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March 2008

The Federal Reserve may soon become much more powerful if Treasury Secretary Henry Paulson has his way. Earlier today, he released the “Blueprint for a Modernized Financial Regulatory Structure,” which includes a number of recommendations designed to take power away from the U.S. Securities and Exchange Commission.

Paulson’s recommendations

The Federal Reserve should be able to increase liquidity by lending directly to “non-depository institutions” (such as investment banks), and to facilitate this, the Fed will have access to information at the investment banks. The government would have the power to perform on-site inspections if they so desire in an effort to quickly lend to the businesses if necessary.

The Eccles Building, situated on Constitution Avenue in Washington, DC.Paulson wants the Federal Reserve to create a Mortgage Origination Commission to oversee and rate how states license and regulate lenders and create minimum qualification standards for licensing.

The Treasury Secretary believes the Federal Reserve should regulate state-chartered banks, payment systems, and insurance companies. The SEC would merge with the U.S. Commodities Futures Trading Commission to oversee traditional investments as well as some of the more complicated structures.

With these suggestions implemented, the government will regulate “business conduct” ensuring consumer protection, including rules for writing term disclosures across the board of financial products.


Nomi Prins points out that the Federal Reserve has spectacularly failed recently with its attempts to stimulate and regulate, so providing more power to the agency is a step in the wrong direction.

All of the plan’s suggestions are cosmetic. Instead, let’s please have a serious discussion about the nature of the banking system structure itself: its complexity, its responsibility, and the proper role of the federal government in regulating it. The United States has had such a debate before, leading up to the landmark 1933 Glass Steagall Act. We can and should have such a sweeping debate again.

Traditional small-government Republicans would most likely agree with Nomi. The Democrats are critical of the plan as well, saying the proposal doesn’t go far enough to provide direct help to consumers and to hold investment banks as accountable as depository banks.

I agree that regulation should be consolidated for all financial firms and the same standards for reserve holdings should apply to any institution that has access to direct lending from the Federal Reserve. What do you think?

Image from Wikipedia
Treasury Releases Blueprint for Stronger Regulatory Structure [U.S. Department of the Treasury]


The latest edition of the Carnival of Personal Finance, a weekly round-up of some of the best articles on the web about personal finance, has been published at Stock Trading to Go. In addition to the host’s Editor’s Picks, be sure to read How to Manage Your Asset Allocation With Multiple Accounts, Grow Your Investments One Snowflake at a Time, and Finding Time for Cost-Cutting Measures.

Also, you may be pleased to know that the schedule for the Carnival of Personal Finance through June 2008 has been finalized. Hosting the Carnival is often a monumental task, and I appreciate all the volunteers willing to assemble an interesting and informative Carnival of Personal Finance each week since June 2005.


As I mentioned briefly, I was in San Francisco for a few days to meet with software developers and strategists from NetworthIQ, ExpensR, and MyStrands. The companies are working together to develop web-based personal finance management software, with the intention of meeting customers’ needs that are not met by Mint, Geezeo, Quicken Online, and others. The companies invited a number of bloggers who write about personal finance to share their experiences and needs with each other.

This workshop gave me the perfect opportunity to meet many of the writers I’ve been working with for several years. Not only did we discuss financial software, but we also got to know each other quite a bit and share blogging tips and tricks. However, the main questions of the day pertained more to financial management software.

I would have to say that personal finance bloggers are not the typical consumers. For example, I track my finances in great detail — though less detail than I did six years ago — using Quicken’s desktop software. Several times a week, I update my transactions and reconcile my accounts against information downloaded from my banks, and once a month, I review my reports to get a good handle on the bigger picture. I do not want to spend any more time than I do now, especially if it involves categorizing my expenses. Software like Mint (reviewed here by Sasha) and Quicken Online (previewed by me) will connect directly to your bank for downloading your transactions and attempt to categorize your spending based on patterns, but this system is not perfect and requires significant manual correction.

Additionally, for most people, the information downloaded from banks does not create a full picture of spending. Although more spending takes place through electronic transactions, cash still plays a large role. Software must include a way to enter cash transactions, not downloadable from any bank. In order to save current Quicken users from expending more effort, I suggested allowing the new web software to “plug in” to existing desktop software. This would allow users like me to take advantage of some of the planned “Web 2.0″ features, like “social networking” and cross-segment comparisons.

All the bloggers had great suggestions for what we’d like to see, but the big questions are how to make personal finance mainstream and what would the most people want to see as the 21st century brings technological advances. So this leads to one question for readers, particularly those of you who think outside the box: What do you want your personal finance software to do and how does that differ from your existing solution?


You’ve probably been concerned at one time or another with your credit worthiness: the somewhat squishy way that lenders determine whether you’re going to repay, for example, a home loan. I say “squishy” because ultimately, these decisions are made by human beings in a temporal landscape. We bought our house in June 2007, and if we had tried just one month later, when rules were stricter, it likely wouldn’t have happened.

Nobody is allowed to know the exact algorithm that produces your credit score, but even if we had access, it probably wouldn’t be the same from month to month.

One thing that we thought we knew was that if you have too many open accounts, it can hurt your credit score. Now, a product support manager for Fair Isaac Corp. (where the term “FICO” comes from) is answering questions at BankRate.com, and in part of the answer to the first question, he replies:

It’s just not true that you can have too much available credit. That by itself is never a negative with the score … There really is never any good reason to close an account.

You’ll probably want to read the rest of the article to get all the specifics, and see what else he says on what does and doesn’t hurt your credit score.


I’m in San Francisco for a Few Days, So Read These Blogs

by Luke Landes

The people behind NetworthIQ and Expensr invited me and a few other bloggers to San Francisco for a workshop to discuss online financial management tools. At this invitation-only event, six bloggers have been asked to present their history and talk about blogging in general. The blogs to be showcased include Consumerism Commentary, Get Rich Slowly, ... Continue reading this article…

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Where Did You Come From, Where Did You Go (March 2008)

by Luke Landes

At the end of every month, I take a look at the source of visitors to Consumerism Commentary, and in March, there were a lot of readers. Don’t forget to stay up-to-date by subscribing to the RSS feed, which will inform everyone of new articles here. Consider, for example, adding Consumerism Commentary to My Yahoo. ... Continue reading this article…

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Thrasher Funds’ GendeX Mutual Fund: You Know, For Kids

by Luke Landes

Do investment companies need to market to “Generation X” and “Generation Y” differently than the general investing public? Would new, “hip” investment products encourage individuals falling within these particular demographics to care about their financial future? Thrasher Capital Management was founded on the principle that these markets, as well as minorities, are currently under served ... Continue reading this article…

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Good News if You’re in the Market for Buying a House

by Luke Landes

Earlier this week, a few real estate market survey results were announced in the media. This could be good news for house shoppers. In January, prices of homes on average were 11 percent lower than prices of homes at the same time last year. These results are based on the S&P Case/Shiller index, which collects actual ... Continue reading this article…

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Balance Transfer Fees on Chase Credit Cards

by Luke Landes

Credit cards simply are no longer offering the enticing deals in order to lure customers. Even though credit card companies have been willing to offer strong cash back rebates and introductory 0 percent APR deals, they’ve done so knowing that they can make up the loss through interest rates from defaulted customers and interchange fees. It ... Continue reading this article…

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Giveaway: $100 Gift Card for SmartyPig, a Unique Savings Account

by Luke Landes

The people at SmartyPig contacted me recently to offer a $100 gift card for use on their site to a Consumerism Commentary reader. SmartyPig has been mentioned on a few personal finance blogs recently, and here’s the deal. SmartyPig is a savings account, FDIC insured, currently earning 1.75 percent APY. Depositors’ funds are held by West ... Continue reading this article…

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Best Buy Offering Store Credit in Return for HD DVD Hardware and Movies

by Luke Landes

If you have an HD DVD player and fear it will be collecting dust in your entertainment center, you have an option to turn the hardware into $50. Best Buy is accepting returns for any HD DVD product in return for store credit. You would receive up to $50 in store credit for the player ... Continue reading this article…

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My First Economic Stimulus Payment Notice Has Arrived

by Luke Landes

Over the weekend, I received a notification from the IRS about the economic stimulus. The notice isn’t personalized; it contains only general information about the new law. The text of the letter is straightforward. Rather than get into the details, particularly the facts that the law authorizes a new credit to 2008 income taxes and ... Continue reading this article…

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15 Families Hit Hard Recently: Time to Adjust Expectations?

by Luke Landes

CNN Money is featuring stories of 15 households that are facing dire financial straits thanks to the economic downturn. Even a rebate check this summer won’t go far to help these families. While some better decisions may have helped them prepare for the direct effects of a recession, hindsight is always 20/20. Here are the ... Continue reading this article…

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Study: Payday Loans Cause More Bankruptcies

by Luke Landes

A new study by researchers at Vanderbilt University Law School and University of Oxford reveals a strong correlation between approvals for payday loans and bankruptcy filings. Considering that people who are rejected for payday loans have other (limited) options for credit, it’s surprising that the rate of bankruptcy isn’t as high with this group. It’s ... Continue reading this article…

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Cost-Cutting Consumers Trade Down from Steak to Chicken

by Sasha

RIS News, a retail technology publication, announced some interesting findings recently related to consumer shopping behavior. According to Deborah Weinswig of Citi Investment Research, the recession is creating more bargain hunters and transforming our shopping style in four key ways: 1. “Trading Down” to Private Label There’s a cost benefit to going generic, and store ... Continue reading this article…

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TaxCut Review, End Your Marriage for Money, and Splurging on a Camera

by Luke Landes

Here are some articles from around the web that I’ve enjoyed lately. Free Money Finance’s co-worker reviewed H&R Block’s Tax Cut software, the same version that I am giving five Consumerism Commentary readers for free. “First impression is that the user interface is nice and easy to move around. Everything progressed in a logical sequence. ... Continue reading this article…

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Real Money, Real World: A Resource for High School Personal Finance Classes

by Luke Landes

Last year, I asked in high schools should require money management classes. My point of view is that such classes should be optional and/or lessons in personal finance can be incorporated into other classes throughout middle school and high school. Not everyone agrees with me, however, considering the state of financial distress many in this ... Continue reading this article…

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The Cost of Buying a Home, Low Cost of Living, and Fed Cover-Up

by Luke Landes

Has anyone been watching the HBO miniseries, John Adams? Although colonial America is not my favorite period of history, I’ve been enjoying the first episodes that have aired. However, during the slower sections of the program, you may want to take the time reading articles from Consumerism Commentary’s history. From the first half of March ... Continue reading this article…

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Economic Stimulus Rebate Schedule: When You’ll Receive Your Rebate

by Luke Landes

The IRS has posted a schedule indicating when tax payers, if eligible, will receive their tax payments. Keep in mind that these are estimates and the IRS could very well not meet this schedule. The schedule is based on the final two digits of your Social Security number. If you file jointly, use the last ... Continue reading this article…

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8 Benefits to a Recession or Down Market

by Luke Landes

Will politicians say the word recession? Not if they’re serious about helping their party get elected. Yet, it feels like we are in a recession — or at least, that’s what the media wants us to believe. The stock market, measured by the indexes, is certainly in a downward trend, but I suppose I agree ... Continue reading this article…

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