US FlagJune 1, 2008 Edition


BERNANKE’S BOLD BEHAVIOR – Over the past several months, Federal Reserve Chairman Ben Bernanke has been rewriting his own job description. Some think the “Bernanke Doctrine” is a move in the right direction, but others believe there may be unknown risks. "It has been a really head-spinning range of unprecedented and bold actions...not that it’s without some cost and without some risk."  For more on Mr. Bernanke, check out Business Week’s “The Fed’s Quiet Power Moves.”  

BEAR NO MORE – The purchase of Bear Stearns, an 85-year-old pillar of Wall Street, by JPMorgan Chase is now official, with 84% of Bear Stearns shareholders approving the purchase for about $10 a share, for a total of $2.2 billion.  Not too long ago, Bear shares were trading in the $170 range.

FRIGHTFUL STORM AHEAD? -  According to Investment News, in remarks to the Commonwealth Club of California, “Dallas Federal Reserve Bank President Richard Fisher predicted a grim economic outlook for the United States (a “frightful storm” ahead) and indicated that the Federal Reserve Board may be considering a change in monetary policy.”  Mr. Fisher described swelling inflation as “the most insidious enemy of capitalism,” leading some to predict a possible hike in interest rates at the next Fed meeting in late June.

HOUSING RESCUE – The Senate is proposing a homeowner rescue package that would allow the FHA to back up to $300 billion in new loans for debt-ridden homeowners facing foreclosure.  The plan would be financed through profits from Fannie Mae and Freddie Mac.  Mortgage holders would have to agree to a substantial loss on existing loans in exchange for avoiding costly foreclosures, borrowers would have to show they could afford the new loans and the FHA would share in any profits from a later sale or refinancing of the home.  While lawmakers are claiming their plan would not require taxpayers to foot any of the costs of rescuing strapped homeowners, is that really the case?  Check out the NYT article, “The Risks of Rescuing Borrowers.”  

BUFFETT SHOPS EUROPE - Warren Buffett is said to be on the prowl for deals in Germany, Switzerland, Spain and Italy. Target? Family-owned companies whose founders are having a hard time finding a successor. We still don’t know who will be the Oracle’s successor.  During an interview with a European newspaper, Mr. Buffett laid the blame for the subprime crisis at the feet of banks...”The banks exposed themselves too much, they took on too much risk...It’s their fault.  There’s no need to blame anyone else,” he said.

GLOBAL OVERSEER – SEC Chairman Christopher Cox is pushing for the formation of a global entity to oversee international accounting standards. The move could give American companies more incentive to shift from traditional U.S. accounting rules to international standards.

FDIC CONCERNED ABOUT BANKS - The head of the FDIC believes the U.S. needs to have a plan ready to shut down any investment bank on the brink of collapse. Since the Federal Reserve's emergency bailout of Bear Stearns, monitoring of investment banks has increased and it sure sounds like a plan needs to be in order.  Here’s a good Bloomberg.com article on the subject.  Speaking of banks, U.S. banks set aside a record $37 billion in the first quarter to boost reserves.  That’s up from $9.2 billion a year ago. 


VSA...The Most Comprehensive
Sales Tool Ever!
Don't take our word for it, click here to see what some of our
10,000 subscribers are saying and go to the Table of Contents for proof.
 
Now get a free personal Website just for subscribing to the VSA!
 
Virtual Sales Assistant (VSA) has been described as an interactive library, but it is much more than that. It is truly a very knowledgeable assistant that can put virtually everything you need to operate a financial practice at your fingertips. Your Assistant is available to you on any computer, anywhere in the world and is on call 24/7/365. Some specific products and services include:
 
     Personal Websites
     E-newsletters
     Lead generators
     Dozens of prospecting ideas
     Hundreds of "One-pagers"*		      Scores of presentations*
     Retirement calculators*
     Education calculators*
     Estate calculators*
*Personalized for you and your client

All this and the price is no more than $21.95 per month (discounts may apply), no annual contract and there is a 30-day free look.�

Check out the more than 60 VSA Sales Ideas. Take advantage of the VSA's 30-day free look,� use just one of the ideas and the VSA will pay for itself!

UBS TELLS EXECUTIVES TO STAY OUT OF THE U.S. – In gangster terminology, UBS has told its senior executives to “lay low.” On the heels of the recent indictment of one of UBS's senior executives, the Swiss bank has told members of the private-banking team that was responsible for wealthy Americans to avoid traveling to the U.S. The bank and their executives are accused of helping a rich client evade taxes and U.S. prosecutors are expected to serve UBS with a subpoena demanding the names of wealthy American clients who may have used the bank to evade income taxes.

SWISS BANKING ACCOUNT SECRECY QUESTIONED – The U.S. is now supporting European finance ministers in their decades-old battle against the banking secrecy laws in Switzerland. The Swiss are under increased pressure as U.S. investigators look into UBS for allegedly helping American clients evade taxes.

DOLLAR’S DECLINE - About 76% of wealthy Americans want the U.S. to do more to stop the dollar's decline, according to a Bloomberg/Los Angeles Times poll of households with annual incomes of $100,000 or more.  As important as the decline itself is the perception it creates of the dollar becoming a less-respected currency. 

MOODY GLITCH - A glitch in Moody's computer models resulted in the ratings firm awarding incorrect triple-A ratings to billions of dollars’ worth of debt products. Further, some senior Moody's staff knew of the flawed calculations early last year but failed to take action. 

SEC TO RATE THE RATERS? - SEC Chairman Christopher Cox has requested information on ratings errors found by Moody's, Standard & Poor's and Fitch.  Many see this as a precursor of new rules for nationally recognized credit-rating agencies. 

BIG LAYOFFS - Financial companies have dismissed or announced their plans to cut more than 83,000 employees since the beginning of the credit crunch. The Bear Stearns debacle alone is expected to result in more than 9,000 job losses. The cuts are less than what the industry experienced during the “dot com” bust, but more cuts are expected.

MORE WRITE-DOWNS – Expect another $35 billion in write-downs from banks and securities firms. “Write-down” is a euphemism for losses that are posted to balance sheets rather than income statements. They can be reversed when and if markets recover.  The practice holds the potential to allow banks to hide the full extent of losses incurred.

FINRA SUED - The collapse in the auction-rate market has caused hundreds of borrowers to face an unexpected rise in financial costs. Guess who is getting some blame? FINRA is faced with hundreds of lawsuits by investors who claim they were misled about the security of the market. 

HANK GREENBERG’S NEW CAREER – According to the Wall Street Journal, “Former AIG CEO Hank Greenberg has no desire to return to his old job and is instead embroiled in lawsuits and counterlawsuits with the company he built up over 38 years.  But those suits may stem from 'prosecutorial excess' by former New York Attorney General Eliot Spitzer.”  Mr. Greenberg may be facing additional legal problems...the SEC has launched an investigation of Mr. Greenberg and several of the deals he made while heading up AIG. 

DARK POOLS AND GAMING – Just an FYI, dark pools are getting tough on "gaming." “Gaming” is the use of trade information by another party for financial gain. The potential problem intensifies as more liquidity flows into the dark pools. So now you know.
Attention Insurance and Financial Advisors!

It is not often that you get a sales idea that can change your life! What if there was a way to:
  1. Eliminate most of your travel time (and the nerve-racking driving!),
  2. Dramatically reduce transportation costs,
  3. Reduce evening activity, and
  4. Shorten the sales cycle.
Click here to learn how!!

Attention Wholesalers, BGA's, GA's and Trainers!
  • If you are not conducting Webinars for your producers, you are losing money!
  • If you are conducting Webinars for your producers and not using Gatherplace, you are losing money too!
Please check out www.gatherplace.net/?r=fsonline for a free trial to see how inexpensively and simply you can use the Internet to inform, train and even recruit producers. If you have needs beyond the standard packages quoted, please contact Fiona Streckler at fiona@gatherworks.com.
LIFE AND LIFE INSURANCE AWARENESS – Life Insurance Awareness Month (LIAM) has succeeded in bringing the industry together in support of a common objective: to remind Americans of their need to include life insurance in their financial plans. The nonprofit LIFE Foundation, which coordinates LIAM, was recently awarded a “Big Apple Award” by the New York chapter of the Public Relations Society of America in recognition of the success of the 2007 LIAM campaign. LIFE has created a “LIAM Turnkey Kit” to help companies, agents and industry associations prepare for this year’s campaign. Available for free online, the kit contains a wide range of resources, such as campaign logos, a customizable newsletter article, template print advertisement and various presentation and communications materials. To access these resources, please visit the LIFE Idea Exchange at www.lifeexchange.org and click on “Turnkey Kits.” The LIFE Foundation has also launched its new website at www.lifehappens.org.

GHOST BUSTERS – In Regulatory Notice 08-27, FINRA is warning member firms to take care when using ghostwritten books and articles to market their services.  When a ghostwritten book or article featuring a representative is purchased, it must be clearly identified as an advertisement.  

“SENIOR” DESIGNATIONS – In an attempt to protect older investors, a number of states have already taken action or are preparing new rules or legislation regarding the use of so-called “senior” designations.  Others, such as New York State, are issuing consumer alerts to their citizens.  

GOOGLE HEALTH – Google has unveiled a U.S. health information service that stores a user’s basic medical history and gathers relevant information relating to their health conditions.  Check it out at www.google.com/health.

REDUCING HEALTH CARE COSTS – America’s Health Insurance Plans (AHIP) has released a proposal that the organization claims would save $145 billion in health care expenditures by 2015 if fully implemented.  Those last three words are the “catch.”  For example, one facet of the proposal would eliminate the current medical liability system, which isn’t likely to happen anytime soon. You can read the proposal here.  

401(k) DEBIT CARDS – FINRA is warning consumers to be careful in their use of 401(k) debit cards being sold by some companies.  The cards charge interest and fees and, significantly, interest starts accruing when transactions are posted to a plan participant’s account.  There is no interest grace period.  In addition, if a 401(k) debit card loan isn’t paid back within five years, income taxes must be paid on the loan balance.  A copy of the FINRA consumer alert is available here. 

THE FEMALE FACTOR – That’s the name of an interesting white paper from the Women’s Institute for a Secure Retirement or WISER.  The subtitle of the paper says it all...Why Women Are at Greater Financial Risk in Retirement and How Annuities Can Help.  Download a copy here.  

STIMULUS PAYMENTS AND IRAS – Individuals who are eligible to receive an Economic Stimulus payment and who elected to have a 2007 federal income tax refund directly deposited into an IRA or other tax-advantaged account are now finding that their Economic Stimulus payments are also deposited directly into the same account.  In Announcement 2008-44, the IRS says that such individuals can withdraw an amount equal to or less than their Economic Stimulus payment without adverse tax consequences.  Such withdrawals must be made before the due date for filing a 2008 federal income tax return, including extensions.

MUNI-BOND TAX EXEMPTION – The Supreme Court has ruled that states can continue to tax interest earned on out-of-state municipal bonds, while not taxing interest earned on in-state munis.  “The decision prevents a significant transformation in the $2.6 trillion bond market and offers the market a bit of stability in a turbulent year.”

GENETIC TESTING – President Bush has signed the Genetic Information Nondiscrimination Act, which bars employers and health insurers from discriminating against individuals based on the results of genetic tests.  The insurance industry supported the bill.

THE FUTURE OF FLYING – It’s safe to say that we all have a stake in the future of the U.S. airline industry, which is staggering under the burden of soaring fuel costs.  For example, it’s likely that U.S. carriers will spend in the range of $60 billion on jet fuel this year, about four times what they paid in 2000.  If you’re interested in what the U.S. airline industry might look like in the future, check out “You Think Flying Is Bad Now...”  

OPERATION TELE-PHONEY – See, the government does have a sense of humor!  Operation Tele-PHONEY was a large telemarketing fraud sweep conducted by the Federal Trade Commission.  So far, more than 180 fraud cases involving advance-fee loan schemes, credit card scams, and other fraudulent activity have been filed.  More information is available at www.ftc.gov.

PERILS OF E-MAIL – Countrywide Financial CEO Angelo Mozilo is far from alone in sending e-mail to an unintended recipient.  A desperate homeowner sent an e-mail to Mr. Mozilo and other Countrywide executives, asking for help in saving his home from foreclosure.  In a response intended for the other executives only, Mr. Mozilo called the request “unbelievable” and “disgusting.”  The only problem is that Mr. Mozilo hit “reply all,” sending his response to the homeowner as well.  Mr. Mozilo’s error, however, saved the day...after his response made its way onto numerous blogs, Countrywide agreed to address the homeowner’s loan problem and he will be able to keep his house.

“DOUBLE CROPPING” – That is the term for buying your own debt at a discount. "The flavor of the day is buying your own debt at below face value," said David Rubenstein, of The Carlyle Group. "I'm buying bank debt in my deal with leverage from the bank that made me that deal." Does this make sense to anyone but those involved in the deals?