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Changing the Subject Doesn’t Make Payday Lending in PA a Better Idea

8:55 am in Uncategorized by ThirdandState

Payday Loans Neon Sign

(Photo: rinkjustice/flickr)

By Mark Price, Third and State

In legislative hearings last month, proponents of a bill to legalize high-interest payday loans tried to change the subject and questioned the motives of some of their constituents. But these attempts don’t alter the fact that allowing payday lending is a bad idea.

As we’ve explained before — and as the U.S. military, U.S. Congress, and former President George W. Bush have all agreed — payday loans are a debt trap that further impoverishes low-income families, driving more of them into bankruptcy. Pennsylvania should leave in place the strong regulations that make use of payday loans much less common here than nationally.

Here is a bit more detail on what happened at the September 19 Senate Banking and Insurance Committee hearing on House Bill 2191. Chairman Don White raised the issue of credit cards and alleged that the AARP’s opposition to payday lending was motivated by the organization’s desire to protect a credit card product it offers. At another point, Representative Chris Ross, the sponsor of the bill, warned that payday lenders currently selling a limited number of online payday loans illegally may be stealing the identities of consumers.

Even if this were true, why does it mean we should legalize storefront payday lenders to locate in local communities throughout Pennsylvania and charge 369% annual interest rates on short-term loans? It doesn’t.

While the strategy of House Bill 2191’s supporters was to talk as little as possible about the dangers payday lending poses for consumers, more telling was who attended the hearings. The hearing room was full of people who had driven in from around the state — Pittsburgh, Allentown, Philadelphia. Pastors, credit counselors and affordable housing groups showed up in opposition to the bill, even though they weren’t testifying.

Their presence didn’t stop some committee members from questioning the motives of an AARP volunteer and rushing the testimony of a pastor of a social service ministry and a military veteran. The only supporters of the bill were the out-of-state companies that stand to benefit financially from these 369% APR loans.

The will of the people — and the editorial boards — on payday lending is clear. Don’t legalize it. Let’s hope that the will of the people outweighs the dollars of the payday lenders in this year’s end game on this issue.

Predatory Payday Lending Bill Flies Out of Cramped PA House Committee

3:01 pm in Uncategorized by ThirdandState

By Mark Price, Third and State

Room 148 of the State Capitol might as well double as a Capitol broom closet. That’s where the House Consumer Affairs Committee this morning rushed out amendments to House Bill 2191, which legalizes predatory payday lending in Pennsylvania.

The amendments to HB 2191 were misleadingly pitched as adding more consumer protections to the bill. Even the Navy Marine Corps Relief Society took a look at these amendments and said they do “nothing to mitigate the already harmful aspects of HB 2191,” and that one amendment “actually worsens the problem it claims to solve.”

What is Payday Lending? Payday lending encompasses small loans, usually for two weeks or less, that require a post-dated check or electronic access to a borrower’s bank account as a condition of the loan. Fees and interest in states that allow payday lending typically total $15 to $17 for every $100 borrowed — amounting to an effective annual percentage rate of more than 300 percent for a loan due in full in 14-days.

One focus of the amendments this morning was language banning renewals or rollovers of a payday loan, as if that was a solution to stopping the long-term cycle of debt. It is not.

Payday lenders support amendments that ban renewals and rollovers because they know how to circumvent them. To avoid appearing to “rollover” or “renew” the debt, lenders ask the borrower to pay off the old loan and take out a new loan by paying a new fee and writing another check. Also, in a practice called “touch and go,” lenders take a cash “payoff” for the old loan that they immediately re-loan with new loan funds the next day.

Here’s how it works: To repay the first loan, the borrower lets the lender cash the original post-dated check or pays the lender $300 in cash to tear up the check. In either case, they borrow again immediately or as soon as allowed by law. Read the rest of this entry →

High CEO Pay Comes Under Fire from Shareholders

10:54 am in Uncategorized by ThirdandState

By Michael Wood, Third and State

In the news today, a couple of instances of CEOs being taken to task by shareholders over excessive pay.

Citigroup Centre in London. Photo by Harshil Shah.

USA Today reports that at Citigroup, 55% of shareholders rejected or abstained from rubberstamping a $25 million payday for their CEO Vikrom Pandit. The vote is only advisory, unfortunely, but is still described as being “historic” for Wall Street firms in the aftermath of the recession. The report notes:

Wall Street’s massive compensation packages have raised the ire of shareholders for years, especially when they appear to have little relation to the performance of specific executives. …

“Citigroup is one of most egregious example of disconnect between incentives of top management and value creation of shareholders,” said Mike Mayo, bank analyst at brokerage firm CLSA and author of the book “Exile on Wall Street.”

“The owners of the big banks, namely the shareholders, are finally taking a greater amount of responsibility by speaking up.”

Closer to home, the Pittsburgh Post-Gazette has a story this morning about discontent at Pittsburgh-based EQT’s annual shareholder meeting. Again, executive compensation seems to be at the heart of this dispute — as well as unease about natural gas production.

Even though the Buffett Rule failed to get a vote in the U.S. Senate earlier this week, it seems that income inequality is on the minds of many Americans right now — as it should be. (In case you missed it, check out the Keystone Research Center and Pennsylvania Budget and Policy Center’s fact sheet on the Buffett Rule and what it means to Pennsylvania.)


PA Must Reads: Local Jobs Data, Holding the Jobless Hostage and the History of Banker Pay

8:03 am in Uncategorized by ThirdandState

A blog post by Mark Price, originally published at Third and State.

The Pennsylvania Department of Labor and Industry (L&I) has released local data on jobs in December. Later today L&I will release the full data here. What follows is a run down of how newspapers across the commonwealth covered the new release.

Randolph Sexton of York, a recent graduate of YTI Career Institute, waits to be called for an appointment Monday at Cheddar’s Casual Café in Manchester Township. Christopher Paules has likely cooked your lunch or dinner. The long-time culinarian has worked or managed kitchens for many of the chains and clubs that pepper York County, including Regents’ Glen Country Club, Ruby Tuesday and the Olive Garden. And despite his skills, Paules has struggled the last few years to find a job that offers both security and enough hours to make a living. On Monday morning, the Dover Township resident was one of more than 100 people who stopped by the soon-to-open Cheddar’s Casual Café in Manchester Township to fill out a job application…

In December, the county’s unemployment rate remained unchanged at 7.7 percent — one tenth of a percentage point above the state’s rate of 7.6 percent, according to data released today by the Pennsylvania Department of Labor & Industry.

Unemployment in the Scranton/Wilkes-Barre/Hazleton metro area decreased three-tenths of a percentage point in December to 8.9 percent.

The region’s jobless rate was the lowest since May, when it was 8.7 percent, according to state Department of Labor and Industry data released today. Nevertheless, the metro area led the state in unemployment for the 21st straight month.

Unemployment declined in Reading and Berks County in December. The city’s jobless rate fell to 11 percent in December from a revised 11.6 percent in November, while the county’s jobless rate fell to 7.9 percent from 8 percent in November, according to statistics provided today by the state Department of Labor and Industry…

In December, Reading’s unemployment rate remained fourth-highest among the state’s 80 largest municipalities. Hazleton, with a rate of 11.7 percent; and Chester and York, both with a rate of 11.3 percent, had higher jobless rates than Reading…

In Berks, a total of 187,200 were employed in December, up from 186,200 in November, and up from 183,300 a year prior.

Unemployment in the Pittsburgh region followed state and national trends in December and fell, dropping two-tenths of a percentage point to hit 6.9 percent, the Pennsylvania Department of Labor and Industry reported today.

The Pittsburgh region’s nonfarm job total reached its highest level since April 2001, increasing by 5,200 to 1.15 million.

The Pittsburgh region is the state’s second-largest labor market and had the fifth-lowest unemployment rate in December.

Unemployment in Harrisburg-Carlisle fell to 6.9 percent in December, down two-tenths of a percent from November, according to new figures from the Pennsylvania Department of Labor and Industry.

When adjusted for seasonal jobs, the Harrisburg-Carlisle region had 259,700 jobs as of December, 2011, up from 258,800 in December, 2010. There were 19,300 unemployed workers, compared to 21,500 in 2010.

The bottom line is that the economy is improving slowly. Unemployment remains abnormally high even in regions that have the lowest unemployment rates in the Commonwealth. Workers who are laid off each month because of the continued weakness in the economy face a prolonged job search.

The Pittsburgh Post-Gazette reports this morning that a minor legislative change required to maintain access to federally financed extended unemployment benefits for 17,000 Pennsylvania workers faces an uncertain future as the Pennsylvania Chamber of Business and Industry pushes the state House of Representatives to delay passage of the bill. The business lobby is seeking to hold the extension hostage in order to push for changes that will in the short run benefit its members but in the long run undermine the overall effectiveness of the unemployment insurance system for the rest of us.

Thousands of Pennsylvanians will see their federally funded unemployment benefits expire after this week, with legislation to extend those checks lingering in the state House of Representatives.

A pending measure, which passed the state Senate last week, would offer 13 additional weeks of benefits to the state’s jobless residents. The federal funding was approved by Congress in December but requires the state to tweak its unemployment compensation rules in order to receive those dollars.

That bill is awaiting consideration by a House panel, which has a vote scheduled for Monday. Legislative staffers say the belatedly approved benefits would be retroactive, but pressures to also enact broader changes to the state’s unemployment compensation system could further hold up that assistance.

Approximately 17,000 residents would be affected if the benefit extension is not approved, according to the state’s Department of Labor & Industry.

Speaking of people seeking short term gains at the expense of the rest of us, Gillian Tett of The Financial Times has an excellent summary of the history of banker pay. While I don’t share Tett’s optimism that the current abnormal levels of pay in the financial sector are at an end, it is a step in the right direction to at least acknowledge that banker pay is out of step with historical norms.

PA Must Reads: PA Department of Public Welfare Adviser Resigns $100K Job Over Conservative Journal, More on Banks

8:01 am in Uncategorized by ThirdandState

A blog post by Mark Price, originally published at Third and State.

The Pittsburgh Post Gazette reports this morning that Bank of New York Mellon has reached a partial settlement with the Securities and Exchange Commission (SEC). Under the deal, the bank will stop listing services as “free” that it, in fact, charges a fee for. What remains to be settled are monetary damages for allegations that the bank overcharged pension plans and other clients for financial services.

Bank of New York Mellon Corp. Tuesday reached a partial settlement with the U.S. Justice Department in a lawsuit accusing the custody bank of systematically overcharging pension funds and other investors by adding hidden spreads to foreign currency trades executed on their behalf…

The Pennsylvania Treasury Department has said it will decide this month whether to file suit on behalf of the state’s pension funds.

Bailed-out banks making money from complex financial deals. Where have we heard that before?

Philadelphia should demand that Wall Street banks refund half a billion dollars lost or owed by city agencies on interest-rate swap contracts that were supposed to cut city borrowing costs but instead swelled budget deficits at the worst possible time, a Harrisburg-based advocacy group and its labor-union allies say…

The School District of Philadelphia paid a net $161 million to Morgan Stanley, Goldman Sachs, and Wells Fargo Bank on 10 interest-rate swap contracts connected to bonds the district sold, starting in 2003…

Borrowers using the Philadelphia Authority for Industrial Development paid $33 million to JPMorgan Chase Bank and Merrill Lynch Capital Services on swaps sold in connection with a series of bond issues, and owe up to $111 million on swaps still in force.

Philadelphia International Airport paid an estimated $41 million to JPMorgan to settle swap options issued in connection with bond refinancing and owes an additional $58 million on swaps still in force.

Philadelphia water and wastewater agencies paid more than $10 million to Citigroup for swap options connected to bond refunding and owe an additional $16 million on swaps still in force.

And that’s not counting swaps liabilities for the Board of City Trusts (which runs Girard College and Wills Eye Hospital), Philadelphia Gas Works, and other public agencies.

The Pittsburgh Post-Gazette reports this morning that the Port Authority of Pittsburgh, which operates the region’s public transit system, is planning a new round of fare increases and services cuts. If completed, the cuts will mean the agency will provide half the level of service it provided a year ago. Remember this next time you read about a Pittsburgh employer complaining they can’t find workers.

Venerable bus routes serving Mt. Lebanon, Coraopolis, Green Tree, Mount Washington, Oakmont, Edgewood and Sewickley will be among 45 routes eliminated by the Port Authority in September if there is no solution to a statewide transportation funding crisis.

Riders who aren’t stranded will pay more — the authority plans a 25-cent increase in the base Zone 1 fare, to $2.50, on July 1. Zone 2 rides will go up 50 cents, to $3.75. It will be the fourth fare increase in the past 4 1/2 years. The last was in January 2011.

As part of a 35 percent reduction in service hours that would take effect Sept. 2 — the largest cut in the agency’s 48-year history — all of the authority’s current 102 bus and rail routes would be scaled back, some ending altogether and others with deep drops in off-peak and weekend service…

The reduction, coupled with a 15 percent service cut last March, would leave the region’s biggest transit agency with barely half of the service it offered a year ago.

An estimated 500 to 600 jobs could be eliminated, with most of that achieved through layoffs, authority CEO Steve Bland said…

According to the agency’s most recent audit, state operating assistance decreased by $34.2 million in the fiscal year that ended last June 30, a 19 percent drop. State aid makes up more than half of the authority’s income.

Loyal readers of this blog know that the Pennsylvania Department of Public Welfare (DPW) has proposed limiting access to food stamps and terminated health care for thousands of children. These moves have been advocated by the Corbett administration as common sense efforts to root out fraud and abuse. The Philadelphia Inquirer reports this morning that an advisor to the DPW advocates for these kind of changes as part of a broader culture war. Warning to readers, to read some of the really creepy stuff I’m just going to send you to the full article.

A high-level Corbett administration adviser resigned his $104,470 position Tuesday after questions were raised about his outside role as editor of a conservative faith-based journal…

[Robert W.] Patterson was hired in October by Welfare Secretary Gary Alexander as a special assistant to help set policy for services provided to millions of Pennsylvanians through the Department of Public Welfare (DPW)…

In the journal, Patterson has weighed in on everything from what he called “misguided” programs that grew out of the 1960s War on Poverty – programs now administered by DPW – to what he described as a woman’s ideal role in society: married and at home raising children.

Carey Miller, spokeswoman for DPW, said Patterson submitted his letter of resignation Tuesday.

Asked why, she said Patterson had formally requested to remain in his position as the journal’s editor while working for the state, but his request had been rejected.

She would not say why Welfare Secretary Alexander had hired him, whether Alexander was familiar with his writings, or whether he agreed with Patterson’s oft-expressed view that many social welfare programs have worsened the lot of the poor by promoting single motherhood and displacing marriage as a way out of poverty.

“It is irrelevant to get into that,” Miller said. But she added: “I can say that the journal does not reflect the views of the Corbett administration.”

In the journal’s summer issue, Patterson authored a piece defending what he called “pay-as-you-go entitlements,” such as Social Security, but advocated scaling back assistance programs such as Medicaid, food stamps, the children’s health insurance program, and cash assistance for the poor.

Bank Swap Deals Cost Philadelphia City, School District

5:17 pm in Uncategorized by ThirdandState

A blog post by Sharon Ward, originally published at Third and State.

Large financial institutions, including many that received financial bailouts in the wake of the financial crisis, are making hundreds of millions of dollars off interest rate swaps negotiated with the City and School District of Philadelphia.

That’s the key finding in a new report the Pennsylvania Budget and Policy Center out today. We found that swap deals negotiated with banks such as Wells Fargo, Morgan Stanley and Goldman Sachs have cost the city and school district $331 million in net interest payments and cancellation fees. If interest rates continue to remain low, still-active swaps could cost the city another $240 million in future net interest payments.

WHYY’s NewsWorks was there and posted this brief video clip.

Our report recommends that banks refund a portion of the cancellation fees they received for terminating bad deals and renegotiate those deals which are currently active.

Financial institutions have returned to profitability after the financial crisis, yet some Philadelphia schools cannot afford to keep nurses on staff. Now the banks have an opportunity to step up and help prevent more damaging cuts to schools and public safety, just as taxpayers helped the banks avoid total collapse just a few years ago.

PA Must Reads: The Banks Defrauded Your Local Government and Oppose a New Financial Industry Watch Dog: Coincidence?

2:48 pm in Uncategorized by ThirdandState

A blog post by Mark Price, originally published at Third and State.

The Philadelphia Inquirer this morning reports that Wells Fargo has settled charges that it rigged bids on bond auctions affecting 150 Pennsylvania municipalities and agencies.

Here’s an idea: let’s in-source bond work to a new branch of Community Legal Services (CLS) that charges less than private law and financial firms and still earns enough surplus to subsidize the rest of the CLS mission. What’s that you say? That would impede the efficiency of the free market … I mean the pay-to-play political contributions from high-priced private firms that perform municipal bond work.

Wachovia Bank, now Wells Fargo, agreed to pay about $150 million to settle charges that former employees rigged bids for the reinvestment of $9 billion in bond proceeds between 1998 and 2004, guaranteeing Wachovia excess profits at the expense of cities, towns, and other borrowers, federal and state authorities said Thursday

The settlement requires Wachovia to pay millions in restitution to borrowers in 25 states. That figure includes $5.3 million to roughly 150 Pennsylvania municipalities and agencies, including the Pennsylvania Turnpike Commission, the Philadelphia Parking Authority, and more than a dozen school districts, State Attorney General Linda Kelly said.

While Wells Fargo was settling charges it defrauded taxpayers, the financial industry scored another political victory as a U.S. Senate filibuster blocked a vote on the confirmation of a director for the newly created Consumer Financial Protection Bureau (CFPB).

PA Must Reads: Banks Profit From Secret Loans

9:14 am in Uncategorized by ThirdandState

A blog post by Mark Price, originally published at Third and State.

After a lengthy battle failed to prevent publication, Bloomberg Markets Magazine has released an analysis of data obtained from the Federal Reserve on previously undisclosed loans the Fed made to banks during the financial crisis. As of March 2009, the Fed provided $7.7 trillion in loans and guarantees to troubled banks, according to Bloomberg, which also reported that the bank bailout lasted from August 2007 to April 2010.  By comparison the Troubled Asset Relief Program (TARP) of the U.S. Treasury was just $700 billion.

Banks worldwide earned an estimated $13 billion by taking advantage of below-market rates on emergency U.S. Federal Reserve loans from August 2007 through April 2010.

The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets Magazine reports in its January issue.

Below are the Bloomberg estimates of the money some Central Pennsylvania banks made from these loans:

  • Fulton Financial: $1.6 million
  • M&T Bank: $17.1 million
  • PNC Financial Services: $29.1 million
  • Susquehanna Bankshares: $16.9 million

It would have been a mistake not to rescue the banking system, but the failure to disclose the extent of the banking bailout in timely fashion made it harder to implement the reform necessary to better handle future financial crises. 

Morning Must Reads: Bailouts for the Banks and Cake for the 99%

6:57 am in Uncategorized by ThirdandState

WTF cake (Photo: sanfranannie, flickr)

WTF cake (Photo: sanfranannie, flickr)

A blog post by Mark Price, originally published at Third and State.

What is good for the financial sector is good for the 99% 1%.

For the financialization of America wasn’t dictated by the invisible hand of the market. What caused the financial industry to grow much faster than the rest of the economy starting around 1980 was a series of deliberate policy choices, in particular a process of deregulation that continued right up to the eve of the 2008 crisis. Not coincidentally, the era of an ever-growing financial industry was also an era of ever-growing inequality of income and wealth. Wall Street made a large direct contribution to economic polarization, because soaring incomes in finance accounted for a significant fraction of the rising share of the top 1 percent (and the top 0.1 percent, which accounts for most of the top 1 percent’s gains) in the nation’s income. More broadly, the same political forces that promoted financial deregulation fostered overall inequality in a variety of ways, undermining organized labor, doing away with the ‘outrage constraint’ that used to limit executive paychecks, and more.

The Pittsburgh Post-Gazette reviews employment law in Pennsylvania and notes that there are two sets of rules, the rules for the rest of us (we are employed at will and rarely get a severance) and the rules for top executives. Read the rest of this entry →

Today’s Must Reads: Three Act Plays About Zombie Banksters, Smokestack Chasing and the Convoy

11:15 am in Uncategorized by ThirdandState

A blog post by Mark Price, originally published at Third and State.

Paul Krugman describes our economic woes as a three-act play; now you Occupy Wall Street kids turn it into zombie banker street theater!

So, in case you’ve forgotten, it was a play in three acts. In the first act, bankers took advantage of deregulation to run wild (and pay themselves princely sums), inflating huge bubbles through reckless lending. In the second act, the bubbles burst — but bankers were bailed out by taxpayers, with remarkably few strings attached, even as ordinary workers continued to suffer the consequences of the bankers’ sins. And, in the third act, bankers showed their gratitude by turning on the people who had saved them, throwing their support — and the wealth they still possessed thanks to the bailouts — behind politicians who promised to keep their taxes low and dismantle the mild regulations erected in the aftermath of the crisis. Given this history, how can you not applaud the protesters for finally taking a stand?

A story in The Philadelphia Inquirer suggests Occupy Wall Street – Philadelphia is off to good start and includes more than just unshowered hippie kids. My twitter feed this morning even included a rumor that the Mayor was going to approve a brief moment of electricity so the protestors can watch the Phillies in Game 5 of the National League division series against the St. Louis Cardinals. As the saying goes, we want bread AND roses Phillies.

In the course of the morning, infrastructure — the kind meant to sustain the protest — started falling into place. After an organizer hopped up on a stone wall and called out that tables were needed for first aid and other stations, a rabbi from a nearby temple offered four tables, as did a community group called Fight for Philly. District 1199C of the National Union of Hospital and Health Care Employees donated office space for Occupy Philadelphia’s legal team. Philadelphia Jobs with Justice, a coalition of labor unions and student, community, and religious groups, agreed to allow financial donations for the protest to be funneled through it, to ensure compliance with tax laws. The stagehands union said it would have a professional sound system in place for Friday, eliminating the need for the ‘people’s mike’ — a system of echoing by the crowd, so all could hear.

Our friends at Good Jobs First often talk about the war among the states where economic development officials throw bags of cash at companies to lure them across state lines. Delaware gave AstraZeneca $40 million to leave Pennsylvania for Wilmington. AstraZeneca is now shedding jobs. In the spirit of Occupy Wall Street, you can put on your cardboard sign the following: To attract good jobs to your region, invest in institutions that provide public goods like education and training, not individual companies. Of course, with a sign like that, you will want to go over the top with your zombie banker costume.

London-based AstraZeneca has about 14,400 employees in North America, of which about 3,500 are in Delaware. AstraZeneca moved much of its operations in the Pennsylvania suburbs of Philadelphia to Wilmington in 1999, in part because the Delaware Economic Development Office gave it a package of grants and tax credits totaling $40.7 million … These are not the first and won’t be the last of the job cuts for AstraZeneca. It announced in March 2010 that it would cut 10,400 jobs by 2014. Employment was about 63,000 at the end of 2009 and is down to about 61,000 currently.

Saving the most exciting morning news for last: The Patriot-News editorial board comes out this morning in favor of exploring whether south-central Pennsylvania could benefit from more integrated public transportation systems across counties. Well, not the most exciting bit of news, but south-central Pennsylvania stands to gain a lot in terms of economic growth, environmental quality and economic opportunity for low-income workers from more integrated public transportation systems and, going beyond The Patriot-News, better funded public transportation agency.

The counties of Adams, Cumberland, Dauphin, Lebanon, Lancaster and York make up south-central Pennsylvania. They share many similarities, and their populations routinely travel between county borders and the major cities in the region. Yet in these six counties, there are four different public transit systems in operation … PennDOT recently undertook a study of the transit offerings in Lackawanna and Luzerne counties and the cities of Scranton, Wilkes-Barre and Hazleton. The study laid out the costs and benefits of more cooperation among the systems and recommended some consolidations.

And for those of you in south-central Pennsylvania yet to venture out onto the highways to join the convoy, a reminder why better public transportation is important.