Cheat Sheet Q & A:

The Question(s):

Is the Federal Reserve really a private entity? 

Did the banks really get paid for all their home loans from the TARP monies?

Bottom Line:  I’ll take the Fed first…  To directly answer your question is no.  The Federal Reserve regulates our monetary policy and Governors and Chairman are compensated by public dollars.  They don’t purport to be private though, they do claim to be an independent entity.  That’s were it becomes a bit more of a philosophical discussion. 

It’s true that what the Federal Reserve Governors and Chairman decide doesn’t require the approval of anyone.  The do operate with complete autonomy in regulating interest rates and monetary policy.  However…  The Federal Reserve was created through legislation and the Federal Reserve Chairman is appointed by the executive branch and confirmed by Congress.  That’s where you could argue that the Fed may not be completely independent (if you were desirous of making that argument).  With regard to the TARP question. 

So on to the Troubled Asset Relief Program.  Yes the Federal Government did buy mortgages from banks through TARP.  That was the main way the hundreds of billions of TARP dollars were distributed.  Lenders had been used to originating mortgages, bundling them and selling them off to third party buyers (like Bear Stearns and Lehman for example).  Once the meltdown began there were no buyers for those mortgages and the cash flow of these financial institutions began to freeze.  The lack of liquidity is what led to the collapse of so many financial institutions.  TARP’s primary function was to buy mortgages from financial institutions to provide the liquidity to keep them running.  Now one misconception is that TARP enabled banks to recoup their losses on those loans.  That was not the case.  There is a rule called mark to market.  That means that each quarter a lender must adjust the value of the mortgages on their balance sheet to reflect the current market value of the homes that are behind those mortgages.  So banks did have to right down the value of loans and take the losses prior to selling the loans to the Government. 

If you have a topic of question you’d like me to address email me:

Audio Report:


Average insurance cost set to skyrocket under ACA for Floridians in 2014:

Bottom Line:  So we now know what the available plans are for Floridians on the exchange that opens October first.  The news isn’t good.  The average Floridian obtaining their own insurance plan for the 2012 open enrollment season was $243 per month.  The cheapest available plan on the exchange for 2013 is…  $257 or 5% more.  But that’s the cheapest plan available.  What about the average plan that compares to current coverage?  Well that’ll run you $328 per month or 35% more!  All told there are 102 available plans in the three tiers of coverage (bronze, silver and gold categories) but it’s all bad news on the cost side.  Those numbers are before the Government subsidies that many will be eligible for but since all of us as tax payers pay for the subsidies, it’s just a different side of a same coin.  The cost increases are large and real. 

Audio Report:



Know your fees before you book - 38% of airfare expense is in fees:

Bottom Line:  We’ve become more fees aware as airline passengers in recent years.  We still may not be aware enough.  A record $27 billion in fees have rolled into airlines over the last year.  That represents 38% of all revenue to airlines.  The most common reason we still book airfare is by the base advertised price of a ticket.  But for every $100 spent on a ticket it’s costing us a net $138.  This is where as consumers we need to be more fee aware based on our anticipated travel situation.  When comparing airfare prices take a look at the fee policies of the airlines you’re considering and determine a total cost of flying for your situation prior to booking. 

Audio Report:


Not so happy Halloween this year… 

Bottom Line:  Last year was a record Halloween for Americans.  A record 170 million Americans participated in Halloween festivities and a record $79.82 per person was spent on the holiday.  The initial estimates from the National Retail Federation indicate that 12 million fewer people will be participating in Halloween festivities this year and the average spending will drop 5% to $75.  That’s not good news for retailers and the economy but it’s just Halloween.  The big question is if this is an indication of the real holiday shopping season.  If it is we could be setup for a truly scary 4th quarter in this economy. 

Audio Report:


Target starts video streaming service with ten free downloads:

Bottom Line:  Target’s new video service is now live.  It’s called the Ticket: .  Now it does seem odd that Target is offering a video service to complete against those in the downloadable video business but it could be worth a look.  First the specs:  They have a library of 30,000 movies available and 50 TV shows.  That’s nothing special but…

Target purports to have the best parental control options of any service.  Every person in the home has their own profile.  As a parent you can control the content that’s made available to your children if you’re inclined.  Not only can you screen based on rating but also the type of content.  So if you’d like to screen out language, violence, nudity, etc. in addition to ratings – you can.  And you can adjust it for each user’s login.  Additionally Target is offering ten free downloads to all who try it.  So what the heck, go ahead and try it.

Audio Report:



The future is now in same day delivery services online.  What are you doing to be positioned correctly?:

Bottom Line:  Google is no longer beta market testing it’s same day delivery service is select areas, they’re going live with it in San Francisco.  If you operate in a retail environment in your business what are you doing to position yourself for this next phenomenon? 

Over the next two years Google, Amazon, Wal-Mart, Target among others will all be offering same day delivery on orders as a standard service.  That will eliminate one of the current advantages for physical retailers…  The “I need it now” factor.  So it’s critical for companies to craft their own strategy to be part of the opportunity rather than being left in the dust. 

Audio Report:



What to do with Yahoo email that’s not yours:

Bottom Line:  So recently Yahoo killed all of the dormant email accounts and email addresses.  They then turned around an opened up millions of email addresses that were not actively being used.  There’s one problem.  People who still want to send email to people with the email address a person used to have are commonly sending emails to the wrong person with the “new” same address as the former owner.  So…  Yahoo has a new feature starting today to combat this issue.  You’ll notice a new “not my email” button in your Yahoo email.  If you’re receiving email with a new address that’s not meant for you and Yahoo theoretically will take care of this.

Audio Report:



A practice banks are cracking down on - fraudulent incomes on mortgage apps:

Bottom Line:  The good news is that mortgage fraud is still on the decline.  Down nearly 6% this year over last year and way lower than back in the go go boom days.  But there is a new trend in mortgage fraud that’s creating issues for honest people as well as lenders.  It’s the partial liar loan. 

Stated income loans are illegal now so the so called “liar loans” in which a person could obtain a loan based on no verification of income or assets.  These days’ employers do verify what they can.  The new tactic that’s being used by scammers is to take someone who does have verifiable employment and verifiable assets and simply inflate them to obtain more and higher limit mortgage loans.  Often a lender can verify employment and even the position one works in with an employer but may not be able to verify exact income.  Now that lenders are identifying this problem many are starting to slow down the origination process to dig deeper to verify as much information as possible.

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