Author: Megan Carpentier

On Tuesday, America’s poverty rate jumped from 13.2 percent to 15.8 percent — or from 39.8 million to 47.4 million of 308 million Americans — as the government finally acknowledged that the way it calculated the poverty rate was designed to artificially deflate the statistics. The previous poverty rate was based on what an emergency food diet cost in 1955 and didn’t take into account government transfer payments, let alone differential living expenses and health care costs.

The official yearly statistics, to be released in September, will account for medical costs, transportation costs and updated costs of living when determining poverty, and add in food stamps and tax credits (like the fully refundable Earned Income Tax Credit, which often pays the working poor more in refunds than they paid in taxes) as income. Elderly people are expected to see the largest rise in their poverty rate due to medical expenses, while children are expected to appear less poor because of Special Supplemental Nutrition Program for Women, Infants and Children (WIC) funds. High costs of living are expected to drive up poverty rates in major urban areas like New York, Boston, Los Angeles and San Francisco.

What the government will not do is allow the more realistic poverty calculations help determine which Americans qualify for transfer payments such as food stamps, Medicaid, housing benefits, WIC and child care benefits. That might be considered too generous for the likes of some in Congress who prefer to complain about budget deficits for the benefit of the television cameras rather than extend unemployment benefits to those Americans who can’t find jobs in a jobless economic recovery.

According to critics of laws forcing employers to pay women wages equal to those of men, government-enforced wage equity is an unfair burden on employers and strictly a product of women choosing to opt out of high-powered career tracks in order to pursue other kinds of work or take care of their families. Despite the fact that all the available evidence shows that no more than one-third of the wage gap is choice-driven and many employers simply prefer childless female candidates to working mothers, plenty of Social Security-collecting pundits and politicos continue to believe that the best thing a woman can do for society is to be exclusively a mother. Empirically speaking, though, that’s untrue.

A study by Casey Mulligan, published by The New York Times, shows that the only reason Social Security remains solvent today is because women made huge strides in the labor market since the program’s inception. Longer life expectancies coupled with standard retirement ages that have barely changed, a system that once relied on the payroll taxes of working men to pay benefits to retired men and their stay-at-home spouses never would have survived without the inclusion of women in the labor force.

But the system can only keep working for the benefit of elderly men and women if women continue to work and the wage gap continues to shrink.

In fact, millions of married women worked for pay and paid the payroll taxes as they did. This was largely profit for the Social Security system, because the system would have paid those women benefits regardless. The revenues of governments in the future will depend just as much on how women spend their time. Governments can expect more revenue if women continue significantly with their labor market progress, and less revenue if some of women’s payroll gains are reversed in the years ahead.

Since the payroll taxes funding Social Security are based on earnings, employers that pay women less for the same work as their male colleagues are, in effect, depriving the Social Security system of taxes as much as they are depriving their female employees of equal pay. Everyone loses, except those at the top of the food chain, who don’t pay Social Security taxes on their earnings over $106,800 anyway.

Since George W. Bush took office, commercial banks have more than doubled their annual federal lobbying budgets, to great effect. In addition to securing a nearly industry-wide bailout in the wake of a financial crisis spurred by their own risky investments, banking lobbyists notched many successes in scaling back the consumer protection agency. From Reuters:

The lobbyists have successfully scaled back various iterations of the plan. One would make the regulator part of the Treasury Department, and force it to consult with existing watchdogs before imposing restrictions. Republican alternatives are even weaker, alternately housing a consumer unit either in the Federal Deposit Insurance Corp or the Federal Reserve. Expect a diluted compromise between diluted compromises — just as seems the case for the “Volcker Rule” to limit proprietary trading by banks.

But perhaps the most dangerous effect all this lobbying has had is on banks’ own behavior.

From the beginning, economists warned about the potential for a bank bailout to create moral hazard. Moral hazard is a market failure in which companies, like banks, take bigger risks than they would with their own money because they know they have a backup plan — like a government bailout. For decades, the same voices had warned that Fannie Mae and Freddie Mac, though technically private enterprises, carried a moral hazard because their management and their investors expected that the government would bail them out if their risks turned out poorly and, in fact, when their risky investments tanked, the government did exactly that instead of allowing them to fail.

Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program — the banking bailout — has said for months that the bailout has inculcated the same moral hazard in regular banks that government involvement in Fannie Mae and Freddie Mac did for them. In his most recent report, he identified the moral hazard as one of the largest costs of the TARP program, and one against which the government needed to better guard.

To the extent that institutions were previously incentivized to take reckless risks through a “heads, I win; tails, the Government will bail me out” mentality, the market is more convinced than ever that the Government will step in as necessary to save systemically significant institutions. This perception was reinforced when TARP was extended until October 3, 2010, thus permitting Treasury to maintain a war chest of potential rescue funding at the same time that banks that have shown questionable ability to return to profitability (and in some cases are posting multi-billion-dollar losses) are exiting TARP programs.

Barofsky refers to the fact that many companies exited the TARP program by the end of 2009 in order to avoid caps on executive compensation, and yet some banks continue to operate at a loss — the very thing their participation in TARP was intended to avoid. Since the banks that exited the TARP program have another 20 months to fail and re-enter the program, they can engage in overly risky behavior knowing that they continue to have a government safety net.

Pethokoukis notes that a recent IMF report shows that lobbying also produces behavior in line with banks operating under a moral hazard.

The International Monetary Fund recently found that banks that invested more to influence policy over the past decade were more likely to take more securitization risks, have larger loan defaults and sharper stock falls during key points of the crisis.

In other words, banks that spent millions of dollars to change policies, reduce or eliminate regulation and lobby for bailouts engaged in riskier behaviors — including many of those behaviors that led to the financial crisis — than those banks that didn’t feel they needed to invest in changing the structure of the market in which they operated. Spending money on lobbyists to change the rules of the game, so to speak, seemingly leads companies to behave as though they can mitigate or eliminate market risks by convincing government officials to change the regulatory environment or simply front the cash to avoid failure. Thus, lobbying and bailouts become a constant cycle of moral hazard, reinforcing perceptions in the market that a bank’s risk isn’t really of failure or financial loss, but of having to spend more money to lobby the government to fix things.

Last year, commercial banks alone spent $50 million lobbying Congress, not to mention the money they donated, through PACs and individual donations, to candidates. Some of the money they spent lobbying to change the rules and eliminate regulation came straight from taxpayers’ pockets in the form of TARP funds. So Americans’ hard-earned money didn’t just go to pay executives multi-million salaries; it also went to lobby the government to maintain conditions that will allow the banks to reap huge profits and take great risks, and then rely on the government to bail them out if they fail again.

Although official inflation rates remain low, the two spending categories driving what little inflation exists are food and fuel. New consumer spending numbers indicate why: Food and fuel are two of the few categories on which Americans are spending more money. Increased spending indicates to businesses that raising prices won’t cause most people to buy less, leaving them free to do just that.

David Rosenberg explains:

But 60% of that headline consumer spending print came from food and energy — everything else rose a tepid 0.2%. In fact, spending on durables or ‘big ticket’ items rose by less than 0.1% in its weakest showing in four months. Almost all the growth was in non-durables, which surged 1.8% and most of that were groceries and gasoline — the two ‘G’s. Services eked an advance of less than 0.2%, held back by housing/utilities.

In other words, most of the increase in consumer spending in January is driven by increasing spending on fuel and food, which are virtually the only consumer items increasing in cost. People aren’t necessarily buying that much more food or gas; they’re just spending more on it, because demand for those categories remains relatively stable regardless of cost.

Adding to the good news for consumers, Rosenberg notes that Americans are increasingly reliant on government transfers (which includes unemployment) to fund their meager purchases. Government transfers rose .7 percent between December and January and more than 12 percent between January 2009 and January 2010. Unemployment, welfare and Social Security payments are buying the increasingly expensive food and gas on which Americans rely, even as Sen. Jim Bunning (R-Ky.) keeps fighting to prevent long-term unemployed Americans from continuing to collect unemployment benefits.

Most of the time, universal condemnation of a company’s business practices leads to little more than some unflattering newspaper articles, unmet calls for a boycott and the eventual collective amnesia. But Goldman Sachs — despite the fact that it’s far from a retail business — is already warning shareholders that the criticism of its shady practices, such as its currency trades with Greece, may have a negative effect on its business. The New York Times reports that in Goldman’s recent SEC disclosure, Goldman specifically identified bad press as a potential risk of which shareholders should be aware.

“Press coverage and other public statements that assert some form of wrongdoing, regardless of the factual basis for the assertions being made, often results in some type of investigation by regulators, legislators and law enforcement officials, or in lawsuits,” the firm added. The filing goes on to note that the cost of responding to these issues is both time-consuming and expensive and that the “adverse publicity … can also have a negative impact on our reputation and on the morale and performance of our employees, which could adversely affect our businesses and results of operations.”

Of course, if Goldman had chosen to identify the potential public relations risks of its business practices, like helping a country hide the true value of its sovereign debt, then the risk of those transactions coming to light and hurting the company could have been ameliorated from the beginning. So, either Goldman isn’t as good at evaluating risks as it tells clients that it is, or it decided a long time ago that the money it would make from even transactions that carried a severe public relations risk would be greater than its losses.

Although unemployment numbers for the month of February won’t be out until Friday, the administration is already on the political defensive — never a good sign. In an interview on CNBC, National Economic Council Director Larry Summers announced that blizzards will “distort” unemployment statistics. “It’s going to be very important,” he said, “to look past whatever the next figures are to gauge the underlying trends.”

He added: “In past blizzards, those statistics have been distorted by 100,000 to 200,000 jobs.”

What Summers meant to say was that the additional 100,000-200,000 people who, indeed, are unemployed due to the winter storms might well end up re-employed before too long. Many of those left jobless because of the storms are employed in the construction industry, which will pick up as weather conditions improve, and others were left unemployed when stores or restaurants closed during the storms, which impeded hiring.

However, with long-term unemployment at its highest level since the Great Depression and new statistics out showing that fully 40 percent of those collecting unemployment have been doing so for at least six months (let alone Jim Bunning’s one-man blockade of unemployment benefits for those very Americans), this administration ought to be smarter about focusing on the individuals facing job losses and unemployment. After all, the unemployed currently have a more favorable view of President Obama than those who have jobs — so long as Larry Summers can keep his foot out of his mouth.

The least complex explanation for derivatives, and particularly the credit default swaps that drove this financial crisis, is that they are a form of unregulated insurance — they are designed to insure investors against risk by guaranteeing a payout in exchange for premium-like payments. But the lack of regulation of derivatives led to the need to bail out AIG, among other companies, and drove America to the brink of financial collapse.

Martin Mayer predicted all of that in his book “The Danger of Derivatives” in 1999, and in an interview with Gretchen Morgenson of The New York Times, he offers some solutions the government could — but probably won’t — put into effect to stop a repeat of this crisis.

To prevent the regular insurance industry from taking customers’ premiums and then being unable to pay out claims, the industry is regulated. The states and federal government require that insurance companies keep significant capital around so that if there are a number of simultaneous claims, they can be paid without bankrupting the company. Insurance giants like AIG liked derivatives because it allowed them, for a time, to make money without having to comply with the capital requirements of regular insurance.

The banks that use derivatives like them, too, as they are able to take risky bets without assuming all of the risk. And, as Mayer points out, in the wake of the bailout, they continue to make risky investments, now that they know full well the government (and taxpayers, by proxy) won’t allow them to fail. Mayer recommends that derivatives be regulated like the insurance products they are and traded on the open market because it requires more transparency in terms of accounting and risk, and that taxpayer-insured banks (i.e., commercial bans) be barred from using them because of the risk.

Of course, Mayer doesn’t believe that will happen, in no small part because too many in Congress don’t understand derivatives and are more than happy to allow financial industry lobbyists to argue that they aren’t really insurance and aren’t really that risky, and that to regulate them will mean stifling innovation. Of course, this “innovation” is simply a way to insure some and then make money off of the failure of others — quite the innovation.

But the financial industry ought to be happy that Mayer is just calling for oversight and regulation — Financial Times columnist Wolfgang Munchau called this weekend for an outright ban on credit default swaps, and he’s hardly the first. They might end up stuck between the proverbial rock and hard place — but without the sweet lubrication of taxpayer dollars to bail them out again.

Of all the interesting tidbits in Brett Arends’ article in The Wall Street Journal about how to decide whether to walk away from your mortgage, his admission that the middle class is the only part of America adhering to standards of personal financial responsibility might be the most shocking.

Still, when it comes to the idea of walking away from debts, many people are held back by a sense of morality. They feel it’s wrong to abandon their obligations. They don’t want to be a deadbeat. Your instincts, while honorable, are leading you astray.

The economy is fundamentally amoral.

Sometimes I think middle-class Americans are the only people who haven’t worked this out yet. They’re operating with a gallant but completely out-of-date plan of attack—like an old-fashioned cavalry with plumed hats and shining swords charging against machine guns.

Arends goes on to point out that when a business’s debt exceeds its ability to pay, that business declares bankruptcy. He adds that “walking away from debts is as American as apple pie,” unless you’re a homeowner.

Why is Arends so profoundly down on Americans sticking out the tough housing times? He counts the ways:

• 11 million families current owe mortgages for more than their houses are worth — a full 25 percent of families that have mortgages.
• 5 million of those homeowners owe at least 25 percent more than their houses are worth.
• More than half of mortgage holders in Nevada owe at least 25 percent more than their homes are worth, as well as one-third of Florida mortgage holders and twenty percent of California mortgage holders.
• To regain even a 25 percent loss of value, a home would have to increase in value by one-third — and even if housing prices went up by 5 percent a year, it would take more than 5 and a half years to increase in value by one-third.
• Housing prices aren’t rising at 5 percent a year now.

Arends also notes that in many states, lenders cannot come after homeowners for the money they fail to make on a foreclosure or, when they do, they face significant hurdles in getting that money. With the foreclosure rate so high, many lenders don’t bother. Better yet, from Arends’ perspective, if one’s liquidity is in retirement accounts, lenders who do choose to pursue the remainder of the loan will find themselves unable to access that money at all.

Of course, from a larger perspective, if too many mortgage holders — the 50 percent of Nevadans, for instance — took Arends’ advice, they would contribute to continued depreciation of housing stocks and lenders’ unwillingness to offer mortgages to any but the least risky buyers. The one positive part of Obama’s struggling mortgage modification program, in the minds of most analysts, is the fact that it is helping to spread out the number of foreclosures over a longer period of time, thus keeping home values from going into yet another freefall. A spreading willingness among the American middle class to treat their relationship to debt (and particularly housing debt) as a business transaction instead of the fulfillment of the American Dream (whether that phrase has been trademarked yet by the National Association of Realtors^TM or not) would indeed lead many people to walk away from their often-failed investments.

Luckily for the economy, few Americans are going to stop buying into the idea that home ownership is fundamentally part of the American experience — and many people will continue to pay their underwater mortgages as long as they possibly can.

One of the ongoing criticisms of the Federal Reserve is that, despite its expertise and mandate, it presided over the failing institutions and didn’t understand enough about the complex transactions that triggered this financial crisis — not to mention that it hardly has the best interests of the consumers of financial services at heart when conducting its oversight. But the call to consolidate the regulation of the financial services industry has led the various Federal Reserve Bank presidents to complain that they’ll lose power. They’re led in their efforts by Kansas City Federal Reserve President Thomas Hoenig, who addressed a letter to the Senate Banking Committee on Feb. 19 with some interesting claims.

“It is a striking irony to me that the outcome of the public anger directed toward Washington and Wall Street may lead to the further empowerment of both Washington and Wall Street in regulating financial institutions,” Hoenig said in the letter, written in response to lawmakers’ questions.

It’s an curious premise: If Americans are upset at Washington for not regulating banks stringently enough to prevent a financial crisis, they’ll be upset when Congress asserts its authority and regulates banks more stringently? St. Louis Federal Reserve Bank President James Bullard added his own criticisms of the plan on Feb. 25.

St. Louis Federal Reserve Bank President James Bullard told a business group that a plan for a multi-member financial system watchdog is unlikely to prevent a future crisis because it was unlikely to act decisively.

One of the major criticisms of the bailout is that the Fed and the Treasury Department acted too quickly to throw money at banks without proper oversight or control mechanisms, leading to a situation today in which many banks continue to make money hand over fist while refusing to extend credit or loans to struggling businesses. Hoenig followed up on his letter to the Senate on Feb. 26, when he claimed that the Fed needed to retain its full regulatory powers to keep up with the lives of regular Americans.

“I think that is a tragic mistake; it takes the eyes away from the Federal Reserve in knowing what’s going on in America.”

It’s amusing to think that the Fed needs to maintain its significant regulatory authority to keep up with what is going on in America, when its lack of involvement in what was going on in America helped lead to the subprime mortgage crisis. Today, the president of the Federal Reserve Bank of Richmond, Jeffrey Lacker, added to the calls to keep his authority intact in a speech in Washington

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“As long as the Federal Reserve is responsible for discount-window lending, it makes no sense to diminish the Fed’s robust role in the supervision of a range of banking institutions, from large to small,” Lacker said today in remarks to the annual conference of the Institute of International Bankers in Washington.

In other words, because the Fed loans money to banks and sets interest rates, it should be in charge or regulating banks because those two missions, somehow, inherently go together. To critics who find fault in the Fed’s protection of consumers, Lacker had an answer.

I think we do a really good job of consumer protection, if you look at our record, especially since 2007,” Lacker said. “We acted very rapidly to emerging information about risks to consumers in mortgage lending,” Lacker said. “Plus, putting it with somebody who’s doing safety and soundness regulation makes sense to me.”

Yes, because eventually the Fed realized that the banks over which it had regulatory authority were outright deceiving their customers, putting them in mortgages for which they were unqualified and doing it all for the purpose of securitizing the loans and earning money off of insurance against mortgage defaults, they should be the agency in charge of protecting consumers. All of the Fed presidents’ opinions square neatly with Fed Chairman Ben Bernanke’s statements that the Fed should keep, and even expand, its regulatory authority. Bernanke is even now promising to investigate the currency derivatives set up by Goldman Sachs to help Greece hide the true extent of its debt. Of course, Goldman started its relationship with Greece in 2001, and Greece is now in the midst of a financial meltdown, partly as a result of the swaps which allowed Greece to hide its debt. It only took the Fed nearly a decade and the collapse of an entire country’s economy to get it to think about investigating derivatives. They’re obviously ready to provide consumers with assurances about financial companies and the products they offer.

President Obama plans to change the criteria used to award all federal government contracts in order to reward companies who pay employees better than average wages and offer benefits. Rather than cheering the thought of having more government money end up in individual workers’ pockets, (rather than in CEOs’ bank accounts) Republicans are booing the initiative.

The proposal, which sources tell The New York Times is designed not to raise the cost of contracting, seems simple on the surface.

One federal official said the proposed policy would encourage procurement officers to favor companies with better compensation packages only if choosing them did not add substantially to contract costs. As an example, he said, if two companies each bid $10 million for a contract, and one had considerably better wages and pensions than the other, that company would be favored.

John Podesta showed the White House Office of Management and Budget last year that more than 400,000 people employed by government contractors make $22,000 or less per year — well below the poverty line for a family of four and less than half of the U.S. median income — and new studies show that many such people are reliant on Medicaid and food stamps.

But if you thought a proposal to reward companies financially for paying their workers better would be relatively non-controversial in Washington, you’d be wrong. The business community, as represented by the Chamber of Commerce, hates any government program that uses a company’s behavior to determine how many of your tax dollars should be spent enriching its CEO.

Randel K. Johnson, senior vice president for labor at the United States Chamber of Commerce, called the plan a “warmed-over version” of President Bill Clinton’s regulations that sought to bar federal agencies from awarding contracts to companies with a record of breaking labor, environmental or consumer laws. President George W. Bush vacated those regulations soon after taking office.“We strongly opposed the Clinton blacklist regulations,” Mr. Johnson said, “and this appears worse than that.”

Yes, it’s truly terrible to think that companies that break laws might be barred from participating in government programs that reward them financially! Just because having a record of illegal activity keeps individual Americans from getting many government jobs, a felony record can keep individuals from voting or exercising their Second Amendment Rights, and committing certain kinds of crimes entitles the government to monitor offenders’ behavior for the rest of their days shouldn’t mean, according to the Chamber of Commerce, that companies should be subjected to the terribly harsh punishment of not receiving tax dollars. And, according to the Chamber, allowing the government to choose, all other things being equal, to award a contract to a company that pays its workers enough money to disqualify them for food stamps or Medicaid is just a misuse of government power.

Reports that only 25 percent of eligible homeowners have applied for inclusion in President Obama’s $75 billion mortgage modification program and only 5 percent have received permanent relief have left the Administration struggling for new ways to assist homeowners fighting foreclosure. Its latest idea is stunning in its administrative simplicity, and in its late inclusion to the plan: they want to force banks to engage in modifications before they initiate foreclosure proceedings.

Under the terms of the proposal, banks would be prohibited from foreclosing on houses until mortgagees were screened for eligibility in the mortgage modification program or at least four verifiable contact attempts had been made. Banks will have to stop foreclosure proceedings while customers are in temporary repayment plans. Government officials estimate that nearly 90 percent of outstanding mortgages are eligible for inclusion in that program.

Currently, banks can initiate foreclosure proceedings against any homeowner that hasn’t applied for a mortgage modification. And foreclosures can proceed even while applications for inclusion in the modification program are under review or even after a customer has received a temporary notification — probably part of the reason for the small proportion of temporary modifications converted into full modifications.

The Administration’s proposal, in effect, lowers the barriers for entry into the mortgage modification program by putting the onus on banks to include the homeowners having the most trouble with their mortgages before they engage in foreclosures. It’s such an obvious solution to an intractable problem — getting the information about and applications for the modification program to the people who need it but don’t necessarily know about it — that it’s almost surprising banks weren’t forced to do it from the get-go. Then the nearly 3 million homeowners who lost their houses last year might still have them.

Although Citibank has restored access to Fabulis CEO Jason Goldberg’s accounts and apologized for attempting to sever their business relationship with his company over its “objectionable” content (because a social networking site for gay men is inherently objectionable) Citibank also admitted that it’s company policy not to work with businesses due to moral objections. As explained in the Wall Street Journal:

But Deal Journal’s Peter Lattman last week quoted a different statement from a Citi spokeswoman: “While we don’t comment on our customers, we typically decline accounts associated with content that the general public may potentially find inappropriate or offensive.”

Apparently, fearing the wrath of the religious right trumps all other business considerations: the last documented company to be told it wasn’t allowed to open a Citibank account was an online retailer, sillyunderwear.com, which embroiders the words “Too Big To Fail” in red lettering on white briefs. Who knew a major multinational corporation would fear the wrath of the hordes of customers who would not stand for their money being stored in the same bank as a joke underwear retailer!

Yesterday, Citibank claimed that for Internet businesses — and Internet businesses only — they “specifically reserve the right not to open, or to suspend, an account if we find illegal or discriminatory content.” Unfortunately, Citibank’s employees put those directions into practice by reviewing the websites and blogs of all its customers and then declining to work with any business that might bother its more socially conservative clientele.

It is almost a cliché that layoffs lead to higher mortality rates, but now there is science to back up some of the anecdotes. Michael Luo of The New York Times reports on the three men laid off from a Lackawanna steel plant who suffered heart attacks in the wake of the announcement, and how they fit into broader research on the topic of economic stress and personal health.

One 2006 study by a group of epidemiologists at Yale found that layoffs more than doubled the risk of heart attack and stroke among older workers. Another paper, published last year by Kate W. Strully, a sociology professor at the State University of New York at Albany, found that a person who lost a job had an 83 percent greater chance of developing a stress-related health problem, like diabetes, arthritis or psychiatric issues.

But it’s not just the immediate stress of a layoff that seemingly has effects on workers’ health; there may well be lasting effects of being laid off.

The paper, by Till von Wachter, a Columbia University economist, and Daniel G. Sullivan, director of research at the Federal Reserve Bank of Chicago, examined death records and earnings data in Pennsylvania during the recession of the early 1980s and concluded that death rates among high-seniority male workers jumped by 50 percent to 100 percent in the year after a job loss, depending on the worker’s age. Even 20 years later, deaths were 10 percent to 15 percent higher.

On a day when President Obama is leading an increasingly frustrated effort to pass health reform — a leading part of which is limiting insurers’ abilities to use pre-existing conditions or events (like rape and domestic violence) to deny people coverage — in a month in which unemployment has risen and remains about 10 percent, it’s interesting to note that economic stressors may well have long-term consequences. But at least in this economy, insurers can’t possibly call being laid off a pre-existing condition and have large enough risk pools to make money.

Jason Goldberg is the CEO of a company called Fabulis, which is developing a website, iPhone app and social media application targeted at gay men. His company — which is at least his third start-up — is funded by investors including The Washington Post and the venture capitalist Allen Morgan, and they just launched their beta version this month. You would think he would be the kind of customer Citi would want — but Citi decided otherwise after a compliance officer reviewed his site and decided that a social networking application for gay men was “objectionable.”

Without notifying Goldberg or anyone at Fabulis, Citi shut down their bank accounts for objectionable content on Fabulis’ blog, though it refused to specify which content. After hours of phone calls, several articles and a threat to take their banking elsewhere, Citi finally called Goldberg to say that the three Citi employees who had decided Goldberg’s social networking site was objectionable were “wrong to have said what they said.” Note that the bank did not say they were wrong to have suspended his account without notification, or to have flagged his blog as objectionable because it talks about the gay-themed (but not pornographic) company that he is starting, but just that the three employees statements to him were wrong.

In fact, what they told Goldberg was likely right out of an employee handbook, if the phrasing is anything to go by: “Content was not in compliance with Citibank’s standard policies.”

Does Citibank make a regular habit of reading up on the content generated by all its business customers — and are its personal banking clients exempt? Do they accept business accounts from companies that produce or distribute pornography (which includes business giants such as Barnes and Noble and Amazon, as well as nearly every convenience store in the country)? Do they terminate the business accounts of freelance writers if they object to the content written by the customer — be it sexual or political? Is their compliance department monitoring the blog of each and every customer to make sure that storing your money with them is socially acceptable? It seems unlikely that Citi is going around reading all of its customer’s blogs or checking to make sure that every client meets with its employees’ standards of unobjectionable. Far more likely, Goldberg’s business was targeted because of its audience — gay men — and what some employees decide is objectionable.

But then maybe Citibank’s unspoken policy of judging the thoughts and sexual orientation of its customers is why Playboy Enterprises does its banking with Bank of America.

Given that President Obama’s recently announced mortgage assistance program is only 2 percent of what he gave to banks for the mostly unsuccessful mortgage modification program, one might be forgiven for thinking that the housing market is on an upward trajectory. If JPMorgan Chase’s recent SEC filing is any guide, that assumption is just plain wrong.

Chase’s recent filings, as reported by Shahien Nasiripour at the Huffington Post, anticipates some pretty bleak times ahead, despite Chase’s nearly $12 billion profit in 2009. Chase anticipates billion dollar increases in the housing loans it will have to write off, including prime, subprime and home equity loans — meaning that they anticipate having to foreclose on billions of dollars worth of Americans’ homes in 2010.

In 2009, the firm wrote off $1.9 billion in prime mortgage loans. In 2010, it expects to write off $2.4 billion. For subprime loans, it wrote off $1.6 billion. This year, it expects $2 billion to be written off. And the lender expects home equity loan losses, a $4.7 billion hit last year, to reach $5.6 billion in 2010.

In addition, recent reports indicate nearly one-quarter of American homeowners have mortgages in excess of the value of their homes, and an additional 5 percent have mortgages amounting to 95 percent of the value of their homes.

Nasiripour speculates that Chase’s figures don’t take into account the number of homeowners whose mortgages are underwater that may simply walk away from their mortgages. Patrick Newport with IHS Global Insight tells why:

“The price that you pay for walking away is you probably won’t be able to borrow to buy a home for about four to five years [and] you probably won’t be able to use your credit card for two to three years,” he said.”But, you’ll have this big weight off your shoulders and you’ll probably save tens of thousands — and in come [sic] cases hundreds of thousands — of dollars by walking away.

These are the very homeowners Obama’s expensive mortgage modification program was designed to assist — not simply for their own sakes, but for the sakes of their banks, whose losses will be expensive. But the recalcitrance of the banks to do more than pay lip service and give homeowners the runaround on modification may end up hurting them more than a few years of bad credit will hurt their customers.

Whirlpool should be used to protests after plant closures by now: After shutting down factories and laying off workers in Newton, Iowa, Herrin, Ill., and Searcy, Ark., in 2006, in LaVergne, Tenn., and Reynosa, Mexico in 2008, and in Fort Smith, Ark., and Evansville, Ind., in 2009 and 2010 as part of its latest round of layoffs affecting 5,000 people, one would think they’d know the drill. People get mad and depressed when their livelihoods disappear, and especially when their jobs get sent overseas. But a letter sent to its Evansville employees indicates management has a tin ear as well as a cold heart when it comes to this round of layoffs.

Perhaps the $20 million in job creation funds it accepted to develop new technologies shortly after it announced the Evansville layoffs to little media attention has something to do with it? Nonetheless, Sam Stein at The Huffington Post reports that Whirlpool would like its soon-to-be-former employees to go gently into that good night of unemployment and dwindling prospects so they can keep their taxpayer money.

And they most definitely don’t want them to join in a union protest on Friday with AFL-CIO President Richard Trumka — but it’s all for their own good.

“With this in mind, we have shared our concern with Local 808 leaders that these negative activities will only hamper employees when they look for future jobs. The entire community is aware and sympathetic towards the situation we all face. We fear that potential employers will view the actions of a few and determine whether they would want to hire any of Evansville Division employees in the future. We hope that this is not the case, but think it is certainly a consideration.”

Evansville, a city of about 117,000 people, had a median household income of $34,629 in 2008 according to the U.S. Census Bureau. But the Evansville metropolitan area, according to the Bureau of Labor statistics, supported 173,000 jobs last December (down from 179.2 in November 2008). Unemployment, while under the national average of 10 percent in December, was 8.1 percent — more than 2 points up from November 2008. In Evansville, 12.3 percent of the workforce belongs to a union — the same as the national average. It’s a fair guess that potential employers in Evansville won’t be turned off to see their about-to-be-unemployed neighbors protesting the company that is moving their jobs to Mexico — and a better bet that the company is more concerned about the bad publicity for its stimulus grant than the future employment prospects of the very people it is laying off.

Patrick Thibodeau of ComputerWorld reports that one result of the administration’s crackdown on employers using H-1B (non-immigrant skilled worker) visas is that one company, Peri Software Solutions, may be required to pay $1.45 million in back wages to 163 employees. Peri reportedly failed to pay workers prevailing wages — one requirement of the H-1B program is that employers pay foreign workers more or less what they would American workers, if they could find any — as well as forcing them to sign employment contracts that they were sued for violating.

Unlike American workers, however, the foreign workers at Peri might get their back wages, right after they’re sent home.

The Labor Department is also seeking to hit Peri with a $439,000 civil penalty and a two-year debarment from the H-1B program.

Unless Peri’s workers are able to find other H-1B jobs before being asked to leave the United States, punishing Peri for paying its workers less-than-prevailing wages will mean that their workers will lose their jobs and be sent back to their countries of origin.

The Catch-22 of immigration law — report the person who got you into the country, and get sent home for the privilege — is something many immigrants and foreign workers face on a regular basis. Without significant reform, for which Congress likely doesn’t have the stomach this year, the administration’s crackdown on employer violations of labor law will necessarily result in job losses for the people already hurt by the labor law violations.

(h/t @Elana_Brooklyn for the link)

Anyone who has ever been unemployed or “underemployed” (working part-time or freelancing when one needs full-time work) knows that it’s quite easy to get down about your employment prospects. But just in case you thought the 20 percent of Americans who are among the ranks of the un- and underemployed were happy, Gallup has a new poll just to prove they don’t love being on the margins of society.

Sixty-eight percent of those working part time are not optimistic about finding a full-time job and 55 percent of those unemployed are not hopeful about their prospects.

Of course, unlike economists and statisticians at the Labor Department, they don’t need to wait for depressing weekly or monthly unemployment figures to know that the economy sucks.

Interestingly, the same study shows that Obama polls more favorably among the underemployed than among the general public: He has a 55 percent approval rating among the underemployed and 49 percent overall. Of course, other studies showed recently that the wealthy are facing hardly any unemployment and the financial industry, which received a huge boost from the administration last year, may be shifting some political donations to Republicans (although that may just be spin, depending on how the rest of the election cycle plays out this year). Perhaps, then, Obama should hope that his newly passed jobs bill isn’t successful, lest those who benefit from it turn against him as soon as they have hope again.

The Project on Government Oversight today sent a stark warning to Congress: Don’t let the commercials paid for by the Financial Industry Regulatory Authority (FINRA) fool you, because they’re the last people to whom you want to give expanded regulatory authority. According to POGO, FINRA’s incompetence or deliberate unwillingness to provide oversight of the securities industry added to the current financial crisis and nearly every major securities scandal since the 1980s.

According to Andy Kroll at Mother Jones, FINRA is a private regulator within the industry charged with protecting consumers, but since it is often staffed with industry insiders and funded by the industry, it hardly does the job it’s intended to do. If it seems like there’s a conflict of interest in letting an industry group protect the consumers the industry might be able to make more money defrauding, POGO says that’s exactly the problem.

As POGO wrote in its letter to Congress, “the cozy relationship between FINRA and the securities industry has resulted in pervasive conflicts of interest, and ought to raise doubts about whether FINRA can ever be an effective regulator.”

Not that doubts about its conflicts of interest stopped President Obama from nominating its immediate past chair to run the Securities and Exchange Commission; once there, Mary Schapiro directed the staff to come to the now-infamous settlement with Bank of America over its failure to disclose the Merrill Lynch bonuses.

Other examples of FINRA’s ineffectiveness as a regulator abound: From missing the Madoff and Stanford Ponzi schemes to taking a hit to its own investment portfolio of half a billion dollars and then awarding its executives $30 million on bonuses, FINRA is often a reflection of the very self-governance problems in the financial services industry that are at the root of the call for further regulation.

Now FINRA is calling on the government to give it the authority to police investment advisers in addition to securities brokers, despite its track record of protecting the industry’s interests first and consumers’ interests second (if at all). The folks at POGO hope that Congress’ intention to pursue some sort of new consumer regulation doesn’t end up being an opportunity to outsource henhouse protection to the foxes already bedeviling it.

The headlines trumpet the increase in Wall Street bonuses in 2009 — they were up 17 percent over 2008, a number that the New York State comptroller, Thomas DiNapoli, calls a “bitter pill” for American taxpayers (if not for New York’s increasingly stretched coffers). Did bankers learn nothing?

Actually, it appears that they’ve learned a little something: Although bonuses are up 17 percent, they’re down one-third from 2007, when Wall Street was last profitable. Financial firms actually had a banner year in 2009, fueled in no small part by bailouts, and firms netted more than $55 billion in profits alone, after losing $43 billion in 2008. So, despite record gains, they didn’t pay out record bonuses — at least, they didn’t in terms of non-deferred compensation. Deferred compensation, such as stock options, aren’t taxed until they are recorded as income. That’s, at least, a start.

Deferred compensation is a bonus method that DiNapoli supports, despite its tax implications for the state.

DiNapoli supports reforms that require Wall Street bonuses to be tied to long-term profitability, to force more stability in the volatile markets and “make sure the securities industry thrives without driving the rest of us out on a fragile economic limb.”

But if cash bonuses are still hard to stomach for many Americans who aren’t doing as well as the Wall Streeters, it’s hard to believe that Americans will be less bothered by stock options than cash — especially if massive stock options cause tax revenue shortfalls and cuts in services.