I received a letter in the mail from a ministry located in Dallas. The individual who heads up this ministry is a late night televangelist. I don’t have any idea nor is it my place to judge his intent. However, I do want to point out what I think is a misinterpretation of what the Bible says about giving – the prosperity gospel message.

The take-away from this letter was that you need to give money to this ministry so that God can make you rich and rid you of all of your financial problems. The background message of the letter is that this minister is the vehicle that all of this happens. Of course, this is why you would want to give money to his ministry. For someone who is new to Christianity or to someone who thinks that a relationship with Christ is a lotto ticket, the following could be very convincing.

“I am talking about a continuous increase for you to live in.”

Translated – This is all about what you are going to get.

“Believe it’s God ’s will to prosper you with financial blessings in hard times.”

Translated – You are entitled to financial blessings. My point of agreement with his message is that God’s will is to prosper each and every one of us. At the same time, it is not up to us to pre-determine how, when, and to what degree. The motivation to give and or tithe should be out of obedience and not with the intent of what you get in return.

“Decide where you want to be and ask God for wisdom to take you to the next level of increase.”

Translated – Tell God where you are going. How about telling God what is on your heart and then ask Him to answer the prayer according to His will for your life?

“If what you have in your hand is not enough to be your harvest, then make it a seed.”

Translated – If you don’t have your riches yet, then take what you have and invest it into my ministry and God will make you rich.

“The Lord has anointed me to help you obtain your increase.”

Translated – I am the gateway for this increase to happen. Unfortunately, this is somewhat the theme throughout the whole letter.

Then the powerful close before asking for money. In the envelope, he sends a blue rubber bracelet that you that you are supposed to wear for one night. Then you send the bracelet back to him, he wears it, and prays for your increase to happen.

Just check the list and you are done.

You agree that you are following his instructions.

I have checked my needs for increase.
I have written down my other prayer requests.
I have worn the blue rubber band all night on my wrist.
I have enclosed it in the envelope with my prayer request.
I have enclosed a Deuteronomy 34 seed faith offering for wisdom of $34 or double it $68 or triple it $102.

Then the credit card information and I guess your increase is on the way.

It is the message that is troublesome. It is not up to us to tell God what we want in return for giving and being obedient. The purpose of giving is not for increase. God is not a lotto ticket. Giving is about being obedient without expectation or desire of how God is going to bless us. Giving is about blessing others and building treasure in Heaven.

Tags: Bob Brooks, Giving, obedience, prosperity gospel, televangelist, tithe

Americans Pare Down Debt – Massive Defaults Produce Rare Annual Drop in Obligations, Clear Ground for Growth
Wall Street Journal

In this article, the writer talks about how the US consumer is “shedding debt at the fastest rate in more than six decades, largely through a wave of defaults.” He then comes to the conclusion that this is good news because “the defaults are leaving many people with more cash to spend and save, jump starting the financial rehabilitation that economists see as a crucial prerequisite to robust growth.”

The writer starts to give examples to support his notion by telling the story of a homeowner in LA who had to give up their home. Due to the foreclosure, the homeowner’s debt went from $1,000,000 down to $100,000. The homeowner states that “we are on the right path now. The stress is gone.”

He writes that this homeowner is “among those taking a radical approach to reducing their debt load.”

Right path? Reduced stress? Just like that, there are no problems. It is as if you no longer have any problems due to that debt.

Now this homeowner gets to live with the potential consequences that go along with walking away from a mortgage. First, there are potential taxes that might be due on any of the mortgage that the lender forgives which could be a large number. Second, there are all of the potential legal problems (lawsuits) as well as dealing with the debt collectors. Finally, the consumer’s credit score is trashed for a long time to come. Defaulting on a debt does not solve a consumer’s problems. New problems replace old problems.

There are some very large assumptions being made to arrive at the conclusion that debt defaults turn into economic growth and an increase in consumer spending. I would argue the opposite for a few reasons. First, as I stated above, problems don’t just go away after a default. In most cases, they get worse due to the consequences of defaulting on a debt. Second, the effects of a personal debt crisis will change the way people view money. After going through that type of experience, most consumers want to be very financially responsible which means a reduction in useless spending and an emphasis on saving. That will not increase growth in the economy.

“Loan Help Can Harm Credit Scores – Some homeowners in government program are surprised when ratings drop as much as 100 points. ” – Dallas Morning News

The Dallas Morning News article states that homeowners who sign up for the government’s mortgage assistance program are discovering that their credit scores are being lowered by 100 points. The article states that housing counselors feel it is unfair. “Why should people’s credit be hurt even worse when they’re trying to do the right thing?” “It’s a feeling of being duped.”

It is a mortgage assistance program. In other words, it is to designed to help homeowners who are in trouble and on verge of foreclosure. Think about it for a second. What is the purpose of a credit score? It is designed to provide a score to potential lenders of the risk level of someone who is applying for credit. If a person is trying to avert potential foreclosure, shouldn’t that be reflected in the credit score? If I were a lender trying to determine whether or not I was going to lend money, I would definitely want the credit score to alert me that there was a potential risk.

What is the good news in all of these defaults? The debt is being dealt with and that is a process that needs to occur. However, the downside of a debt default has to work itself through the system before we can get healthy again.

Tags: Bob Brooks, credit, Credit Score, Dallas Morning NEws, Debt, default, Foreclosure, homeowner, Wall Street Journal

How does the market keep going up when we are racking up all of this debt? How can the market be positive with a shaky future of trillions upon trillions of dollars of debt? Well the key word has always been in the future. That big debt problem has always been looked upon as a problem that our kids are going to have to contend with.

As long as the Government continues to finance the deficits, everything will be OK. What if we are getting to a point where financing debt becomes the problem? Well, I see it becoming a problem in 2 phases. The first phase has to do with our potential lenders. In the past, other countries have been willing to lend to us. Today, they are demanding higher interest rates for loaning the US money. The second problem occurs when even higher interest rates do not even matter. A serious loss of confidence has occurred. We just cannot get enough money borrowed to cover the problem.

I think that last week we saw phase 1 occur for the first time. Last week, we had 3 big treasury offerings. The demand to buy our treasury bonds was very weak. As a result, we started to see interest rates climb. Rising interest rates in a debt-filled world is problematic. For one thing, this has an indirect effect on mortgage costs. In order to lessen the severity of the foreclosure crisis which has a direct effect on whether or not the real estate markets ever bottom, interest rates need to stay down and not rise.

One other interesting development is that investors are being paid more for holding treasuries than in corporate bonds. You see this in the interest rate swaps market. This signals that investors feel more confident and that they are taking less risk by holding corporate bonds rather than those of the Government.

One of the downsides of this healthcare bill passing is the publicizing of the additional financial burden this is going to create in the future. This brings the reality of our trillions of dollars of debt to the fore-front. Don’t for a minute believe that this will cut the deficit. The CBO’s analysis is performed using government accounting and “estimates.” When has the Government ever gotten an estimate correct? Then you have Greece showing us what our future more than likely looks like. All of that gives investors a reality check and makes them think twice before loaning more to the government.

Watch the interest rate on the 10 year treasury bond. Below 4% we are fine. Above 4% creates a dicey environment. As I write, we are dangerously close that level.
Incidentally, the Government has to raise 1.6 trillion dollars to cover the short-falls for the year. That is on top of the 2 trillion that needs to be refinanced this year.

On a Lighter Note…
How about this for a vote of confidence for the politicians? Since 1897, a year after the Dow Jones started, 90% of gains came on days when Congress was out of session. This body of research also looked at how investments would have performed while investing in the days that Congress was in session and out of session – The out of session investments strategy had investment returns 100 times greater than when Congress was in session.

Tags: Bob Brooks, Congress, Debt, Dow Jones, Government, healthcare, interest rates, investors, treasury bonds

For years we have heard that Social Security was going to run out of money one day well into the future. Most peg the estimates in 2037. Social Security is a pay as you go type plan. That means that the government depends on revenue from Social Security taxes to off-set the pay-outs to retirees.

Well, yesterday the Congressional Budget Office released their findings that Social Security will face this year a situation that was not supposed to occur until somewhere between 2014 and 2016. For the first time, Social Security will pay out more than it takes in this year.

It appears that a high unemployment rate has another dark side. With fewer people employed, fewer dollars are collected from payroll taxes. Further, because of unemployment more people have opted into the Social Security benefit system more benefits are being out.

Well, at least we have the Social Security fund. After all, it is supposed to be there until 2037. For years, Social Security always had a surplus at the end of the year because the program always took in more than it paid out. You would think that money would get safely tucked into the Social Security trust fund.

Rule #1 – You never tell a politician that there is money lying around because sooner or later they will spend it. Leave it up to the politicians to screw this one up. There isn’t money sitting in the Social Security trust fund there are a stack of IOU’s from the Government. Yes, the Government helped itself to our tax dollars designated for Social Security benefits.

So guess who will be calling in those IOU’s real soon. Yes, the Social Security administration is going to want some money from the Government. Hey it is OK – we can print that money as well. At what point does it become a problem and this whole money printing thing doesn’t work out so well?

That is the million dollar question. This article discusses the potential that the end game for all of the borrowing might be sooner than expected.

According to www.usdebtclock.org, we currently have a $14.2 trillion liability for Social Security…and the Politicians want universal healthcare.

Tags: Bob Brooks, Congressional Budget Office, Government, healthcare, Social Security, Unemployment

Bank of America releases press release after press release making statements that shine a customer friendly light on Bank of America. First, there was the announcement at the end of last year that BOA was going to stop raising interest rates on its credit card customers. Of course, a mere 3 months later they were going to be forced to do so anyway as the new Credit Card Act went into effect. The probable reality is that the bank has already raised all of the rates they are going to raise.

Then within this last month, the PR department announced that they are going to stop charging overdraft fees for debit card holders. No longer will they allow consumers to spend money that they don’t have.

What makes this press release so comical is the new federal regulators’ regulations which will go into effect July 1st. These new regulations force banks to stop allowing customers to go into overdraft unless the customer opts into the program. Bank of America still has a program where customers can opt into the overdraft program. Plus this new Bank of America policy doesn’t go into effect until mid-June. So they are just announcing they are going to comply with the rules that they will be forced to comply with anyway.

Yesterday they announced that they are going to offer mortgage principle reductions to a select number of customers to help them avoid foreclosure. Great sound bite until you drill into the details. This is for a select group of Countrywide loans that were the worst of the worst sub-prime loans. In other words, these portfolios present a huge liability for BOA which forces the bank to take some type of action.

Are they really doing something that will make a difference? It is highly unlikely. These loans are the worst of the worst. These are the homes severely under water (homeowner owns more than it is worth). The potential for foreclosure is extremely high. Thus, BOA is probably going to lose a lot of these homeowners anyway.

What Bank of America and the rest of the lending world need to realize is that these losses are going to occur and someone is going to take them. Unfortunately, the politicians along with the banks are just pushing off the inevitable into the future. With the rate that homeowners are walking away from homes, it is the banks that are going to be holding the bag. Sound bites and press releases aside, banks need to get to real solutions that really make a difference on homes that are going to produce losses anyway.

You can only put off taking losses for so long.

Tags: Bank of America, Bob Brooks, Countrywide, Credit CARD act, federal regulators, Homeowners

Nothing surprises me anymore when it comes to the politicians and what they deem as a solution for a problem. Last year the politicians declared they were going to fix the foreclosure crisis in this country by passing the Home Affordable Modification Program. Well, this program didn’t turn out to be much of a solution. Home modifications were not getting done and the foreclosure crisis has worsened.

Now the politicians have another program that they feel will fix the foreclosure crisis and involves motivating people to do what is called a short sale. A short sale is simply a transaction where a buyer makes a reduced offer on a house less than the seller’s mortgage balance and the bank agrees to the offer while forgiving the rest of the debt.

For example, say that the seller has a $100,000 mortgage on a house. The buyer offers $55,000 for the house. The bank agrees to sell the house to the buyer for $55,000. The bank then forgives the difference between the mortgage amount and the reduced price of the house. This works out well because it saves the seller from going into foreclosure.

Well the government is willing to pay the bank $1,000 to conduct a short sale. If there is a second loan, the government will give the second bank $1,000 as well. The best part is that the government would give $1,500 to the homeowner for doing a short sale. No I am not making that up.

Let’s look at how the Government at least in a small way is wasting more taxpayer dollars. If a homeowner is facing a foreclosure, a short sale opportunity is a dream situation for multiple reasons. First, short sales rarely happen (on average) because banks don’t want to take the loss in a short sale. So, you are in a great situation if you have a bank that is agreeing to a short sale. Second, the distressed homeowner has no negative effect to the credit report. This was not a foreclosure. It was a transaction agreed upon by the buyer and the bank. Third, the seller gets the bank to sign off any liability. In other words, the bank agrees not to come back and file a lawsuit on the loss. In a foreclosure, the bank can come back and sue for the loss.

It is the best case scenario for the homeowner. Why would you have to pay someone $1,500 to motivate them to participate in a short sale?

It is the banks that need to be motivated to take the hit and the Obama administration thinks that $1,000 is going to do the trick? An even bigger insult to the bank is the fact that the seller is getting $1,500 versus the $1,000 payment to the banks.

The latest foreclosure numbers show a challenging situation. There are 7.5 million homes in the foreclosure process right now. 31% of loans that have been delinquent for 6 months are not in foreclosure as of yet. 22.8% of loans delinquent for 12 months have not been moved to foreclosure status. Finally, there are 2.5 million homes that are beyond 60 days late. These numbers dwarf the 2 to 3 million homes that are on sale on the market right now…and the government wants to pay homeowners to do a short sale?

It makes me wonder if the politicians in Washington are really committed to fixing the problem. It seems to me that the agenda has no desire to truly fix the problem when they come up with laughable solutions.

Tags: Bob Brooks, Foreclosure, Government, Home Affordable Modification Program, Homeowners, Obama Administration, short sale

It appears that the Credit Card Act is doing very little to curb consumer abuse. I made a purchase the other day and used a 0% interest for 6 months. My plans were to just use their money and pay it back. It is an easy online payment for 6 months, I thought. Well I went in to make my first payment and entered all of my information. The website showed that the payment went through and there were no problems. That was on the 5th. I went back to check it on the 8th and everything still looked great.

I then checked the website on the 15th just to triple check. The 13th of March was the deadline for payment. It showed 10 days later that the payment didn’t go through and then $80 worth of fees. It conveniently did so right around the payment deadline date. Did I receive an e-mail that said the payment didn’t go through? Absolutely not! Did the website show everything was OK? Yes, until it was too late. So I call the card company. After waiting for 25 minutes, this lady answered the phone.

I told her my story as if she cared. Then she told me the checking account number that was entered was a digit off. Then I suggested that the new credit card rules were designed to curb this type of abuse.

She said, “We don’t follow those rules and regulations.” I said, “Are you serious? You don’t follow the rules and regulations?” She then said that she meant they follow all rules and regulations. Of course, she didn’t even know about the rules and regulations. Apparently, this lender keeps their employees in the dark and does not follow the law and hopes that they consumer doesn’t figure out what they are doing.

So, she sends me to an “escalation” specialist. I guess I had been officially escalated. Now my expectations were pretty low that this was going to get resolved. Credit card companies don’t let people who make mistakes off of the hook…unless…maybe they are doing something that they shouldn’t such as…not following the laws.

I started out the conversation with a very pleasant tone to my voice. I told her the story. I then brought up the fact that they were not following the new credit card act. She explained to me that I just didn’t understand the laws and that they were following it. I decided to let it go since she said, “we will just drop all of the charges and return you to the 6 month no interest status.” I didn’t even ask. This is unheard of in this environment unless they are truly trying to get away with something.

The bottom line:

(1) Don’t get a false sense of confidence that this new law is protecting you.
(2) Always talk to a supervisor.
(3) Expect a long hold time. They are understaffed and I think that they count on you giving up.
(4) Always approach employees with a lot of grace. They didn’t set the rules. Don’t forget how much grace God gives each of us.

Tags: Bob Brooks, Credit CARD act, Credit Card Companies, customer service, interest rates, payment, regulations

“It is my belief that not just politically but also economically, it’s better for us to start getting a system in place — a universal health care system — signed into law by the end of my first term as president and build off that system to further — to make it more rational — by the way, Canada did not start off immediately with a single-payer system. They had a similar transition step. Transitioning a system is a very difficult and costly and lengthy enterprise. It’s not like you could turn on a switch and you go from one system to another.” – Presidential Candidate Barack Obama in 2007

I have re-written today’s thoughts many times and titled it many different ways. As you will read below, probably along with the same way you feel today, I am completely disgusted by what has taken place. At the same time, I find a great deal of hope in what I refer to as the trifecta of hope.

For I know the plans I have for you… plans to prosper you and not to harm you, plans to give you hope and a future. – Jeremiah 29:11

Be still and know that I am God – Psalm 46:10

Don’t worry about anything; instead, pray about everything. Tell God what you need, and thank him for all he has done. – Philippians 4:6

Sorry, President Obama, my hope doesn’t hinge on what you “do for me.”

This should not be a big surprise. I think that anyone who felt this would never happen was just kidding themselves. This is a well oiled agenda that is set on creating a socialistic state run by big government. Yesterday, we stepped through the initial gateway of socialism. Although the politicians would like for us to believe that we live in a country where we have a voice, yesterday it was demonstrated that is not true. It sickens me to watch it play out.

It sickens me to watch all of these politicians prostituting themselves with backroom deals and mortgaging our future on a bunch of lies. A true leader would not need a backroom deal. A true leader would look at a bill and determine whether or not it was in the interest of the people, vote his or her conscience, and do so with no thought of the ramifications for his or her political career.

Politician Stupak gets the prize. This guy is putting on the badge of prolife demanding that anything related to Government funded abortion get struck from the bill. He would not vote yes until he was assured of that. He could have stepped up to the plate and stated that unless the bill was completely rewritten, there would be no way in good conscience he would vote for it. Instead, he accepts a pledge from the most pro abortion president to ever be in office that this would never happen. This politician just threw out decades of hard work protecting the lives of babies by compromising his values. This executive order signed by President Obama can be easily overruled in a court of law. What is important is that he saved his re-election by acting as if he didn’t compromise his values.

The most disgusting of all of it is the fact that these politicians went against the will of the people. Poll after poll showed the majority of America didn’t like this bill. They pushed it through regardless of how American citizens felt and would have done anything possible to make it happen. This isn’t about the will of the people. This is about the agenda of power. Americans can line up in the streets of Washington all day long and it will not matter.

So, is there any hope? Well, there is always hope. However, it will take more than tea parties. It is a multi-step process. The agenda has to be slowed between now and November. Between now and November, I think that they will go into hyperdrive to transform America. Hopefully, in November we will have balance again in Washington by kicking these politicians out of office. However, does it really fix the problem by replacing politicians with other politicians? Well, you have to hope so. The Republicans were no better when they controlled everything. As far as healthcare goes, it is pretty easy to be a Republican in this deal. You can wear the badge of the American people and look pretty good.

We need real leaders. The system is completely broken. I guess I can’t be too hard on these politicians. I don’t know how one survives in Washington without being a politician. So, here we go! The process of socialization is underway. First, it is socialization of healthcare. Second, it is the nationalization of the banking system. That is already in process. Third, it is taking control of energy. They should start aggressively working on cap and trade. Finally, there is the privatization of the retirement accounts. That is already in process. Our Founding Fathers are turning in their graves right now.

Tags: Bob Brooks, healthare, Nationalization, Obama, politicians, socialism, Stupak

We will post the next blog on Monday, March 22. We are off during the week of Spring Break. As always, thank you for reading my daily writings.

I receive press releases frequently and am always interested in the ones from Dr. Jerome Corsi. I thought I would share this one with you. With healthcare Obama-style about to be passed, don’t suspend the belief that anything cannot happen. I like to keep you informed on things that we hope would never happen.

From Dr. Corsi

Dominique Strauss-Kahn, head of the International Monetary Fund, or IMF, called for the creation of a new IMF-based one-world currency to replace the dollar as a reserve asset in world trade. Speaking at the Bretton Woods Committee meeting in Washington on Feb. 26, Strauss-Kahn cautioned against continuing an international monetary system that was dependent upon the dollar.

“And one day, the Fund might even be called upon to provide a globally issued reserve asset, similar to – but in important respects different from – the SDR,” Strauss-Kahn said. “That day has not yet come. But I think it is intellectually healthy to explore these kinds of ideas now – with a view to what the global system might need at some time in the future.”

This new call for an IMF-based one-world currency adds support to the G20 decision in April 2009 to move in that direction. Red Alert (Dr. Corsi’s site) cautions readers that the increasingly direct calls for a one-world currency to replace the dollar in international trade signal an uneasiness international bankers have with relying upon either the dollar or the euro as the standard for world trade.

With China dominating world trade, having amassed over $1.75 trillion in foreign-exchange reserves largely through manufacturing low-cost goods, the Chinese are increasingly unwilling to bet upon the soundness of dollar holdings, given the debt position of the United States.

G20 London meeting endorsed IMF one-world currency. Red Alert has previously reported that Russia and China championed the idea to use the IMF’s Special Drawing Rights as a new international currency as a proposal that was adopted by the G-20 meeting held in London in April 2009.

That G20 summit meeting took an important step to create a new one-world currency through the International Monetary Fund that is designed to replace the dollar as the world’s foreign-exchange reserve currency of choice.

Point 19 of the final communiqué from the G20 summit specified that, “We have agreed to support a general SDR which will inject $250 billion into the world economy and increase global liquidity,” taking the first steps forward to implement China’s proposal that Special Drawing Rights at the International Monetary Fund should be created as a foreign exchange currency to replace the dollar. What are Special Drawing Rights?

The IMF created SDRs in 1969 to support the Bretton Woods fixed exchange-rate system. “The international supply of two key reserve assets – gold and the U.S. dollar – proved inadequate for supporting the expansion of world trade and financial development that was taking place,” a document on the IMF website explains. “Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF.” When the Bretton Woods fixed-rate system collapsed, major world currencies, including the dollar, shifted to a floating exchange-rate system where the price of the dollar and other major world currencies was created by trading on international currency exchanges.

Until the current global economic crisis, SDRs issued by the IMF have been used by IMF member nation-states primarily as a reserve account to support international trade transactions, not as an alternative international currency available to settle international debt transactions in danger of default.

The discussion of using SDRs as an international reserve payment system is further evidence that the momentum to create a one-world currency is gaining among not only among academic economists, but also among and professional economists holding prominent government positions.

Who is Robert Mundell?

Red Alert previously reported that strong support for the idea of a one-world currency has been consistently championed by Columbia University economics professor Robert Mundell, widely regarded as “The Father of the Euro.” He has argued for decades the proposition that nation-state currencies, including the dollar, need to give way to a new official world currency. For his work in defining the “optimal currency area” as being defined by international free-trade areas and regional markets, instead of nation-states such as the United States of America, Mundell won the Nobel Prize in economics in 1999.

Mundell’s argument is that nation-states are not optimal currency areas because nation-state borders are artificial constraints that are imposed on the globe to create ethnic or historical divisions that do not necessarily represent how international markets operate. To understand the concept, Mundell cites former Federal Reserve chairman Paul Volker’s frequently quoted dictum that, “A global economy needs a global currency.” For globalist economists, multinational corporations add currency risk simply because their companies operate in many different nations.

Currency risk is defined as the possibility that holdings in one particular nation-state currency may depreciate in value against the currency of the nation-state in which the corporation is based, resulting in a business loss from the currency fluctuation itself, not from a downturn in the company’s primary business activities.

A regional or one-world currency would eliminate currency risk because prices in all countries operating in the market area would be denominated in the same currency unit.

Mundell is on record urging that the IMF fund Special Drawing Rights to replace the dollar as the standard for holding foreign-exchange reserves that result from international trade transactions.

Tags: Bob Brooks, Dr. Jerome Corsi, health care, International Monetary Fund, one-world currency, Red Alert

You have to love our oversight system in this country when it comes to abusive consumer practices. Politicians and federal regulators are very slow to move. We saw this with the recent actions taken to reign in credit card abuse. The politicians and the federal regulators allowed these abusive practices to go on for a long time and then they reacted with some watered down regulations. In most cases, these regulations occur in the same sequence.

First, it is the federal regulators who do the dirty work. In most cases, the politicians don’t want to get their hands dirty clamping down on those who help fund their campaigns. Then after the federal regulators pass the regulations, the politicians express outrage and then turn them into laws. This way they are only enforcing something that has already been done.

Well, that happened with credit card companies. Now it is happening with the banks. Banks are raking in roughly 24 billion dollars a year in overdraft fees from these programs that allow you to go into overdraft when you use your debit card. Here is the scenario – you are at the grocery and unbeknownst to you there is only $10 in your bank account. You have a bill that totals $50 – you swipe your card and the bank approves the overdraft and charges you $17 to $34 in overdraft fees.

Federal regulators passed new rules last November requiring banks to ban these practices. Now if you want the overdraft protection, you have to opt into the program.

The Center for Responsible Lending released a survey that showed that 80% of those surveyed would want the debit card purchase denied rather than allowing it to go through. The same survey showed that the average overdraft was only around $17. You tack $34 on to that amount and that overdraft protection is costly.

Just like I have illustrated with the credit card act, these new rules don’t go far enough.

These rules should be written to tell banks what they can and cannot do when it comes to overdraft protection. As long as there are loose ends, banks can resort to deceptive tactics to get consumers to sign up for these programs.

How about disallowing overdrafts all together? This is where the consumer protection system fails to do its job. Why don’t the federal regulators just disallow these programs all together? Overdraft protection is just another form of loan sharking. Technically you are borrowing the money from the bank because they are paying something with the bank’s money. So, if you went over by $20 and they charged you $34 in a fee, technically it is the equivalent of a 170% interest rate.

So do yourself a favor and don’t opt into these overdraft programs and when a bank wants to pitch you a new service, make sure that the overdraft service isn’t buried in the details.

Tags: banks, Bob Brooks, Credit CARD act, federal regulators, overdraft fees, overdraft protection, politicians

I have to hand it to the public relations/marketing department of Bank of America. I cannot determine if their public relations messages are genius or an insult to my intelligence.

Back in November of last year, Bank of America declared that they were not going to raise rates on credit card holders anymore. They were going to be the good guys and put a stop to all of that credit card abuse. Of course, three months later in February 2010, they were going to be limited in doing so anyway with the new Credit Card Act. My guess is that they had already raised rates on their cardholders so making that announcement was no big sacrifice. However, just like a politician, those sound bites make for good PR for anyone not really paying attention.

Now, the PR department strikes again. They announced yesterday in grand fashion that they are going to stop charging overdraft fees for debit card holders. No longer will they allow consumers to spend money that they don’t have.

So once again, you have to ask the question – Is Bank of America really making a big sacrifice and being the good guy? After all, that is a big revenue producer for them.

The answer is no for two reasons. First, the gouging consumers program of allowing customers to go into overdraft and then charging them a fee had run its course. Just like in the case of raising interest rates by credit card companies, the consumer pressure was getting to the point where credit card companies were going to be forced to stop the abuse.

Second, and what makes this so comical, federal regulators’ new regulations, which will go into effect July 1st, force banks to stop allowing customers to go into overdraft unless the customer opts into the program. Bank of America still has a program where customers can opt into the overdraft program. Plus this new Bank of America policy doesn’t go into effect until mid-June. So they are just announcing they are going to comply with the rules that they will be forced to comply with anyway.

How about changing up that press release a little bit? “Bank of America has just announced that they are going to comply with the new regulations that are to go into effect July 1st by not allowing customers to go into overdraft. However, customers can still opt into the program.”

So is this an insult to your intelligence or great PR that makes Bank of America look like the good guy?

Tags: Bank of America, Bob Brooks, Credit CARD act, federal regulators, overdraft

The real estate numbers are just not getting any better. If all of the rosy predictions are accurate, the real estate sales numbers should be showing improvement. Yet January’s pre-owned sales numbers decline 7.6%. That decline occurred even amidst the politicians trying to motivate would be homebuyers to buy homes through the extension of tax incentives.

Then we are still dealing with this ongoing foreclosure crisis. The Obama administration has taken heroic efforts to fix that problem through home modification programs. It was reported by the treasury that this program has modified only 66,000 troubled loans through the end of last year. That hardly puts a dent in the problem.

There are two aspects of the foreclosure situation that are worth considering. The first aspect is what is referred to as the shadow inventory.

The shadow inventory consists of all of the homes that are in foreclosure and have not yet hit the market. Currently, there are a little over 3 million homes that are for sale and on the market. It is estimated that there are 7 million homes in shadow inventory about to hit the market. That will triple the current level of inventory sitting on the market.

The bigger challenge is the continuation of the domino effect. More foreclosures create a larger inventory of homes which puts pressure on home prices which decreases values of home which can lead to more foreclosures. In addition, foreclosure creates more losses in the credit markets, which adds fuel to the credit crisis which affects the economy, the banking system, and employment. It is a vicious cycle.

At the heart of the foreclosure problem is the adjustable rate mortgage or ARMS. Once the ARM period is up, the rate changes and in most cases the payment goes up to the point where the homeowner cannot afford it. As a result, the home goes into foreclosure. Now that is an oversimplification look at the problem. However, it is not to far off. Last year was pretty quiet for adjustable rate mortgages. Look out for 2010! We will have the highest number of ARMs coming due since this crisis started. We don’t get a slow down in ARMs adjusting until roughly mid 2012. With unemployment this high, homeowners upside down in their homes, and the inability to refinance in many cases, how many of these ARMs will result in foreclosure?

This is just one aspect of the debt crisis that is going to take a while to resolve. Unfortunately, there are no good solutions when you are talking about a debt induced problem. Debt induced problems have to work themselves out over time until all of the bad debt has resolved itself.

Tags: adjustable rate mortgages, Bob Brooks, debt crisis, economy, Foreclosure, shadow inventory

Government big enough to supply everything you need is big enough to take everything you have. -Thomas Jefferson.

Note: please excuse any typos – My assistant who proofreads is out today and I am not a very good editor!

USA Today reported that on average people who hold Government jobs make more than people who hold the same occupation in the private sector. This is true for more than 8 out of 10 occupations.

The article states – “Overall, federal workers earned an average salary of $67,691 in 2008 for occupations that exist both in government and the private sector, according to Bureau of Labor Statistics data. The average pay for the same mix of jobs in the private sector was $60,046 in 2008, the most recent data available. These salary figures do not include the value of health, pension and other benefits, which averaged $40,785 per federal employee in 2008 vs. $9,882 per private worker, according to the Bureau of Economic Analysis.”

The government spends about $125 billion annually on 2 million citizens.

Riddle me this – How do you give Government more control of everything? First you do nothing to help the private sector create jobs. Sorry to the politicians in Washington, little too late with your job bill. The damage has been done. It will now take years to overcome what you have allowed to let happen. Second, you put as much of America on the Government payroll as possible through better paying jobs and extended unemployment benefits. How do you entice people to work for the Government? You make it much sweeter than the private sector.

Of course, the National Treasury Employees Union President has to disagree with the findings. Colleen Kelley says the comparison is faulty because it “compares apples and oranges.” Federal accountants, for example, perform work that has more complexity and requires more skill than accounting work in the private sector, she says.

Really? She said that with a straight face? I think that private sector accountants might disagree. We are talking about the numbers that are coming out of Washington where the luxury of assuming exists.

See the differences in pay here -

Tags: Bob Brooks, employment, Government, USA Today

Debt is the world’s greatest problem right now. We saw an enormous debt problem develop starting in the early 80’s slowly evolving over a few decades until it started coming apart in 2005 and completely popped in 2008, creating a crisis.

This debt problem that we face today is affecting or will affect everyone either directly or indirectly. It has affected the entire global economy. As you know, the response to this problem was not the approach which should have been taken. The politicians and leaders all over the globe should have taken a 2 step approach. First, lightly intervened to give the economies of the world a little foundation and let the debt detox process begin. Second, rebuild the infrastructure of the world of small business. That is the engine to growth. Although it would have been painful at the time, I believe that we would have been in much better shape today.

Unfortunately, that didn’t happen. Their two prong approach was totally different. First, aggressively intervene to save the system. Second, build a dependence on the government rather than rebuilding capitalism.

As a result, two unintended consequences have now occurred. First, the debt problem is even bigger and much more global in scale as we have borrowed money to stay a float. Second, they have delayed the inevitable.

When will the inevitable become reality? For a year now, we have been borrowing money just to pay the bills and service the debt. We are using debt to stay afloat. At some point, we have to face the day of reckoning. This is unsustainable.

For the problems in America, it is sustainable until printing money ceases to work. That would be the day when the need overwhelms the system. Incidentally, we could be getting closer to that point than you think.

It is not the same for the problems elsewhere. Many of these foreign countries might just be forced to face the music and default on their debt, creating the day of reckoning.

Regardless, at some point, the debt has to go away and someone has to take a loss. That is how it works. The longer we wait, the bigger and more painful the problem.

Tags: Bob Brooks, Debt, debt crisis, default, Government