Top Finance Blog

Most of us remember that it seemed like the financial world came crumbling down the day Lehman Brothers announced that they were going into bankruptcy. I have to admit that, even though there were overall signs that something wasn’t right, this was the defining moment when I knew this country was in trouble.

Ever since their collapse, there’s been an investigation as to why they failed, and I know why. You research things like this so you can see if someone else might be going in the same direction and should get an intervention so that they don’t collapse. That’s the one thing about the United States; it will try to find answers to bad things. Unfortunately, we don’t always learn from history either, and my thought is that this one will look and sound good, but in the end won’t stop any other banks from falling. Why? Let’s take a look at the main talking points of this investigation.

The first is that leadership lied to cover their bad performance. That’s not novel at all, and it’s the thing that’s brought down other companies in the past, such as Enron and Arthur Anderson. They even sent a young woman whom they’d made CFO only a couple of months earlier, Erin Callen, into the public to be the public face of the company, spouting all this positive stuff before she had a chance to look at anything and determine they were lying.

Something else they did was not count bartered items that were temporarily “repossessed” as loans. What they did for awhile was allow people to put up assets instead of collateral to trade for cash, but instead of calling it a loan they called it sales, which made both profits and liabilities look better, but wasn’t really legitimate. To say it wasn’t legitimate is to say that it took a foreign law office to tell them they could do it, because no American law office would. Now that’s sneaky and fraudulent.

Finally, they had some help in covering all of this up through Ernst & Young, who validated everything Lehman was doing even though they’d been informed by someone that it wasn’t legal to do. Does this remind anyone of David G. Friehling, Madoff’s accountant? Ernst & Young is a major player; they had to know this wasn’t legitimate, and they have a fiduciary responsibility not to certify this kind of thing. Oh wait, obviously they weren’t paying attention to the Arthur Anderson history either.

And that’s my main point. History repeated itself many times here, and it still resulted in another greedy banking institution and a weeping willow accounting company failing to do what was right. Why did Lehman fail? Because they didn’t pay attention in history class.

It’s safe to say that most of us live in areas where we’d love to be able to contain our energy costs in some fashion. If you live in cold climates, you have to deal with high energy bills in the winter. If you live in warm climates, you have to deal with high energy bills in the summer and sometimes in the winter in trying to stay cool.

The big move these days is towards finding more energy efficient, or “green”, ways of living. Some people will make moves such as direct water heating, where instead of having a hot water heater they have some kind of apparatus installed at points where they can get water that heats the water only when needed. Others hope to go even further, such as adding solar panels or other alternatives of capturing “free” energy to their home.

Yet, this isn’t widespread, and we all initially know the reason why. It’s expensive to upgrade your home for this kind of energy efficiency. I checked into it a few years ago, and learned that it would cost nearly $38,000 to add solar paneling, batteries, etc, to my home. That’s a third of what my house is worth, so obviously it’s pretty steep in my mind. Based on my current heating bills, even with the increase in oil prices, it would take about 9 years to recover the costs of something like that, even with a state rebate.

Here’s the other problem. It turns out that adding something like that to your home doesn’t increase the value of your home. According to CNN Money, when appraisals are done, they don’t take into consideration any green initiatives you’ve added to your home. This means a $100,000 home whose only upgrades are to green alternatives will still only be worth $100,000, or whatever the market price for the home is at that time.

Sure, environmentalists would love if all of us decided not to worry about price and just did the right thing but that’s not economically feasible across the board. Even adding used solar panels and batteries, which can cost upwards of 50% or more less than new, is still an expensive proposition, especially when compared to modernizing your kitchen, something that definitely adds value to your home.

This just proves that it’s not as easy a decision as one would hope it might be in deciding whether or not to add certain energy efficient initiatives to a home.

Everyone might not see it this way, but I think this is a pleasant surprise.

Bank of America has taken the proactive step of saying that they’re eliminating overdraft fees on debit card purchases. Well, that’s kind of a misnomer, but it works for the moment.

What they’re going to do if you use your debit card to try to make a purchase is to deny you, which is what credit cards and debit cards used to do in the past. That means you won’t get hit with fees you don’t know about by going over your banking limit.

What they’re also going to do is, if you go to an ATM to try to get money out and you don’t have it, tell you that you don’t have enough to cover what you’re trying to take out. You will have the option of accepting a $35 fee if you decide to go forward with that transaction, or do something else instead.

I think this is a brilliant move, and I’m glad to see B of A taking a step like this instead of just finding ways to get more money from unsuspecting consumers, especially when they’re not on the best financial footing. Not everyone keeps up with their money all that well, and sometimes it’s not your fault, such as when you think a check has been cashed months ago and had been checking your balance, and out of the blue it’s suddenly cashed and you hadn’t checked again. I’d rather have a store or restaurant decline me than turn around later to see I’ve been dinged with some high fees.

Good move, B of A; you’re off my list for the time being, even though you haven’t addressed those checking fees yet.

For now, it seems that the freefall that was known as Citigroup has slowed down and actually stabilized for awhile. The company whose stock price used to be around $55 a share back in 2006 is now hovering around $3.50 a share, but it’s been hovering around there for a few weeks now, even slightly improving over that period of time.

Of course we all know what brought Citigroup to this point, and we’ve seen how they’ve reacted to some of these things. Suffice it to say that Citi hasn’t inspired the most confidence in its consumers, let alone its stock holders. And yet, we just learned that Bruce Berkowitz, who manages the $11 billion Fairholme fund and was recently named Morningstar’s U.S. stock manager of the past decade, bought more than $700 million worth of Citi shares.

What’s he thinking? He says that the company is showing signs of a turnaround, even in those areas where they’d been losing a lot of money. He also said that the shares are cheap right now, and it’s a good investment in a company that seems to be on the upswing, saying that, in his opinion, right now it has the “government’s Good Housekeeping seal.”

I don’t know about this, although I did write earlier this year about how it seemed to be a good thing some days to be Citigroup because of how the government seems to be giving them all sorts of breaks as they try to recover. So maybe Berkowitz has something here.

Or maybe not. Personally, I agree that the stock price is very low, and if someone were interested in owning a piece of a bank just to see what it’s like this would be a good time to buy. But $700 million worth? Well, this guy’s done it before and survived it, so maybe he’ll do it again. If it’s me, though, I might spend my couple of hundred, then wait and see. I might, by the way, means if I were in the buying mood, which I’m not.

I have to tell you, these days I’m getting more wary about the insurance people I talk to, including the people who supposedly represent me. Sometimes I’m just not sure what they’re saying, or whether I believe them to be representing me more than they’re representing themselves.

Here’s my story. Since 1997, after I got married, we have had at least 7 different insurance people. The first guy we haven’t seen in about 7 or 8 years now; I have no idea what’s going on there. I dropped my policy with his company, but my wife still has hers. Strange that we haven’t heard from him, though, since we used to see him twice a year.

The second person was through the union my wife was a part of when she worked at a different place. They sold us on a policy where we didn’t have to do any health tests, with promises of big benefits if something happened to me. Those assertions turned out not to be true, and for what we were paying if anything had happened to either of us we’d only have gotten $15,000; sham!

The third person was a friend of my wife’s, and my wife trusted her a lot. I liked her, but was never sure what she was telling me. In the end, I’m not sure if what she set up for us was legitimate or not, mainly because, later on, it seems that we learned what we thought would happen wasn’t going to happen.

The fourth person we never got to meet. My wife’s friend got out of the business, and we got a letter stating there was someone new who was going to be taking over our account. We never heard from that person, and I met someone at a networking meeting I thought was friendly and asked her to take over for us.

She was person number five, and she was nice. She was the one who first told us that what we thought we had we probably didn’t have. That didn’t sit well with us, but she was also the person who wanted more money from us, which also didn’t sit well. At that point, you’re just not sure what you believe or not.

At least we saw her a few times, but that didn’t last. For some reason, we had an appointment scheduled with her and her husband showed up instead; he was person number six. He was the first person who actually explained how investing worked so that I understood it, even though that’s not what he was hear for. Or rather, it’s not the reason we asked him to come, though he did try to get us to invest with him. But I already had someone else, so that didn’t happen. He was supposed to come back to see us in three week’s time, but we never saw nor heard from either him or his wife again. Later we heard both had left the company.

Finally there’s guy number seven. He’s who we have now, and I’m not sure I trust him. When he came, he came with someone else, who did half the talking; that was weird. They came in wondering why none of the information they had on us matched the policies we had, until I remembered eventually that the reason the other guy was supposed to come back was to give us an updated policy. This guy said he’d be back in three weeks to finally give us our updated policy.

We finally see him this coming Thursday, six months after he was supposed to show up. Yup, we never heard from him until a couple of months ago, when we got a letter saying he’s lost our phone number and had forgotten about us, and asked if we could call him. Let’s see, his company has our policy, he had our address because he could write us, but no where in the records was our phone number, which we haven’t changed in 10 years? Not only that but my premium went up in November, even though I’m being told that my policy will expire when I turn 70 if I’m still alive and I won’t get anything from it?

I know a little bit more now about life insurance policies, yet it seems I don’t know enough as it pertains to me and my wife. If I don’t know it, then how could people who aren’t in the game understand it any better? It’s hard to find someone you can trust, and I’m not sure I trust my guy right now. However, on Thursday, I hope to ask some tough questions about things, and the answers had better be illuminating in a positive fashion, otherwise we might be moving to insurance person number eight.

How are you doing with your insurance person?

There’s something that’s been going on for at least the last 6 to 9 months that I hope no one has fallen for.

What happens is you get a call from someone telling you that there’s something wrong or getting ready to happen to your current credit card, and that you need to talk to them about lowering your interest rate.

If you get these phone calls and pick up the phone, don’t talk to these people. If you get a message asking you to call them back, don’t return the phone call. These are scams, with one of two intentions:

1. Get you to sign up for a new card

2. Get you to give them information you shouldn’t be giving out over the phone

The first is bad enough; the second is truly nothing but trouble. They have multiple ways of getting information out of you if you’re not savvy, such as having you press certain keys, or telling you that they’re from the fraud department of either Visa or Mastercard or something like that.

Here’s the thing, however. When they call, they never tell you which credit card it is that you might be having problems with. That should be your first clue. Some people will ask them which card and then start throwing out the names, in which case they’ve just handed the scammers all the information they need to continue the con. Some people are ready and willing to give out their passwords, pin numbers, and even their checking account numbers to these folks; don’t do it.

In a couple of instances people have been getting mail saying these same sort of things. Just because you’ve received something in the mail doesn’t mean it’s legitimate. Once again, most of the emails come without any information on them except a phone number or website address, which means it’s a scam because it didn’t come from your bank. You should know what the mailings from your bank or credit card look like; if you get something that doesn’t fit that, disregard it, or pull out your phone book (does anyone still use phone books? If not, look up the number on the internet) and call the bank directly, and you’ll probably find out 99% of the time that it was a scam.

If you’re contacted out of the blue by anyone who wants to talk about your credit cards or bank account, always be wary. If they can’t tell you some things without you telling them something, hang up and call your institution on your own. Better safe and rude than sorry and poor.

Last March I wrote about the efforts the Federal Trade Commission was putting through trying to get FreeCreditReport.com to change its advertising so that they had to disclose the fact that their credit report wasn’t actually free, but instead a shill trying to get everyone to buy credit monitoring services instead. They even went so far as to create their own musical ad to counter FCR’s television ads.

Now they don’t have to do that sort of thing anymore. Check out the image below:

Yup, the FTC has been able to force FCR to change their website and own up to the reality that the only free credit report available for everyone comes from AnnualCreditReport.com instead, where consumers can get a free copy of their credit report from all 3 major agencies. Experian, which owns FreeCreditReport.com, has had to acquiesce, and now faces a major loss of funds as they were averaging nearly 6 million visits a month, with most of those folks coming in after hearing those commercials on TV and thinking they would be able to get free credit reports from the site, but only being able to get the Experian credit report for free.

To be fair, I subscribe to the credit reporting service. I get a great rate, and I like the fact that I find out who’s looking at my credit and what I need to do to try to get certain things altered here and there. Of course, I’m upset that they killed their affiliate program, as they were one of the companies I helped advertise, and I made some money from them. Still, I’ll admit that I did go there thinking I would be able to get a free credit report for all 3 agencies,and was initially disappointed by that.

By the way, it’s not only Experian that has to add this disclaimer. Any credit reporting company that offers what Experian offers has to do the same thing. And, by the way, they don’t have to follow through with it until April 1st, so you won’t be seeing it immediately on other sites. Be a smart shopper, and decide what you want before giving any company your credit card number.