Many people don’t feel comfortable talking about money. This happens for a lot of reasons. The wealthy often view discussions of money as pedestrian. Others don’t talk about their financial problems out of shame or embarrassment. Some aren’t discuss matters out of ignorance, others aren’t interested and therefore don’t know what they are missing.
This really is a shame. You have nothing to lose by talking about your financial situation. Open and honest dialogue can help you to understand your own psychological dynamics regarding money, or help to illuminate aspects of the wealth building process that might be optimized. Think about how much more efficiently we would invest and build wealth if we were more open about it?
Bottom line: its beneficial to talk about money, you’ve got nothing to lose and everything to gain by discussing it.
Don’t know if you saw this headline, but Bloomberg has quoted Federal Deposit Insurance Corporation chairwoman Sheila Bair as saying the FDIC might run out of money unless they increase bank fees. Right now the FDIC wants a fee of 20 cents per $100 bucks of insured deposits to cover the shortfall. However, the finance industry is opposing it because of concerns about corporate profits (here).
This is important, if you have money in a bank, the Federal Deposit Insurance Corporation is the agency that backs your deposits in case of bank failure. If they don’t have enough funds, its a signal that there might be problems if additional banks go under.
Are more banks going to go under? Who knows, but at first glance the story does not look encouraging. The FDIC has been putting smaller banks into receivership at an increasing rate; last December it was 3, this January they put down 6 and in February the figure was 10 (1). Most of these have been smaller regional banks. If another one of the major retail banks files for bankruptcy, the FDIC could be looking at a serious problem.
The agency has requested that congress increase their borrowing limit. According to the representative I spoke with, they had no expectations as to whether congress would meet their request, but since the Feds have been throwing money around like crazy, its a good bet our elected representatives will comply. At the same time it is important to be aware of the money shortfall and how it may affect your wealth.
One aggravating aspect of dealing with large institutions is hassling with automated phone menus. Since we’re both busy dealing with non blogging issues, here is a quick clip from MoneyTalksNews on how to quickly get a live person on the the phone. The clip features get2human.com and talks about some ways to automate the processes of getting through corporate phone menus.
The website they reference, get2human.com, actually works well. A good friend of ours used the site after watching the video. He called his credit card company and requested that they lower his credit card rate. They said no, but the main point is it was a quick and easy call.
Here is whats come across our radar screen that’s noteworthy.
First, It looks like your costs to eat out are going to increase. According to the latest numbers from the Consumer Price Index, food away from home figures increased at a rate of about 5% per month for the first quarter of 2009. Projections are you’ll be hit with another 4% before the year ends (1). If you are only saving and not investing and creating more wealth, you will have more trouble adjusting to the increases over time.
Second, My Dollar Plan has a good posting on shared finances in a marriage. They go over the various models for integrating your finances and offer some tips for managing difficulties. There is very little discussion of marriage dynamics in the personal finance blogsphere, so its nice to see these kinds of discussions. Here.
Third, if you are thinking about refinancing or taking out a new mortgage, Jane Bryant Quinn’s latest column has a great breakdown of the realities of obtaining mortgage financing in the current lending climate. Bottom line: if you don’t have a 20% down payment, good credit and some solid income, its going to be a LOT harder to get a mortgage. Here.
If you’ve been living somewhere where you haven’t felt the impact of the recession, the Boston Globe has published a really excellent photo essay on the global effect of the downturn. You should take a moment to look at it.
The picture below – taken from the essay – is a flower blooming in a California construction project that was forced to shut down.
Okay, so here is some relevant news for everyone who is considering refinancing. The federal reserve has committed to buying over $1.25 trillion worth of securities. Observers suggest this could lower mortgage interest rates by .25 to .5% in the next few days. The nationwide average is currently at 5.12%.
The $1.25 trillion would purchase approximately 50% of all the new loans originated in the US this year (1,2). Since they are buying such a huge amount of loans, its a good bet the feds efforts will be successful.
While bank lending standards have tightened, this is still good news for people who are refinancing or are first time buyers. It could definitely help your wealth if you take advantage of this opportunity.
Update: the blogsphere has largely weighed in on the Fed’s move. By and large reactions have differed from yours truly, most bloggers hate Bernanke’s decision. Click here to see what others are saying.
So, the headlines over the past two days have been flying hot and heavy over the latest American International Group scandal. Currently, Washington has been turning up the heat on AIG to force the company to divest itself of the large number of bonuses it plans on paying to its current and former employees. Are the employees entitled to this wealth?
At its face, the issue seems simple – AIG has taken gobs and gobs of money from taxpayers to keep itself from filing bankruptcy. Its seems hypocritical to pay out large amounts of bonuses when the company is not solvent.
However, the issues surrounding the AIG debacle are more complicated than it might first seem.
1) Much of the bonus funds are being paid to irreplaceable employees in the financial products division. Many of the individuals who are in line for 7 figure payouts have specialized knowledge of the complex financial products AIG was selling. Its reasonable to expect that persons with specialized skills command a higher compensation level. So, there is at least a somewhat defensible reason for some of the payments.
2) In many cases, AIG is contractually obligated to make the bonus payments. I’m not an expert, but it seems like the payments were probably set up several months before the meltdown and formalized via contracts. In other words, the bonuses are not all discretionary – the payments are legacy issues from better days.
3) AIG and Congress are financially intertwined. In 2008, AIG contributed over 9 million dollars to congressional candidates. In addition, several members of the senate and the house of representatives, like Robin Hayes (R), John Kerry (D) and Nancy Pelosi (D), have owned large blocks of AIG shares in the recent past (1). So, there doesn’t appear to be an aversion to AIG’s greed, merely that the latest payments have hit the national nerve.
To wrap this up, if you look at the latest AIG scandal in context its not as simple as it first seems.
Just in case you didn’t see the headline, economist Lewis Alexander, has left Citigroup to work for the department of the treasury (1).
This decision seems problematic at best. Citigroup would likely have filed for bankruptcy if it were not for federal intervention. Given that the treasury has been struggling to respond to the economic crisis, it would seem that perhaps someone from a different institution would have been a better choice for building public confidence.
Ta Dah! The politico is reporting that the US national debt has reached 11 trillion dollars (1). If this keeps up, our Chinese creditors are going to want something more than just our full faith and credit. Keep in mind: Even if you are personally debt free, you still owe part of that national debt!
I caught Ben Bernanke’s interview with 60 minutes this last weekend. Through the interview, Bernanke seemed calm, collected and well composed – almost a little too calm. Given that he is under a titanic amount of pressure, I wonder if he’s not taking some sort of stress medication – possibly a beta blocker like Propranolol.
This is just speculation, but have a look for yourself.
Hi All,
