Kevin Drum

Overdraft Hell

| Wed Sep. 9, 2009 11:19 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.

Advertise on MotherJones.com

Tough Choices

| Tue Sep. 8, 2009 10:12 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.

Art vs. Artists

| Tue Sep. 8, 2009 5:49 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?

The Pakistan Problem

| Tue Sep. 8, 2009 1:55 PM EDT

Pakistan, as we all know, has become pretty virulently anti-American over the past few years.  Saeed Shah of McClatchy provides the latest:

The lively Pakistani media has been filled with stories of under-cover American agents operating in the country, tales of a huge contingent of U.S. Marines planned to be stationed at the embassy, and reports of Blackwater private security personnel running amuck. Armed Americans have supposedly harassed and terrified residents and police officers in Islamabad and Peshawar, according to local press reports.

Much of the hysteria was based on a near $1 billion plan, revealed by McClatchy in May and confirmed by U.S. officials, to massively increase the size of the American embassy in Islamabad, which brought home to Pakistanis that the United States plans an extensive and long-term presence in the country.

...."I think this recent brouhaha over the embassy expansion has been difficult to beat back," said Anne Patterson, the U.S. ambassador, in an interview Thursday....Patterson said she wrote last week to the owner of Pakistan's biggest media group, Jang, to protest about the content of two talk shows on its Geo TV channel, hosted by star anchors Hamid Mir and Kamran Khan, and a newspaper column of influential analyst Shireen Mazari in The News, a daily, complaining that they were "wildly incorrect" and had compromised the security of Americans.

Sounds like August in America.  Less snarkily, this is a problem that you can't really say is undercovered, since it's gotten a fair amount of attention lately, but is nonetheless probably underappreciated: Pakistanis really, really don't like the United States.  That's been true for a long time, and as Shah makes clear, it's even more true now.  In the latest Pew poll, America's favorability rating was a whopping 16%.

I'm not sure how you operate in an environment like that.  I hope Gen. McChrystal has a few ideas to offer when his long-awaited Afghanistan assessment is released later this month.  But I'm not holding my breath.

Chocolate and the Efficient Market Hypothesis

| Tue Sep. 8, 2009 12:42 PM EDT

Kraft Foods has made a $16 billion bid to acquire Cadbury PLC, maker of fine British chocolates.  Naturally, Cadbury turned them down:

Prior to Kraft going public with its offer on Monday, Cadbury had already rebuffed the advance in private. In publicly rejecting it, Cadbury said the offer, a 31% premium to its closing share price on Friday, "fundamentally undervalues" the company.

This is precisely what every company always says whenever someone offers to buy them: even though the offer price is 20% or 30% or 40% higher than the current stock price, it always "fundamentally undervalues" the firm.

In other words, corporate CEOs universally reject the efficient market hypothesis, and since Wall Street as a whole seems to agree, that means that essentially the entire finance industry rejects the EMH.  So if that's the case, why should anyone else believe it?

POSTSCRIPT: Related trivia: my mother once had a cat named Cadbury.  I conducted a blind taste test once of British-made Cadbury's chocolate and its American-made twin, and everyone involved could taste the difference and preferred the British version.  Cadbury Australia has a phenomenal selection of varieties, far more than the pitiful three or four we have in America.  The last time I was there in the early 90s, one of the varieties was chocolate with a creamy chocolate filling, and it was great.  Sadly, their website suggests it's no longer made.  Sic transit etc.  On the other hand, some of the other varieties look well worth a try.

Healthcare in 1,000 Words or Less

| Tue Sep. 8, 2009 11:55 AM EDT

Jon Cohn assesses the state of play of healthcare reform over at TNR, and he's on pretty much the same page as me: August didn't kill it; Democrats are finally facing the reality that they can't count on any Republican votes; reconciliation is now a serious threat; and Dems fully understand that failing to pass something would be calamitous.  So he's cautiously optimistic.  The difference is that his version of this is based on real expertise and extensive reporting, not just a gut feel.  Go read.

Advertise on MotherJones.com

Quote of the Day

| Mon Sep. 7, 2009 12:25 PM EDT

From James Joyner:

When Thomas Friedman loses faith in a war, it’s time to give up.

The subject is Afghanistan, and Friedman doesn't quite say that we should withdraw.  He says, "This is a much bigger undertaking than we originally signed up for."  He says it's become a war between light black and dark black and "light black is simply not good enough to ask Americans to pay for with blood or treasure."  He says, "I feel a vast and rising ambivalence about this in the American public today, and adopting a baby you are ambivalent about is a prescription for disaster."

You'd think anyone who could write all that would take the obvious next step and recommend that we get out.  But no.  The farthest Friedman is willing to go is to suggest that the war in Afghanistan ought to be "debated anew."  Sheesh.

Happy Labor Day!

| Sun Sep. 6, 2009 11:53 PM EDT

Michael Moore Takes On Wall Street

| Sun Sep. 6, 2009 3:03 PM EDT

The Venice film festival is in full swing, and today the Guardian reviews Michael Moore's latest film, Capitalism: A Love Story:

Moore jabs his finger at everyone from Reagan to Bush Jr, Hank Paulson to Alan Greenspan. He drags the viewer through a thicket of insurance scams, sub-prime bubbles and derivative trading so wilfully obfuscatory that even the experts can't explain how it works.

The big villain, of course, is capitalism itself, which the film paints as a wily old philanderer intent on lining the pockets of the few at the expense of the many. America, enthuses a leaked Citibank report, is now a modern-day "plutonomy" where the top 1% of the population control 95% of the wealth. Does Barack Obama's election spell an end to all this? The director has his doubts, pointing out that Goldman Sachs — depicted here as the principal agent of wickedness — was the largest private contributor to the Obama campaign.

I say: sit back and enjoy.  There's no need any longer for the ritual fainthearted acknowledgments that "Moore sometimes goes a bit too far" or "Moore sometimes prefers theater to getting the facts straight" or any of that.  It's probably true, but why bother anymore? The wingers have already decided that we're all a bunch of radicalfascistextremistcommunistunamericansocialistchicagothugs anyway, so what the hell.  Might as well just enjoy some lefty porn along with a big bag of popcorn and hail Michael Moore as a true American prophet.  What more can they call us, after all?

Glenn Beck Gets a Scalp

| Sun Sep. 6, 2009 1:58 AM EDT

A few days ago, after a month of low-level sniping, Glenn Beck declared full-on war against Van Jones, an environmental activist who had been appointed an advisor on green jobs to the White House Council on Environmental Quality.  Why?  Well, Jones had been fairly radical in the early 90s, which was probably enough, but it's more likely that the real reason had to do with a recent boycott of Beck's show spearheaded by ColorOfChange.com, a group that Jones co-founded in 2005.  Jones left the group a couple of years ago, but no matter: Beck wanted revenge and Jones was an easy target.

I don't have the stomach to repeat all the smears that have been leveled at Jones, so you'll have to google it if you haven't been keeping up with this.  And none of it would have mattered much if (a) a YouTube of Jones calling Republicans "assholes" hadn't gone viral and (b) he hadn't signed a petition in 2004 from 911Truth.org asking for an investigation into charges that the "current administration may indeed have deliberately allowed 9/11 to happen."

But it did, and he did, and tonight Jones resigned.  "I cannot in good conscience ask my colleagues to expend precious time and energy defending or explaining my past," he said. "We need all hands on deck, fighting for the future."

So now Beck has his scalp and our effort to generate green jobs during a recession will be just a little less effective.  Lovely.

UPDATE: More here from Gawker ("The story of how the President's Special Advisor for Green Jobs became the biggest, scariest villain of the right wing (this week, anyway) is also the story of how the right wing information delivery process works now") and David Roberts ("For the record, Jones isn’t a truther").  The wingers, of course, are ecstatic over all this.