Those of you who are looking to skirt your federal tax payments this year have a bit of reading to do beforehand. Why? Because whatever argument you're basing your tax non-payment on has probably already been tried by somebody.

And failed miserably.

IRS: The Truth About Frivolous Tax Arguments

The above PDF is the latest-updated version from our pals at the IRS, who no doubt are going to be frowning upon tax dodgers even more than usual in the coming years.

Gots to bring in that sweet tax revenue so the "wealth" redistribution can continue unabated!

Labels: Taxes

Regular visitors to IYM and Money Musings probably know that I'm a big fan of TransUnion's TrueCredit monitoring service, having been a subscriber since March of 2007. (Check out my TrueCredit review for details.)

I hadn't logged into TrueCredit since November, and when I went in to update my info this weekend, I found that they're no longer reporting so-called "FAKO" (like FICO, but different) scores:



Hmmm. Now, I first heard of (and mentioned) VantageScores back in 2006. So, for TrueCredit, this change has been a while coming. (Though according to Sun's Financial Diary, TransUnion was reporting its single-bureau VantageScores back in 2008.)





Yay! More obfuscation on the part of the credit bureaus! How grand!

VantageScore Brush-Up

Because our credit-consuming public was so obviously in need of yet ANOTHER credit-scoring scale (yes, Virginia, that's sarcasm), the three bureaus stepped up to the plate with VantageScore. Supposedly, its calculations are standardized across the three bureaus ... though if you check all your VantageScores, you still won't see the same score three times. This is because banks and other financial entities all have their own methods of reporting info to the bureaus. (For example, the credit union which held our 990-day Honda car loan reports only to Equifax, and not the other two bureaus.)

As I wrote back in 2006, VantageScores are a two-part entity. The first part — the numerical one — ranges from 501 to 990. The higher the number, the more favorably lenders should view you.

The second part of VantageScore takes you on a trip back to elementary school, where you're assigned a credit-risk letter grade from A to D, and then F. The ranges look something like this:

Letter Rating	Score Range	Category
A	901-990	Super Prime
B	801-900	Prime Plus
C	701-800	Prime
D	601-700	Non-Prime
F	501-600	High Risk

Great, huh? So do you feel like a kid again — specifically, one who's about to get beat up at recess?

No? Well, maybe you should.

Why VantageScore?

Why did we need another credit-scoring model? Well, lenders and bureau execs have told us that more "industry standardization" was needed, and that "short credit-history" (aka "thin file") borrowers were unfairly penalized in the FICO model.

As the VantageScore Solutions site explains:



Oh, how I love it when credit quants "open doors to opportunities" with their new and "highly predictive" models. Such financial innovation has worked out so well for us the last several years, hasn't it? I mean, at this point, when I hear the words "financial" and "innovation" used together, I tend to run the other way.

And this:



Personally, I call BS.

The devout pessimist in me screams that VantageScore likely has much more to do with (1) muscling in on Fair-Isaac's FICO-based scoring monopoly, and (2) opening up new revenue streams for the bureaus and the VantageScore creators. How do I reach to this conclusion?



Lookee here! More credit-score-reporting revenue and fees for the industry! Yippee!

Who's Using VantageScore?

We don't know. A quick scouring of Google suggests that "some" auto lenders use it:



Seven of the top 50 auto lenders, huh? Is that supposed to be a ringing endorsement?

And in an August 2009 PDF from OFHEO.gov, Mr. Burns states that "three of the top ten mortgage originators use VantageScore and two of the three ratings agencies incorporate VantageScore into their analytical models."

Three of the top 10 mortgage originators? Uhhh ... that's a bit better ... I guess.

(The PDF itself is a pretty interesting read IF you're in the mood to have VantageScore hard-sold to you, AND you happen to run one of our two main government-sponsored housing-related entities.)

And note, kids, that these shaky usage numbers are AFTER the VantageScore folks have had four-plus years to sell the benefits of their system to every lending institution on the planet.

Summary

So how do I feel about finding VantageScores, rather than FICO-like scores, appearing on my credit-monitoring screens?

How 'bout ... ambivalent.

I don't consider my $30 monthly TrueCredit fees as payment for constant viewing of my and my wife's credit scores. With no debt other that our mortgage, color me "not too worried" about how VantageScore LLC tallies me out on a financial-responsibility index. (One of the VantageScore explanations for why I currently have B-rated standing states, "Your average credit amount on open real estate accounts is too low." What exactly does that mean? Am I supposed to take these guys seriously?)

Rather, I'm primarily paying TrueCredit/TransUnion to send me alert emails when things change on any of our reports. New inquiries, new accounts — those are the things I want to know about as they occur. Beyond that, the credit scoring is just a value-added benefit.

Though now that VantageScores are displayed, it may be less "value" added than before.

Labels: Credit Scores

I've just added my review of Quicken 2010 Deluxe on the main IYM site.

After a few days' use, I'm hopeful that this version will be even better than 2008 Deluxe (review), which I found to be outstanding for my needs.

I'll say here that the 2010 version, while it took longer to install, does seem to perform day-to-day operations faster than did 2008.

I've not yet experienced any of the glitches that other users have discussed on the 'net, but we'll see how it goes...

Labels: Product_Reviews, Quicken, Software

It's a new year, which means it's time for new federal tax withholding tables!

I know, I know. You readers' hearts are all aflutter. The excitement is palpable. You're giddy with Christmas-like anticipation.

Well, calm down, Beavis. The new withholding tables are here:

IRS.gov: 2010 Employers' Tax Withholding Tables

This year, however, we have something unusual with our withholding tables, and that something is intrigue.

You see, someone made changes to them thar tables. According to biggovernment.com, Congress has gone and fiddled with the tables, all quiet-like, in order to create more money for the gubmint to play with ... without having to directly raise taxes. (Times being what they are, and Congress' spending inclinations being so unrestrained, perhaps FedGov has simply borrowed a cash-flow strategy from California?)

Actually, I don't know whether that's the case or not. And I'm not about to devote the time to plugging numbers into 37 different versions of our tax tables to see what the outcomes are.

What I do know is this: When I use Excel to compare my household's withholding across three different sets of tax tables (2009 original, 2009 after stimulus, and 2010), I find nothing nefarious.

We know that the tax tables were revised in February of 2009 to account for the "Making Work Pay" tax credits passed by Congress. In my family's case, that credit was $800. What I'd expect to see, therefore, is a difference in roughly that amount from what would've been withheld using 2009's original tax tables versus what was withheld in 2009's revised tables, and versus what will be withheld using 2010's tax tables.

And that's pretty much what I found.

The revised 2009 tax tables (post tax credit) had my employer withholding $600.30 less than it would have done using 2009's original tables (pre tax credit). And the 2010 tables will have me withholding $603.60 less than would've been done with 2009's original tables. In both cases, the government's adjustments to the withholding tables effectively give me most of the $800 "Making Work Pay" credit during the current year, just as we were told would be the case.

There is more math work to do here, though, if someone is so inclined. I don't have an answer as to why, for 2010, there will be nine tax-withholding brackets rather than the seven we saw in 2009. But what I do see (via the spreadsheet below) is that some odd things happen when semimonthly income reaches the $5k-$6k level. ("Odd" as in: It's odd when compared to what the revised 2009 withholding tables provided this same income bracket last year.)

You can find more info regarding the "Making Work Pay" tax credit here. (It's worth noting that the $800 credit phases out for married couples who earn $150k or more per year.)

If you'd like to play around with the spreadsheet I used (tables are for the "Married / Semimonthly" pay basis), it's available here. If nothing else, it's a good example of how to calculate taxes via tax tables using Excel!

Labels: Spreadsheets, Taxes

A really common question that I'm receiving from IYM spreadsheet users lately goes as follows:

In your spreadsheets, how do I change the "$" to "£" or to another currency symbol?

The first thing to do is to UNPROTECT the active worksheet (assuming it's protected). In Excel 2007, you'd select:

REVIEW → UNPROTECT SHEET

In earlier versions of Excel, from your menubar, choose:

TOOLS → PROTECTION → UNPROTECT SHEET

Once that's done, "left-click and drag" so that you've selected the entire area on which you wish to make the currency-symbol change. In this example, I'm working on my Accounts Payable/Receivable spreadsheet. Because of space constraints, I'm selecting only a small portion of what you'd normally need to change (i.e., the entirety of the CHARGE, PAYMENT, and BALANCE columns):



So that's the area of cells on which I'll be making my symbol change. With that area selected, I'll now right-click somewhere inside that area, and choose FORMAT CELLS:



Now the FORMAT CELLS window should appear. Select the NUMBER tab, then CURRENCY (or ACCOUNTING, if you like your currency symbols to be left-justified), then SYMBOL. You can now change your currency symbol using the drop-down menu:



Click OK to apply your changes and close the window. The cells now look like so:



If I preferred, in the FORMAT CELLS window, in the NUMBERS tab, I could select ACCOUNTING rather than CURRENCY. With this change, my symbols would be a bit more orderly:



That's all there is to it!

Labels: Excel, Tutorials

One of the features of Quicken which I've grown to love is its "Cash Flow Comparison" reporting. In particular, I get a kick out of seeing how our spending in various categories changes over time.

Generating a Quicken report for this — one which shows your categorized spending broken down into, say, a monthly basis — isn't tough at all. And because Quicken lets you easily export the data to an Excel-readable format, your ability to crunch numbers is limited only by the amount of free time you have to kill doing it. Ahem.

Getting a suitable monthly-spending comparison starts, as you'd expect, with Quicken's "Reports" menu in the toolbar. (I'm using Quicken 2008 Deluxe [my review] here, by the way.) From the toolbar, follow the menu tree like so:



... choosing REPORTS → COMPARISON → CASH FLOW COMPARISON.

This brings up Quicken's default spending comparison report, "Cash Flow Comparison - YTD." It shows all your income and spending for the current year, categorized nicely, annualized and compared against last year's spending.



What if you wanted to see your spending in just one big category ... say, "Food," which in my case includes both groceries and dining out? You don't care about all the other stuff Quicken spits out.

Swing over to the CUSTOMIZE button on the right side. Click that. Then, in the window that appears, click the CATEGORIES tab. Click the CLEAR ALL button to reset your category-reporting selections. Now find the category or categories you want ("Food" in my case) and check-mark them.



Then click the OK button at the bottom.

Now, since we want to see each month's food expenses for this year, and then compared to the same monthly periods from a year earlier, we need to change some of the drop-downs at the top of the report window. The changes to make are shown here with yellow arrows:



For "Date Range," we want "Year to date."

For "Compare to," select "Prior year period."

And for the "Column" option, select "Monthly."

After these changes, the Quicken spending report for category "Food," plus all subcategories, now shows two years' worth of our food expenses, broken down monthly. Each month of this year is compared to its year-ago period. (Note that such a report spans quite a bit of space to the right, as evidenced by the scroll bars Quicken offers at the bottom of the report window.)

While you've likely got all the data you're needing right there in the Quicken report itself, I tend to prefer to see such data in Excel. If your version of Quicken is at all recent, it's a small matter at this point to dump (or "export," if you're in polite company) the report into an Excel-readable format.



In the report menubar, select EXPORT DATA → EXPORT TO EXCEL COMPATIBLE FORMAT. Then tell Quicken where you want the text file (.txt) to be saved. (I'm a desktop kind of guy, myself.)

Now open Excel. In XL2007, click the colorful Office button, and then OPEN. In earlier versions, select FILE → OPEN.

In the OPEN window, under "FILES OF TYPE:" select the "ALL FILES (*.*)" option.

Now direct Excel to open the text file you created moments ago. Excel will automatically open its three-step, text-import wizard. The wizard then guides you through the stupid-easy process of bringing your delimited text file (.txt) into a much fancier, more-number-crunchier Excel file (.xls or .xlsx).



Set your columns and formatting, and otherwise play your cards right, and you'll have a chock-full-of-Quicken-data Excel spreadsheet with numbers ready to be crunched six ways to Sunday!

Labels: Quicken, Tutorials

Not that this is breaking news to readers here, but at least we have a sizeable media outlet stating the obvious — that stupid-low interest rates mean savers get to pay for banks' mistakes:

NY Times: At Tiny Rates, Saving Costs Money

If you haven't figured it out by now, you and I as Designated Savers get to subsidize the spend-happy folks (and the banks who lend to them, and the financial system that craters without them...) pretty much in perpetuity. I rather appreciate this comment from PIMCO's Bill Gross, explaining things oh-so-well:



And don't we savers know it. I mean, Mr. Gross ought to at least get acquainted with ING Direct.




We go on to learn that (SURPRISE SURPRISE) low interest rates are particularly painful for seniors. Why? Because so many of them are on fixed, safe-investment-based incomes:



Ms. Lurie needs to wake up and smell the Starbucks Holiday Blend.

Firstly, were I the reporter on this story, I'd have to ask Ms. Lurie, "Exactly who is it that's paying you those on-the-floor savings rates, thereby forcing you to reverse-mortgage your home equity to them, thereby (again) generating some sweet banking monthly fee income?"

(Answer: the banks)

Secondly, I've formed the opinion that if your nearest Really Big Bank and/or Bank Holding Company could find a way to book record profits and earn management bonuses simply by putting seniors in bread lines, they'd do it. And a millisecond later they'd leverage-up their bets at 37-to-1, utilizing some variety of "Seniors in Bread Lines" default-swap derivative.

("Jenkins!" yells the Goldman Sachs guy who's reading this. "We need some financial innovation over here — STAT!")

I dunno. Ms. Lurie seems pretty naive. Perhaps we could arrange for her to make a social call with the Rickmans, late of Denver:

Denver Post: Credit-Card Squeeze Angers Elderly Couple

Our geriatric anti-heros, the Rickmans, are mighty miffed at Bank of America.



That's his prerogative, certainly. Whilst it is, admittedly, a bit late, I do have a simple yet valuable Life Equation for Mr. Rickman:



It should go without saying that when card companies see their ability to do "Whatever the f__k they want" to their customers being limited at some specific time in the near future, as they do with the CARD Act, then they will all immediately rush to do "Whatever the f__k they can" to their customers immediately, if not sooner.

This idea of banks frontrunning upcoming regulations ain't rocket science. Really. I'd say "It's so simple, even a congressman could figure it out," but a cursory glance at today's headlines would prove it's not quite that simple, apparently.

Ah well. Let's see what this week's news cycle brings...

Labels: Debt, Saving

I recently got into a heavy discussion with someone on a message board regarding house prices in my home state of Oklahoma. His contention, having lived here earlier in his life, was that homes in Oklahoma were FAR overpriced relative to their true values — that the "median home price / median income" multiple here was at 10x or more. My argument was that this was not the case, and that home values here weren't far outside any affordability metrics of which I was aware.

Historically, I've been told, home prices tend to fluctuate in a range of 3 to 5 times an area's median household income. Here's an article that discusses that ratio:

newgeography.com: Improving Housing Affordability

In it, we're told:



So where does this put Oklahoma?

Well, according to the U.S. Trustee Program / Department of Justice, Oklahoma's median income for a one-person/one-earner household is $38,244 (as of May 2009). (Such figures would be applicable to bankruptcy courts, and regularly updated, obviously, since how a BK filer's income compares to his/her state's median income forms a primary basis for how the debts are treated in court.)

Census.gov shows Oklahoma's median income, as of 2005, to have been $39,292, though we don't know if this was for one-, two-, or more-earner households ... or for some combination thereof.

Now for home sales: According to Housingtracker.net, the median listing price for Oklahoma City homes (they don't show a statewide figure) as of December 21 was $157,900.

For a second source, MLS shows Oklahoma's median home sales price to be $122.5k as of October 2009.

So if we divide the MLS median sales price ($122,500) by the DOJ's median income figure ($38,244), we get a housing-price ratio of 3.2 for Oklahoma. This is well within historical norms, and certainly FAR away from the 10x ratio my fellow poster was suggesting.

(For those interested, the same calculations would put California at a ratio of 5.2, utilizing a median income of $48,140 and a median home sales price of $250k.)

Labels: Homeownership, Mortgages

Confession: I loves me some warm drinks in the wintertime. Coffee, tea, hot buttered rum ... you name it, and I'll drink it.

But there's one winter drink that, for me, rules them all.

When I was a kid, my mom always made this wonderful orange spice tea around the holidays. Later, when my wife and I got together, I managed to cajole the recipe from my mom. Today, this tea's strong orange-and-cinnamon smell, and its lemonade-y zing, inevitably bring back my most vivid holiday memories. (The spiced rum is my recent addition, by the way. Sometimes good stuff happens when you ask, "What if?")

In any case, this tea is truly my personal Nectar of the Gods.

Wintertime without it? Bah.

Just wouldn't be right!



And for those who'd prefer to mix it one serving at a time, or just want to give it a try:



For those of you who aren't fans of spiced rum, I imagine Grand Marnier would go very well with this tea, too, though I haven't tried it.

Note, please, that I like my tea to have some ZING, and the ingredient amounts above reflect that — especially in the single-cup recipe. So feel free to experiment with them to find a combo that works for you!

Labels: Recipes

You'd think, from watching all the coverage that "holiday living" gets on the news shows, that someone somewhere would talk about the proper way to save for Christmas.

But no. All I see is advice on how to spend for Christmas.

In my opinion, the money gurus universally miss the boat here, and I'm not sure why. Not a one of them that I've seen talks about saving up for Christmas throughout the year.

Even my guy Dave Ramsey, in a cliché-drenched appearance on Good Morning America last week, advised GMA's financially-stressed viewership that the proper way to handle Christmas expenses was to "spend cash."

"When you go shopping for Christmas gifts, take along an envelope with cash in it," he said. "When the cash is gone, go home."

Well, yeah. Okay.

The GMA host, of course, gushed at the "Why didn't I think of that?" brilliance of this idea, at its cleverness and — dare I say — mono-syllabic zing. She treated this utterance from Dave as sheer genius.

I, on the other hand, threw up just a little.

For Joe and Jane Sixpack, where, pray tell, will this cash come from?

This whole "spend cash" mantra implies that most people can cash-flow their Christmas expenses simply by allocating some portion of their December income to it. Pardon me for being slightly dubious here, especially when recent surveys suggest that 61 percent of us live paycheck-to-paycheck.

I say the cash-flow thing is "implied" because NO ONE specifically refers to the process by which folks could GUARANTEE that they have COLD HARD CASH saved up and ready to cover all their holiday gift-giving needs. I mean, I know it's difficult to turn down offers like this...



... so that when Christmas 2010 rolls around, you'll still be six months short of paying for Christmas 2009.

(Wanna guess why the credit union above shows that ad rather than one for their "Christmas Club" savings account? Gee, I can't imagine.)

The saving process I'm talking about is what Mary Hunt refers to as Freedom Accounting. And if you're one of those crazy people who wants to avoid going into debt for Christmas — why do you hate America, anyway? — then it is like gold.

I wrote the following in last year's Saving for Christmas post:



That's the secret: Treat your gift-giving as a bill, like any other, and pay yourself for it (i.e., save up) in advance, every month. Keep this money in a separate savings account. Track it in Quicken, or in an Excel spreadsheet like ExcelGeek's Freedom Account spreadsheet. Or live on the edge and create your own. Whatever method works for you ... well, do that.

Just do yourself a favor and start saving now for Christmas 2010!

Labels: Budgeting, Saving

The folks at Rasmussen just released some yummy survey data:



The headliner here — that fifty percent of respondents say their card rates have been raised in the last six months — shouldn't be a surprise to anyone, since the card companies now have a legal deadline to beat. Gotta get those rates inflated now, and the flow of credit restricted!

Another nineteen percent "don't know" if their rates have gone up. I'm hoping those nineteen percent are people who, like me, don't carry balances, and who thus don't much care if their rates rise.

I note also that some forty-five percent of poll respondents say they "sometimes" carry a balance on their cards. I'm willing to bet that a decent chunk of them are clamoring for Congress to ride cavalry to their financial rescue RIGHT NOW, rather than in February of 2010. Well, fuhggetaboudit:

NY Times: A Gift To Credit Card Companies

Make sure and blame it all on the Republicans. Yes. They're the bad guys.

Except when they aren't:

Boston.com: Support Wanes for Interest-Rate Caps

From that second article:



For those readers who might be just a tad confused, yes, Carper is speaking of the same "free market" economy where taxpayers are forced to pony up billions in loans and guarantees to keep our worst-of-breed banks and automakers afloat, and where taxpayer dollars are also used to (theoretically) prevent home prices from declining to affordable, market-clearing levels. (As Barney Frank has said, defaulting FHA loans aren't a bad thing. They're policy.)

Just one more reason for me to despise them all equally: Dems, Repubs, banks, lobbyists, unions, U.S. automakers ...

The list just goes on and on.

Labels: Credit Cards, Statistics

Jeez, this video had me bent over. And you don't even have to be in the auto biz to appreciate it:

The Onion: Ford Unveils New Car for 2010: The 2003 Taurus (video)



No kidding! I know a couple of those people — except the government's "Cash for Clunkers" already got them to spend way more than $650. Oh well.

Labels: Automobiles

Oh, the tumult that's been going on in the credit-card world the last ten months or so!

Oh, the angst displayed by dubious cardholders as their precious credit limits have been slashed, their APRs inflated to orbit, and new annual fees instigated!

Yeah. Pardon me while I fire up another batch of buttered popcorn and enjoy the show.

I mean, the entertainment value here — all the verbal flailings and gnashing of teeth of revolving debtors, so loudly pronouncing their financial misfortunes minute-by-minute on TV and the 'net — is sky-high. (Not unlike those new APRs.)

Maybe you've noticed, too: 'Net message boards and chat rooms are absolutely ablaze with debtor diatribes lately.

"Citibank just raised my rate to 29.99 percent FOR NO REASON!" the postings typically go. "I pay all my bills on time! This is so unfair! It should be illegal!"

And so on.

Well, color me fulfilled. Why? Because I can now count myself amongst the great unwashed masses whom Citibank has deemed worthy of a 20+ percent APR on our plastic. (They rate-bumped me a year ago, too.)

Our "20 percenter" letter (PDF page 1 and PDF page 2) arrived just a couple of days ago.

Being a dedicated late-night reader of financial sites and blogs, I'd be fibbing if I said I hadn't been expecting the letter for a while.

It was anticlimactic, really. I knew it wouldn't matter.

Lisa and I haven't carried a balance (other than for card arbitrage purposes) since paying off our cards in 2004. So this APR increase, and all the other rate increases which accompany it (see PDF page 2 above), are of zero consequence to us. This particular Citi card is of the cash-back variety, which means we use it (and a similar card from Chase) for practically every purchase we can, and we pay off all balances in full each month.

This is one of the nice things about being almost-debt-free: Banks like Citi can jack your APR to 40 percent. Heck — make it 50 percent.

When you don't carry a balance, you don't care about the rate.

It's a non-event. A yawner.

You don't carry a balance. That rate means nothing. In fact, you're a predator of sorts.

It's a good place to be.

On the other hand, if you're Liz Jones, then you've got problems. Money school is in session, and the teacher just called you out.

Again I'd like to point out: The private-sector deleveraging that's going on is pretty stout. I'm happy to see it. Heck, I'm almost giddy.



With unemployment in double digits and credit lines disappearing faster than honey buns in Michael Moore's pantry, your neighborhood Debt-Laden Consumer is likely in a world o' hurt.

For a lot of folks, even those who aren't strictly paycheck to paycheck, life is dishing out a mighty painful lesson:

Debt is not your friend ... and neither is the bank who sold it to you.

For those readers who'd like to venture away from Citibank for a moment and scan the bigger picture, I offer the following, courtesy of the New York Times:

NY Times: Banks Squeeze Customers Ahead of New Rules

Enjoy ... and be on the lookout for your letter!

Labels: Credit Cards

Liz Jones.

Yeah.

I don't know who she is, either. Apparently, she's a social critic and columnist. Lives "across the pond," as they say.

But she sure appears to be a GDP-growth-worshipping economist's wet dream:

Dailymail: I'm £150,000 in Debt...

I'd say that it takes big courage for someone like her to come out and announce her debt situation. But really, the true courage comes when she proves that she's willing to actually work and pay it off ... rather than "Woe is me!" her way to more recognition and preferential treatment.



Ummm ... yeah. You, Liz, have racehorses, a farm with a "bat sanctuary," and you "holiday in Tuscany." You wear clothes made by designers whose names have far too many consonants. You spend all this money in some dear hope that others will either be jealous of you, or will see you for something you're not.

I'll give you this: You made me, a social peon (though a solvent one), laugh at you. You sure did that.



Nice. And there's more, of course — much more — in the article.

But don't hate her because she's so pathetic.

Hate her because she's still (I'm pretty sure) blaming her poor parents.

Labels: Debt, Spending

More news from the nightmare that is GMAC:

WSJ: GMAC Asks for Fresh Lifeline

Really. It Just. Never. Ends.

At least now I understand why the goldbug investors think the way they do.

And remember, folks: I noted back in April that the brainiacs at GMAC ramped up subprime auto lending again. FICO of 600? Sure! Let us put you in a new car!

Cash for Clunkers? You betcha! GMAC was feeding at the trough on that one, too.

Seriously: When is enough ... enough?



And as the article above notes, the FDIC's on the hook for GMAC, too. It's backing $4.5 billion of GMAC debt from earlier this year ... and is about to back another $2.9 billion of issued debt for this pathetic excuse for a company. (Good thing the FDIC is already in the red. At least this way, they sort of know how GMAC feels.)

These days, all roads truly do lead to the taxpayer.

No wonder fiat currencies have such a fabulous track record.

Labels: Automobiles, Bailouts, Banking

As I suggested back in a July post titled "Credit Card Charges Appearing," we'll now get to see what Bank of America and Citibank are willing to do to pry a few coins from the fingers of deadbeats:

WCBSTV.com: Charged for Perfect Credit?

("Deadbeats," if you're a card company, are those greedy, black-hearted souls like myself who pay off their balances in full each month. Interest-free. Like clockwork.)

The gist of the article? Bank of America and Citibank are going to "experiment" by tacking annual fees of $29 to $99 onto the cards held by some full-balance-paying convenience users.

Yeah. As if we couldn't see this coming.



How far will the big banks take this ploy? I don't know — but I have this wacky suspicion that at least one of my household's cash-back reward cards are going to end up as a "test case."



I'd really love to see this backfire on the suits at Citibank and BoA somehow. But really, since the taxpayer is effectively on the hook for whatever bad decisions grenade the balance sheets of the Too Big To Fail banks, we'll be paying for it one way or another.

So far this year, cash-back cards have netted my household just a tad under $306. Would we be willing to give up, say, $99 per year of that (as an annual fee) simply to keep (1) the convenience of use, and (2) our credit scores from suffering at the loss of aged accounts and credit lines?

Honestly, at just this moment, I'm not sure.

Hey, Citibank: Are you feeling lucky?

Labels: Credit Cards

In today's episode of "Can I Haz Bailout, Pleez?" we turn to David Lazarus, writing for the esteemed LA Times:

LA Times: How About a Student-Debtor Bailout?

Let me preface all this just a bit: I believe there is very little about student loan debt that is different from any other kind of debt: It too is a known claim against an unknown future.

It is not "good debt." It is not "bad debt." It is just debt.

Student loans are nefarious, though, in ways that other debts are not: Student-loan debt is typically issued so easily and in such large amounts that the people who take on its burden — young adults who, in the vast majority, have not yet created nor sustained a stream of reliable income — will find themselves facing five and six-digit liabilities at precisely the same time (no more Bank of Mom and Dad) that it is most important that they begin BUILDING SAVINGS.

No, I don't care about a college graduate's "earnings potential." Potential doesn't pay the electric bill. It isn't a PIN-based currency at Wal-Mart. Your landlord won't accept it as payment for rent. Those tens of thousands of dollars of racked-up student loan debt are certain, and inescapable. (Well, unless you're willing to flee the country.)

So here's how Lazarus' article begins:



I dunno. Because you were loaned over $80k on an uncollateralized basis, maybe?



They already "helped" you, Steve. They gave you $80k, no questions asked, with which you could pursue a higher education. All you had to do was sign your name. Presto! Eighty grand is yours!

What? Now that school's done, and you're out there in The Real World, you find that that repayment's a bitch? That the loan terms are "unfair?" That groups like mortgage bankers, real-estate pros, and Wall Street banks — groups with stuffed-pocket lobbyists, and groups who can effectively hold the economy hostage when their business plan puts them in the ditch — those guys get preferable deals?

Wow.

Sounds like you DID learn something after all! We're making progress!



Damn that easy credit, anyway. Who knew it would cause such problems?

Look: You want to put an end to those nasty annual tuition increases at State U? Here's how you do it:

Stop making student loans easily available to anyone with a pulse.

Complicated, I know.

Nix the "Just sign here!" loan programs. Stop presenting as a given that EVERYONE should be able to go to college, regardless of price and/or background. Cut off the "free money" for college, and see what happens to tuition, room and board, and all the other associated college expenses.

In the mid-2000s, we made mortgage money available to be borrowed by pretty much anyone who could write down at least twenty percent of our alphabet, and in no particular order. What happened? Home prices blew up, up, up.

We've long made college loans available on much the same basis. And yet people are surprised — nay, infuriated — when college tuition rises by double digits, year after year.

Huh. Weird.

The more money you make easily available for Product A, the more Product A's price will rise. This is basic economics. We just repeatedly ignore it. (And create newer, bigger government programs to "solve" it.)

Ah, but I digress. Back to the article:



Yes, Steve, I know. Paying back five-digit uncollateralized loans, at the terms to which you agreed, is so damn unfair. (Note to the gallery: See how we've become so addicted to "low rate" credit? How, after so many years of watching "free" money get handed out, we're all so entitled to more of it? Isn't Steve just a shining example of this?)

But there is a bright side — something that would maybe help Steve forget about those, uh, "predatory" loan rates. From what I see — and I'm just talking here! — he might be a fantastic candidate for the government-subsidized, FHA-backed, first-time homebuyer program! He should look into that!

Because, as we all know, more low-rate debt is the answer.

Always the answer.

Bring it on. Bailouts for everyone.

Labels: Bailouts

I'm beginning to see more and more anti-401k talk these days. I've covered this topic a few times in the last twelve months — the articles "401k Mess" and "401k Tax Break Under Microscope" are examples that come to mind.

Now we have a glossy mag of no less stature than Time joining the 401k punching party:

Time:Why It's Time to Retire the 401k

And it's a long article, too — something like five pages of bodyblows dealt to the 401k setup. You know it's gonna be good when you get this on page one:



One can sit back and pretty easily foretell what Time is going to harp on: They'll lament the disappearance of "guaranteed" employer pension plans. They'll point out that the 401k was never intended to be more than a tax-advantaged "executive perk."

And they'll posit that the answer to all this JUST MIGHT BE (of course) a NEW GOVERNMENT PROGRAM. Because all the previous ones have worked SO WELL.

There are other options, of course. Like this one:



Just exactly how contributing six percent of one's income per year for thirty years, plus Social Security (yeah, right) gets one to "retirement security" ... well, I must be missing comething in my Google Docs Retirement Insurance spreadsheet for an employee starting with a $40k salary.

With pay raises of 2 percent per year, and expected annual returns of 4 percent per year, our $40k/year worker would amass just a touch under $172k at the end of Year 30.

From there, in a "math that almost works" world, our Joe Sixpack could withdraw about $12,600 per year (18 percent of his final pay, or $1,050/month) for 20 years before draining the account. (Note that these calcs are independent of taxes and inflation, both of which are pretty certain to be, uh, "non-negligible" going forward.)

Of course, there'll be Social Security payments to count on in 30 years. Don't forget about those. Ahem.

However, if I step into the "math that doesn't work" world which Time magazine seems to inhabit above, I'd find that Joe's account, if he withdrew "about a quarter of his final pay" each month, would be in the red by Year 43.

Good thing his retirement paycheck would be "guaranteed."

Look: At the conservative end, would Joe's monthly check for $1,050 be better than nothing? Absolutely. It might buy him a couple bags of decent sandwiches, anyway.

Does it resemble anything close to real "security?" No.

Does anything in the proposed plan resemble real "security?" No.

Plus I have a few more concerns about this "retirement insurance" setup:

• If it's privately run, we're told that "some government regulation" would be needed.

I mean, they did such a great job with the banks and AIG and all. I'm supposed to feel reassured by this? Really?

• If it's government run ...

Well, yeah. Just smell the goodness of those low, low returns you'll get by investing in long-term Treasuries and other government bills. Aw, what the heck — we can always just print it, right?

• If the insurance companies can earn better than 4 percent a year, what's the investment vehicle?

Lemme guess: Stock market? Mortgage-backed securities? Collateralized debt obligations? Other financial hodge-podge?

Or are we looking at just another government-authorized Ponzi scheme?

And what happens to the market indexes when everyone's six percent STOPS going into their 401ks, and STARTS going elsewhere?

And if the premiums are just going back into the stock market, how's that better/different than what we have now?

Call this scheme whatever you like — retirement insurance, a privatized version of Social Security designed to complement the other doomed Social Security, or something else — but I want to know just how exactly they'll get to the level of "50% of final pay" that the Time author conjures above.

Of course, they did use the word "presto" in their presentation, which sort of suggests magic of some kind.

Could it be that maybe — just maybe — this whole "retirement security" insurance thing is, as I suspect, just a newfangled continuation of our country's ongoing War on Math?

Labels: Investing, Saving

Readers who've followed my discussions regarding irresponsible home buying and lending know that I'm pretty opinionated on this topic: It's quite obvious, for instance, that the taxpayer-backed Federal Housing Administration (FHA) has become today's subprime lender of choice. (Nobody else is stupid enough to do it.)

As this week's evidence, I point you to this NY Times article:

NY Times: FHA Problems Raising Concern of Policy Makers

Oh, it's worth a read, all right. Even if you only pay attention to the real-life FHA borrowers profiled. The first one's Bernadine Shimon, a teacher in Northglenn, Colorado.



No, the government gave you an anchor ... and then told you to swim. Check this:



I won't skid off into a ditch here with some rant about how it is NOT the government's job to "take risks on people." (Or did the publisher leave a page out of my pocket U.S. Constitution?)

Instead, I'll just keep the party going, and offer up a second FHA-borrower profile — that of Chaz Fullenkamp:



Really? How, pray tell, do you figure that?



Yeah. And I'm surprised we even still have a financial system. Or a currency that's good for anything other than kindling.

And Recent FHA Results Say...

Also in the article, we're told that FHA's loan portfolio is facing, uh, a fair amount of default and delinquency issues.



And:



And:



So how do Congressfolk feel about this? It's no biggie, apparently.



And a certain Massachusetts representative's response is even better:



I'd say these reactions are unbelievable, but they aren't. What else would you expect to hear from elected officials who well and truly believe there are no limits to what we can and should throw money at? (Vive la printing press!)

You know, really, I wish that this were all a bad dream. But it's not. It's real.

The financial profligacy — and often, sheer ignorance — of these people is absolutely astounding.

Labels: Homeownership, Mortgages

It was almost precisely two years ago that I wrote a blog entry entitled "ASPIRE Act Doesn't Inspire Me Much".

Somehow I lost track of the ASPIRE Act after that. Can't imagine why, given the economic events that got rolling around that time. [/snark]

Guess what? Looks like the idea hasn't died:

US News: Coming Soon: $500 for Every Newborn?

I didn't like the idea two years ago.

I don't like it now.

You know what such an idea screams to me? It says, Let the government "care" for you — cradle to grave. After all, we know what's best.

Or maybe I'm just imagining things.



Handing someone $500 (or more) at birth, when they've done precisely ZERO to earn it. Sounds positively ... redistributive.



Financial literacy programs, I'm all for. The rest of Cramer's spiel, though, is trash. There are other motives at play here. I just can't put my finger on them.



Yeah. Progressive.

Kind of like cancer is "progressive."



Now there's a surprise. NOT.



Cost? What cost? A few clicks on the FedRes mainframes, and WHAMMO you've got brand new cashola, ready to be spread hither and yon. We've established this.



That'd be a fine argument — except that creating costly entitlement programs is usually the unspoken goal of vote-buying politicians.

Am I alone in my displeasure on this?

Labels: Saving