Warren shining light on 2008 financial meltdown

By Sally Greenberg, NCL Executive Director

Hurrah for Elizabeth Warren! The new Senator from Massachusetts is shining a bright light on so-called financial regulators from her perch on the Senate Banking Committee. This past week Warren asked officials from the Comptroller of the Currency (OCC) and the Federal Reserve to provide information to the public and the Committee.

These two federal agencies – each with responsibility for overseeing financial institutions – proved pathetically unwilling and unable to protect the public during the financial meltdown of 2008.

Warren and banking committee colleagues asked Daniel Stipano of the OCC to turn over information on what happened that led to massive foreclosures in 2008. Stipano claims there is a “longstanding policy not to publish information deemed part of the bank oversight process.” Stipano also said disclosing investigative findings by outside consultants in their review of the foreclosure crisis would make “institutions less willing to be forthcoming with us” during bank examinations.

The problem, which former FDIC Chief Sheila Bair describes in her book “Bull by the Horns,” is that these consulting firms are hired to review bank practices and paid princely sums to do so by the very banks themselves, which is a built-in bias.

PricewaterhouseCoopers told the Senate it received a whopping $425 million to conduct reviews for US Bancorp, Citigroup, and SunTrust Banks. The total amount made for conducting reviews is roughly $2 billion.

Senator Jack Reed, a great consumer champion himself, argued at the hearing that the consulting firms should be paid by the regulators instead. That’s a good idea – it does mean that tax dollars could be going to pay these fees (though there could be fund created to pay for consultant review by imposing a surtax on banks) but there are two advantages. First, the government can negotiate consultant services for much lower rates (government doesn’t always strike great bargains for professional services but it often does), and second, this would remove the bias inherent in banks hiring consultants to review their practices.

One thing is clear: Senator Warren’s voice on the banking committee is proving to be the game changer consumer advocates had hoped for.

Hits, misses from DOE on college pricing tool

By Sally Greenberg, NCL Executive Director

The Washington Post “Color of Money” columnist, Michelle Singletary, and I have something in common. We are both sending a kid to college next year. A recent column is focused on the financial realities of paying for college, and she is none too impressed with a new tool provided by the Department of Education to price out the cost of college. It’s available here. I agree with Singletary’s critique of the site, but I also see a lot of value, and I’ll get to that later.

Singletary wants the site to include a financial aid shopping sheet and she notes that the Obama Administration apparently will have 600 colleges providing financial aid information on the site as of 2013-2014. There will be several important pieces of information, including the costs for the year, estimate of monthly payments graduates would expect to make on federal student loans. Singletary says “and they will supply information about the percent of students who enroll, graduate and repay their loans.” Actually that information is there now and I found that incredibly helpful as a parent.

So here’s what I liked about the site. I have an aversion for for-profit colleges, as I’ve noted in this blog previously. I think they steal money from largely lower-income, military, and minority students, charge ridiculous tuition and when they do even provide a degree – their default rates are very high – that degree is often worth little in the marketplace.

I tested the information available on the site. I plugged in Strayer University in DC, a for-profit entity, to the search engine. Average tuition is $29,000+, graduation rates are 22.7 percent, and the loan default rate is 13.9 percent. Compare that to Catholic University, a well-regarded and longstanding nonprofit university, also in DC. It may be the least difficult of the four major universities in DC to get into. Tuition is $34,000, graduation rates are 68.3 percent, and default rates are 1.7 percent. Yes, it costs $5,000 more a year than Strayer, but your chances of graduating are far greater and your chances of defaulting on your student loans are far lower.

Let’s try Georgetown University, also highly regarded and in DC, and very selective. Tuition is $26,000. Graduation rates are 93.8 percent and default rates are 1.3 percent. What does that tell you? If you go, you’re likely to graduate and you are very unlikely to default. That’s a good investment.

To my mind, Catholic and Georgetown are priced similarly to Strayer, but are far better investments I think this information is critical for parents and students of all ages. The information I’d like to see added to the site now is how easily graduates find jobs and what they make once they get those jobs. The site wasn’t able to provide that critical information. I have seen that somewhere but I wasn’t able to locate that here. In the next few months, I hope the Education Department make that available.

Thanks to Michelle Singletary for giving these new tools much-needed publicity. The sites are far from perfect, but they do provide some critical information that savvy consumers should be able to use to make a good investment in theirs or their children’s education.

LifeSmarts Nationals 2013: Looking for a few GREAT volunteers!

By Brandi Williams, LifeSmarts Program Manager

The National Consumers League is hosting its 2013 National LifeSmarts Championship in Atlanta from April 20-23 at the Hyatt Regency Atlanta, and volunteers are needed! We expect teams from 30+ states and the District, plus at-large teams representing student leadership organizations FCCLA and FBLA, to be in attendance — the largest number of student teams to attend Nationals to date!

Now you can become a part of this incredible opportunity to support teens from across the country as they strive to become future consumer and worker champions!

Please join us and share your time and expertise with these exceptional students by volunteering as competition officials. Volunteers serve as Question Masters, who read the questions and interact with the players on stage, or Judges, who sit on a panel of 3-5 and determine if players’ answers are correct.

If you are planning to join us at Nationals as a volunteer, please click “Register Now!” to complete the Registration form. Hotel reservation details are included on the registration form.

REGISTER NOW!

As friends of LifeSmarts, we welcome you to spread the word about LifeSmarts with colleagues in your industry. By reaching out to your network to share the LifeSmarts mission, you can increase awareness about educating today’s youth today, so they become savvy consumers tomorrow.

Thank you again for your continued dedication to LifeSmarts, and for considering this invitation to play a key role at this national event. Please do not hesitate to contact us with questions.

Hoping Treasury Secretary-designee Lew takes a new tack

By Sally Greenberg, NCL Executive Director

It appears that when the government was handing out TARP funds and bailing out ailing financial firms, the “special master for compensation” Patricia Geoghegan approved $6.2 million in raises for General Motors, Ally, and AIG. These are the findings of Christy Romero, special inspector general for TARP in her new report.

Surprise, surprise. Sheila Bair documents this preferential treatment for fat-cat executives in her book, Bull by the Horns. From Treasury Secretary Tim Geithner to Presidential Advisor Larry Summers, you can count on high-level government officials with ties to Wall Street time and again to look after their friends first before the American taxpayer.

When these bonuses were being bestowed on the industry icons, Treasury’s Compensation Chief Kenneth Feinberg (and former NCL Trumpeter Honoree), was appointed to a special oversight post created during the crisis. He scolded the companies for what he called “ill-advised” payouts to executives and vowed to curb lavish pay. Treasury nonetheless allowed seven firms to bypass pay restrictions from 2009 to 2011, according to this latest report from Christy Romero’s office. Romero said that “Treasury made no meaningful reform to its processes. Lacking criteria and an effective decision-making process, Treasury risks continuing to award executives of bailed out companies excessive cash compensation without good cause.”

That says it all. We can only hope that the new Treasury Secretary-designee, Jacob Lew, if he’s confirmed, will take a different tack. Forbes Magazine columnist Robert Lenzner has high hopes. He says in a recent column about Lew, “It’s a relief to have a man who is not in the hip pocket of the big banks, who is not part of the pin-striped old boys club, who’s likely to put the interests of his former brethren high on the priority list.” That’s a hopeful sign.

Should more be done to police fuel mileage reporting?

By Alex Lipow

Alex Lipow, a public policy, telecommunications and fraud intern at NCL this winter, is taking a gap year after high school before starting college at Emory University in Atlanta, Georgia in the fall.  In high school, Alex was actively involved in debate, Model United Nations, and student government. Alex has experience working as an intern in Congressman Steve Cohen’s office and as a fellow on President Obama’s re-election campaign.

A recent article written by Dave Hurst in Forbes discusses the discovery that some major auto manufactures intentionally over-reported the fuel economy of their cars.  This in turn raised the reported average fuel economy of their entire fleets. According to Hurst, the EPA mandates that certain procedures be used to test the fuel economy of cars but relies a great deal on manufactures to conduct the tests themselves. The results of these tests are then used in advertising and are displayed on window stickers for consumer reference.  The goal of this process is to give consumers the ability to compare cars sold by different companies based upon their stated mileage.

The EPA first audited Hyundai and Kia after receiving complaints about the accuracy of their reported fuel economy figures. The audits show that Hyundai and Kia exaggerated mileage data showing that some of their vehicles had reached 40 miles per gallon (mpg). In some cases, the fuel economy was exaggerated by as many as six miles per gallon. This practice appears to be widespread. A class-action lawsuit is pending against Ford for misrepresenting mileage numbers in its C-Max and Fusion hybrids and Honda was recently in court over mileage claims of its Civic hybrid.

When I first read Hurst’s article, I could not help but ask who is protecting consumers and holding corporations accountable for malfeasance like this? Reliable information is crucial to the buying process, whether it be homes, toasters or cars. When comparing vehicles, fuel economy is often one of the most important features consumers consider. If it is listed inaccurately, as in the instances described above, would so many people have bought these cars?

How has this misreporting become so widespread? One reason may be the relatively few resources the EPA dedicates to mileage testing. A 2009 Car and Driver article found, for example, that just 18 EPA employees are responsible for mileage testing. With such a small staff, the EPA is only able to test 200 to 250 vehicles per year, roughly 15 percent of the total number of new car models introduced in a given year. It may be time for the EPA to consider more closely monitoring mileage testing or levying sizable fines against companies that misreport mileage. At the very least the EPA should devote more resources to its own testing program so that it can protect consumers from this type of deceptive practice. Had regulators been able to supervise the testing and reporting of this information, consumers may have been able to make a better decision about the product they would have preferred to buy.

‘Why we’re investing in America’

By Sally Greenberg, NCL Executive Director

I read something unexpected in the Wall Street Journal (November 20, 2012) recently. William E. Conway, Jr., co-founder of the Carlyle Group, a private equity firm with assets of more than $150 billion in management, the third largest such firm in the world, wrote an Op-Ed piece entitled,“Why We’re Investing in America.” Conway noted that his firm has invested in nearly every region of the world over 25 years, but these days they are putting their investments in the United States because, in his words:

The US is characterized by inherent attributes that are often taken for granted: freedom, the rule of law, confidence in regulatory agencies. America has admired universities, the deepest and most-liquid capital markets, peerless medical systems and pockets of innovation such as Silicon Valley-all of which, though not perfect, are highly advanced and function smoothly. Nowhere on the globe can my firm invest in companies with as much confidence as we do in the US. And while we take comfort in the long-term safety of US assets, we also see opportunities for growth. This is because of a combination of very low interest rates, a strengthening housing market, and significant domestic energy discoveries.

I don’t know much about Conway except that he’s very rich and the Carlyle Group has been implicated in dealings with the Bush family, Middle East and even Osama Bin Laden, and recently bought a chain of nursing homes. They undoubtedly invest in some odious companies and industries. But I’m making a different point. I quote from Conway’s piece because I think it’s an astounding acknowledgement from a powerful US businessman that the United States, for all of our strict regulations and our corporate taxation that business loves to complain about – is a great place to invest precisely because we don’t suffer from widespread corruption, we have a highly educated and productive workforce, and orderly markets that are strictly regulated (not strictly enough, as we learned from the disastrous sub prime debacle of a few years ago and as former FDIC Chair Sheila Bair points out with frequency in her excellent book, Bull By the Horns) and business thrives under these conditions. Indeed, Conway talks of confidence in regulatory agencies in the US; they are predictable and they operate under the rules of administrative law. Conway ends the piece with this:

Many in America and beyond have been paralyzed by fear of the fiscal cliff, frustrated with Washington’s partisanship, mesmerized by the presidential election or stunned by the post-Great Recession recovery. Any way you look at it, though, now is a great time to invest – and there is no better place than America.

His Op-Ed tells us that a strong regulatory structure that attempts to keep capitalism in check is not only good for consumers, citizens and taxpayers, but also good for business.

Affordable Care Act saves consumers millions on Rx coverage, improves adherence

By Ayanna Johnson, Health Policy Associate

Late last week, the Congressional Budget Office (CBO) released a report, projecting large savings in health care as a result of the passage of the Affordable Care Act (AC) in 2010. Medicare patients have saved $5 billion in prescription drug costs since 2010. The law improves coverage, by closing the gap—the “doughnut hole” in prescription coverage— after Medicare coverage runs out.  Medicare prescription coverage maxes out at $2,930; closing the gap will save the average Medicare recipient $648.  The Department of Health and Human Services notes that from 2012-2022, Medicare patients with high prescription drug costs will save upwards of $18,000.

Critics of this provision in the ACA have stated that increasing drug coverage will encourage patients to buy their more expensive drugs and decrease the use of generics. While this is a possible scenario, helping individuals afford their medication in order to stay healthy is the primary objective for this provision. In fact, studies have shown that once coverage ends, patients stop taking their medicine—especially their more expensive prescriptions. By increasing coverage individuals can have access to both brand name and generic prescriptions at lower, affordable costs. This seems like a win-win. This provision increases medication adherence, as more individuals are able to afford their drugs.

Increasing adherence is key to lowering overall medical costs. Adhering to medicines and a treatment plan prevents conditions, like heart disease, high blood pressure and diabetes from spiraling out of control. Lowering the price it takes to do this is important for our health as a nation.

The report found for the first time an “offset” of prescription drug coverage—increasing drug coverage lowers overall medical spending costs. The CBO “estimates that a 1 percent increase in the number of prescriptions filled by beneficiaries would cause Medicare’s spending on medical services to fall by roughly one-fifth of 1 percent.” That small savings would result in a net cost of $51 billion in providing the new provisions, instead of the $86 billion originally estimated.

This is good news for consumers and our health care system. Having the numbers from the CBO at the national level to support the widely accepted idea that spending a little more on medication will decrease overall healthcare spending, is the next step to promoting adherence initiatives.

Here at the National Consumers League we are working on a campaign to do just that. Our medication adherence campaign, Script Your Future, aims to increase awareness about the problem of non-adherence and show the benefits of taking medicine as directed. With the help of great tools like wallet cards to list medications and discuss with a pharmacist and text reminders to take medication, the problem of adherence can be addressed.

Book review: Bair’s ‘Bull by the Horns’

By Sally Greenberg, NCL Executive Director

Several weeks ago I dropped by my local book store to hear former Federal Deposit Insurance Corporation (FDIC) Director Sheila Bair read from her new book, “Bull by the Horns.” The place was packed. I had no idea so many people would come out to hear her read and be so eager to talk about the FDIC’s role in the near-collapse of the economy and the sub-prime lending debacle.

The FDIC plays a critical role in protecting bank depositors and overseeing the bank to ensure they are making wise investments and their finances are sound. When they are not, the FDIC can also oversee the process of winding down a bank’s business. The agency was created after the Great Depression to prevent a repeat of the run on banks by depositors desperate to get their money out for fear of losing it all. Today the agency ensures most bank deposits up to $250,000.

I admit that when I bought the book for the NCL library I thought, “I’ll never get around to reading this; furthermore, it’s probably a snooze.” I opened up the first page, began to read, and was hooked. It reminded me why Sheila Bair was always held in such high esteem in the consumer community during her tenure at the FDIC. She was often a voice in the wilderness, standing by her beliefs that investors–and not taxpayers–be on the hook if a bank or investment firm failed. She was frequently fighting NY Fed and then Secretary of Treasury Timothy Geithner, Larry Summers, OCC’s John Dugan, and the Fed Chairman Ben Bernanke and was often the only woman. As such she was routinely excluded from meetings and decisions involving the other regulatory agencies.

Bair paints a picture of her counterparts at the Fed, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, all financial heads of agencies – especially Geithner – as being more interested in protecting the big banks and Wall Street, rather than taxpayers, especially Citibank, where Geithner had close ties. Geithner, Bair says, was often eager to commit FDIC’s funds to help bail out firms that had engaged in high risk lending and slip shod investment practices. Bair resisted them at different times, and though she chose her battles carefully, they pilloried her for it. She also compromised more than she felt comfortable doing, if only to be a team player and put in place stronger standards in place for risk-taking among financial institutions. The expression that “Wall Street wants risk socialized and profits privatized” applies never seems more fitting than when reading Bair’s book.

I highly recommend it. It has some good Washington gossip and more than a few glimpses inside the world of the Washington financial regulators. Her meetings with President Obama are far more positive than her interactions with his appointees. It makes you wonder why the President put Wall Street types like Geithner and Summers in charge of agencies that needed an independent, fair-minded regulator.

If I ever run into that guy named Barack Obama, I’m going to recommend he read the book and think about Sheila Bair for Secretary of Treasury. That would be a great appointment.

LifeSmarts DC Training Camp a success

By Brandi Williams, LifeSmarts Program Manager

Reaching out to teens to get them excited about consumer education and personal financial literacy was our goal when the LifeSmarts team began developing LifeSmarts Training Camp in 2011. Training Camp was designed as an educational field trip to help students explore real-world applications of consumer knowledge, through games, activities, and a live LifeSmarts competition.

In January, the National Consumers League hosted the first Training Camp in the District of Columbia, and it was received with such success that we immediately began planning for a second DC-area camp to kick off the 2012-2013 program year.

This last Tuesday, NCL held a second District of Columbia LifeSmarts Training Camp! Hosted by our friends at Google Washington, DC, 12 teams of students and teachers from across the area joined us for full day of fun! Students and teachers spent the day working together in teams of five students and one coach on topic-focused activities and gained points and prizes throughout the day. Teams waited eagerly for the awards ceremony to discover which teams would be recognized for having the highest team scores.

The first-place prize went to McKinley Technical High School, coached by Melanie Wiscount. The team received movie passes, LifeSmarts t-shirts and flashdrives, and a pizza party, and the coach received a $100 gift card.

Prizes were also awarded to the second-place team, also from McKinley Technical High School, coached by Sarah Elwell, and the third place team, from Eastern High School, coached by Ricardo Neal.

Judges helped us determine our Spirit Award winner — the team that best showcased team spirit and good sportsmanship — which was awarded to the team from Archbishop Carroll High School, coached by Sonya Wilson.

Additionally, educators were entered into a random drawing for two $100 gift cards, which were ultimately awarded to coach Egheosa Ibginoba from Coolidge Senior High School and Chantell Moses from Theodore Roosevelt Senior High School.

There was so much energy and excitement throughout the room for the entire day! You can find photos of excited and engaged students by visiting and becoming a fan on Facebook. Students and teachers walked away from Training Camp excited about the knowledge they’d gained and ready to dive into the content of the LifeSmarts program.

Upcoming Training Camps are scheduled for November 9, 2012 in Denver, CO and January 5, 2013 in Atlanta, GA.  If you’re interested in joining, either with a team or as our guest, don’t hesitate to contact us. We’d love to see you there!

Live event today! Chat with the pros about managing personal finance online

NCL live online event @ 2:30 pm Eastern today!
Personal financial management tools: opportunities and challenges for consumers

Event details

• When: Today! September 27, 2012, 2:30pm Eastern
• Where: The event will be broadcast live on NCL’s YouTube channel and at nclnet.org
• Who: Confirmed panelists include: John Breyault, NCL (moderator); Sophie Raseman, U.S. Treasury Department; Ken Sun, Mint.com/Intuit; Phil Christian, Chase; Mark Schwanhausser, Javelin Strategy & Research; Linda Sherry, Consumer Action; and Ron Shevlin, Aite Group
• Who should attend: Personal finance reporters, bloggers, policymakers, consumer advocates, and consumers interested in personal finance issues
• To RSVP for this free event, click here

Join NCL’s chat with the pros and learn more about the benefits and concerns with online personal financial management tools (PFMs).

Far too many consumers face aggressive financial fees, inadequate savings, and piles of debt. One way that consumers are addressing this is by adopting online tools to help them manage their personal finances. It is estimated that 26 million consumers will be using PFMs by 2015.

What challenges and opportunities do those tools create?

Questions that will be explored by an expert panel of analysts, advocates, regulators and PFM industry representatives include:

• Given the large amounts of sensitive financial data that consumers are sharing via PFMs, what are the benefits they are getting from these tools?
• Are PFMs helping consumers pay less in fees, save more money and get out of debt faster?
• How are consumers’ financial management habits being affected by the new breed of mobile and bank-affiliated PFMs?
• Does the government have a role in ensuring consumers can use PFMs safely and effectively?

Panelists will take questions from our online audience on YouTube and via the Twitter.

Ask your questions in advance of the chat — or follow it via the Twitter hashtag: #eTool$

This event was made possible thanks to an unrestricted educational grant from Chase Blueprint®.