A noose of snooping gets tighter and more expansive

If there were ever a federal agency misnamed, it’s the Consumer Financial Protection Bureau.

“(Washington, DC) - Judicial Watch announced today that it has obtained records from the Consumer Financial Protection Bureau (CFPB) revealing that the agency has spent millions of dollars for the warrantless collection and analysis of Americans' financial transactions. The documents also reveal that CFPB contractors may be required to share the information with "additional government entities."

The records were obtained pursuant to a Freedom of Information Act (FOIA) request filed on April 24, 2013, following the April 23 Senate Banking Committee testimony of CFPB Director Richard Cordray. The documents uncovered by Judicial Watch include:

Overlapping contracts with multiple credit reporting agencies and accounting firms to gather, store, and share credit card data as shown in the task list of a contract with Argus Information & Advisory Services LLC worth $2.9 million

Deloitte Consulting: solicitation issue date 11/30/2011, award effective date 05/29/2012;

Argus: solicitation issue date 02/14/2012, award effective date 03/15/2012;

Experian: solicitation issue date 07/03/2012, award effective date 09/24/2012

An "indefinite delivery, indefinite quantity" contract with Experian worth up to $8,426,650 to track daily consumer habits of select individuals without their awareness or consent

$4,951,333 for software and instruction paid to Deloitte Consulting LLP

A provision stipulating that "The contractor recognizes that, in performing this requirement, the Contractor may obtain access to non-public, confidential information, Personally Identifiable Information (PII), or proprietary information."

A stipulation that "The Contractor may be required to share credit card data collected from the Banks with additional government entities as directed by the Contracting Officer's Representative (COR)."

The full extent of the CFPB personal financial data collection program is revealed in a document obtained by Judicial Watch entitled "INDEFINITE-DELIVERY INDEFINITY-QUANTITY (IDIQ) STATEMENT OF WORK." According to the IDIQ document's stated Objective: "The CFPB seeks to acquire and maintain a nationally representative panel of credit information on consumers for use in a wide range of policy research projects... The panel shall be a random sample of consumer credit files obtains from a national database of credit files."

To accomplish this objective, the CFPB describes the scope of the program accordingly:

The panel shall include 5 million consumers, and joint borrowers, co-signers, and authorized users [emphasis added]. The initial panel shall contain 10 years of historical data on a quarterly basis [emphasis added]. The initial sample shall be drawn from current records and historical data appended for that sample as well as additional samples during the intervening years [emphasis added] to make the combines sample representative at each point in time.

The CFPB data collection program has been highly controversial since the April 2013 hearing, when Cordray disclosed elements of the venture at a Senate Banking Committee hearing. At the time, the US Chamber of Commerce accused the CFPB of breaking the law by demanding the account-level data without a warrant or National Security Letter.”

http://washingtonexaminer.com/feds-collecting-personal-confidential-data-on-consumers-credit-cards-bank-transactions/article/2532467

Fixing troubled mortgages for the elderly

Sometimes older is not wiser. It seems that Pedro Garcia, a retired corrections officer, refinanced the home he bought for $23,000 40 years ago for $490,000 with what is known as an exotic "option ARM." In 2009 the house was valued at $150,000. When his payments had balooned beyond his pension's monthly income he quit paying. Bank of America, under pressure from tax cheat Geithner to remedy these bad decisions and "predatory lending" when money was flowing, refinanced it for $85,000 and then gave him a reverse mortgage on that, so he is now paying nothing. Of course, he'd already used that refinancing money--$70,000 to fix up the house, medical bills for his ill wife, and monthly living expenses. I guess the bank just eats that. But he still has a small second mortgage, which has also been modified by that lender. Something like 500,000 borrowers have been rescued by Obama's $75,000,000,000 foreclosure prevention plan. (WSJ story here) According to the article, Mr. Garcia and others were misled by these predators and the ARMs they pushed. No mention in this article about the number of non-profit organizations (like ACORN) that worked with banks and pushed both subprimes and ARMs especially for minorities. 32% of option ARMs were in foreclosure or delinquent as of August, compared to 48% of subprime. The difference is the option ARM people were good credit risks, sensible and wiser. Go figure. Pot. Rainbow. Free money.

And we're still seeing schemes from the government to put people into more housing debt, this time it's Obama instead of the Bushes or Clinton. Earlier this week there was an article on the tax credit plan for first time buyers. Claims for the $8,000 tax credit might have significant fraud. What a surprise! This little goodie if it is extended, will cost the tax payers an additional $16.7 billion. The new proposed ceiling might be $300,000 income per couple instead of the current $150,000. Under the current stimulus plan we the tax payers pay $43,000 for each borrower who uses that $8,000 tax credit. If they raise the ceiling, each tax credit will cost us $250,000 per home sale. (WSJ story here) Folks, you all took second grade math. Does this make any sense to you?

Update: On April 3, 2008 Michelle Malkin exposed the housing counseling racket, deep within the Bush Administration: ". . . mortgage counseling is a thriving racket that benefits far Left groups ranging from the AARP to ACORN to La Raza and Legal Aid. The Department of Housing and Urban Development funds hundreds, if not thousands, of these groups across the country. In October, HUD announced more than $44 million in new housing counseling grants to over 400 state and local efforts. The White House has increased funding for housing counseling by 150 percent since taking office in 2001." http://michellemalkin.com/2008/04/03/the-left-wing-mortgage-counseling-racket/

But wait--she appears on Fox News from time to time, so it must not be reliable.

The housing mess has a long history

We've all seen the pressure to lower standards and make homeowners of people who can't save the downpayment, can't pay the mortgage, can't meet the minimum standards, but I was unaware how far back government interference in the housing market went--back to the early 1920s with Herbert Hoover when he was Secretary of Commerce. Or even 1913, if you figure the home mortgage deduction. And I knew about rent controls creating an artificial "housing shortage" after WWII. I knew what had been required of us even with our first home purchased in 1962, but we never used FHA or VA, and sort of assumed that's the way it was until the 70s or 80s. Guess not. There's a lot I didn't know about how housing became a political football for both parties and invited crime and corruption to flourish. Catch up on the history beginning with Hoover, and follow it all the way up to now. See Obsessive Housing Disorder.

"The next stop on the road to 2008 was a fateful campaign to lower lending criteria, which, the housing advocates argued, were racist and had to change. The campaign began in 1986, when the Association of Community Organizations for Reform Now (Acorn) threatened to oppose an acquisition by a southern bank, Louisiana Bancshares, until it agreed to new “flexible credit and underwriting standards” for minority borrowers—for example, counting public assistance and food stamps as income. The next year, Acorn led a coalition of advocacy groups calling for industry-wide changes in lending standards. Among the demanded reforms were the easing of minimum down-payment requirements and of the requirement that borrowers have enough cash at a closing to cover two to three months of mortgage payments (research had shown that lack of money in hand was a big reason some mortgages failed quickly).

The advocates also attacked Fannie Mae, the giant quasi-government agency that bought loans from banks in order to allow them to make new loans. Its underwriters were “strictly by-the-book interpreters” of lending standards and turned down purchases of unconventional loans, charged Acorn. The pressure eventually paid off. In 1992, Congress passed legislation requiring Fannie Mae and the similar Freddie Mac to devote 30 percent of their loan purchases to mortgages for low- and moderate-income borrowers."

So we're doing more of the same, trying to refinance these failed homeowners, offering rock bottom rates, wondering why it isn't working?

"As Harvard economist and City Journal contributing editor Edward Glaeser has observed, mortgage lenders have finally “recovered their sanity”—only to have government dangling subsidized low interest rates and tax credits in front of them and their potential customers all over again. Behind these efforts is a fundamental misconception among politicians that housing drives the American economy and therefore demands subsidy at virtually any cost."

The author points out the damage the home mortgage deduction has done, as well as other government subsidies, regulations and programs. Good article. And Obama owes ACORN big time, so we're in for more of the same on the road to "recovery." Go read it.

Where did the money go?

The drop in gasoline prices since summer has amounted to about $2,000 per household in spendable income. That's why a "stimulus" check isn't going to dent the recession. Now, we didn't get that much--we have two cars but don't drive a lot, but it did halve what we spent on gasoline. I think our share went to our California relatives (bunches of them--probably more than any other state). According to USAToday here's were it went:

48% for groceries

42% to savings

30% to pay down credit card debt

10% for entertainment

9% for home improvements

I think that shows the American people can make good financial choices when the government gets out of the way. Even though money that goes into savings isn't technically out there circulating by buying "stuff," it is used by banks to offer credit to businesses that do employ people. If you remember, since Congress doesn't, this was the idea behind the huge September scare--TARP. The money was to be used for banks to get the economy going. Instead, it has morphed into PARP POOP PORK. This is why we're getting the return of the Hoover-FDR economic boondoggle of federal fiddling (1929-1943), only this time it will be the Bush-Obama Boondoggle. Let's hope it doesn't last over a decade this time.

Usury

(yū'zhə-rē) I seldom use my Macy's credit card--must have pulled it out by mistake when I shopped there on December 19. Today I got a "red star rewards" statement for the period ending December 21. I charged about $60 (2 presents for my husband and 2 for me!) and the minimum payment is due on Jan. 15. So that's 25 days for a 30 day billing account. If I choose to pay less than the full balance, $1 will be added to my revolving account balance, which inexplicably is recorded as $22.41 even though I had zero balance on Dec. 19. It says in upper right corner of page one that the average daily balance is $5.98, the daily periodic rate 0.05918%, which corresponds to an annual percentage rate of 21.60%. On the second page is the note "A finance charge in the amount of $1.00 will be added to your Revolving account balance if you choose to pay less than the full balance by your due date. If that happens, the actual ANNUAL PERCENTAGE RATE charge on that account is 200.64%.

Anyone with better math and English skills want to explain this, without using the words usury, obfuscation, exorbitant or onerous?

The widening gap

You can't turn on the radio, TV or open a newspaper without someone talking about a gap*--and I don't mean the store where teen-agers shop. There's a poverty gap, a gender gap, a technology gap, a health care gap, yada, yada. Three and a half years ago I wrote down my reasons for the widening gap between the rich and the poor (this is actually a fabrication because people are retiring and by plan and choice reducing their household income, but let's imagine there is a gap). Let's call it The Easy Gap.

1. Easy credit cards: We got our first credit card in the late 60s--I think it was a "Shopper’s Charge." We now have one department store credit card and one bank card--we’ve never carried a balance. Since the late 80s and into the 90s, many new households have never known what it was to live on their earned income. 2. Easy divorce: Christians now have the same divorce rate as anyone else in the culture. When we married 48 years ago, regular religious observance offered families some protection. No fault divorce particularly hurt women and children, pushing them economically into competition with two income families. 3. Easy sex: Casual one-night stands were glorified in the movies of the 70s and 80s. Although adultery and fornication had long been a theme in literature, drama and movies, casual sex and living together before marriage became the gold standard of relationships by the 80s, even though it’s been proven that it increases the divorce rate. Then easy sex came into the living rooms via TV so that even young children think who’s spending the night is no more important than what toothpaste mom buys. Women having and raising babies alone is the biggest cause of growing poverty and the gap that liberals worry about. 4. Easy birth control and abortion: The millions of Americans that might have sprung from the loins of some of our best and brightest have been denied life itself, and thus their slots in the pie chart has been taken by poor, uneducated immigrants. Obviously this creates a huge gap between the middle class and the poor, who instead of having a solid footing as those aborted citizens might have had, flood across our borders or arrive as refugees with nothing. 5. Easy technology and gadgets: Time wasted on I-pods and text messaging and vegging out in front of bad movies on DVDs has certainly absorbed billions of hours that could have been invested in networking, education or advancing up the career ladder. Cable and cell phone monthly costs easily equal what we spent on a mortgage 30 years ago. 6. Easy bankruptcy: Load up the credit cards with consumer spending, mortgage your future, then make the rest of us pay it off for you. It might have been Plan B 20 years ago, but is now Plan A. Interest only mortgages, leases for larger and more expensive vehicles, second mortgages--for a generation who thinks the future will be paid for by someone else, it’s a recipe for a growing gap. 7. Easy leisure: Thirty eight years ago (1970) few middle class families took vacations--if Dad had a week off (and most companies didn’t offer it) he spent it fixing the house. Sure it’s a huge industry and employs a lot of people, but we’re looking at the gap aren’t we? We’d probably been married 10 years before we took a family vacation (my parents never had one), and then it was at my mother’s farm for a week. Our daughter and her husband had been to Key West, Arruba and took a Mexican cruise in the first 5 years of their marriage. 8. Easy entertainment: This is related to leisure and technology, but today’s young families have difficulty being alone or quiet, it would seem. Even 30 years olds seem unable to walk around without head phones. They are spending their children’s future at movies, sporting events and theme parks. A visit to the library is most likely to pick up a movie, not a book. 9. Easy college loans: Instead of attending a state school, working during the summer or attending closer to home, many young people begin their real working lives with huge debt, a debt that takes years to pay off, assuming they don’t default. Loans were so easy in the 80s, that parents who could well afford to pay tuition had their children at the public trough. 10. Easy shopping: You can be a couch potato or a computer novice and never leave home to shop. Addiction is easy. Just call in with the credit card. See? And I haven’t even said a word about how much health care costs, or how the women’s movement changed our culture, public transportation or taxes. And while the government is tangentially involved in these areas, mostly it boils down to perfectly legal choices, choices which when they become ingrained in our way of life lead to poverty or slippage down by a quintile for the next generation.

According to a google search: health care gap = 15,700; gender gap = 842,000; technology gap = 166,000; obesity gap = 417; poverty gap = 113,000.

Monday Memories--credit for the payroll

In 1960 I was a secretary at a small tool and die company in Indianapolis. I ran the office, answered the phone, prepared invoices, filed, wrote the checks for payroll, ordered supplies--the usual, plus made the coffee and cleaned the restrooms. After a few days of my coffee, the boss relieved me of that job. My boss was good looking for an old guy--he was about 33 and had a glass eye (I was 20 so he seemed ancient.)

After a month or so, and I learned to drive the truck, I was sent downtown to the bank to get a loan either for payroll or for the next job. I just did what I was told, but even I knew the boss was borrowing against a job that most likely we didn't have yet, or was a long way from the design table. But it all seemed to work.

I hadn't thought about that little building with the gravel drive-way and the trips to the bank to borrow money for the boss who hadn't finished elementary school until thinking about all the companies this week wondering about their line of credit for payroll, remodeling or new products. One or two missteps and I think that Indy bank would've owned the company and my boss's house. Now we have to wait and see what the brilliant minds with years of experience and advanced Ivy League degrees who got us into this mess will do to save our homes and businesses.

Six questions on the bailout

Over at City Journal, Nicole Gelinas thinks President Bush, Secretary Paulson and Congress should have taken a deep breath and answered some questions. Read the whole story--I've included just the questions. But I suspect the trillion dollar deal is done. I can see why Obama didn't want to return to DC to provide input. He doesn't want to be anywhere near this when the far left finds out there's no money for the goodies he's promised. As one commenter at Politico observed, ". . . if you were voting for Obama because of all the freebies he promised he will get you, that ship has sailed. That leaves voting for the candidate that is best at keeping our country secure." Here's the questions.

One. Will this bailout plan actively delay recovery?

Two. Isn’t Treasury worried about the dead-weight loss to the economy that the bailout could represent?

Three. How will this plan restart the now-moribund credit markets?

Four. When the Treasury prices mortgage-related assets under its program, what criteria will it use in assessing current values?

Five. Will the Treasury buy derivative securities like credit-default swaps under this program?

(Six) Bonus Question: The proposed bailout plan means that many creditors to financial institutions would be effectively off the hook for mistakes made by the firms to which those creditors lent money. (Injecting government capital into flailing banks, which some have proposed, could carry the same risk.) But in Thursday’s FDIC-engineered failure of Washington Mutual, the nation’s sixth-largest commercial bank, uninsured creditors will suffer losses made through similar management and investor miscalculations. Why is it acceptable for WaMu creditors to suffer, but not the creditors of the institutions that will be able to sell their bad assets to the taxpayer? Aren’t we setting ourselves up for worse problems in the future, by encouraging future lenders to big financial institutions not to worry too much about the toxic assets those companies may be amassing?

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Subprime late payments

A chart in today's WSJ showed the number of people keeping up with mortgage payments on subprime loans is improving. During the last quarter about 7.6% were late and that's dropped to 7.2% (this compares to .8% and .6% in prime). Missed payments were high in mid-1999, then dropping way down to under 2% in mid-2003. Obviously, the reasons for this have yet to be sorted out. But it must not be the economy, or how much was loaned to poor people vs how much to speculators. Subprime loans went to low income people who were poor credit risks and to high income people with high debt in relation to their income. The rest of us went the standard route--10 or 20% down and fixed rates.

But here's what's interesting. After 9/11 there was a drastic drop in late payments for both types of loans. As the economy soared, so did late payments. Seems to be psychological, not financial.

Dear Pat W. Johnston, Director of Consumer Services

Give it up, Pat (I think it is a made-up name like Betty Crocker, or Mr. Goodwrench). Stop sending me credit card offers. I don't care if you have NO ANNUAL FEE. I don't want your 20,000 bonus miles. I don't need your annual percentage rate of 9.24% (0.02532% daily) because I never carry a balance on my credit card. You have spent so much money, time, paper and postage on me. Do you think I'm being coy when I send your love letters back? And if I were to accept, here's what I'd have to do:

Authorize you to check my credit and employment history (which you've already done to pre-approve me)

Authorize you to transfer my current balance (don't have one)

Agree to limit my legal rights, including my right to go to court, to have a jury trial, and to participate in class actions

Accept an offer that is void to residents of GU, PR, VI and all other U.S. dependent areas, but apparently not to illegal immigrants who might be using my SS number and Tax ID that Ohio State lost in a hacking incident recently

Accept that I won't know my limits or the full details of the agreement until after you approve me

Accept that if you do make a mistake in billing, I must contact you no later than 60 days after the first bill, but if I phone to report the error (press 1 for English), I won't be preserving my rights. I need to write you a letter!

If I stop payment on an automatic withdrawal from my bank account because of your error, the letter (not a phone call) has to reach you three business days before the automatic payment is scheduled

After I've jumped through all those written letter and mail deadlines, you get 90 days after the 30 days you took to acknowledge my letter. You know what Pat, if that is really your gender-free name, this is beginning to sound as though you've got all the goodies on your side, doesn't it?

And if the merchant is the problem, he has to be in Ohio, within 100 miles of my current mailing address.

Then you have another bunch of rules specially made for Ohio residents about anti-discrimination. Credit must be equally available to all creditworthy customers and credit reporting agencies maintain separate credit histories on individuals upon request. In Ohio? Really? So that's how you got my name and address and put me in your data base? You can't get credit reports in other states except Ohio, New York, and Vermont? And I can't even begin to figure out what you said about married Wisconsin residents, but it sounds pretty strange.

Now that I've read all the way to the bottom, I see that you've already looked at my credit report and pre-screened me. Instead of tearing up these offers, I should have been calling the consumer opt-out number 1-888-567-8688. What do you want to bet that they'll ask me my social security number and there won't be a live person, and the recording will assure me all this is confidential?

Derek has been keeping track of Pat's letters. According to one of the commenters at his blog, these are more than just benign, pesky offers--these scum scams check your credit rating twice a month which degrades your credit! Another commentor added that calling the opt-out number didn't stop the offers.