparate sources and bring them together through self-assembly.  We take a joke from YouTube, a terrifying scene from a Japanese slasher movie, a melody from a three-minute iTunes purchase, and the sublime from our memories of last year's visit to the Grand Canyon, perhaps augmented through a photograph.  The result is a rich and varied stream of inner experience.

Tyler's contention is that the "mental ordering" involved in collecting lots of cultural bits and then obsessively organizing them can be every bit as gratifying and inspiring as consuming a play by Shakespeare or a novel by Faulkner (or a Broadway show or a genre romance novel).  But this strikes me as a chimera: it's like comparing your own amateur piano playing with taking in a performance by Glenn Gould.  They're both worthwhile activities, and the former can illuminate the latter, but that doesn't mean you get the same thing out of them.  That's because Gould is a genius and you're not.  There's more to art than whether it lights up your brain's pleasure centers.

It's unfair to offer just this short excerpt without more of Tyler's surrounding argument, but one way or another an awful lot of the book hinges on the idea expressed here: namely that obsessive mental ordering of cultural bits is increasingly providing a substitute for the enjoyment of traditional, long-form art created by others.  He might be right that this is happening, but I'm double plus unconvinced that it's as positive a development as he suggests.  Opinions?