Times reporter Joe Nocera listened in on a Chase employee-only conference call and one employee asked, "Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?"

Translation: When are we going to start making loans?The executive moderator replied:

Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase.. What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.

Later, the same executive said,

We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.

Translation: We'll use that $25 billion as a war chest to buy other banks, and hoard it in case times get tougher.

"Read that answer as many times as you want," wrote NYT, "You are not going to find a single word in there about making loans to help the American economy."

Furthermore, a new tax break allows banks to immediately deduct any losses they that are on the books of the banks they acquire.

What is the government doing to make banks use the money for loans? Apparently, jack, except for asking really really nicely. If this continues and banks don't use their government handout to open up loans, this bailout will be the single greatest ripoff in American history, and those responsible are naive if they don't think they'll have a giant bloody revolution on their hands—and I mean that in the literal sense.

So When Will Banks Give Loans? [NYT] (Photo: Getty)

Help!!!!

I can't stop spending! I've tried the whole "control your spending" thing, but it just isn't working. I'm $10 trillion in debt and I only make $2.5 trillion per year, and now this Bernanke jerk put me on the hook another $1.5 trillion! My boss is breathing down my neck and China is threatening to repossess all my stuff.

Please, what can I do?

Calm down, Jim. You too can escape from debt by following a few basic budgeting principles. Let's take at look the government's budget and see if can't benefit from some personal finance wisdom.

Take the scale down a couple thousand notches and the United States Government is like a divorced father working to make ends meet. The poor guy makes about $30,000 per year and grapples with a seemingly inescapable debt of $90,000. Instead of paying down the debt's principle, he spends slightly beyond his means, about $32,880 each year, ensuring that that his coffers won't overflow anytime soon.

Each year, he sits down and writes out a detailed five-year budget that always puts him in the black towards the end. He promises to start paying down the debt then, but in practice, the extra cash never materializes. It's not that he doesn't have good intentions. His spending is just too unwieldy.

He has two types of expenditures: personal and court mandated. His personal expenses are the basics. He pays for rent and food, and the occasional beer at the neighborhood bar. Nothing too extravagant. It's becoming tougher to justify those little luxuries as his other expenses have grown. By order of the court, he must pay his ex-wife significant alimony, plus child-support for their growing kid. He could save money by eating out less or watching the game from home instead of heading to the bar for a pint, but those unpopular choices wouldn't make anybody happy.

These are the pretty much the choices facing the U.S. government, but on a drastically larger scale.

How Much Do We Owe?

The U.S. debt is huge. The interest payments alone cost more than $400 billion. China is our Master Card and Japan is our Visa. As a society, we owe them $2 trillion, plus interest. And every single day, we borrow another $1.5 billion.

What's All This I Hear About A Deficit? Is That The Debt?

No. The deficit is our yearly contribution to the debt. When politicians talk about slashing the deficit, they mean that *this year* we will still add to the national debt, but maybe not as much as we thought. Presidents habitually propose "balanced" budgets that slash deficits year after year, ending with a balanced budget after five years. Ignoring the fact that Presidential terms are four years, those proposals mean that the government will continue to add to the debt for every year except the last, when we will contribute nothing to debt, but won't do anything to reduce it either.

When the government spends less than it receives, we have a surplus. This is rare. Surpluses come with the same choices as holiday bonuses. You can blow them on iPods (or F-22 Raptors,) or pay off your student loans and credit card bills (or Social Security.)

Why Is The Planet's Wealthiest Nation In Debt?

Just like our hypothetical divorced father, the U.S. has two types of expenses: discretionary and mandatory. Discretionary spending accounts for one third of our budget and funds all the those nice little things that we want, but aren't required to fund. This encompasses most agencies you know about, like the Pentagon and the Departments of Agriculture, Education, State, Labor, Justice, Transportation, Commerce, and Homeland Security. All of it is nice, but if Congress wanted, it could quickly swing the legislative mace and kill off the FBI and the Navy.

Discretionary spending is also the source of those pork barrel projects that get Senator McCain in such a huff. Technically, pork barrel projects benefit the residents of one Congressional district—think of that spiffy new park down the street—rather than further any national aim. In a budget of nearly $3 trillion, they cost around $18 billion.

The vast majority of the federal budget is eaten up by the mandatory spending that funds our social safety net. The big entitlements are Social Security, Medicare, and Medicaid. The cost of entitlements is driven by the number of eligible citizens, rather than the annual Congressional appropriations process. To our divorced father, they are the court-ordered child support payments.

Congress has the ability to tweak entitlement program eligibility, or scrap them altogether, but politicians don't like futzing with our entitlements because it's one of the easiest ways to get fired.

Don't Mention The War!

You may have noticed, we're at war. The wars in Iraq and Afghanistan add to our national debt, but not to our deficit. How? Emergency spending. Congress doesn't have a rainy day fund like most responsible families. When the United States' car breaks or we have an unexpected health scare, Congress waives its few existing budget rules and appropriates emergency funds, adding to the debt like any normal expense. For those keeping track, the wars have added almost half a trillion dollars to the debt.

Even in peacetime the Pentagon guzzles nearly half a trillion dollars annually for its operating budget. The defense budget is so large that it was one of the only points of reference for the recent $700 billion bailout.

Ok, Debt Is Bad. How Do We Reduce It?

If our hypothetical divorced father can reduce his debt, so can the government.

Keep A Budget: Well at least this one is covered. We have a budget and we know exactly where our money goes. See, here's the President posing with his newfangled "E-Budget." To make your own slightly less fangled version, read our post on How To Build Your Own Budget .

Acknowledge The Problem: Hmm, well, we kinda have this one covered. Maybe you remember that Perot fellow, the one with the ears and the oil who loved talking about our debt? He got it. Some of our politicians get it, but Oh! New Program! WANT!

-sigh-

Stop Digging: This means balanced budgets. The government won't ever pay off its massive debt unless it stops sending more than it takes in year after year. Balanced budgets are only the first step. We really need more money.

Make Small Cutbacks: Um, yeah. Whole think tanks devote their time to finding "small cutbacks" that might save a little cash. If the government really was a divorced father, we'd point him to our post: 5 Expenses You Can't Afford If You Have Credit Card Debt.

Start An Emergency Fund: Lockbox, anyone? This was one of the original ideas behind Social Security and Medicare: start a separate fund with a separate funding stream, and keep the big bad mess away from our annual operating budget. It didn't take Congress long, those naughty little rascals, to figure out that the big box labeled "COOKIES - DO NOT TOUCH" was filled with yummy, yummy cookies, on which they've been feasting ever since. Now the trust funds, as the President likes to point out, are filled with IOUs. Whoops! You, however, are more disciplined than Congress, and have no excuse for failing to fund a rainy day fund.

Snowball: You have an edge over the government in that you can start a debt snowball, paying off your smallest balances first and then applying your newfound cash to payoff the larger balances. The government doesn't have "small" and "large" balances. They simply owe tons and tons of money. Revel in your superiority by reading our post: Use Snowball Method Spreadsheet To Pay Off Debts

Make More Money: This means raising taxes, the government's nearly exclusive source of income. Everyone, even people who want more government programs, hates paying taxes. There's nothing pleasant about it. But it's the only way the government can raise cash. We need to pay for all those nifty services like the Do Not Call List and the Pentagon.

Spend Less: This means cutting services, like that Do Not Call List and Pentagon thing we like so much. Rarely can we agree on what to fund, let alone what to cut. In a budget of $3 trillion, canceling the government's cable service doesn't amount to much. The big dollar savings come from staunching the future cost of entitlements or scaling back defense spending, but good luck getting the needed votes in Congress.

But Isn't Some Debt Ok?

Some debt is the natural byproduct of a healthy society that reinvests in its future. Just as student loans are investments to boost future earnings potential, the government funds projects that can improve society and the economy. We can all agree that the interstate system is rather spiffy.

Economists bicker over how much debt relative to income is healthy for the economy, but most everyone accepts that a reasonable amount of debt—however much that may be—is alright, much in the same way that carrying a mortgage isn't fundamentally bad.

Public policy is the constant, painfully entertaining struggle to provide the right services at the right tax levels. When you realize that cutting spending means fewer police officers or raising the retirement age, and that making more money means raising your taxes, you begin to understand why we have a $10 trillion debt.

What Can You Do To Reduce The Debt?

The most important thing you can do is to keep paying your taxes. If you are feeling especially charitable, you can make a donation directly to the treasury. Make your check payable to the Bureau of the Public Debt, and in the memo section, write: "Gift to reduce the Debt Held by the Public." Mail your check to:

Attn: Dept G
Bureau Of the Public Debt
P. O. Box 2188
Parkersburg, WV 26106-2188

Budget of the United States Government [Government Printing Office]
(Photo: Matt McGee)

Let's dive into the text and see what renter protections Congress cooked up:

SEC. 109. FORECLOSURE MITIGATION EFFORTS.

(b) Coordination- The Secretary shall coordinate with the Corporation, the Board (with respect to any mortgage or mortgage-backed securities or pool of securities held, owned, or controlled by or on behalf of a Federal reserve bank, as provided in section 110(a)(1)(C)), the Federal Housing Finance Agency, the Secretary of Housing and Urban Development, and other Federal Government entities that hold troubled assets to attempt to identify opportunities for the acquisition of classes of troubled assets that will improve the ability of the Secretary to improve the loan modification and restructuring process and, where permissible, to permit bona fide tenants who are current on their rent to remain in their homes under the terms of the lease. In the case of a mortgage on a residential rental property, the plan required under this section shall include protecting Federal, State, and local rental subsidies and protections, and ensuring any modification takes into account the need for operating funds to maintain decent and safe conditions at the property.

Renters are explicitly allowed to keep any legal rental subsidies, so even if grandma's nine-room penthouse Park Avenue suite is foreclosed, she can keep her rent-controlled rate of $32 per month.

SEC. 110. ASSISTANCE TO HOMEOWNERS.

(b) Homeowner Assistance by Agencies-

(3) TENANT PROTECTIONS- In the case of mortgages on residential rental properties, modifications made under paragraph (1) shall ensure—

(A) the continuation of any existing Federal, State, and local rental subsidies and protections; and
(B) that modifications take into account the need for operating funds to maintain decent and safe conditions at the property.

The bailout bill is full of goodies to help keep people stay in their homes. If you're facing eviction, read our post explaining the bailout bill, and then immediately call your local HUD office to discuss your options.

Text of H.R. 1424: Emergency Economic Stabilization Act of 2008 [GovTrack]
PREVIOUSLY: Chicago Sheriff Halts Foreclosure Evictions, Won't Toss Innocent Renters
What Does The Bailout Mean For You?
(Photo: Getty)

Your 401k Should Stop Free Falling

The bill was heralded as a way to calm the markets following the 778-point mini-crash the day after the original bill failed. That plan hasn't exactly worked. But! If the bill does eventually succeed in stabilizing the markets, everyone with a 401k, IRA, mutual fund, or plain old stocks will directly benefit.

New And Improved FDIC Insurance Limits

The FDIC has upped its insurance limits from $100,000 to $250,000. A couple can now stash half a million dollars in the bank, fully insured by the federal government. The new limits even apply to credit unions.

Technically, the FDIC insurance limits are only extended through 2009 to prevent banks from contributing added billions to the insurance fund that they need in their coffers. Congress will almost definitely make the increase permanent next year, giving banks plenty of time to save up cash to contribute to the reserve fund.

AMT Extension

The dreaded AMT—the parallel tax system designed to snag at least a few tax dollars from the wealthiest Americans—will no longer impact almost 20 million Americans. Couples are now exempt up to $69,950 (an extra $3,700!), while singles are exempt up to $44,350 (an $1,850 increase!) The benefit fades out at $150,000 and $112,500, respectively.

A true fix would have involved indexing the AMT for inflation. Maybe next time.

Other Tax Credits

These apply to smaller subsets, possibly you!

• $8 billion in tax breaks for victims of natural disasters;
• $5 billion for college tuition deductions;
• $400 million to help teachers buy their own school supplies;
• $3 billion in deductions for residents who pay state and local taxes in states that don't have an income tax.

The bailout essentially doubles as an energy policy expanding and extending for eight years several energy credits that were set to expire.

• Homeowners can now claim a 30% tax credit for putting solar panels on their roofs without any limit;
• The same 30% credit applies to wind turbines and geothermal heat pumps;
• A one-year extension of breaks for energy efficient home improvements;
• Plus, the first 250,000 buyers of plug-in electric vehicles are eligible for a $7,500 tax credit.

The energy portions of the bill also throw a lot of money at companies looking to invest in clean, renewable energy, but this is about you, not them.

The bill almost failed again in the House because members of both parties wanted to pay for the tax breaks upfront. The Senate, however, only offset the energy portions of the bill. Remember to one day thank your grandkids for the tax breaks.

Mental Parity

Health insurers are now required to treat mental health issues the same as they would any physical illness. It also prevents health insurers from making their mental health benefits any more restrictive than other covered illness.

Most importantly, without mental parity, we wouldn't have a bailout bill at all. The Senate couldn't introduce a new bailout bill from scratch, so they cut and paste the bailout bill into the relatively uncontroversial mental parity bill. Creative, isn't it?

Homeowners

This is a housing bill, after all. The heart of the bill is the Troubled Asset Relief Program, or TARP. A team of mortgage specialists—possibly the people who got us into this mess but can now benefit from hindsight—will scoop up questionable mortgages held by banks. Toss out the skunk and the room won't stink anymore, right? Presumably, the theory goes, this will allow everybody to calm down and get back to business as usual. Banks will once again lend to businesses so they can meet payroll, consumers will be able to borrow money for cars, homes, and school.

Beyond buying up securitized mortgage, the government may also buy whole mortgages on a case-by-case basis. Even if the government doesn't own your home, the Treasury and other federal agencies have been empowered to modify loans to minimize foreclosures.

Many House members wanted to empower bankruptcy judges to rewrite predatory mortgages altogether, a proposal that was rejected by the Senate.

Homeowners who are able to reduce their mortgages won't owe tax on the difference, as they normally would. And if you're a renter living in foreclosed home, you can stay, so long as you stick to the terms of your lease.

If you are at risk of foreclosure, the Department of Housing and Urban Development has several tips for staying out of foreclosure:

1. Don't ignore the problem!
2. Immediately call your lender and try to work out a solution.
3. Open mail from your lender because it may contain useful information to help avoid foreclosure.
4. Start reading up on your rights and foreclosure laws.
5. You have options to help avoid foreclosure. Study them.
6. Call (800) 569-4287 to find a HUD-approved housing counselor.
7. Spend more on your mortgage, less on everything else.
8. Sell-off assets that you don't need, like that spare car or jewelry.
9. Don't pay anyone to help you avoid foreclosure. They are scammers.
10. Watch out for anyone promising to save your home if you sign a document. You are signing away your house to scammers.

We've written many posts expanding on these topics, including:
4 Things To Try Before Foreclosure
Consumers Are "Unaware" That Lenders Can Help Them Avoid Foreclosure
Lenders Freeze Mortgages Rates For Some
What To Do When Rental Gets Foreclosed?
Mother Saves Family From WaMu Foreclosure With Consumerist's Executive Contact Info
Halt Foreclosure Proceedings By Challenging Your Bank's Claim To Your House
New Ruling Means Banks Could Have Tough Time Foreclosing
32 More Foreclosures Dismissed For Lack Of Documentation
Freddie Mac: Don't Let Fraudsters Steal Your Home
Watch Out For Equity Stripping Scams
How To Save Your Home from Foreclosure
Beware The "Fannie Mae" Prize Draw Scam

HUD also has a new program that can help people transition from predatory mortgages to FHA-insured 30-year fixed mortgages. You qualify if:

• Your troubled home is your primary residence and you don't own a summer home.
• Your mortgage was born before 2008, and you have made at least six payments.
• You need help paying your existing mortgage.
• As of March 2008, the mortgage costs more than 31% of your gross monthly income.
• You haven't been convicted of fraud in the past 10 years or lied on your mortgage application.

Yes, This Affects You

There's been a lot written about the bailout and whether it will work. One article in particular from the New York Times captured poignantly the potential price of apathy and inaction:

In 1929, Meyer Mishkin owned a shop in New York that sold silk shirts to workingmen. When the stock market crashed that October, he turned to his son, then a student at City College, and offered a version of this sentiment: It serves those rich scoundrels right.

A year later, as Wall Street’s problems were starting to spill into the broader economy, Mr. Mishkin’s store went out of business. He no longer had enough customers. His son had to go to work to support the family, and Mr. Mishkin never held a steady job again.

Frederic Mishkin — Meyer’s grandson and, until he stepped down a month ago, an ally of Ben Bernanke’s on the Federal Reserve Board — told me this story the other day, and its moral is obvious enough. Many people in Washington fear that the country is starting to spiral into a terrible downturn. And to their horror, they see the public, and many members of Congress, turning into modern-day Meyer Mishkins, more interested in punishing Wall Street than saving the economy.

Let's hope this thing works.

Lesson From a Crisis: When Trust Vanishes, Worry [The New York Times]
Rescue Sweetened With Tax Incentives [The Washington Post]
Bailout Brings With It Diverse Perks [The New York Times]
Details about the Bailout Plan [Daily Kos]
Tips for Avoiding Foreclosure [HUD]
Hope For Homeowners [HUD]

(Photo: Getty)

NEWMAN: (peering at bottle label) What is this 'MI, ten cents'?
KRAMER: That's Michigan. In Michigan you get ten cents.
NEWMAN: Ten cents!?
KRAMER: Yeah.
NEWMAN: Wait a minute. You mean you get five cents here, and ten cents there. You could round up bottles here and run 'em out to Michigan for the difference.

KRAMER: No, it doesn't work.

NEWMAN: What d'you mean it doesn't work? You get enough bottles together...

KRAMER: Yeah, you overload your inventory and you blow your margins on gasoline. Trust me, it doesn't work.

S 3055 [NYT] (PDF)
Text version [Open Congress]
(Photo: Getty)

The bailout will be expanded to pension plans, local governments, and community banks. Here are the details as reported by Reuters:

• The $700 billion in buying power would be doled out by Congress in stages. After the first $250 billion is authorized, the President could request another $100 billion. The final $350 billion could be cleared by a further act of Congress.
• Washington will take a stake in companies helped through the program so that taxpayers can share in the profits if those companies get back on their feet.
• A new congressional panel would have oversight power and the Treasury secretary would report regularly to lawmakers in two elements of a multi-level oversight apparatus.
• Compensation limits would be set for the chiefs of participating firms to prevent excessive pay and "golden parachutes" for those who might tap government aid and then quit.
• The federal government may stall foreclosure proceedings on home loans purchased under the plan.
• Alongside the plan to buy securities outright, the Treasury Department will conceive an alternative insurance program that would underwrite troubled loans and would be paid for by participating companies.
• If the government has taken losses five years into the program, the Treasury Department will draft a plan to tax the companies that took part to recoup taxpayer losses.

Both parties will now release their Whips into the horde of election-weary members. Expect an exciting (yes, exciting) vote late tonight before the Asian markets open.

Lawmakers Reach Tentative Bailout Deal [WSJ]
PREVIOUSLY: BREAKING: Congress Has A Bailout Plan
(Photo: Associated Press)

(Thanks to everyone who sent this in!) (Photo: zncjmom)

• Cut taxes for working families and the middle class.
• Get rid of capital gains tax for small-businesses and entrepreneurs.
• Some kind of rollback on the changes in bankruptcy law in '05 that made it harder for people to declare personal bankruptcy.
• Get rid of unproductive tax loopholes that only benefit corporations.
• Lower health insurance premiums for all.
• Insure the uninsured with the same level of coverage Congress gives itself
• Reduce dependence on foreign oil in 10 years.
• $150 billion for renewable energy solutions and next-generation biofuels
• More sick days and paid time off.

What do you think? Can he deliver?

(Photo: BohPhoto)

WHO: Barack Obama
WHAT: Shortly before the opening of the Democratic National Convention, Obama assured America that Hillary was always a viable candidate in his VP search.
WHERE: Obama Dismisses Worries About Clinton Fallout [New York Times]
THE QUOTE: "'I've tried not to have long discussions about short lists, long lists...But I’ve said publicly before and I will repeat again that Senator Clinton would be on anybody’s short list, so I took her very seriously."

"Taking it seriously" is a phrase companies (and now, presidential candidates) use over and over again to appear contrite or thoughtful without actually saying or doing anything. Our series of posts documenting the phrase's attempts recurrences are our attempt to question how much seriousness-taking is actually going on.

(Thanks to Michael Belisle!)

(Photo: BohPhoto)

The commissioner, a 2006 President Bush appointee, told the Business & Media Institute the Fairness Doctrine could be intertwined with the net neutrality battle. The result might end with the government regulating content on the Web, he warned. McDowell, who was against reprimanding Comcast, said the net neutrality effort could win the support of “a few isolated conservatives” who may not fully realize the long-term effects of government regulation.

“I think the fear is that somehow large corporations will censor their content, their points of view, right,” McDowell said. “I think the bigger concern for them should be if you have government dictating content policy, which by the way would have a big First Amendment problem.”

“Then, whoever is in charge of government is going to determine what is fair, under a so-called ‘Fairness Doctrine,’ which won’t be called that – it’ll be called something else,” McDowell said. “So, will Web sites, will bloggers have to give equal time or equal space on their Web site to opposing views rather than letting the marketplace of ideas determine that?”

McDowell's scare tactics aren't new. Conservative bloggers have tried to sabotage the net neutrality debate by making a false connection to the long-dead fairness doctrine, which required regulated media outlets to give equal time to opposing views. If the government penalizes Comcast for crippling the internet, the argument goes, well then that friends is regulation; and if the government can regulate Comcast, it must, obviously, regulate the rest of the internet immediately. This kindles the fear of god in conservative talk show hosts like Rush Limbaugh, who would rather stay silent than let Al Franken take up his airtime calling him a big fat idiot.

In the spirit of fairness, Commissioner McDowell is more than welcome to respond, provided he respects our own regulations.

McDowell: Fairness Doctrine, Net Neutrality Linked [Broadcasting & Cable]
FCC Commissioner: Return of Fairness Doctrine Could Control Web Content [Business & Media Institute]
(Photo: Getty)

CreditCards.com reports that FICO announced it changed its mind during Congressional testimony yesterday.

Back in the day, adding an authorized user to your account was mainly used by parents to help their kids develop better credit scores. As the housing bubble ramped up, private credit score boosting companies would "rent" authorized user slots to strangers with poor credit so they could qualify for loans they shouldn't have. It was a contributing factor to the subprime meltdown. When FICO developed a new scoring system, FICO 08, in direct response to the credit checking industry's failure to accurately check and score credit, they said they were going to kill piggbyacking.

"Fortunately, we were able to come up with technology that makes it much harder to game the system," said Mike Campbell, FICO COO.

That's good news for responsible consumers looking to get better rates on their credit cards, mortgages, and other loans.

'Piggybacking' gets stay of execution from FICO [CreditCards.com]
(Photo: Special*Dark)

As of June 30, the closed banks had total assets of $3.6 billion. That's down from $4.1 billion six months earlier. Most of the assets are in 1st National while First Heritage accounts for $254 million.

Calls to 1st National were referred by a receptionist to Joe Martony, an executive vice president in Scottsdale, Ariz. Martony didn't return repeated calls to his office.

In Nevada, 1st National has 10 branches and employs about 350 people. Five of its branches are in Las Vegas, three are in the Reno-Sparks area, one is in Carson City and one is in Laughlin. Notices of the closure were being posted late Friday.

Fifteen 1st National branches are in Arizona, while Newport Beach-based First Heritage has three branches in Southern California.

Customers will be able to access their cash over the weekend by writing checks, or through ATMs and debit cards. Because Mutual of Omaha has purchased the banks in their entirely, all former customers, including those who exceeded FDIC insurance limits, will recover the full value of their accounts.

90 banks remain on the FDIC's problem list, and chairwoman Sheila Bair has warned us to expect more bank failures—but consumers have absolutely nothing to worry about as long as they keep their accounts within the FDIC's insurance limits.

FDIC takes over 2 more banks, closing 28 branches [AP]
Two More Banks Fail [The Wall Street Journal]
(AP Photo/Nevada Appeal, Brad Horn)

Last week, the Labor Department reported the fastest inflation since 1991 — 5 percent for June compared with a year earlier. Energy costs soared nearly 25 percent. The price of food rose more than 5 percent.

So the minimum wage hike is "a drop in the bucket compared to the increases in costs, declining labor market, and declining household wealth that consumers have experienced in the past year," Lehman Brothers economist Zach Pandl said.

The new minimum is less than the inflation-adjusted 1997 level of $7.02, and far below the inflation-adjusted level of $10.06 from 40 years ago, according to a Labor Department inflation calculator.

25 states require employers to pay more than the national minimum wage, but 1.7 million Americans still rely on the federal government to set a wage floor. Only 20% of them are teenagers.

The nation's top financial minds can't tell us how the minimum wage effects the economy, but we're sure our beloved cadre of ever-cheerful commenters not only knows for certain, but is willing to share.

Federal minimum wage rises to $6.55 today [AP]
(AP Photo/ Ellen Wznick)

The Senator recently criticized the Office of Thrift Services for allowing banks to underwrite cruddy mortgages, and specifically mentioned that IndyMac might be in trouble. Afterwards, the bank's depositors started a run on the bank, withdrawing up to $100 million per day. According to the director of OTS, a political appointee: “The senator made comments in his letter questioning the viability of the institution. When a member of the United States Senate makes such a statement, it frightens depositors.”

Schumer responded:

If OTS had done its job as regulator and not let IndyMac's poor and loose lending practices continue, we wouldn't be where we are today. Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs.

Now, now, Senator, man up for your actions. Your persistent questions about the subprime meltdown are obviously what got us into this mess in the first place.

The bank's failure will cost the FDIC around $10 billion. IndyMac customers, like the woman who pointlessly banged on the bank's doors pleading, "please, please, I want to take out a portion," will be able to access their money via ATMs over the weekend, and will have full access by next week. The 10,000 customers who collectively deposited $1 billion above FDIC insurance limits will lose half of their uninsured funds.

The latest bank failure is a reminder that your FDIC insured bank account will always be safe, but only if you keep your deposits within FDIC limits.

Regulators Seize Mortgage Lender [NYT]
IndyMac Bank seized by federal regulators [L.A. Times]
IndyMac Seized by U.S. Regulators; Schumer Blamed for Failure [Bloomberg]
(Photo: The Associated Press)

Spherion had switched life insurance providers without informing Thomas. Under the new policy, employees had to work for one full day to activate their coverage. Spherion never mentioned this to Thomas, and repeatedly assured him that he didn't need to do anything to retain his coverage.

His widow said he easily could have worked a day if that was what it took to activate the new policy. Spherion could have waived the one-day-of-work provision, as it did for other employees but not for Amschwand.

When Thomas died, because the policy had never been formally activated, Spherion refunded his insurance premiums and told his widow she would receive nothing else.

The story has played out often under the federal Employee Retirement Income Security Act. Designed to protect employee benefits, the law has been used by employers as a shield against suits.

Federal appeals courts, interpreting Supreme Court decisions dating to 1993, consistently have said companies that offer health, life and retirement benefits under ERISA cannot be sued for large amounts of money, or damages. Instead, they can be sued only for typically smaller sums such as Amschwand's insurance premiums.

Several federal judges have bemoaned the unfairness even as they have felt constrained to rule in favor of employers.

"The facts ... scream out for a remedy beyond the simple return of premiums," Judge Fortunato Benavides of the New Orleans-based 5th U.S. Circuit Court of Appeals said in the Amschwand case. "Regrettably, under existing law it is not available."

The Supreme Court recently refused to hear Melissa's case. Congress has refused to act. Insurers continue scrape up lucre, and consumers are left to suffer.

Employers use federal law to deny benefits [AP]
Write Your Senator
Write Your Representative
PREVIOUSLY: How To Write To Congress
(Photo: Getty)

As an idea, risk-based pricing isn't all that bad: consumers pay for credit based on their risk. But with credit cards, only interest rates and late fees are arguably "risk-based."

Interest rates are a terrible way to counter risk. Responsible cardholders never carry balances, so fiddling with their interest rates mean nothing. Kicking consumers with retroactive penalty APRs means that creditors failed to properly assess the risk in the first place; if creditors were truly risk based, they would respond to increased risk by slashing credit lines.

Late fees are equally terrible. Most creditors have three tiers of late fees. It doesn't matter if you're late by one hour or one month, even though the two clearly show different degrees of risk.

Or as Levitin puts it:

Suffice it to say that it is a real stretch to say that credit card pricing overall is risk-based; certain elements of card pricing are partially risk-based, but many are not. Moreover, there is no empirical evidence connecting the advent of risk-based pricing to lower costs of credit to creditworthy consumers or greater credit availability to subprime borrowers. There is a study that correlates late fees and overlimit fees with banks' aggregate cardholder risk, as well as with banks' market power, but there is no research connecting fee levels, which are often one-size fits all, with individual cardholder risk. The putative benefits of risk-based pricing depend on pricing being sensitive to individual level, not aggregate level risk, so that low risk cardholders don't subsidize high risk cardholders.

In any case, the benefits that the card industry attributes to risk-based pricing are explained at least as well by other factors: lower costs of funds explain lower interest rates to creditworthy consumers (issuers’ annual net interest margin has been fairly static for the last two decades), and securitization is at least as good of an explanation for the expansion in subprime lending.

So why do credit card companies pretend to use risk-based pricing? To evade government regulation. Professor Levitin makes a convincing six-point case for the government to lasso creditors with powerful regulations, but we'll let you read the full paper for yourself to see why.

The Credit Cardholders' Bill of Rights [Credit Slips]
All But Accurate: A Critique of the American Bankers Association's Study on Credit Card Regulation [SSRN]
(Photo: Getty)

The California Public Utilities Commission and state officials believed that crisis-era pacts with San Diego-based Sempra Energy and others were costing consumers an extra $1.45 billion to $3.08 billion — an amount they had hoped to return to electricity customers, possibly by reducing or eliminating future charges.

A Washington utility had hoped to get relief from a nine-year power contract with Morgan Stanley Capital Group. Under that contract, the Snohomish County Public Utility District is paying $105 a megawatt-hour, well above the historic norm for the Pacific Northwest of $24 a megawatt-hour, but also well under the $3,300 a megawatt-hour hit at the peak of the energy crisis that spread beyond California's borders, according to the court's synopsis.

Justice Scalia scolded the states for whining about "buyer's remorse." Roger Berliner, a lawyer for Nevada utility Sierra Pacific Resources, applauded the Justice for his unrivaled ability to blind himself to reason:

"It was the failure of regulators to protect consumers from market manipulation" that caused the utilities to overpay for power. I don't think the court appreciated the extent to which the dysfunction in the market made it impossible for there to be just and reasonable contracts."

Supreme Court deals blow to states on electricity [Los Angeles Times]



(Photo: Getty)

• ETFs should be relative to the phone's cost; a $5 phone should have a lower fee than a $50
• ETFs should go down month by month
• Contract lengths should be "reasonable" (whatever that means)
• Extended a contract shouldn't refresh the ETF (no shit, they've already recouped the cost of the cellphone)
• People should be able to get their first bill and look it over before the ETF goes into effect

FCC chief lays out plan for cell phone fees [Washington Post]

"The government will never, never accept such penalty amounts," then-Nextel marketing vice president Scott Wiener wrote in an e-mail in January 2004...A spokesman for Sprint-Nextel, John Taylor, said the company determined it could not assess the termination fees in its federal contract because it would have been against the law.

Why do consumers put up with these fees, but the government won't? Why is it illegal to charge the government ETFs, but not us? Perhaps Sprint thought that if they started charging the government ETFs, someone would get wise and question the fees, and anti-ETF legislation would be enacted...

Government relieved of cancelled cellphone fees [USAToday] (Thanks to Jason!)

Our favorite polling question takes aim at people who support mandatory binding arbitration, but don't quite know what they're supporting:

A majority of those who were initially supportive or unsure of binding arbitration disapprove of arbitration when important information is given about common provisions in consumer contracts. With added information, Americans overwhelmingly disapprove of binding arbitration.

Big shift among binding arbitration supporters. Those who said they approve of, or were not sure about binding arbitration were presented the three following facts:

1. The arbitrator who decides the outcome of the dispute will be selected by the company
2. The consumer may never take legal action against the company over the dispute
3. Binding arbitration applies even in cases where the consumer has been seriously injured by the product or service

When presented with this information, two in three (66%) disapprove of binding arbitration and only one in five (21%) approve. Among those who initially said they were unsure, disapproval is very high (64% disapprove, 6% approve). Disapproval is high even among those who initially approved of arbitration (67% disapprove, 28% approve).

After learning the specifics of contract provisions, Americans overwhelmingly are against binding arbitration. When initial and final disapproval ratings are combined, binding arbitration loses by more than eight to one (81% initial/final disapproval, 10% final approval).

Congress may be unable to do anything about our unpopular President, but 64% of us want them to get off their asses and pass the Arbitration Fairness Act. When they return tomorrow, rested from their holiday break, give 'em a call and tell them to channel our collective hatred of mandatory binding arbitration into action.

New Poll: Americans Say "No Thanks" To Binding Arbitration [Consumer Law & Policy Blog]
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One local taxpayer, who asked not to be identified, reported that he had discovered an unexpected deposit of $1,800 in his bank account. He said a review of his bank records revealed that it was a deposit from the IRS bearing another taxpayer's Social Security number. He said he contacted the IRS and was told by an agent that the deposit was one of 15,000 misrouted checks sent out incorrectly as a result of a computer programming glitch.

[Internal Revenue Service spokesman Kevin McKeon] said he could not confirm that figure or that a computer problem was responsible.

The government will want its cash back, so don't giddily spend any unexpected stimulus money. Paper checks can be mailed back to the IRS, while those with direct deposit should report the error to their bank.

IRS: Some stimulus checks sent to wrong accounts [Newsday]
(Photo: Joe Shlabotnik)

Here's what happened: Senate Majority Leader Harry Reid (D-NV) filed a motion for cloture—Senate-speak for shut-up and stay on topic—which requires a supermajority of 60 votes for approval. Without cloture, Senators can yack forever like a bunch of riled-up monkeys. The vote on cloture failed 49-42, empowering Republicans to filibuster our beautiful piece of legislation into the ground.

What protections have Senate Republicans stolen from you? Let's look at Senator Rockefeller's (D-WV) substitute amendment sporting the new, improved Passenger's Bill of Rights:

TITLE IV—AIRLINE SERVICE AND SMALL COMMUNITY AIR SERVICE IMPROVEMENTS

SEC. 401. AIRLINE CONTINGENCY SERVICE REQUIREMENTS.

(a) IN GENERAL.—Chapter 417 is amended by adding at the end the following:

SUBCHAPTER IV—AIRLINE CUSTOMER SERVICE ``§.41781. AIRLINE CONTINGENCY SERVICE REQUIREMENTS.

(a) IN GENERAL.—Not later than 60 days after the date of enactment of the Aviation Investment and Modernization Act of 2008, each air carrier shall submit a contingency service plan to the Secretary of Transportation for review and approval. The plan shall require the air carrier to implement, at a minimum, the following practices:

(1) PROVISION OF FOOD AND WATER.—If the departure of a flight of an air carrier is substantially delayed, or disembarkation of passengers on an arriving flight that has landed is substantially delayed, the air carrier shall provide—

(A) adequate food and potable water to passengers on such flight during such delay; and

(B) adequate restroom facilities to passengers on such flight during such delay.

(2) RIGHT TO DEPLANE.—

(A) IN GENERAL.—An air carrier shall develop a plan, that incorporates medical considerations, to ensure that passengers are provided a clear timeframe under which they will be permitted to deplane a delayed aircraft. The air carrier shall provide a copy of the plan to the Secretary of Transportation, who shall make the plan available to the public. In the absence of such a plan, except as provided in subparagraph (B), if more than 3 hours after passengers have boarded a flight, the aircraft doors are closed and the aircraft has not departed, the air carrier shall provide passengers with the option to deplane safely before the departure of such aircraft. Such option shall be provided to passengers not less often than once during each 3-hour period that the plane remains on the ground.

(B) EXCEPTIONS.—Subparagraph (A) shall not apply—

(i) if the pilot of such flight reasonably determines that such flight will depart not later than 30 minutes after the 3 hour delay; or

(ii) if the pilot of such flight reasonably determines that permitting a passenger to deplane would jeopardize passenger safety or security.

(C) APPLICATION TO DIVERTED FLIGHTS.—This section applies to aircraft without regard to whether they have been diverted to an airport other than the original destination.

(b) POSTING CONSUMER RIGHTS ON WEBSITE.—An air carrier holding a certificate issued under section 41102 that conducts scheduled passenger air transportation shall publish conspicuously and update monthly on the Internet website of the air carrier a statement of the air carrier's customer service policy and of air carrier customers' consumer rights under Federal and State law.

(c) REVIEW AND APPROVAL; MINIMUM STANDARDS.—The Secretary of Transportation shall review the contingency service plan submitted by an air carrier under subsection (a) and may approve it or disapprove it and return it to the carrier for modification and resubmittal. The Secretary may establish minimum standards for such plans and require air carriers to meet those standards.

(d) AIR CARRIER.—In this section the term `air carrier' means an air carrier holding a certificate issued under section 41102 that conducts scheduled passenger air transportation.''.

(b) REGULATIONS.—Not later than 60 days after the date of enactment of this Act, the Secretary of Transportation shall promulgate such regulations as the Secretary determines necessary to carry out the amendment made by subsection (a).

So what's different from the old versions?

• Compliance: Airlines now have 60 days, not 90 days, to get their act together and slap together a contingency plan;
• Advertising: Congress wants this Bill of Rights placed "conspicuously" on each arline's website. No burying the Bill of Rights in a site index;
• Not Just For Departures: The substitute amendment now covers delayed arrivals.

We're not wild about the absence of civil penalties, or empowering pilots to stall if they "reasonably determine" that take-off is less than 30 minutes away. As compensation for these losses, Senator Rockefeller tossed in this gem of a sweetener:

SEC. 402. PUBLICATION OF CUSTOMER SERVICE DATA AND FLIGHT DELAY HISTORY.

Section 41722 is amended by adding at the end the following:

(f) CHRONICALLY DELAYED FLIGHTS.—

(1) PUBLICATION OF LIST OF FLIGHTS.—An air carrier holding a certificate issued under section 41102 that conducts scheduled passenger air transportation shall publish and update monthly on the Internet website of the air carrier, or provide on request, a list of chronically delayed flights operated by the air carrier.

(2) DISCLOSURE TO CUSTOMERS WHEN PURCHASING TICKETS.—An air carrier shall disclose the following information prominently to an individual before that individual books transportation on the air carrier's Internet website for any flight for which data is reported to the Department of Transportation under part 234 of title 14, Code of Federal Regulations, and for which the air carrier has primary responsibility for inventory control:

(A) The on-time performance for the flight if it is a chronically delayed flight.

(B) The cancellation rate for the flight if it is a chronically canceled flight.

(3) CHRONICALLY DELAYED; CHRONICALLY CANCELED.—The Secretary of Transportation shall define the terms `chronically delayed flight' and `chronically canceled flight' for purposes of this subsection.''.

If an flight is chronically late, not only must the airline broadcast their shame on their website, but they must also warn travelers before selling tickets that their flight will likely be delayed.

The Passenger's Bill of Rights was tacked onto a much larger bill reauthorizing the FAA. Members of Congress could rip out the Bill of Rights and and pass it separately, but the Congressional calendar crowds up before elections, and our important little bill has little hope of standing out.

Like a Price Is Right Danger Price loser, we don't get the contingency plans; we don't get the food or water; and we don't get the chronically delayed flight notifications. We get nothing. Thanks, Senate Republicans!

Air safety, passenger rights bill hits dead end in Senate [AP]
On the Cloture Motion (Motion to Invoke Cloture on the Rockefeller Amdt. No. 4627 (Subst.) to H.R. 2881 ) [U.S. Senate]
(Photo: Getty)

In a surprising departure from the norm, the government is actually cracking down on some of the more egregious credit card practices. Usually they say that including more tiny print is sufficient enough consumer protection. Some things they're addressing: creating a mandatory minimum payment period, forbidding double-cycle billing, and prohibited APR from being raised on an outstanding balance. The proposals are simply that, proposals, at this point, with finalization expected by year's end, and we'll see what happens after all the exceptions and industry lobbying groups get factored in the equation. The specific anti-consumer credit card practices getting attacked, inside...

From the Office of Thrift Supervision press release:

1. Reasonable Time to Make Payments – Institutions would be prohibited from treating a payment as late unless consumers have been provided with a reasonable amount of time to make payment. The proposed rule would create a safe harbor for institutions that adopt reasonable procedures to ensure that periodic statements are mailed or delivered at least 21 days before the payment due date.

2. Payment Allocation. – When different annual percentage rates apply to different balances, institutions would be prohibited from allocating any amounts paid in excess of the minimum payment in a manner that is less beneficial to consumers than one of three methods. For example, institutions could apply the entire amount first to the balance with the highest annual percentage rate or split the amount equally among the balances. When an account has a discounted promotional rate balance or a balance on which interest is deferred, institutions would be required to use payment allocation practices that give consumers the full benefit of the discounted rate or deferred interest plan.

3. Interest Rate Increases on Outstanding Balances – Institutions would be prohibited from increasing the annual percentage rate on an outstanding balance unless certain exceptions apply. For example, an institution could increase the variable rate if a promotional rate has expired or if the cardholder’s payment is delinquent (e.g., the minimum payment has not been received within 30 days of the due date).

4. Fees from Credit Holds – Institutions would be prohibited from assessing a fee if a consumer exceeds the credit limit on an account solely due to a hold placed on the available credit – unless the amount of the transaction would also have exceeded the credit limit.

5. Balance Computation Methods (“Double Cycle Billing”) – Institutions would be prohibited from computing finance charges on outstanding balances based on balances in billing cycles preceding the most recent billing cycle. The proposed rule would prohibit institutions from reaching back to prior billing cycles when calculating the amount of interest charged in the current cycle, a practice that is sometimes referred to as two- or double-cycle billing.

6. Fees/Deposits Charged to the Account for the Issuance of Credit – Institutions would be prohibited from charging to the credit card account fees or security deposits for the issuance or availability of credit (such as account-opening fees or membership fees) if those fees or deposits utilize the majority of the available credit on the account. In addition, the proposal would require that fees or deposits that exceed 25% of the credit limit be spread over the first year, rather than charged as a lump sum at account opening. Institutions would not be prohibited from issuing credit cards that require a consumer to pay a security deposit if that deposit is not charged to the account. Such an approach can be a means of repairing or building credit.

7. Firm Offers of Credit – Institutions making firm offers of credit that advertise multiple annual percentage rates or credit limit ranges would be required to disclose in the solicitation the factors that determine whether a consumer will qualify for the lowest annual percentage rate and highest credit limit advertised.
For Overdraft Programs:

1. Opt Out – Institutions would be prohibited from assessing a fee for paying an overdraft unless they provide a consumer with: the right to opt out of payment of overdrafts; a reasonable opportunity to exercise the opt-out; and the consumer does not opt out. The proposed opt-out right would apply to all transactions that overdraw an account regardless of the whether the transaction is, for example, a check, an automated clearinghouse (ACH) transaction, an ATM withdrawal, a recurring payment, or a debit card purchase at a point of sale.

2. Fees from Debit Holds – Institutions would be prohibited from assessing an overdraft fee if the overdraft is caused solely by a hold on funds that exceeds the actual purchase amount of the transaction, unless this purchase amount would have also caused the overdraft.

Summary of Practices Addressed in Proposed Rule on Unfair or Deceptive Acts or Practices [Press Release]
Fed to Pursue Aggressive Checks on Credit Cards [Washington Post] (Thanks to Brandon!)
OTS publishes summary of unfair credit card rule proposal [U.S. PIRG Consumer Blog]

(Photo: samwilkinson)

Let's see where the bill currently stands:

`Sec. 42301. Emergency contingency plans

`(a) Submission of Air Carrier and Airport Plans- Not later than 90 days after the date of enactment of this section, each air carrier providing covered air transportation at a large hub airport or medium hub airport and each operator of a large hub airport or medium hub airport shall submit to the Secretary of Transportation for review and approval an emergency contingency plan in accordance with the requirements of this section.

`(b) Covered Air Transportation Defined- In this section, the term `covered air transportation' means scheduled passenger air transportation provided by an air carrier using aircraft with more than 60 seats.

`(c) Air Carrier Plans-

`(1) PLANS FOR INDIVIDUAL AIRPORTS- An air carrier shall submit an emergency contingency plan under subsection (a) for—

`(A) each large hub airport and medium hub airport at which the carrier provides covered air transportation; and

`(B) each large hub airport and medium hub airport at which the carrier has flights for which it has primary responsibility for inventory control.

`(2) CONTENTS- An emergency contingency plan submitted by an air carrier for an airport under subsection (a) shall contain a description of how the air carrier will—

`(A) provide food, water that meets the standards of the Safe Drinking Water Act (42 U.S.C. 300f et seq.), restroom facilities, cabin ventilation, and access to medical treatment for passengers onboard an aircraft at the airport that is on the ground for an extended period of time without access to the terminal;

`(B) allow passengers to deplane following excessive delays; and

`(C) share facilities and make gates available at the airport in an emergency.

`(d) Airport Plans- An emergency contingency plan submitted by an airport operator under subsection (a) shall contain a description of how the airport operator, to the maximum extent practicable, will provide for the deplanement of passengers following excessive delays and will provide for the sharing of facilities and make gates available at the airport in an emergency.

The Senate could strengthen the bill by looking to an earlier House version. "Extended period of time" should be strictly defined as three hours, and once that extended period of time expires, airlines should be forced to deplane passengers. Failing to provide a strict time frame gives airlines too much undeserved responsibility to regulate themselves, a failing strategy that made a Passenger's Bill of Rights necessary in the first place.

Work on the bill starts tomorrow at 4:30 p.m. We'll be keeping our eye on the Senate to see what happens.

FAA Reauthorization Act Of 2007—Motion To Proceed [GovTrack]
H.R. 2881: FAA Reauthorization Act of 2007 [GovTrack]
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Weak Passengers Bill Of Rights Moves Through Congress
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"We really do literally have five or six major corporations in this country that determine for the most part what Americans see, hear and read every day," said Sen. Byron L. Dorgan (D-N.D.), the lead sponsor of the resolution. "I don't think that's healthy for our country."

Dorgan has 25 senators behind his bill, including Democratic presidential candidates Hillary Rodham Clinton of New York and Barack Obama of Illinois, and is confident it will pass the Senate. A similar bill has been proposed in the House.

The Bush administration has threatened a veto, but Dorgan could try to attach the resolution to a must-pass bill to make it harder for the White House to block.

Senate panel moves against FCC media-ownership rules [L.A. Times]
S.J. 28 - A Joint Resolution Disapproving The Rule Submitted By The Federal Communications Commission With Respect To Broadcast Media Ownership [THOMAS]
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Alpha Consumer, who was at the hearing, recounts:

[Susan Wones of Denver said one] of her Chase credit cards jumped from a 14.9 to 25 percent interest rate after she got close to, but didn't exceed, her $6,000 credit limit. She said the interest rate on a second Chase card similarly shot up after she went $15 over her credit limit in the middle of a billing cycle, even though the beginning and ending balances were under the limit.

The NFL does not allow one team, in the midst of the fourth quarter, to unilaterally move their end zone 20 yards in their favor just because they don't like the point spread. The rules are laid out before the kickoff, and the umpires enforce the same rules for both home and visiting teams for the whole contest. It's time for legislation at the federal level that tells the credit card industry, "Game Over" to unilateral, one-sided, rule changes.

As a registered Republican, it has typically been my philosophy that business and commerce flourish and perform better with minimal government interference. However, when an industry sector proves time and again that it is unable to police itself and behave and engage in fair and ethical trade practices, legislative intervention is required.

"credit card abuses faced by our middle class families add insult to injury ...charging interest on penalty fees is wrong...contracts are totally incomprehensible...if this problem is going to be resolved it is going to be resolved here in Congress...The fed is looking at disclosures, it's (looking is) endless."

The Credit Cardholders' Bill of Rights is a wonder-packed piece of legislation that would:

• Ban arbitrary rate increases
• Force creditors to provide 45 days notice of any rate increase
• Ban double-cycle billing
• Empower cardholders to set limits on their cards and ban over-the-limit fees once that ceiling is reached
• Ban excessive fees
• Ban lending to subprime borrowers
• Require creditors to mail bills at least 25 days before the due date, instead of 14 days as currently required
• Require creditors to apply payments first towards high interest items

The Credit Cardholders' Bill of Rights: Providing New Protections for Consumers [House Financial Services Committee]
Live blog from credit card hearing [U.S. PIRG]
Credit Card vs. Consumer [Alpha Consumer]
HR 5244 - The Credit Cardholder's Bill Of Rights [THOMAS]
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Credit Card Victims Muzzled, Ordered To Release Financial Histories Before Sharing Their Experiences
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...may include some good ideas, but it is largely a re-hashed, unsubstantiated industry wish-list that seeks to eliminate state enforcement authority over insurance, securities and other financial products, without even guaranteeing strong consumer protection at the federal level.

The FTC alleged that consumers lured to ValueClick's Web sites by these promises were led through a maze of expensive and burdensome third-party offers - including car loans and satellite television subscriptions - which they were required to "participate in" at their own expense, in order to receive the promised "free" merchandise. The FTC charged that ValueClick's use of deceptively labeled e-mail offering free gifts and its failure to disclose that consumers must expend substantial sums of money to obtain the promised "free" merchandise violates the CAN-SPAM Act and the FTC Act.

The FTC also charged that ValueClick, Hi-Speed Media, and E-Babylon, misrepresented that they secured customers' sensitive financial information consistent with industry standards. The FTC alleged the companies published online privacy policies claiming they encrypted customer information, but either failed to encrypt the information at all or used a non-standard and insecure form of encryption. The agency also charged that several of the companies' e-commerce Web sites were vulnerable to SQL injection, a commonly known form of hacker attack, contrary to claims that the companies implemented reasonable security measures.

ValueClick to Pay $2.9 Million to Settle FTC Charges [FTC]