Category: Economics & Business

What got us here

Take a little mortgage business quiz. Match the allegation and the firm.

Allegation

1. Handed out copies of the movie Boiler Room as a training tape

2. Partnered to sell its “PayOption Arms” with a brokerage owned by a five-time felon, whose convictions included gun-related charges

3. Forbade loan officers to check borrower income on certain loans

4. Ran an “art department” in its Tampa office, where documents were altered

5. Settled allegations of institutionalized marketing deception that covered two million customers

6. Developed “FastQual,” a program designed to approve borrowers in twelve seconds

7. Incentivized brokers and loan officers through “yield spread premiums” and other compensation schemes to put borrowers into more expensive loans

8. Tapped two kegs of beer at weekly staff meetings

Institution

A. Citigroup

B. Countrywide

C. Ameriquest

D. IndyMac

E. Merit Financial

F. New Century

G. All of the above

From an excellent profile of the mortgage crisis at Columbia Journalism Review. The answers are in the first comment.

Not so venerable any more

These aren’t fly-by-night companies going under, being sold, or in danger.

  • Henry, Emanuel and Mayer Lehman founded their firm in 1850.
  • WaMu began as The Washington National Building Loan and Investment Association in 1889.
  • Merrill Lynch began as Charles E. Merrill & Co. in 1914. Edmund C. Lynch joined the firm in that first year and it became Merrill Lynch in 1915.
  • AIG began selling insurance in Shaghai, China, in 1919.

They all made it through 1929.

Where home prices may actually … rise?

Believe it or not, in the future people will be buying and selling homes. Some of them will even make a profit.

It’s not so crazy an idea. Consider Albuquerque, N.M. The mid-sized Southwestern city has experienced housing price declines since a peak in the third quarter of 2007, job growth has been flat, and housing starts are expected to fade by 45 percent through the end of 2008. Nevertheless, it’s a city that home builders and economists are bullish about for 2010 and beyond.

Forbes has the story.

A house on my street that sold last summer for top dollar is on the market again (it’s a long story). The asking price is just 2% less than last year. Of course, they haven’t sold it after three weeks. Still . . .

Thanks to Byron for the link.

That’s rich

Commenting on today’s NewMexiKen poll, Tom has provided some interesting thoughts about being rich. I’m not certain I agree completely with his framework, but I find much of it compelling. Rich is surely better defined by accumulated wealth than by annual income.

I don’t believe you are “rich” if you cannot afford to send your children to college without incurring long term debt (you or them). I don’t believe you are rich if your home is your sole source of savings. I don’t believe you are rich if you finance your car (unless by choice). I don’t believe you are rich if you cannot, as Tom suggests, sustain your lifestyle (without debt), even if your annual income drops substantially.

You might be quite comfortable. You might have a lot of discretionary income. But to have any meaning at all — “possessing great material wealth” — being “rich” surely implies money and lifestyle markedly different from middle class.

Internet and customer service update

I tested the download speed just now and recorded 10.19Mbps. That’s with Qwest broadband with optic fiber to the neighborhood. I’m paying for the 12Mbps tier, but I’m reasonably happy.

Apple has extended subscriptions to MobileMe another two months due to the problems we’ve had. Better that there weren’t any hassles, but I admire them for giving their customers an adjustment up front. I have a free 60-day trial that has turned into 150 days and my problems have been minor.

AAA insurance customer service on the other hand sucks. When I called to cancel the policy for my dad’s townhouse, they told me there would be a $40 charge — this on a $200 annual premium. When I grumbled that we’ve sold the property, not just cancelled the policy, I’m told that she (the customer service rep) will waive the charge. So if you don’t complain, you pay $40. Nice.

Then yesterday, after nearly two weeks, I called to ask about the refund. She’ll send out the check today this customer rep tells me. How long do you wait if you don’t ask?

And don’t even get me started on Tucson Electric Power.

Comcast

Comcast has redeemed themselves. They’ve been responsive, polite and adjusted (and possibly expedited) my refund. I got a call a short while ago.

It was never the money that made it worth the complaint, though it was MY money. It was the inconsistencies in the story I got from their people and the clear indication that what they told me — billing will end July 21st — was not what happened — it appeared to have ended August 1st.

But thanks for the polite and positive feedback Comcast — and the correction.

I do suggest you take a look at your bills and see if they really are clear to the average customer, especially when services are added or ended.

And consider allowing former customers that relied on electronic bills and payments access to their record until the balance is paid and the account closed — no matter who owes whom.

Next complaint: Tucson Electric Power.

Mercy!

“Aug. 12 (Bloomberg) — Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.”

Via Atrios.

It only gets worse

Over the weekend NewMexiKen ranted about Comcast sending an email advising me to check my bill online but, because they had closed the account, when I tried to do so, I was denied access.

An individual who represented himself as being with Comcast Cares commented here on my rant and said “Thanks again for the valuable feedback and providing the opportunity to assist!”

OK, Mr. Comcast Cares, it has only gotten worse. If you are genuine and really care, my email address is newmexiken~at~gmail~dot~com.

Today I received the very bill they’d told me about and after 17 minutes on the phone am no closer to resolution. I’ll try and make this brief. In July I paid for service THROUGH August 7, $64.49. But I ended the service on July 21st and took the modem into the Comcast service center on July 22. I was assured that would be the end date for the billing, though they would have to wait until a technician could come out and actually disconnect the cable (just internet) before closing the account and refunding me the extra I had paid. I was told the disconnect would happen July 29th. (Later I was told August 5th.) The refund would follow by the end of the same week, August 1st. (Later I was told in two weeks.)

First error. The bill today says I had a balance due of $64.49. Apparently I was not credited with the July payment. Then the bill states I am charged for service August 2 through September 7. But then the cost of that service is subtracted. (Zero sum game.)

The result Comcast says is minus $15.02. There is no explanation whatsoever for how plus $64.49 turned into minus $15.02.

The customer rep was, of course, of no use. Getting to talk to a supervisor was beyond hope today. I guess I’ll start over when I can be doing other stuff while I wait.

My estimate is that I am owed one-half month’s service, which I did not receive but for which I paid in advance. That would be about $32 and the $17 difference really isn’t worth the hassle if it weren’t for the principle of the thing. Comcast is worse than Ma Bell ever thought about being.

Oh, and the rep today told me it would be 6-8 weeks for the refund.

Just another rant

As I’ve mentioned, NewMexiKen replaced Comcast internet with Qwest, which works about the same and is $12 a month cheaper.

Because Comcast charges in advance, they owed me a partial month’s refund. Today, twelve days after I ended the service they sent me an email notice that my new “bill” is ready. It reads:

“Your Aug 1, 2008 Comcast billing statement is ready for viewing. To view your bill, go to http://www.comcast.com/payonline . Enter your User Name and Password, and from the next screen select GO from the VIEW YOUR BILL option.”

So, eager to see how much they are refunding, I go to the Comcast site — I never use the link in the email, but always enter with the URL. I attempt to login in and, of course, I learn that my account is closed and no longer available.

I’m back to what I said nine days ago, “that utilities have the most confusing and often faulty websites.” Is there no one at Comcast who bothered to think that all those people who do as they ask and get their bills electronically, might need access to their final bill and just maybe Comcast should maintain an account online for at least 30 days after it closes?

For that matter, is there no one at Comcast that bothers to think about its customers at all?

Their profit, our loss

This from a useful quick take on Freddie and Fannie by James Surowiecki:

The result of all this was that the companies reaped the rewards of the private sector while enjoying the security of the public sector. Seemingly insulated from all harm, they became reckless. They constructed a giant pyramid of debt on a very small base of capital (eighty-one billion dollars, by the most recent publicly available figures), and by May, 2008, either owned or guaranteed more than five trillion dollars in mortgages. As a result, even though just a small percentage of Fannie’s and Freddie’s mortgages are delinquent, the potential losses are huge. That’s why, in recent weeks, investors finally lost faith in them.

Even one percent of five trillion dollars is fifty billion dollars.

Given a Shovel, Americans Dig Deeper Into Debt

“Tallying what the lenders have made off Ms. McLeod over the years is revealing. In 2007, when she earned $48,000 before taxes, she was charged more than $20,000 in interest on her various loans.”

From The Debt Trap, a The New York Times “series about the surge in consumer debt and the lenders who made it possible.”

‘The open question is whether we’re in for a bad couple of years, or a bad decade.’

Something has clearly gone wrong with the economy. But how bad are things, really? And how bad might they get before better days return? Even to many economists who recently thought the gloom was overblown, the situation looks grim. The economy is in the midst of a very rough patch. The worst is probably still ahead.

From a good survey of current conditions in today’s New York Times.

It was the best of times. It was the worst of times.

“If you ask me, there isn’t much suspense in this year’s election: barring some extraordinary mistakes, Mr. Obama will win. Assuming he wins, the real question is what he’ll make of his victory.”

Paul Krugman in Friday’s column.

Krugman also says “If the current housing slump runs on the same schedule, we won’t be seeing a recovery until 2011 or later.”

And he predicts a slow rebound from the current recession: “If the current slump follows the typical modern pattern, the economy will stay depressed well into 2010, if not beyond …”.

This Bud’s for who?

“I’ll tell you one thing,” said the 21-year-old concrete worker during his lunch break at The Brick of St. Louis bar, in the shadow of this city’s storied Anheuser-Busch Cos. brewery, “if Budweiser is made by a different country, I don’t drink Budweiser anymore. I’ll go back to Wild Turkey.” (Wild Turkey, a Kentucky bourbon, is owned by French drinks giant Pernod Ricard SA.)

WSJ.com via Paul Krugman.