ABCDE BUSINESS sunday, june 20, 2010 CAR PAGES
When outrageous sells The 2011 Infiniti QX56 is Nissan’s most in-your-face luxury SUV yet, Warren Brown writes.
Plus, ads for thousands of vehicles. Starting on the back page.
THE BIG MONEY
On Apple and the naked truth The fracas over nudity apps is just beginning. G3
KIPLINGER’S PERSONAL FINANCE Sharing the wealth As BP halts its dividend, others offer top yields. G3
MARKETS Stocks cap big two-week rally
Losses for the year are erased as confidence grows that Europe can contain its debt crisis. 5 YTD: Dow
NASDAQ S&P 500 +0.2% +1.8% +0.2%
GUT CHECK Ezra Klein
You’ve seen the stimulus. Now, meet the anti-stimulus.
by Ezra Klein
locked in an unexpected battle with the massive anti-stimulus that’s ripped through the states? Most people would choose “a”
A
or “b” (though I’d say “a” has the better of it). They probably haven’t heard of “c.” But ask Bruce Bartlett, a conservative economist who worked for Ronald Reagan, George H.W. Bush and Jack Kemp, and you’ll hear all about it. “When the history of the current crisis is written, much of the blame will be placed on the sharp fiscal contraction of state and local governments,” he says. “I think economists will view this as a preventable error equivalent to the Fed’s passive shrinkage of the money supply in the early 1930s.” Take my home state of California, with an unemployment rate of more than 12 percent. We need the government to help create jobs, and quick. But instead, Sacramento is raising taxes and cutting services. That’s like bailing water into the boat rather than out. The Golden State has its reasons. Its budget is in terrible shape, and the constitution doesn’t allow officials to run deficits. But in an effort to do right by the numbers, they’re doing wrong by the economy. And they’re not alone. Some 46 states are facing budget gaps that will require them to cut spending or raise taxes. The Center on Budget and Policy Priorities estimates that in 2011, the states will have to come up with a total of $180 billion. These budget shortfalls are the
equivalent of a massive anti-stimulus, which some experts believe has overwhelmed
multiple choice question for you: Did the stimulus a) work; b) fail; c) end up
Coming up short Total state budget shortfall in each fiscal year, in billions.
-200 -150 -100 -50 0
2009 2010 2011 2012 –$110 –$112
–$76* –$120
–$180 Estimate –$200
SOURCE: Center on Budget and Policy Priorties * Reported to date.
THE WASHINGTON POST
the $787 billion stimulus passed by the federal government in 2009. The argument goes to the very role of stimulus in the economy. People understand perfectly well that boom-time economies seem better than they really are. But the reverse is true for busts: They’re generally worse than they need to be. In a downturn like the one we’re in, there’s idle labor and productive capacity (people, machines, shop floors, etc.) that could be working, but isn’t. That’s because the economic shock of 2007 left businesses and families cowering. Uncertain about the future, they spend less now. The role of the government is to step up and keep the economy moving until consumer confidence returns. That’s what the federal stimulus was supposed to do. It might have been too small, and there’s plenty to argue over in its composition, but analysts say it did essentially what it promised: IHS Global Insight,
gut check continued on G4
You could see your last overdraft fee
New rules end automatic penalties, but banks will recoup losses somehow
by Ylan Q. Mui
decade ago, when he was a student at George Mason Uni- versity, Becnel overdrew his Bank of America checking ac- count when he bought a cup of coffee, resulting in a penal- ty of about $40. Unaware that he was out of money, he kept using his debit card and get- ting whacked with penalties, racking up hundreds of dol- lars in overdraft charges. Becnel paid the fines, shut down his account and switched banks. To this day, he refuses to do business with Bank of America, even though
B
MICHELLE SINGLETARY The Color of Money
How to spot the red flags of a senior being conned
W
hen we talk about the aging population in the United States, the
conversation is often focused on who will take care of the physical needs of millions of seniors. But there’s a growing threat we also need to make our concern: financial fraud of the elderly.
One of five Americans over the
age of 65 — that’s 7.3million seniors — has been victimized by a financial swindle, according to a newly released survey by the Investor Protection Trust, a nonprofit education organization. This survey is particularly troubling when you consider that more than a third of people over 70 have some form of memory impairment, according to a 2008 published study by a national team of university researchers. Cognitive problems make seniors more vulnerable to fraud. The money stolen from seniors adds up to more than $2.6 billion a year, according to a report released last year by MetLife’s Mature Market Institute, the insurer’s research organization. “With the present state of the
economy, older Americans are at a greater risk than ever of having their financial security threatened,” said Sandra Timmermann, director of the institute. For each case of elder fraud
reported to authorities, an estimated four or more go unreported, according to MetLife. Appallingly, family members and caregivers are the perpetrators in 55 percent of the cases. In an effort to catch the
thieves, the Investor Protection Trust has joined forces with a number of organizations to create the Elder Investment Fraud and Financial Exploitation project. The organizations involved include the North American Securities Administrators Association, the National Adult Protective Services Association, the American Academy of Family Physicians, the National Area Health Education Center Organization and the National Association of Geriatric Education Centers.
color continued on G2
ank of America is still suffering the wrath of District resident Philip Becnel. More than a
A summary of the Federal Reserve’s new regulations on bank overdraft charges:
The rules apply to debit card transactions and ATM withdrawals. They do not apply to checks or recurring payments, such as automatic bill pay.
Consumers must opt in to an overdraft program for a bank to charge any fees.
Consumers who opt in can drop the program at anytime.
Banks must comply with the new overdraft rules for all new accounts opened after July 1.
For existing accounts, banks must comply with the overdraft rules by Aug. 15.
his new bank is farther from home. “That was kind of the final
straw for me,” said Becnel, now a private investigator with the Dinolt Becnel & Wells Investigative Group.
“The compounding of fees, it’s almost criminal.” Banks have long walked a thin line on overdrafts. They are a sore point for many con- sumers, but the fees generate billions of dollars of revenue
MARK SHAVER VIA GETTY IMAGES/ILLUSTRATION WORKS Keeping your money from slipping away
each year. Now the Federal Reserve has stepped in to craft new regulations aimed at preventing complaints like Becnel’s. Starting July 1, the rules will prohibit banks from au- tomatically charging over- draft fees. Instead, consumers can decide whether they want to use the service or would rather simply have their debit cards declined. In addition, some banks have stopped charging overdraft fees if the account is a few dollars in the hole — eliminating the in- famous $40 cup of coffee — and are capping the number of charges each day. According to market re- search firm Mintel, about 25 percent of consumers it surveyed this spring indicat-
overdraft continued on G4 G AX FN FS LF PW DC BD PG AA FD HO MN MS SM
The deficit makes for strange bedfellows
Labor leader, CEO work toward politically viable, long-term solution
by Edmund L. Andrews and Eric Pianin The Fiscal Times
Until two months ago, Andy Stern and David Cote seemed to embody the Beltway view that the bipartisan commission President Obama created to tackle the na- tion’s budget deficit was doomed to fail. They seemed an unlikely duo,
after all: Stern was the firebrand labor leader who had channeled millions of dollars into Demo- cratic election campaigns. Cote was a Fortune 500 chief executive, and a Republican, who made more than $12 million last year. Today, though, they have teamed up and are working close- ly together toward what they hope will be a politically viable, long- term plan for reducing the deficit, which last year totaled $1.4 tril-
ANDREW HARRER/BLOOMBERG
“It’s students, workers and poor people who
pay the price.” — Andy Stern, labor leader
lion. They talk and e-mail at least once a week, swapping ideas and information. They sit together at commission meetings and ar- ranged a field trip for a tutorial
Andrews and Pianin work for The Fiscal Times, an independent news organization that specializes in fiscal and economic matters. It is funded by Peter G. Peterson, who separately supports groups that advocate for long-term debt reduction.
DANIEL ACKER/BLOOMBERG
“There is little understanding of the magnitude of the looming
problem.” — David Cote, Honeywell chairman
with experts on the tax code. Cote tries to soften his peers on the Business Roundtable. Stern is pressing union officials about ways to tinker with Social Securi- ty.
Both men know the odds are
long, given the pitched power struggles in Congress, the lack of
consensus on ideas and even the premise that the deficit needs ad- dressing now. Twelve of the panel’s 18 mem- bers are lawmakers, six from each party, and both parties are fixated on the upcoming midterm elec- tions. But Stern and Cote insist that they have a chance, and both have a history of political bridge- building. In pushing for health- care reform, Stern formed allianc- es with business lobbying groups and even teamed up with Wal- Mart Stores — a longtime foe of organized labor. Now Stern argues that deficit
reduction isn’t simply a conserva- tive issue. “What I keep saying to the progressive community is that when the crisis hits, it’s students, workers and poor people who pay the price,” said Stern, who recent- ly stepped down as president of the Service Employees Interna- tional Union, the nation’s fastest- growing labor union. Cote, chairman and chief exec- utive of Honeywell International, a global technology company, is proselytizing among his own cor- porate fellow travelers. “Even in the business community,” he says, “there is little understanding of the magnitude of the looming
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