Break’s over.
For the last five years, Congress has cut students a break on the interest rate for unsubsidized student loans, the most popular kind used at Ball State. Starting in July, if the low rate of 3.4 percent isn’t reinstated, it could go back to 6.8 percent, which represents an average $2,000 increase over the course of paying back the loan.
In 2007, the College Cost Reduction and Access Act was passed, which reduced the rate to 3.4 percent for undergraduate students. It was meant to help make college more affordable during poor economic times. Now the plan is about to expire.
“They only had a five-year plan,” said John McPherson, director of Ball State’s Scholarships and Financial Aid. “And now the only way to keep the cost low is to come up with more money to pay for it.”
Rep. Joe Courtney (R-Calif.) recently introduced a bill to keep the rate at 3.4 percent, and President Barack Obama has said he wants to keep it for at least a year.
“A college education is key to success in today’s economy,” said Courtney in a press release on his website. “But for many students, the spiraling costs of higher education are creating an immense barrier.”
For the average student using a subsidized Stafford Loan, it could means about a $2,000 increase over 10 years, according to information from the National Association of Student Financial Aid Administrators.
“If you look at averages, obviously a college degree provides opportunities you can never get anywhere else,” McPherson said. “Over the life of a person, it’s not going to be huge.”
Sophomore Joseph Dimaggio uses loans and grants to pay for college, and since he decided to add a second major, he anticipates being in college an extra two and a half years. He said he’s afraid that he’ll have to spend several years paying back his loans before he can start to settle down.
“There are a lot of things I’d rather do with $2,000,” he said.
He said he wants to become an actuarial scientist, and he said it’s important to know what jobs are in demand.
“We hit such a low,” he said. “And I have a lot of friends that are older and overqualified for the job they have, especially in teaching.”
Last academic year, about 10,400 Ball State students used subsidized Stafford loans. Altogether, they borrowed $44 million.
Even if the interest rate is brought back to 6.8 percent, McPherson said this is the best deal for most students, especially if this is their first time taking out a loan. Private lenders might deny them, or give them a higher interest rate, McPherson said.
Perkins loans have a fixed 5 percent interest. But they are for extremely needy students, and not many people qualify, he said.
With a subsidized loan, the federal government absorbs the interest while a student is in college and six months afterward. If the CCRAA program is abolished, students would be responsible for the interest accumulated during the six months after they graduate.
With unsubsidized loans, students pay the interest that is built up during college and during the six-month grace period after graduation. The government uses a formula to determine a student’s need and how much money they will receive with each type of loan. The formula includes factors like income, family size, number of people already in college and the family’s assets.
Every year, two thirds of Ball State students borrow some kind of loan, McPherson said. In 2010-2011, undergrads were leaving college with an average debt of $24,121.
Rob Tyler, an adjunct professor of personal finance and the founder of Tyler Wealth Management, offered examples of how this would impact students. His estimate: not very much.
To repay the average student loan over 10 years with an interest rate of 3.4 percent, the monthly payment is about $237.59. At a rate of 6.8 percent, the monthly payment jumps to $277.79, an increase of just $40.20.
Tyler crunched a few numbers based on loan information from the Ball State Credit Union.
The interest rate for a loan from the credit union on a new car, for example, is 2.99 percent. In order to offset the extra $40.20 a student is paying back on student loans, and with the interest rate for a new car taken into consideration, they would need to buy a car that costs $2,237 less than what they had previously budgeted.
On a loan for a new house, Tyler used a 4.5 percent fixed interest rate on a 30-year mortgage for his example. In that case, to accommodate the extra $40.20 a month in student loans, he or she would want to buy a house that’s about $8,000 less than they budgeted — not a huge amount relative to a $200,000 home.
“You have to think, what’s my sacrifice?” Tyler said. “Your college education is going to last you a lifetime.”
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2012年2月11日星期六
Public Safety
The mad dash to cobble together college funding will soon be under way.
In the weeks ahead, colleges will begin mailing out their much-anticipated acceptance letters and financial aid packages. The notices will alleviate pent up anxiety and finally give high school seniors a clearer idea of what their futures will hold.
But amid all the emotions, students and families will also need to start sorting out how they’ll pay for tuition. The average bill now comes in at more than $17,000 to attend an in-state public college.
The problem is that navigating the universe of financial aid can be confusing. That’s because there’s a vast patchwork of grants, scholarships and loans available. But a failure to compare the options and explore the alternatives could mean the difference in thousands of dollars in debt upon graduation.
Adding to that confusion is a spate of headlines in recent weeks regarding changes in financial aid. To help navigate this process, here’s a look at what’s behind the recent changes.
—
Comparing costs » As part of his broad plans to make higher education more affordable, President Barack Obama recently said he wants to make it easier for families to estimate the cost of college.
As it stands, there isn’t a uniform template for financial aid award letters, and officials say the forms can be difficult to decipher, even misleading. For example, schools usually provide a total “out of pocket” cost after subtracting aid such as grants and scholarships. But some schools also subtract loans from that figure, even though loans have to be repaid and actually push up costs because of interest charges.
In other cases, interest rates and other loan terms are not spelled out. Officials say this could lead to students taking on more debt than they realize.
To address the issue, the Department of Education and the newly created Consumer Financial Protection Bureau announced in October that they are developing a model financial aid form. There aren’t any plans yet to make the form mandatory. But once a template is finalized, Congress could vote to require colleges to use it to maintain access to federal aid. The adoption of such a form has also been widely supported by student advocates.
Separately, Obama is pushing for a “college scorecard” that would require schools to disclose their graduation rates, rate of employment and debt repayment among graduates.
—
Interest rates » Taking out a student loan to attend college has become the norm, with two-thirds of graduates leaving campus in debt. But not all loans are alike. So it might have caught your attention last month when Obama said in his State of the Union address that the fixed interest rates on student loans are set to double in July if Congress fails to act.
Before you panic, keep in mind that there are primarily two types of federal student loans: subsidized and unsubsidized. The difference is that the government doesn’t start charging interest on subsidized loans until the student graduates. With unsubsidized loans, interest starts accruing right away.
The loans also come with different interest rates. Unsubsidized loans currently charge a fixed rate of 6.8 percent. The interest rate on subsidized loans was gradually lowered to its current fixed rate of 3.4 percent over the past few years. But the law that temporarily reduced the rate sunsets in July.
So unless Congress extends the reduction, the rate on subsidized loans will snap back to 6.8 percent.
Next Page »
http://tourism9.com/ http://vkins.com/
In the weeks ahead, colleges will begin mailing out their much-anticipated acceptance letters and financial aid packages. The notices will alleviate pent up anxiety and finally give high school seniors a clearer idea of what their futures will hold.
But amid all the emotions, students and families will also need to start sorting out how they’ll pay for tuition. The average bill now comes in at more than $17,000 to attend an in-state public college.
The problem is that navigating the universe of financial aid can be confusing. That’s because there’s a vast patchwork of grants, scholarships and loans available. But a failure to compare the options and explore the alternatives could mean the difference in thousands of dollars in debt upon graduation.
Adding to that confusion is a spate of headlines in recent weeks regarding changes in financial aid. To help navigate this process, here’s a look at what’s behind the recent changes.
—
Comparing costs » As part of his broad plans to make higher education more affordable, President Barack Obama recently said he wants to make it easier for families to estimate the cost of college.
As it stands, there isn’t a uniform template for financial aid award letters, and officials say the forms can be difficult to decipher, even misleading. For example, schools usually provide a total “out of pocket” cost after subtracting aid such as grants and scholarships. But some schools also subtract loans from that figure, even though loans have to be repaid and actually push up costs because of interest charges.
In other cases, interest rates and other loan terms are not spelled out. Officials say this could lead to students taking on more debt than they realize.
To address the issue, the Department of Education and the newly created Consumer Financial Protection Bureau announced in October that they are developing a model financial aid form. There aren’t any plans yet to make the form mandatory. But once a template is finalized, Congress could vote to require colleges to use it to maintain access to federal aid. The adoption of such a form has also been widely supported by student advocates.
Separately, Obama is pushing for a “college scorecard” that would require schools to disclose their graduation rates, rate of employment and debt repayment among graduates.
—
Interest rates » Taking out a student loan to attend college has become the norm, with two-thirds of graduates leaving campus in debt. But not all loans are alike. So it might have caught your attention last month when Obama said in his State of the Union address that the fixed interest rates on student loans are set to double in July if Congress fails to act.
Before you panic, keep in mind that there are primarily two types of federal student loans: subsidized and unsubsidized. The difference is that the government doesn’t start charging interest on subsidized loans until the student graduates. With unsubsidized loans, interest starts accruing right away.
The loans also come with different interest rates. Unsubsidized loans currently charge a fixed rate of 6.8 percent. The interest rate on subsidized loans was gradually lowered to its current fixed rate of 3.4 percent over the past few years. But the law that temporarily reduced the rate sunsets in July.
So unless Congress extends the reduction, the rate on subsidized loans will snap back to 6.8 percent.
Next Page »
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2012年2月7日星期二
Private-Equity Lobbying Helped Protect Romney’s Tax Benefits
February 07, 2012, 7:18 AM EST
By Steven Sloan
Feb. 7 (Bloomberg) — The largest U.S. private-equity funds and venture capital firms have relied on a five-year, multimillion-dollar lobbying campaign to protect the carried interest tax break that helped drive presidential candidate Mitt Romney’s 2010 effective tax rate below 14 percent.
With the issue gaining attention in this year’s U.S. presidential election campaign, the investment industry is again girding to defend its preferential tax treatment. Blackstone Group LP alone spent $5 million in 2011 lobbying Congress on issues including the tax treatment of carried interest.
“If anything preserves the status quo, it will be the very heavy lobbying campaign,” said Edward Kleinbard, a law professor at the University of Southern California. “There’s no other reason for the subsidy to survive.”
Opponents of the tax rate for carried interest see this as an opportunity to press for change. Romney released his 2010 tax returns on Jan. 24, revealing he paid an effective tax rate of 13.9 percent on income of $21.6 million.
Romney, a former Republican governor of Massachusetts and co-founder of Bain Capital LLC, has come to personify the debate over whether the carried interest paid to private-equity managers should be taxed at the capital gains rate of 15 percent while ordinary income is taxed at rates as high as 35 percent.
Tax Fairness Debate
Democrats view the carried interest issue as an element of the tax fairness theme that President Barack Obama is highlighting in his re-election campaign. Representative Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, plans to introduce a bill as soon as this week that would tax carried interest at the same rate as regular income, according to spokesman Josh Drobnyk. The bill probably won’t advance in the Republican-controlled chamber this year.
Carried interest is the profits-based compensation that private-equity managers, real estate investors and members of oil and gas partnerships often receive. They get a portion of their clients’ earnings as investment income if the underlying earnings are treated that way. Levin and Obama call carried interest compensation for work, which they say should be viewed like wages for tax purposes.
Private-equity firms invested more than $148 billion in 1,234 U.S.-based companies in 2010, according to the Private Equity Growth Capital Council. The industry says it employs more than 8 million people.
Washington Lobbyists
Companies opposed to changing the tax treatment of carried interest have hired veteran Washington lobbyists to make their case. Wayne Berman of Ogilvy Government Relations is Blackstone’s top lobbyist on the issue. He was an assistant commerce secretary during George H.W. Bush’s administration. Other Ogilvy lobbyists working for Blackstone include Drew Maloney, who was a staffer for former House Majority Whip Tom DeLay, a Texas Republican, and Moses Mercado, the former House Democratic Leader Richard Gephardt’s deputy chief of staff.
Kohlberg Kravis Roberts & Co. hired former Representative Vic Fazio, a California Democrat, to work with Congress on “tax issues affecting private-equity firms and their portfolio companies,” according to lobbying records. The New York-based private-equity company spent $150,000 in the fourth quarter on lobbyists from Akin Gump Strauss Hauer & Feld to work on issues that included tax policy.
Bain spent $80,000 during the fourth quarter to hire lobbyists from Public Strategies Washington Inc. to “monitor tax reform developments,” lobbying records show. Joseph O’Neill and Paul Snyder are lobbying for Romney’s former company.
O’Neill was chief of staff to former Senate Finance Committee Chairman Lloyd Bentsen and helped run the late Texas Democrat’s 1988 vice presidential bid. Snyder was a legislative assistant to former House Speaker Tip O’Neill, the late Massachusetts Democrat.
Budget Deficit
Raising taxes on carried interest compensation wouldn’t do much to narrow the U.S. budget deficit. In its fiscal 2012 budget request, the Obama administration said the proposal to tax carried interest as ordinary income would generate $14.8 billion over 10 years. In December, the deficit stood at almost $1.3 trillion.
The issue has divided Congress along mostly partisan lines. The last time the Senate considered a bill that would have increased taxes on carried interest — in June 2010 — every Republican voted against it, preventing the bill from advancing. Senator Ben Nelson of Nebraska was the only Democrat to oppose the legislation.
Few Defections
The same bill was passed in the House that year with 15 lawmakers in each party voting against their leaders.
As the debate over carried-interest taxation advanced in Congress, the Private Equity Growth Capital Council was formed in February 2007 so the industry could make its case more directly to lawmakers.
The group, whose members include the Carlyle Group LP, based in Washington, and New York-based Blackstone spent about $2.5 million that year lobbying Congress on issues that included measures to tax carried interest at the same rate as ordinary income. It spent $2.2 million on lobbying in 2011.
“We believe that tax policy should incentivize the kind of entrepreneurial risk-taking that private-equity firms take every day,” said Ken Spain, a spokesman for the Private Equity Growth Capital Council, a trade group based in Washington. “We remain vigilant in respect to this issue. Private equity as an asset class is going to be a topic of discussion throughout 2012.”
Spain is a former communications director for the National Republican Congressional Committee.
Comprehensive Overhaul
While the issue will be a central one in the presidential campaign and on Capitol Hill, the taxation of carried interest probably won’t change until Congress considers a comprehensive tax-code overhaul. That would be difficult to enact before 2013.
One potential challenge for private equity is something that otherwise would be seen as a favorable development for the industry: a Romney administration. Ending the preferential treatment of capital gains if Romney wins the presidency could dissolve notions that he is a captive to his former industry, said Martin Sullivan, a contributing editor at Tax Analysts, a nonprofit organization in Falls Church, Virginia.
“It will be much easier to repeal if Mitt Romney becomes president than if Mr. Obama remains president,” he said.
Still, Romney adviser Eric Fehrnstrom told reporters last month that the Republican presidential candidate thinks carried interest should be taxed at the same rate as a capital gain. The candidate has proposed eliminating the tax on capital gains for those with adjusted gross incomes of less than $200,000 a year.
‘Convoluted’ Code
Private-equity executives also rely on fairness arguments to make their case. In a Jan. 27 appearance on Bloomberg Television, Steve Pagliuca, the managing partner of Bain Capital, said the tax code is “convoluted” and “almost unintelligible.”
“We’ve got to have a fair tax code,” he said. “We don’t wake up every day saying ‘Well, what’s the tax code?’ We wake up trying to build great businesses and we pay all of the taxes that are necessary.”
Mark Heesen, president of the National Venture Capital Association, an industry trade group based in Arlington, Virginia, said his industry often reminds lawmakers of its differences from other investors such as private-equity firms. Venture capital firms typically invest in early-stage companies and don’t use as much leverage as private-equity investors do.
Creating Something
“We are able to demonstrate our belief that quintessential capital gains are all about creating something out of nothing,” he said. “That’s what venture capital does.”
Heesen said his message to Congress is that it’s important to maintain the link between carried interest and capital gains, even if the capital gains tax rate increases. Unless Congress acts, such gains will be taxed at 20 percent in 2013. High earners will face an additional 3.8 percent tax on capital gains and other unearned income as part of the 2010 health-care law.
On the other side of the issue is the AFL-CIO, which has lobbied in favor of changing how carried interest is taxed, and is prepared to do so again. Damon Silvers, the policy director for the labor organization in Washington, called the treatment of carried interest a “tax subsidy for leveraged buyouts.”
“We are going to be pressing the carried interest issue at whatever opportunity we get,” he said. “Mitt Romney’s tax returns are the world’s greatest educational tool about the impact of the carried-interest loophole.”
The AFL-CIO spent $1.1 million in 2007 to lobby Congress on issues that included a Senate bill to raise taxes on carried interest.
Lobbying on the carried-interest debate is only part of the reason the tax break has survived, said David Donnelly, the national campaigns director at the Public Campaign Action Fund, a Washington nonprofit group that tracks political contributions. Investors who are paid in carried interest are often the well-heeled donors that members of both parties turn to for campaign contributions, he said.
“I don’t think it’s simply the lobbying,” Donnelly said. “The people who are interested in this particular provision are high net-worth individuals. That’s a constituency that Congress always cares about when they have to raise money to fund their campaigns.”
–With assistance from Richard Rubin in Washington and Cristina Alesci in New York. Editors: Jodi Schneider, Robin Meszoly
To contact the reporter on this story: Steven Sloan in Washington at ssloan7@bloomberg.net
To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net
http://tourism9.com/ http://vkins.com/
By Steven Sloan
Feb. 7 (Bloomberg) — The largest U.S. private-equity funds and venture capital firms have relied on a five-year, multimillion-dollar lobbying campaign to protect the carried interest tax break that helped drive presidential candidate Mitt Romney’s 2010 effective tax rate below 14 percent.
With the issue gaining attention in this year’s U.S. presidential election campaign, the investment industry is again girding to defend its preferential tax treatment. Blackstone Group LP alone spent $5 million in 2011 lobbying Congress on issues including the tax treatment of carried interest.
“If anything preserves the status quo, it will be the very heavy lobbying campaign,” said Edward Kleinbard, a law professor at the University of Southern California. “There’s no other reason for the subsidy to survive.”
Opponents of the tax rate for carried interest see this as an opportunity to press for change. Romney released his 2010 tax returns on Jan. 24, revealing he paid an effective tax rate of 13.9 percent on income of $21.6 million.
Romney, a former Republican governor of Massachusetts and co-founder of Bain Capital LLC, has come to personify the debate over whether the carried interest paid to private-equity managers should be taxed at the capital gains rate of 15 percent while ordinary income is taxed at rates as high as 35 percent.
Tax Fairness Debate
Democrats view the carried interest issue as an element of the tax fairness theme that President Barack Obama is highlighting in his re-election campaign. Representative Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, plans to introduce a bill as soon as this week that would tax carried interest at the same rate as regular income, according to spokesman Josh Drobnyk. The bill probably won’t advance in the Republican-controlled chamber this year.
Carried interest is the profits-based compensation that private-equity managers, real estate investors and members of oil and gas partnerships often receive. They get a portion of their clients’ earnings as investment income if the underlying earnings are treated that way. Levin and Obama call carried interest compensation for work, which they say should be viewed like wages for tax purposes.
Private-equity firms invested more than $148 billion in 1,234 U.S.-based companies in 2010, according to the Private Equity Growth Capital Council. The industry says it employs more than 8 million people.
Washington Lobbyists
Companies opposed to changing the tax treatment of carried interest have hired veteran Washington lobbyists to make their case. Wayne Berman of Ogilvy Government Relations is Blackstone’s top lobbyist on the issue. He was an assistant commerce secretary during George H.W. Bush’s administration. Other Ogilvy lobbyists working for Blackstone include Drew Maloney, who was a staffer for former House Majority Whip Tom DeLay, a Texas Republican, and Moses Mercado, the former House Democratic Leader Richard Gephardt’s deputy chief of staff.
Kohlberg Kravis Roberts & Co. hired former Representative Vic Fazio, a California Democrat, to work with Congress on “tax issues affecting private-equity firms and their portfolio companies,” according to lobbying records. The New York-based private-equity company spent $150,000 in the fourth quarter on lobbyists from Akin Gump Strauss Hauer & Feld to work on issues that included tax policy.
Bain spent $80,000 during the fourth quarter to hire lobbyists from Public Strategies Washington Inc. to “monitor tax reform developments,” lobbying records show. Joseph O’Neill and Paul Snyder are lobbying for Romney’s former company.
O’Neill was chief of staff to former Senate Finance Committee Chairman Lloyd Bentsen and helped run the late Texas Democrat’s 1988 vice presidential bid. Snyder was a legislative assistant to former House Speaker Tip O’Neill, the late Massachusetts Democrat.
Budget Deficit
Raising taxes on carried interest compensation wouldn’t do much to narrow the U.S. budget deficit. In its fiscal 2012 budget request, the Obama administration said the proposal to tax carried interest as ordinary income would generate $14.8 billion over 10 years. In December, the deficit stood at almost $1.3 trillion.
The issue has divided Congress along mostly partisan lines. The last time the Senate considered a bill that would have increased taxes on carried interest — in June 2010 — every Republican voted against it, preventing the bill from advancing. Senator Ben Nelson of Nebraska was the only Democrat to oppose the legislation.
Few Defections
The same bill was passed in the House that year with 15 lawmakers in each party voting against their leaders.
As the debate over carried-interest taxation advanced in Congress, the Private Equity Growth Capital Council was formed in February 2007 so the industry could make its case more directly to lawmakers.
The group, whose members include the Carlyle Group LP, based in Washington, and New York-based Blackstone spent about $2.5 million that year lobbying Congress on issues that included measures to tax carried interest at the same rate as ordinary income. It spent $2.2 million on lobbying in 2011.
“We believe that tax policy should incentivize the kind of entrepreneurial risk-taking that private-equity firms take every day,” said Ken Spain, a spokesman for the Private Equity Growth Capital Council, a trade group based in Washington. “We remain vigilant in respect to this issue. Private equity as an asset class is going to be a topic of discussion throughout 2012.”
Spain is a former communications director for the National Republican Congressional Committee.
Comprehensive Overhaul
While the issue will be a central one in the presidential campaign and on Capitol Hill, the taxation of carried interest probably won’t change until Congress considers a comprehensive tax-code overhaul. That would be difficult to enact before 2013.
One potential challenge for private equity is something that otherwise would be seen as a favorable development for the industry: a Romney administration. Ending the preferential treatment of capital gains if Romney wins the presidency could dissolve notions that he is a captive to his former industry, said Martin Sullivan, a contributing editor at Tax Analysts, a nonprofit organization in Falls Church, Virginia.
“It will be much easier to repeal if Mitt Romney becomes president than if Mr. Obama remains president,” he said.
Still, Romney adviser Eric Fehrnstrom told reporters last month that the Republican presidential candidate thinks carried interest should be taxed at the same rate as a capital gain. The candidate has proposed eliminating the tax on capital gains for those with adjusted gross incomes of less than $200,000 a year.
‘Convoluted’ Code
Private-equity executives also rely on fairness arguments to make their case. In a Jan. 27 appearance on Bloomberg Television, Steve Pagliuca, the managing partner of Bain Capital, said the tax code is “convoluted” and “almost unintelligible.”
“We’ve got to have a fair tax code,” he said. “We don’t wake up every day saying ‘Well, what’s the tax code?’ We wake up trying to build great businesses and we pay all of the taxes that are necessary.”
Mark Heesen, president of the National Venture Capital Association, an industry trade group based in Arlington, Virginia, said his industry often reminds lawmakers of its differences from other investors such as private-equity firms. Venture capital firms typically invest in early-stage companies and don’t use as much leverage as private-equity investors do.
Creating Something
“We are able to demonstrate our belief that quintessential capital gains are all about creating something out of nothing,” he said. “That’s what venture capital does.”
Heesen said his message to Congress is that it’s important to maintain the link between carried interest and capital gains, even if the capital gains tax rate increases. Unless Congress acts, such gains will be taxed at 20 percent in 2013. High earners will face an additional 3.8 percent tax on capital gains and other unearned income as part of the 2010 health-care law.
On the other side of the issue is the AFL-CIO, which has lobbied in favor of changing how carried interest is taxed, and is prepared to do so again. Damon Silvers, the policy director for the labor organization in Washington, called the treatment of carried interest a “tax subsidy for leveraged buyouts.”
“We are going to be pressing the carried interest issue at whatever opportunity we get,” he said. “Mitt Romney’s tax returns are the world’s greatest educational tool about the impact of the carried-interest loophole.”
The AFL-CIO spent $1.1 million in 2007 to lobby Congress on issues that included a Senate bill to raise taxes on carried interest.
Lobbying on the carried-interest debate is only part of the reason the tax break has survived, said David Donnelly, the national campaigns director at the Public Campaign Action Fund, a Washington nonprofit group that tracks political contributions. Investors who are paid in carried interest are often the well-heeled donors that members of both parties turn to for campaign contributions, he said.
“I don’t think it’s simply the lobbying,” Donnelly said. “The people who are interested in this particular provision are high net-worth individuals. That’s a constituency that Congress always cares about when they have to raise money to fund their campaigns.”
–With assistance from Richard Rubin in Washington and Cristina Alesci in New York. Editors: Jodi Schneider, Robin Meszoly
To contact the reporter on this story: Steven Sloan in Washington at ssloan7@bloomberg.net
To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net
http://tourism9.com/ http://vkins.com/
2012年2月3日星期五
Geithner says 2010 law made financial system 'stronger and safer'
Reporting from Washington—
Treasury Secretary Timothy F. Geithner has a message for voters as they listen to Republican presidential candidates call for repeal of the 2010 Dodd-Frank financial overhaul law: Remember the pain.
“I would say remember 2008 and 2009,” Geithner told reporters Thursday during a news conference touting the benefits of the overhaul. “Remember the fact that the reason why we’re living with very high unemployment with millions of Americans that have lost their homes, terrible damage to the basic economics of America is because of the failures that caused this crisis in the financial system.”
“And if you want to go back to that,” he said, “if you want to choose that future, then you should be in favor of the repeal of the law.”
Republican presidential candidates have hammered away at the sweeping rewrite of financial regulations.
At a debate in Florida last month, GOP frontrunner Mitt Romney said the law was “just killing the residential home market and it’s got to be replaced.”
Newt Gingrich was more blunt. Asked what could be done to help struggling homeowners, he said, “I think, first of all, if you could repeal Dodd-Frank tomorrow morning, you would see the economy start to improve overnight.”
In the face of such criticism on the campaign trail and from Republicans in Congress, Geithner defended the law.
He said it already had helped the financial system become “stronger and safer” even as some key provisions, such as the Volcker Rule restriction on banks trading with their own money, are still being implemented by regulators.
Speaking as the head of the Financial Stability Oversight Council, a panel of regulators created by the law to monitor the financial system for signs of problems, Geithner said the law had helped the economy recover.
Regulators this year would designate the large financial firms outside the banking system that will receive tougher oversight because their failure would pose a risk to the financial system, he said.
And the Obama administration would release more details about its plans to overhaul the housing finance system and replace Fannie Mae and Freddie Mac, which the government seized in 2008.
Republicans and business groups have criticized the hundreds of regulations required by the new law and tough new oversight, including the creation of the Consumer Financial Protection Bureau.
They have said that the uncertainty about pending regulations has made businesses hesitant to hire, and that tough new rules on banks, such as requiring them to hold more reserves, was limiting the banks’ ability to make loans to boost the recovery.
But Geithner said the new rules were badly needed to prevent a repeat of the crisis, and he criticized opponents who were trying to drag out implementation of the Volcker rule and other provisions. Slowing those changes would only increase uncertainty, he said.
“No financial system is invulnerable to crisis. We have a lot of challenges ahead. We still have a lot of unfinished business on the path of reform,” Geithner said. “But the American financial system now is much less vulnerable than it was and is now able to help finance a growing economy, rather than being a drag on overall economic growth.”
RELATED:
Timothy Geithner says a second stint at Treasury is unlikely
Financial regulatory overhaul faces new criticism on first birthday
Consumer agency chief’s appointment is invalid, GOP senators say
http://tourism9.com http://vkins.com/
Treasury Secretary Timothy F. Geithner has a message for voters as they listen to Republican presidential candidates call for repeal of the 2010 Dodd-Frank financial overhaul law: Remember the pain.
“I would say remember 2008 and 2009,” Geithner told reporters Thursday during a news conference touting the benefits of the overhaul. “Remember the fact that the reason why we’re living with very high unemployment with millions of Americans that have lost their homes, terrible damage to the basic economics of America is because of the failures that caused this crisis in the financial system.”
“And if you want to go back to that,” he said, “if you want to choose that future, then you should be in favor of the repeal of the law.”
Republican presidential candidates have hammered away at the sweeping rewrite of financial regulations.
At a debate in Florida last month, GOP frontrunner Mitt Romney said the law was “just killing the residential home market and it’s got to be replaced.”
Newt Gingrich was more blunt. Asked what could be done to help struggling homeowners, he said, “I think, first of all, if you could repeal Dodd-Frank tomorrow morning, you would see the economy start to improve overnight.”
In the face of such criticism on the campaign trail and from Republicans in Congress, Geithner defended the law.
He said it already had helped the financial system become “stronger and safer” even as some key provisions, such as the Volcker Rule restriction on banks trading with their own money, are still being implemented by regulators.
Speaking as the head of the Financial Stability Oversight Council, a panel of regulators created by the law to monitor the financial system for signs of problems, Geithner said the law had helped the economy recover.
Regulators this year would designate the large financial firms outside the banking system that will receive tougher oversight because their failure would pose a risk to the financial system, he said.
And the Obama administration would release more details about its plans to overhaul the housing finance system and replace Fannie Mae and Freddie Mac, which the government seized in 2008.
Republicans and business groups have criticized the hundreds of regulations required by the new law and tough new oversight, including the creation of the Consumer Financial Protection Bureau.
They have said that the uncertainty about pending regulations has made businesses hesitant to hire, and that tough new rules on banks, such as requiring them to hold more reserves, was limiting the banks’ ability to make loans to boost the recovery.
But Geithner said the new rules were badly needed to prevent a repeat of the crisis, and he criticized opponents who were trying to drag out implementation of the Volcker rule and other provisions. Slowing those changes would only increase uncertainty, he said.
“No financial system is invulnerable to crisis. We have a lot of challenges ahead. We still have a lot of unfinished business on the path of reform,” Geithner said. “But the American financial system now is much less vulnerable than it was and is now able to help finance a growing economy, rather than being a drag on overall economic growth.”
RELATED:
Timothy Geithner says a second stint at Treasury is unlikely
Financial regulatory overhaul faces new criticism on first birthday
Consumer agency chief’s appointment is invalid, GOP senators say
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2012年1月31日星期二
Will President Obama's Blueprint Cut College Costs?
Mark Kantrowitz is the founder of the Web sites finaid.org, and fastweb.com. He regularly answers reader questions on The Choice. Readers can post comments of their own at the end of this essay.
In his State of the Union address, President Obama announced several proposals to make college more affordable. These included doubling the number of federal work-study program jobs over five years, a one-year extension of low interest rates on certain federal student loans and a permanent extension of the American Opportunity Tax Credit. President Obama also “put colleges on notice,” telling the colleges that if they can’t stop tuition from going up, the financing they get from taxpayers each year will go down. The president also announced initiatives to help families make informed decisions concerning college costs and quality.
More money for college is better than none. As a nation, we must put a priority on increasing federal and state investment in higher education. Maintaining the status quo or making slight tweaks to student aid financing is not enough.
Yet a key concern is that increases in some student aid programs may come at the expense of cuts in other more effective student aid programs.
It is unclear how President Obama plans on paying for increases in student aid financing while Congress concentrates on cost-cutting. Congress cut $8 billion a year out of the Pell grant program last year by ending the year-round Pell grant program, which allowed students in accelerated degree programs to get two Pell grants in a single year. Congress reduced the income threshold at which a student qualifies for a full Pell grant from $32,000 to $23,000. This cuts the Pell grants by $1,100 to $1,700 for nearly 14 percent of Pell grant recipients. Additional cuts are looming on the horizon.
The tight federal budgets yield a zero-sum game, where increases in one form of federal student aid force cuts in other forms of student aid. Adding 700,000 more federal work-study jobs over five years will cost more than $1 billion a year.
But how will the Obama administration pay for a one-year extension of the 3.4 percent interest rate on subsidized Stafford loans for undergraduate students? Approximately 7.4 million students will borrow about $3,500 in subsidized Stafford loans on average, costing the federal government more than $7 billion. The permanent extension of the American Opportunity Tax Credit will add several billion dollars more a year in tax expenditures. If the Obama administration doesn’t find savings elsewhere in the budget, these spending increases will force cuts in the Pell grant program, causing declines in Bachelor’s degree attainment by low-income students. That would be a bad bargain.
The risk is that the proposals for increasing student aid financing may be little more than a shell game, where the federal government gives with one hand and takes back with the other. For example, President Obama’s proposal for a one-year delay in the doubling of interest on the subsidized Stafford loan program will be coupled with increases in interest rates on the Perkins loan program. The re-engineering of the Perkins loan program will increase the interest rate on the Perkins loan from 5 percent to 6.8 percent and transform the subsidized Perkins loan into an unsubsidized Stafford loan. (This will save students some money, by shifting borrowing from higher-cost private student loans to lower-cost federal education loans. But it still involves increasing some interest rates to reduce others). Shuffling the deck doesn’t yield a net gain if there is no improvement in college graduation rates or other public policy objectives.
If the federal government can pay for cutting the interest rates on subsidized Stafford loans in half, then why was it necessary to cut the average Pell grant? Changing the interest rates and subsidized interest benefits on student loans has no impact on college access and completion rates. In contrast, the Pell grant program enables low-income students to enroll in college and to graduate. Cutting Pell grant financing forces low-income students to borrow more, shift enrollment to lower-cost colleges or drop out of college. Increasing the interest rate is a better alternative than cutting the Pell grant.
President Obama’s proposal to provide colleges with an incentive to keep tuition affordable will have a modest impact on tuition inflation. The proposal will base a college’s allocation of federal campus-based aid on whether the college keeps net tuition affordable, limits tuition increases and helps low-income students to enroll and graduate. But the $10 billion in campus-based financing represents only about 6 percent of all federal student aid financing and the allocation formula is complicated. The prospect of losing this financing may force some colleges to increase tuition even faster to compensate for the loss of campus-based aid financing.
There are limits to the ability of colleges to control costs. The consumer inflation rate has little to do with increases in college costs. College costs are largely driven by increases in the number of faculty and staff, increases in salaries, increases in facility costs, energy costs, equipment costs and health care costs, increases in institutional financial aid financing and decreases in federal and state financing. For example, if a college has a discount rate of 37 percent, the college must increase tuition by $1.59 to net $1 in additional revenue. This contributes to college tuition increasing faster than inflation by adding a multiplier effect.
President Obama’s proposal to create a mandatory “Financial Aid Shopping Sheet” and “College Scorecard”, on the other hand, will do more to constrain increases in college costs. This standardization of college cost and financial aid disclosures will provide families with clear, correct and comparable information about the real bottom-line cost of college.
This will help them make informed decisions concerning the tradeoffs between college affordability and other factors in college choice. More families will choose high quality but lower-cost colleges, forcing colleges to cut costs while maintaining or improving quality.
Now it’s your turn, Choice readers. Tell us your opinion on the president’s proposal, or at least Mr. Kantrowitz’s analysis of it, by using the box below.
http://tourism9.com/ http://vkins.com/
In his State of the Union address, President Obama announced several proposals to make college more affordable. These included doubling the number of federal work-study program jobs over five years, a one-year extension of low interest rates on certain federal student loans and a permanent extension of the American Opportunity Tax Credit. President Obama also “put colleges on notice,” telling the colleges that if they can’t stop tuition from going up, the financing they get from taxpayers each year will go down. The president also announced initiatives to help families make informed decisions concerning college costs and quality.
More money for college is better than none. As a nation, we must put a priority on increasing federal and state investment in higher education. Maintaining the status quo or making slight tweaks to student aid financing is not enough.
Yet a key concern is that increases in some student aid programs may come at the expense of cuts in other more effective student aid programs.
It is unclear how President Obama plans on paying for increases in student aid financing while Congress concentrates on cost-cutting. Congress cut $8 billion a year out of the Pell grant program last year by ending the year-round Pell grant program, which allowed students in accelerated degree programs to get two Pell grants in a single year. Congress reduced the income threshold at which a student qualifies for a full Pell grant from $32,000 to $23,000. This cuts the Pell grants by $1,100 to $1,700 for nearly 14 percent of Pell grant recipients. Additional cuts are looming on the horizon.
The tight federal budgets yield a zero-sum game, where increases in one form of federal student aid force cuts in other forms of student aid. Adding 700,000 more federal work-study jobs over five years will cost more than $1 billion a year.
But how will the Obama administration pay for a one-year extension of the 3.4 percent interest rate on subsidized Stafford loans for undergraduate students? Approximately 7.4 million students will borrow about $3,500 in subsidized Stafford loans on average, costing the federal government more than $7 billion. The permanent extension of the American Opportunity Tax Credit will add several billion dollars more a year in tax expenditures. If the Obama administration doesn’t find savings elsewhere in the budget, these spending increases will force cuts in the Pell grant program, causing declines in Bachelor’s degree attainment by low-income students. That would be a bad bargain.
The risk is that the proposals for increasing student aid financing may be little more than a shell game, where the federal government gives with one hand and takes back with the other. For example, President Obama’s proposal for a one-year delay in the doubling of interest on the subsidized Stafford loan program will be coupled with increases in interest rates on the Perkins loan program. The re-engineering of the Perkins loan program will increase the interest rate on the Perkins loan from 5 percent to 6.8 percent and transform the subsidized Perkins loan into an unsubsidized Stafford loan. (This will save students some money, by shifting borrowing from higher-cost private student loans to lower-cost federal education loans. But it still involves increasing some interest rates to reduce others). Shuffling the deck doesn’t yield a net gain if there is no improvement in college graduation rates or other public policy objectives.
If the federal government can pay for cutting the interest rates on subsidized Stafford loans in half, then why was it necessary to cut the average Pell grant? Changing the interest rates and subsidized interest benefits on student loans has no impact on college access and completion rates. In contrast, the Pell grant program enables low-income students to enroll in college and to graduate. Cutting Pell grant financing forces low-income students to borrow more, shift enrollment to lower-cost colleges or drop out of college. Increasing the interest rate is a better alternative than cutting the Pell grant.
President Obama’s proposal to provide colleges with an incentive to keep tuition affordable will have a modest impact on tuition inflation. The proposal will base a college’s allocation of federal campus-based aid on whether the college keeps net tuition affordable, limits tuition increases and helps low-income students to enroll and graduate. But the $10 billion in campus-based financing represents only about 6 percent of all federal student aid financing and the allocation formula is complicated. The prospect of losing this financing may force some colleges to increase tuition even faster to compensate for the loss of campus-based aid financing.
There are limits to the ability of colleges to control costs. The consumer inflation rate has little to do with increases in college costs. College costs are largely driven by increases in the number of faculty and staff, increases in salaries, increases in facility costs, energy costs, equipment costs and health care costs, increases in institutional financial aid financing and decreases in federal and state financing. For example, if a college has a discount rate of 37 percent, the college must increase tuition by $1.59 to net $1 in additional revenue. This contributes to college tuition increasing faster than inflation by adding a multiplier effect.
President Obama’s proposal to create a mandatory “Financial Aid Shopping Sheet” and “College Scorecard”, on the other hand, will do more to constrain increases in college costs. This standardization of college cost and financial aid disclosures will provide families with clear, correct and comparable information about the real bottom-line cost of college.
This will help them make informed decisions concerning the tradeoffs between college affordability and other factors in college choice. More families will choose high quality but lower-cost colleges, forcing colleges to cut costs while maintaining or improving quality.
Now it’s your turn, Choice readers. Tell us your opinion on the president’s proposal, or at least Mr. Kantrowitz’s analysis of it, by using the box below.
http://tourism9.com/ http://vkins.com/
2012年1月23日星期一
Senate GOP's next move awaited in nominations spat
WASHINGTON (AP) — President Barack Obama’s appointments to two key agencies during the Senate’s year-end break ensures that GOP senators will return to work Monday in an angry and fighting mood.
Less clear is what those furious Republicans will do to retaliate against Obama’s “bring it on” end run around the Senate’s role in confirming nominees to major jobs.
While Republicans contemplate their next step, recess appointee Richard Cordray is running a new Consumer Financial Protection Bureau, and the National Labor Relations Board, with three temporary members, is now at full strength with a Democratic majority.
Obama left more than70 other nominees in limbo, well aware that Republicans could use Senate rules to block some or all of them.
The White House justified the appointments on grounds that Republicans were holding up the nominations to paralyze the two agencies. The consumer protection agency was established under the 2010 Wall Street reform law, which requires the bureau to have a director in order to begin policing financial products such as mortgages, checking accounts, credit cards and payday loans.
The Supreme Court has ruled that the five-member NLRB must have a three-member quorum to issue regulations or decide major cases in union-employer disputes.
Several agencies contacted by The Associated Press, including banking regulators, said they were conducting their normal business despite vacancies at the top. In some cases, nominees are serving in acting capacities.
The Federal Deposit Insurance Corp., at full strength, has five board members. The regulation of failed banks “is unaffected,” said spokesman Andrew Gray. “The three-member board has been able to make decisions without a problem.” Cordray’s appointment gives it a fourth member.
The Comptroller of the Currency, run by an acting chief, has kept up its regular examinations of banks. The Federal Trade Commission, operating with four board members instead of five, has had no difficulties. “This agency is not a partisan combat agency,” said spokesman Peter Kaplan. “Almost all the votes are unanimous and consensus driven.”
Republicans have pledged retaliation for Obama’s recess appointments, but haven’t indicated what it might be.
“The Senate will need to take action to check and balance President Obama’s blatant attempt to circumvent the Senate and the Constitution, a claim of presidential power that the Bush Administration refused to make,” said Sen. Charles Grassley, an Iowa Republican who is his party’s top member on the Senate Judiciary Committee.
Grassley wouldn’t go further, and Senate Republican leader Mitch McConnell of Kentucky hasn’t tipped his hand after charging that Obama had “arrogantly circumvented the American people.” Before the Senate left for its break in December, McConnell blocked Senate approval of more than 60 pending nominees because Obama wouldn’t commit to making no recess appointments.
Republicans have to consider whether their actions, especially any decision to block all nominees, might play into Obama’s hands.
Obama has adopted an election-year theme of “we can’t wait” for Republicans to act on nominations and major proposals like his latest jobs plan. Republicans have to consider how their argument that the president is violating Constitutional checks and balances plays against Obama’s stump speeches characterizing them as obstructionists.
Senate historian Donald Ritchie said the minority party has retaliated in the past for recess appointments by holding up specific nominees. “I’m not aware of any situations where no nominations were accepted,” he said. The normal practice is for the two party leaders to negotiate which nominations get votes.
During the break, Republicans forced the Senate to convene for usually less than a minute once every few days to argue that there was no recess and that Obama therefore couldn’t bypass the Senate’s authority to confirm top officials. The administration said this was a sham, and has released a Justice Department opinion backing up the legality of the appointments.
Obama considers the new Consumer Financial Protection Bureau a signature achievement of his first term. Republicans have been vehemently opposed to the bureau’s setup. They argued the agency needed a bipartisan board instead of a director and should have to justify its budget to Congress instead of drawing its funding from the independent Federal Reserve.
Cordray is expected to get several sharp questions from Republicans when he testifies Tuesday before a House Oversight and Government Reform panel.
The NLRB has been a target of Republicans and business groups. Last year, the agency accused Boeing of illegally retaliating against union workers who had struck its plants in Washington state by opening a new production line at its non-union plant in South Carolina. Boeing denied the charge and the case has since been settled, but Republican anger over it and a string of union-friendly decisions from the board last year hasn’t abated.
Consumer Financial Protection Bureau director eyes fraud
by Candice Choi – Jan. 20, 2012 07:16 PM
Associated Press
Associated Press
WASHINGTON – A company’s obligations don’t stop with the law. It also needs to be fair and upfront with customers.
That’s the message from Richard Cordray, who was named by President Barack Obama as the first director of the Consumer Financial Protection Bureau.
“Frankly, there’s a lot of fraud that’s committed in the marketplace that is not on its face necessarily technically illegal,” Cordray said. Such practices will now be a target for the CFPB.
The agency and Cordray’s appointment are both controversial. The CFPB was created as part of the overhaul of the nation’s financial regulations, with a mandate to police the array of financial products marketed to consumers.
Republicans blocked Cordray’s appointment for months, saying the agency would have far too much power with too little accountability. Then, earlier this month, Obama installed Cordray when Congress wasn’t in session.
On Thursday, the agency released a field guide for its examiners to analyze practices at payday lenders, which essentially offer customers advances on their paychecks for a flat fee. It will mark the first time the industry will be subject to such oversight.
The CFPB has started collecting public comment to help simplify the disclosures consumers receive with credit cards, mortgages and student financial aid. It will take months or even years before consumers see how these efforts play out.
But here’s what Cordray had to say about how the agency will impact consumers:
Question: A major focus for the CFPB has been on improving the transparency of a product’s fees and terms, and the disclosures consumers receive. Are there instances where this won’t be enough and more aggressive regulatory action will be required?
Answer: Let me answer that question in two parts.
On transparency and disclosure, a key insight here is that more disclosures don’t always make things better. As it accumulates, there can be so much dense fine print that it can actually make things much worse — consumers find it hard to penetrate and they often will not read it.
That’s a concern and that’s why we’re trying to make things more transparent, simpler and clearer with our “Know Before You Owe” project.
However, simply making things clearer to consumers is not enough if people aren’t actually playing by the rules and defrauding consumers. There we have to enforce the rules and we have to do it fairly, evenhandedly, but with rigor so that everybody understands that they have to follow and respect the law.
Q: Are there practices that are technically legal yet require regulatory action?
A: If something is technically legal, that’s one issue. But we also have the authority to determine that practices are unfair, deceptive and abusive. That’s where our authority can be used to try to protect consumers, even though maybe the technicalities of pre-existing laws have been followed.
So that’s something we’re going to have to be careful about — the use of that authority.
But it certainly is necessary to protect consumers, and frankly there’s a lot of fraud that’s committed in the marketplace that is not on its face necessarily technically illegal. But when you see how a product is marketed, you can see what the effect is on consumers.
Q: So in those situations, what is the most important thing consumers need to know about what the CFPB can and cannot do?
A: Consumers should know that when they feel they’re being treated unfairly, they have the opportunity to come and tell us about it. And I mean the 300 million consumers all across this country, they can come to our website at consumerfinance.gov.
If it’s a mortgage or credit-card issue, they can file a complaint with us.
If it’s any other kind of issue, we will be able to take those complaints eventually.
Q: Once those complaints are in hand, what are the limits of what the CFPB can do?
A: We have three different sets of authority that Congress gave us and that we are by law responsible to carry out. We have rule-making authority. And we particularly are going to be active in trying to correct some of the problems in the mortgage markets over the next year or two.
We have supervision and examination authority, which is new but very important. It’s the ability to actually go into these institutions, look at their books and records and ask questions about what they do, and really get to the bottom of things.
This means both working with them where that’s possible and or bringing enforcement actions where that’s necessary.
And the third is the ability to actually enforce the law.
Q: One of the first industries the agency will be looking at is payday lending. A concern for consumer advocates is that customers often roll over the loans, meaning they repeatedly take out new loans to repay previous loans. What practices in the payday industry raise concerns for you?
A: One of the things we’re very concerned about is making sure that those products actually help consumers and don’t harm them. So the possibility that consumers end up rolling loans over and over, and end up in this sort of debt trap where they’re living off of money at 400 percent interest rates is a concern and it’s something we’re going to look at very closely.
Q: Student loans were a big issue during the Occupy protests, and graduates are burdened with more and more debt. Do you see any parallels to the mortgage industry?
A: I’ve read a lot that suggests that student loans may be a bubble that is developing.
Obviously, the major driver of the total amount of student loans is the rapid increases in tuition and the costs of higher education in the last 10 years. We don’t control that.
What we can control and what we can affect is the choices that consumers make. That they know what their choices are, that they know the difference between federal loans and private student loans — how that can affect terms of repayment, how that can affect the price and interest rate.
These are important things for consumers to know.
http://tourism9.cm/ http://vkins.com/
That’s the message from Richard Cordray, who was named by President Barack Obama as the first director of the Consumer Financial Protection Bureau.
“Frankly, there’s a lot of fraud that’s committed in the marketplace that is not on its face necessarily technically illegal,” Cordray said. Such practices will now be a target for the CFPB.
The agency and Cordray’s appointment are both controversial. The CFPB was created as part of the overhaul of the nation’s financial regulations, with a mandate to police the array of financial products marketed to consumers.
Republicans blocked Cordray’s appointment for months, saying the agency would have far too much power with too little accountability. Then, earlier this month, Obama installed Cordray when Congress wasn’t in session.
On Thursday, the agency released a field guide for its examiners to analyze practices at payday lenders, which essentially offer customers advances on their paychecks for a flat fee. It will mark the first time the industry will be subject to such oversight.
The CFPB has started collecting public comment to help simplify the disclosures consumers receive with credit cards, mortgages and student financial aid. It will take months or even years before consumers see how these efforts play out.
But here’s what Cordray had to say about how the agency will impact consumers:
Question: A major focus for the CFPB has been on improving the transparency of a product’s fees and terms, and the disclosures consumers receive. Are there instances where this won’t be enough and more aggressive regulatory action will be required?
Answer: Let me answer that question in two parts.
On transparency and disclosure, a key insight here is that more disclosures don’t always make things better. As it accumulates, there can be so much dense fine print that it can actually make things much worse — consumers find it hard to penetrate and they often will not read it.
That’s a concern and that’s why we’re trying to make things more transparent, simpler and clearer with our “Know Before You Owe” project.
However, simply making things clearer to consumers is not enough if people aren’t actually playing by the rules and defrauding consumers. There we have to enforce the rules and we have to do it fairly, evenhandedly, but with rigor so that everybody understands that they have to follow and respect the law.
Q: Are there practices that are technically legal yet require regulatory action?
A: If something is technically legal, that’s one issue. But we also have the authority to determine that practices are unfair, deceptive and abusive. That’s where our authority can be used to try to protect consumers, even though maybe the technicalities of pre-existing laws have been followed.
So that’s something we’re going to have to be careful about — the use of that authority.
But it certainly is necessary to protect consumers, and frankly there’s a lot of fraud that’s committed in the marketplace that is not on its face necessarily technically illegal. But when you see how a product is marketed, you can see what the effect is on consumers.
Q: So in those situations, what is the most important thing consumers need to know about what the CFPB can and cannot do?
A: Consumers should know that when they feel they’re being treated unfairly, they have the opportunity to come and tell us about it. And I mean the 300 million consumers all across this country, they can come to our website at consumerfinance.gov.
If it’s a mortgage or credit-card issue, they can file a complaint with us.
If it’s any other kind of issue, we will be able to take those complaints eventually.
Q: Once those complaints are in hand, what are the limits of what the CFPB can do?
A: We have three different sets of authority that Congress gave us and that we are by law responsible to carry out. We have rule-making authority. And we particularly are going to be active in trying to correct some of the problems in the mortgage markets over the next year or two.
We have supervision and examination authority, which is new but very important. It’s the ability to actually go into these institutions, look at their books and records and ask questions about what they do, and really get to the bottom of things.
This means both working with them where that’s possible and or bringing enforcement actions where that’s necessary.
And the third is the ability to actually enforce the law.
Q: One of the first industries the agency will be looking at is payday lending. A concern for consumer advocates is that customers often roll over the loans, meaning they repeatedly take out new loans to repay previous loans. What practices in the payday industry raise concerns for you?
A: One of the things we’re very concerned about is making sure that those products actually help consumers and don’t harm them. So the possibility that consumers end up rolling loans over and over, and end up in this sort of debt trap where they’re living off of money at 400 percent interest rates is a concern and it’s something we’re going to look at very closely.
Q: Student loans were a big issue during the Occupy protests, and graduates are burdened with more and more debt. Do you see any parallels to the mortgage industry?
A: I’ve read a lot that suggests that student loans may be a bubble that is developing.
Obviously, the major driver of the total amount of student loans is the rapid increases in tuition and the costs of higher education in the last 10 years. We don’t control that.
What we can control and what we can affect is the choices that consumers make. That they know what their choices are, that they know the difference between federal loans and private student loans — how that can affect terms of repayment, how that can affect the price and interest rate.
These are important things for consumers to know.
http://tourism9.cm/ http://vkins.com/
2012年1月20日星期五
Q&A: Consumer watchdog spells out agency's tasks
A company’s obligations don’t stop with the law. It also needs to be fair and upfront with customers.
That’s the message from Richard Cordray, who was named by President Barack Obama as the first director of the Consumer Financial Protection Bureau.
“Frankly there’s a lot of fraud that’s committed in the marketplace that is not on its face necessarily technically illegal,” Cordray said in an interview with The Associated Press. Such practices will now be a target for the CFPB.
The agency and Cordray’s appointment are both controversial. The CFPB was created as part of the overhaul of the nation’s financial regulations, with a mandate to police the array of financial products marketed to consumers.
Republicans blocked Cordray’s appointment for months, saying the agency would have far too much power with too little accountability. Then earlier this month, Obama installed Cordray when Congress wasn’t in session.
With a director finally in place, the CFPB is moving quickly to flex its full authority in policing businesses such as mortgage brokers, student lenders and other businesses that previously escaped federal scrutiny.
On Thursday, the agency released a field guide for its examiners to analyze practices at payday lenders, which essentially offer customers advances on their paychecks for a flat fee. It will mark the first time the industry will be subject to such oversight.
The CFPB has started collecting public comment to help simplify the disclosures consumers receive with credit cards, mortgages and student financial aid. It will take months or even years before consumers see how these efforts play out.
But here’s what Cordray had to say about how the agency will impact consumers:
____
Q: A major focus for the CFPB has been on improving the transparency of a product’s fees and terms, and the disclosures consumers receive. Are there instances where this won’t be enough and more aggressive regulatory action will be required?
A: Let me answer that question in two parts. On transparency and disclosure; a key insight here is that more disclosures don’t always make things better. As it accumulates, there can be so much dense fine print that it can actually make things much worse _ consumers find it hard to penetrate and they often will not read it.
That’s a concern and that’s why we’re trying to make things more transparent, simpler and clearer with our “Know Before You Owe” project.
However, simply making things clearer to consumers is not enough if people aren’t actually playing by the rules and defrauding consumers. There we have to enforce the rules and we have to do it fairly, even handedly, but with rigor so that everybody understands that they have to follow and respect the law.
Q: Are there practices that are technically legal yet require regulatory action?
A: If something is technically legal, that’s one issue. But we also have the authority to determine that practices are unfair, deceptive and abusive. That’s where our authority can be used to try to protect consumers, even though maybe the technicalities of pre-existing laws have been followed.
So that’s something we’re going to have to be careful about _ the use of that authority. But it certainly is necessary to protect consumers and frankly there’s a lot of fraud that’s committed in the marketplace that is not on its face necessarily technically illegal. But when you see how a product is marketed, you can see what the effect is on consumers.
Q: So in those situations, what is the most important thing consumers need to know about what the CFPB can and cannot do?
A: Consumers should know that when they feel they’re being treated unfairly, they have the opportunity to come and tell us about it. And I mean the 300 million consumers all across this country _ they can come to our website at consumerfinance.gov. If it’s a mortgage or credit card issue, they can file a complaint with us.
If it’s any other kind of issue, we will be able to take those complaints eventually.
Q: Once those complaints are in hand, what are the limits of what the CFPB can do?
A: We have three different sets of authority that Congress gave us and that we are by law responsible to carry out. We have rule making authority. And we particularly are going to be active in trying to correct some of the problems in the mortgage markets over the next year or two.
We have supervision and examination authority, which is new but very important. It’s the ability to actually go into these institutions, look at their books and records and ask questions about what they do, and really get to the bottom of things. This means both working with them where that’s possible and or bringing enforcement actions where that’s necessary.
And the third is the ability to actually enforce the law _ which is clearly needed if you’re going to have a marketplace that actually works.
Q: One of the first industries the agency will be looking at is payday lending. A concern for consumer advocates is that customers often roll over the loans, meaning they repeatedly take out new loans to repay previous loans. What practices in the payday industry raise concerns for you?
A: One of the things we’re very concerned about is making sure that those products actually help consumers and don’t harm them. So the possibility that consumers end up rolling loans over and over, and end up in this sort of debt trap where they’re living off of money at 400 percent interest rates is a concern and it’s something we’re going to look at very closely.
Q: Suze Orman has a prepaid card and Amex last year rolled out a prepaid card. Do you see any risks with celebrities and major banks backing prepaid cards, or are there upsides?
A: We generally think consumers need to take care when they’re attracted to a product for reasons that might obscure the actual price and risk involved. People want think carefully about what they’re getting into here.
In the prepaid space in particular, there’s a lot of evolution and there are a lot of new products coming out. Some have appeared to be terrible products and some may be pretty good. We’re monitoring that and as I say, it’s a fast moving market right now and we’re going to consider carefully how to address those issues as they arise
Q: A lot of major banks have adopted this theme of transparency. Chase rolled out new checking account disclosures and Citi has its Simplicity credit card. How much faith do you have that the market can “right itself” in terms of transparency?
A: I have a lot of faith in the market if it is backed by evenhanded, comprehensive rules of the road that everyone knows they have to live by. If the market is left to its own devices or if we regulate part of the market and leave the rest unregulated, as happened with the mortgage market, that created, in my view, a lot of what caused the financial meltdown _ that’s never going to work.
It is our view that what we do will actually strengthen markets.
It’s quite possible that banks would have been moving to more transparency and simpler terms on their own. I happen to think some of that is in reaction to knowing that the consumer bureau is now in place, that it’s something we’re emphasizing.
Q: Student loans were a big issue during the Occupy protests and graduates are burdened with more and more debt. Do you see any parallels to the mortgage industry?
A: I’ve read a lot that suggests that student loans may be a bubble that is developing. Obviously the major driver of the total amount of student loans is the rapid increases in tuition and the costs of higher education in the last 10 years. We don’t control that.
What we can control and what we can affect is the choices that consumers make. That they know what their choices are, that they know the difference between federal loans and private student loans _ how that can affect terms of repayment, how that can affect the price and interest rate. These are important things for consumers to know.
We’re working right now with the Department of Education on an easy to navigate shopping sheet for students and their families.
Q: What role do school financial aid offices have in explaining the costs?
A: You have to examine the particular approach of an institution in context. You have to look at the facts and circumstances. So I wouldn’t make a blanket statement about all student loan offices, but obviously that’s an initial point of contact for the student and their families on the terms of what’s being offered. That needs to be done clearly and it needs to be done so that the student and their family can understand that choice.
It’s our belief that if consumers are presented with information in a clear and understandable fashion, they are the ones who will be able to make the best choices for themselves. It will never be for us to try and make these choices for anyone.
Q: Are companies changing their practices just because they know that the CFPB is out there?
A: I think that you are seeing change in these markets. I think you’re seeing it on three sides.
One side is you now have a bureau with some good tools to actually affect these markets in a constructive way.
On the business side, many of them are recognizing that they should get out in front of it. They’re trying to see what they can change on their own to either head off the enforcement or to try to improve things because they’re persuaded that it needs to be done.
The third side is consumers themselves. And it’s very important for consumers to recognize they have a lot of power in the market. Especially with social media, as they group together and it’s not just an isolated complaint but a group of people with a similar complaint. They can affect these businesses and how they respond to them
It’s important for consumers not only to look to the bureau for help but to look to themselves and help themselves.
___
Candice Choi can be reached at www.twitter.com/candicechoi
http://tourism9.com/ http://vkins.com/
That’s the message from Richard Cordray, who was named by President Barack Obama as the first director of the Consumer Financial Protection Bureau.
“Frankly there’s a lot of fraud that’s committed in the marketplace that is not on its face necessarily technically illegal,” Cordray said in an interview with The Associated Press. Such practices will now be a target for the CFPB.
The agency and Cordray’s appointment are both controversial. The CFPB was created as part of the overhaul of the nation’s financial regulations, with a mandate to police the array of financial products marketed to consumers.
Republicans blocked Cordray’s appointment for months, saying the agency would have far too much power with too little accountability. Then earlier this month, Obama installed Cordray when Congress wasn’t in session.
With a director finally in place, the CFPB is moving quickly to flex its full authority in policing businesses such as mortgage brokers, student lenders and other businesses that previously escaped federal scrutiny.
On Thursday, the agency released a field guide for its examiners to analyze practices at payday lenders, which essentially offer customers advances on their paychecks for a flat fee. It will mark the first time the industry will be subject to such oversight.
The CFPB has started collecting public comment to help simplify the disclosures consumers receive with credit cards, mortgages and student financial aid. It will take months or even years before consumers see how these efforts play out.
But here’s what Cordray had to say about how the agency will impact consumers:
____
Q: A major focus for the CFPB has been on improving the transparency of a product’s fees and terms, and the disclosures consumers receive. Are there instances where this won’t be enough and more aggressive regulatory action will be required?
A: Let me answer that question in two parts. On transparency and disclosure; a key insight here is that more disclosures don’t always make things better. As it accumulates, there can be so much dense fine print that it can actually make things much worse _ consumers find it hard to penetrate and they often will not read it.
That’s a concern and that’s why we’re trying to make things more transparent, simpler and clearer with our “Know Before You Owe” project.
However, simply making things clearer to consumers is not enough if people aren’t actually playing by the rules and defrauding consumers. There we have to enforce the rules and we have to do it fairly, even handedly, but with rigor so that everybody understands that they have to follow and respect the law.
Q: Are there practices that are technically legal yet require regulatory action?
A: If something is technically legal, that’s one issue. But we also have the authority to determine that practices are unfair, deceptive and abusive. That’s where our authority can be used to try to protect consumers, even though maybe the technicalities of pre-existing laws have been followed.
So that’s something we’re going to have to be careful about _ the use of that authority. But it certainly is necessary to protect consumers and frankly there’s a lot of fraud that’s committed in the marketplace that is not on its face necessarily technically illegal. But when you see how a product is marketed, you can see what the effect is on consumers.
Q: So in those situations, what is the most important thing consumers need to know about what the CFPB can and cannot do?
A: Consumers should know that when they feel they’re being treated unfairly, they have the opportunity to come and tell us about it. And I mean the 300 million consumers all across this country _ they can come to our website at consumerfinance.gov. If it’s a mortgage or credit card issue, they can file a complaint with us.
If it’s any other kind of issue, we will be able to take those complaints eventually.
Q: Once those complaints are in hand, what are the limits of what the CFPB can do?
A: We have three different sets of authority that Congress gave us and that we are by law responsible to carry out. We have rule making authority. And we particularly are going to be active in trying to correct some of the problems in the mortgage markets over the next year or two.
We have supervision and examination authority, which is new but very important. It’s the ability to actually go into these institutions, look at their books and records and ask questions about what they do, and really get to the bottom of things. This means both working with them where that’s possible and or bringing enforcement actions where that’s necessary.
And the third is the ability to actually enforce the law _ which is clearly needed if you’re going to have a marketplace that actually works.
Q: One of the first industries the agency will be looking at is payday lending. A concern for consumer advocates is that customers often roll over the loans, meaning they repeatedly take out new loans to repay previous loans. What practices in the payday industry raise concerns for you?
A: One of the things we’re very concerned about is making sure that those products actually help consumers and don’t harm them. So the possibility that consumers end up rolling loans over and over, and end up in this sort of debt trap where they’re living off of money at 400 percent interest rates is a concern and it’s something we’re going to look at very closely.
Q: Suze Orman has a prepaid card and Amex last year rolled out a prepaid card. Do you see any risks with celebrities and major banks backing prepaid cards, or are there upsides?
A: We generally think consumers need to take care when they’re attracted to a product for reasons that might obscure the actual price and risk involved. People want think carefully about what they’re getting into here.
In the prepaid space in particular, there’s a lot of evolution and there are a lot of new products coming out. Some have appeared to be terrible products and some may be pretty good. We’re monitoring that and as I say, it’s a fast moving market right now and we’re going to consider carefully how to address those issues as they arise
Q: A lot of major banks have adopted this theme of transparency. Chase rolled out new checking account disclosures and Citi has its Simplicity credit card. How much faith do you have that the market can “right itself” in terms of transparency?
A: I have a lot of faith in the market if it is backed by evenhanded, comprehensive rules of the road that everyone knows they have to live by. If the market is left to its own devices or if we regulate part of the market and leave the rest unregulated, as happened with the mortgage market, that created, in my view, a lot of what caused the financial meltdown _ that’s never going to work.
It is our view that what we do will actually strengthen markets.
It’s quite possible that banks would have been moving to more transparency and simpler terms on their own. I happen to think some of that is in reaction to knowing that the consumer bureau is now in place, that it’s something we’re emphasizing.
Q: Student loans were a big issue during the Occupy protests and graduates are burdened with more and more debt. Do you see any parallels to the mortgage industry?
A: I’ve read a lot that suggests that student loans may be a bubble that is developing. Obviously the major driver of the total amount of student loans is the rapid increases in tuition and the costs of higher education in the last 10 years. We don’t control that.
What we can control and what we can affect is the choices that consumers make. That they know what their choices are, that they know the difference between federal loans and private student loans _ how that can affect terms of repayment, how that can affect the price and interest rate. These are important things for consumers to know.
We’re working right now with the Department of Education on an easy to navigate shopping sheet for students and their families.
Q: What role do school financial aid offices have in explaining the costs?
A: You have to examine the particular approach of an institution in context. You have to look at the facts and circumstances. So I wouldn’t make a blanket statement about all student loan offices, but obviously that’s an initial point of contact for the student and their families on the terms of what’s being offered. That needs to be done clearly and it needs to be done so that the student and their family can understand that choice.
It’s our belief that if consumers are presented with information in a clear and understandable fashion, they are the ones who will be able to make the best choices for themselves. It will never be for us to try and make these choices for anyone.
Q: Are companies changing their practices just because they know that the CFPB is out there?
A: I think that you are seeing change in these markets. I think you’re seeing it on three sides.
One side is you now have a bureau with some good tools to actually affect these markets in a constructive way.
On the business side, many of them are recognizing that they should get out in front of it. They’re trying to see what they can change on their own to either head off the enforcement or to try to improve things because they’re persuaded that it needs to be done.
The third side is consumers themselves. And it’s very important for consumers to recognize they have a lot of power in the market. Especially with social media, as they group together and it’s not just an isolated complaint but a group of people with a similar complaint. They can affect these businesses and how they respond to them
It’s important for consumers not only to look to the bureau for help but to look to themselves and help themselves.
___
Candice Choi can be reached at www.twitter.com/candicechoi
http://tourism9.com/ http://vkins.com/
2012年1月19日星期四
Private equity, carried interest and Mitt Romney
WASHINGTON (MarketWatch) — The term “private equity” is being demonized in political circles these days. The White House and some Republicans have equated private equity with some sort of evil, a disease, and a scourge. I want to believe these politicians do not really understand the concept and if they do, then I fear the country is in a whole lot more trouble than we think.
Private equity consists of investors and funds that provide private companies with direct investments or conduct buyouts of public companies. These investments can be used to fund new start-up companies, expand working capital, make acquisitions, or improve a balance sheet. Private equity is one of the foundations of the capitalist system.
The majority of private equity consists of institutional and accredited investors who commit large sums of money for long periods of time. Private-equity investments often demand long holding periods to allow a turnaround of a distressed company or a liquidity event such as an initial public offering or sale to a public company. Indirectly, almost every American has a stake in the concept and results of private equity.
Mitt Romney owned and managed a private-equity firm called Bain Capital until retiring and being bought out in 1999. Listen to the political rhetoric; you would have thought he presided over the proceedings of the Spanish Inquisition.
This is not the place to debate or critique the dealings or role of private equity funds or Bain Capital. For that, the New York Times gives a good look. Instead, I want to discuss the tax treatment of such enterprises and to ask how such treatment may have affected Romney.
Most private-equity funds are organized as limited partnerships with the investors (pension funds, endowments, foundations and wealthy individuals) contributing capital and becoming limited partners with a general partner — such as Bain Capital — that provides the entrepreneurial management of the partnership. The general partner is paid a management fee.
The general partner may also contribute its own capital and, as an incentive, receives an additional interest in the overall eventual profits. This additional interest is known as the “promote,” “profits interest,” or “carried interest.” The carried interest is typically 20% of the profits and is generated from appreciation in the value of the partnership’s property realized when the enterprise is sold or taken public.
The tax treatment of carried interest under current law allows managers of hedge funds, private-equity funds, venture-capital funds and others to pay a lower 15% maximum income tax rate applied to investment income as capital gains, rather than higher income tax rates for ordinary income which exceed 35%. This is a huge difference.
How do they do that? It is complicated but starts with the taxation of partnerships. If you have an interest in a partnership, you are allocated a share of that partnership’s income. The income to the partner takes on the same character, such as capital gains, that it does in the partnership’s hands, and the partner is taxed on it accordingly. The partnership itself does not pay taxes.
Some investment partnerships, particularly in the private-equity industry, earn mostly capital gains by buying and selling shares in other companies. The managers of these companies thus receive their carried interest in the form of capital gains and pay capital-gains tax rather than ordinary income tax. Nifty trick!
Carried interest is a business and financial arrangement that has formed an essential structural element to almost every sector of the U.S. economy, including real-estate development, private equity, hedge funds, health care, mining, and oil and gas. Changes in the tax rules would have a profound impact on how these businesses operate and their structure.
Many policy makers believe the carried interest paid to partnership managers is really compensation for their management services, which should be taxed at the higher ordinary income rate. On the other side, supporters of the current tax treatment say the carried interest is only a potential share of partnership profits and should not be considered compensation for services.
Changes in the taxation of carried interest have passed a Democratic-controlled House of Representative three times since 2007 and the Obama administration has included a carried-interest tax increase in each of its annual federal budgets and even more recently in the American Jobs Act introduced last September, where the current law on carried interests was described as “an unfair and inefficient tax preference.”
So how does Mitt Romney fit in to all of this?
There is no question he has benefited and perhaps continues to benefit from the favorable tax treatment of the carried-interest provisions. As he retained a share of the “profits interest” after he left Bain Capital, Romney would have gotten favorable tax treatment on certain income received even though his service labor did not contribute to the profits of new investments by the firm. To what magnitude this lessens his tax burdens is not known, as Romney has not released his tax returns
Romney is a wealthy man. Of that there is no doubt. He made it the hard way — he earned it. To some, being too wealthy is somehow wrong. I do not begrudge his success. However, it is a legitimate question to ask how he stands on this particular issue. Would he support changes in the carried-interest provisions for tax policy, economic or social reasons?
It is hard to have crocodile tears for the hedge-fund and equity-fund managers and the like. They have made and continue to make enormous money, partially fueled by favorable tax treatment. “Enormous” may be even too small a word. Even the word “undeserving” comes to mind. I can say the same thing about entertainers, professional athletes, football coaches and lobbyists who do not share in the same tax breaks. However, that is part of the used-to-be-freer market system we have.
There are industries other than the financial sector where the carried-interest concept is ingrained and useful. Changes in tax policy and treatment is worth examining and a good place to start is asking Romney what he thinks.
Jack O. Nutter is a partner in the Washington, D.C., firm of Nutter & Harris. He is former tax counsel to the U.S. Senate Finance Committee. His further comments on tax, economic and political issues can be found at jacknutter.com.
More From MarketWatch
http://tourism9.com/ http://vkins.com/
Private equity consists of investors and funds that provide private companies with direct investments or conduct buyouts of public companies. These investments can be used to fund new start-up companies, expand working capital, make acquisitions, or improve a balance sheet. Private equity is one of the foundations of the capitalist system.
The majority of private equity consists of institutional and accredited investors who commit large sums of money for long periods of time. Private-equity investments often demand long holding periods to allow a turnaround of a distressed company or a liquidity event such as an initial public offering or sale to a public company. Indirectly, almost every American has a stake in the concept and results of private equity.
Mitt Romney owned and managed a private-equity firm called Bain Capital until retiring and being bought out in 1999. Listen to the political rhetoric; you would have thought he presided over the proceedings of the Spanish Inquisition.
This is not the place to debate or critique the dealings or role of private equity funds or Bain Capital. For that, the New York Times gives a good look. Instead, I want to discuss the tax treatment of such enterprises and to ask how such treatment may have affected Romney.
Most private-equity funds are organized as limited partnerships with the investors (pension funds, endowments, foundations and wealthy individuals) contributing capital and becoming limited partners with a general partner — such as Bain Capital — that provides the entrepreneurial management of the partnership. The general partner is paid a management fee.
The general partner may also contribute its own capital and, as an incentive, receives an additional interest in the overall eventual profits. This additional interest is known as the “promote,” “profits interest,” or “carried interest.” The carried interest is typically 20% of the profits and is generated from appreciation in the value of the partnership’s property realized when the enterprise is sold or taken public.
The tax treatment of carried interest under current law allows managers of hedge funds, private-equity funds, venture-capital funds and others to pay a lower 15% maximum income tax rate applied to investment income as capital gains, rather than higher income tax rates for ordinary income which exceed 35%. This is a huge difference.
How do they do that? It is complicated but starts with the taxation of partnerships. If you have an interest in a partnership, you are allocated a share of that partnership’s income. The income to the partner takes on the same character, such as capital gains, that it does in the partnership’s hands, and the partner is taxed on it accordingly. The partnership itself does not pay taxes.
Some investment partnerships, particularly in the private-equity industry, earn mostly capital gains by buying and selling shares in other companies. The managers of these companies thus receive their carried interest in the form of capital gains and pay capital-gains tax rather than ordinary income tax. Nifty trick!
Carried interest is a business and financial arrangement that has formed an essential structural element to almost every sector of the U.S. economy, including real-estate development, private equity, hedge funds, health care, mining, and oil and gas. Changes in the tax rules would have a profound impact on how these businesses operate and their structure.
Many policy makers believe the carried interest paid to partnership managers is really compensation for their management services, which should be taxed at the higher ordinary income rate. On the other side, supporters of the current tax treatment say the carried interest is only a potential share of partnership profits and should not be considered compensation for services.
Changes in the taxation of carried interest have passed a Democratic-controlled House of Representative three times since 2007 and the Obama administration has included a carried-interest tax increase in each of its annual federal budgets and even more recently in the American Jobs Act introduced last September, where the current law on carried interests was described as “an unfair and inefficient tax preference.”
So how does Mitt Romney fit in to all of this?
There is no question he has benefited and perhaps continues to benefit from the favorable tax treatment of the carried-interest provisions. As he retained a share of the “profits interest” after he left Bain Capital, Romney would have gotten favorable tax treatment on certain income received even though his service labor did not contribute to the profits of new investments by the firm. To what magnitude this lessens his tax burdens is not known, as Romney has not released his tax returns
Romney is a wealthy man. Of that there is no doubt. He made it the hard way — he earned it. To some, being too wealthy is somehow wrong. I do not begrudge his success. However, it is a legitimate question to ask how he stands on this particular issue. Would he support changes in the carried-interest provisions for tax policy, economic or social reasons?
It is hard to have crocodile tears for the hedge-fund and equity-fund managers and the like. They have made and continue to make enormous money, partially fueled by favorable tax treatment. “Enormous” may be even too small a word. Even the word “undeserving” comes to mind. I can say the same thing about entertainers, professional athletes, football coaches and lobbyists who do not share in the same tax breaks. However, that is part of the used-to-be-freer market system we have.
There are industries other than the financial sector where the carried-interest concept is ingrained and useful. Changes in tax policy and treatment is worth examining and a good place to start is asking Romney what he thinks.
Jack O. Nutter is a partner in the Washington, D.C., firm of Nutter & Harris. He is former tax counsel to the U.S. Senate Finance Committee. His further comments on tax, economic and political issues can be found at jacknutter.com.
More From MarketWatch
http://tourism9.com/ http://vkins.com/
2012年1月17日星期二
Movement under way to ease investment by Web
OAKLAND, Calif. – Ian Schuster and his business partners have raised almost a quarter of a million dollars to launch their craft beer brewery company, but if they had more money, they could grow the business much faster.
Bryan Brumfield has poured most of his life savings into the artisanal wine business he plans to launch after he retires as an Oakland firefighter in March, and needs additional capital to bring in outside expertise.
Each would love to tap the power of social media to find additional investors online who would each put up small amounts of money in exchange for equity stakes in their companies, a concept called “crowdfunding.”
But they can’t do so under current law. Companies can sell shares to what the SEC calls “accredited investors” – seasoned, high-net-worth people who understand the risks. But financial stakes for small-time investors are limited to 35 people (fewer in some states), just enough to enable some friends-and-family funding, but not enough to harness the Internet’s reach to attract a larger number of equity investors.
Popular websites like Kickstarter and IndieGoGo show the power of crowdfunding, by letting people request funds online from strangers to back specific projects – a theater performance, for instance. But the people who pledge money can only receive perks like T-shirts, not equity shares, in exchange.
Then there are lending websites like Prosper.com that allow for person-to-person loans. People ask to borrow money for anything from plastic surgery to starting a company and offer a fixed interest rate in return. But again, equity stakes are not allowed.
Now, legislation pending in Congress that enjoys strong bipartisan support and Obama administration backing may make crowdfunding possible for entrepreneurs.
Crowdfunding “has the potential to be a powerful new venture capital model for the Facebook and Twitter age, and its potential to create jobs is enormous,” said Sen. Scott Brown, R-Mass., in congressional testimony last month.
“But crowdfunding is currently illegal because of obsolete regulations, some dating back to the 1930s.”
Brown is sponsoring the Democratization of Capital Bill, which would let small companies sell up to $1 million in equity online in chunks of $1,000 or less. It is under review by the Committee on Banking, Housing and Urban Affairs.
A similar bill, the Entrepreneur Access to Capital Act, passed the House in November by a wide margin. It would allow up to $2 million in crowdfunded investments in $10,000 increments.
But some worry that crowdfunding would entice online hucksters to set up shop.
“A lot of people believe everything they see on the Internet, so we are concerned about fraud,” said Jack Herstein, president of the North American Securities Administrators Association. “Scam artists follow the hottest trends. They could make up fraudulent websites. … Once you push the button and send your credit card number, your money is gone.”
Still, he said, he is not opposed to crowdfunding. He just wants built-in safeguards.
“Everybody should be behind anything that helps the economy,” he said.
At a time when banks can be reluctant to make loans, letting small enterprises solicit funds online so they can start up and grow makes sense, crowdfunding supporters say.
“Crowd sourcing for us would be a dream come true,” Schuster said. His Schubros Brewery, based in San Ramon, will start beer production in March after getting its government license. The five partners have done well raising money from themselves, friends and family and a couple of accredited investors.
“We have enough to get started,” he said. “But if we could get more money, we would be more stable from Day 1. We could hire full-time salespeople and grow faster than planned.”
Brumfield, the Oakland firefighter, said crowdfunding would make a huge difference to him. “Unless things change in the banking world, crowdfunding would be the best opportunity besides friends and family for the additional capital I need to launch,” he said.
csaid@sfchronicle.com
http://tourism9.cm/ http://vkins.com/
Bryan Brumfield has poured most of his life savings into the artisanal wine business he plans to launch after he retires as an Oakland firefighter in March, and needs additional capital to bring in outside expertise.
Each would love to tap the power of social media to find additional investors online who would each put up small amounts of money in exchange for equity stakes in their companies, a concept called “crowdfunding.”
But they can’t do so under current law. Companies can sell shares to what the SEC calls “accredited investors” – seasoned, high-net-worth people who understand the risks. But financial stakes for small-time investors are limited to 35 people (fewer in some states), just enough to enable some friends-and-family funding, but not enough to harness the Internet’s reach to attract a larger number of equity investors.
Popular websites like Kickstarter and IndieGoGo show the power of crowdfunding, by letting people request funds online from strangers to back specific projects – a theater performance, for instance. But the people who pledge money can only receive perks like T-shirts, not equity shares, in exchange.
Then there are lending websites like Prosper.com that allow for person-to-person loans. People ask to borrow money for anything from plastic surgery to starting a company and offer a fixed interest rate in return. But again, equity stakes are not allowed.
Now, legislation pending in Congress that enjoys strong bipartisan support and Obama administration backing may make crowdfunding possible for entrepreneurs.
Crowdfunding “has the potential to be a powerful new venture capital model for the Facebook and Twitter age, and its potential to create jobs is enormous,” said Sen. Scott Brown, R-Mass., in congressional testimony last month.
“But crowdfunding is currently illegal because of obsolete regulations, some dating back to the 1930s.”
Brown is sponsoring the Democratization of Capital Bill, which would let small companies sell up to $1 million in equity online in chunks of $1,000 or less. It is under review by the Committee on Banking, Housing and Urban Affairs.
A similar bill, the Entrepreneur Access to Capital Act, passed the House in November by a wide margin. It would allow up to $2 million in crowdfunded investments in $10,000 increments.
But some worry that crowdfunding would entice online hucksters to set up shop.
“A lot of people believe everything they see on the Internet, so we are concerned about fraud,” said Jack Herstein, president of the North American Securities Administrators Association. “Scam artists follow the hottest trends. They could make up fraudulent websites. … Once you push the button and send your credit card number, your money is gone.”
Still, he said, he is not opposed to crowdfunding. He just wants built-in safeguards.
“Everybody should be behind anything that helps the economy,” he said.
At a time when banks can be reluctant to make loans, letting small enterprises solicit funds online so they can start up and grow makes sense, crowdfunding supporters say.
“Crowd sourcing for us would be a dream come true,” Schuster said. His Schubros Brewery, based in San Ramon, will start beer production in March after getting its government license. The five partners have done well raising money from themselves, friends and family and a couple of accredited investors.
“We have enough to get started,” he said. “But if we could get more money, we would be more stable from Day 1. We could hire full-time salespeople and grow faster than planned.”
Brumfield, the Oakland firefighter, said crowdfunding would make a huge difference to him. “Unless things change in the banking world, crowdfunding would be the best opportunity besides friends and family for the additional capital I need to launch,” he said.
csaid@sfchronicle.com
http://tourism9.cm/ http://vkins.com/
2012年1月9日星期一
Consumer financial watchdog to focus first on lending abuse
With its first chief now in place, the new Consumer Financial Protection Bureau will start enforcing rules aimed at reining in abusive mortgage servicers, student lenders and payday-loan companies.
It will be months, though, before the agency can police other areas of consumer finance, such as debt collection and credit-reporting bureaus.
Over Republican opposition, President Barack Obama used a congressional recess appointment Wednesday to install Richard Cordray to lead the consumer finance watchdog. The bureau was created in July as part of the 2010 overhaul of the nation’s financial regulations.
The idea behind the new agency was to prevent financial companies, such as mortgage servicers, from exploiting consumers. Such companies, facing scant federal oversight, committed some of the worst consumer abuses before the financial crisis that created the longest recession since the Great Depression.
In the past, only banks were subject to examination by federal financial regulators. And until now, with no permanent director, the bureau had authority to supervise only big banks.
Senate Republicans had vowed to block Cordray’s nomination until the agency’s structure was changed to allow closer congressional oversight. But Obama took advantage of the congressional break to install Cordray, a former Democratic attorney general of Ohio.
Cordray said he would immediately “begin working to expand our program to nonbanks, which is an area we haven’t been able to touch up until now.”
That change will likely start within weeks.
Agency officials who are supervising big banks have already been trained to examine nonbank financial firms.
Still, some areas of consumer finance will remain outside the bureau’s reach.
Aside from payday, mortgage and student loan companies, the consumer protection bureau can supervise only nonbank companies it defines as “larger participants” in their markets.
In June, the agency sought public comments on a proposal to supervise major debt collectors, credit reporting bureaus, check cashers, issuers of prepaid debt cards and debt-relief companies.
The comment period has ended, and the agency is reviewing the responses. It’s not clear how long the review will take.
Once the comments have been reviewed, the proposal must be revised, subjected to further public comment and then approved by the White House. This could take months or years.
If the agency’s proposal is approved, it will be able to send inspectors to credit bureaus and others that meet the “large participant” definition.
Here’s a guide to the powers that the CFPB now holds over different categories of companies:
Nonbank mortgage lenders and servicers: These companies have been subject to existing laws and rules, but the agency was unable to supervise them without a permanent director. With Cordray’s appointment, the CFPB can have officials monitor mortgage lenders and servicers.
That might discourage any from using “robo-signers” to foreclose on borrowers without doing the required paperwork. That practice became widespread over the past decade, and no federal agency was responsible for cracking down.
Payday lenders: Companies that make short-term loans to borrowers with weak credit already are governed by federal laws such as the Truth in Lending Act. But there’s been no federal oversight to make sure they comply.
The CFPB can now send examiners to payday firms it suspects of illegal or abusive practices. The agency wants to make sure they disclose the full cost of a loan up front so consumers can make an informed choice.
Private student lenders: CFPB examiners have gained the authority to examine these companies. The federal government has been cracking down on for-profit education companies whose graduates can’t find jobs and have little chance of repayment. The CFPB can now require these lenders to follow existing rules and write new ones intended to guarantee that they lend fairly.
Prepaid debit card companies, credit bureaus, money-transfer companies, check cashers, debt relief services: These companies are subject to federal laws. But they’ve faced little oversight in the past. The CFPB proposed in June identifying major participants in these markets to make sure they’re following the rules. It’s unclear when that proposal might take effect.
Big banks: Banks already are overseen by the bureau, so nothing much will change as a result of Cordray’s appointment. Since its creation, the agency has been placing full-time examiners in the nation’s biggest banks to enforce laws and rules. It can require them to file regular reports, monitor risks they might pose to consumers and write new rules.
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It will be months, though, before the agency can police other areas of consumer finance, such as debt collection and credit-reporting bureaus.
Over Republican opposition, President Barack Obama used a congressional recess appointment Wednesday to install Richard Cordray to lead the consumer finance watchdog. The bureau was created in July as part of the 2010 overhaul of the nation’s financial regulations.
The idea behind the new agency was to prevent financial companies, such as mortgage servicers, from exploiting consumers. Such companies, facing scant federal oversight, committed some of the worst consumer abuses before the financial crisis that created the longest recession since the Great Depression.
In the past, only banks were subject to examination by federal financial regulators. And until now, with no permanent director, the bureau had authority to supervise only big banks.
Senate Republicans had vowed to block Cordray’s nomination until the agency’s structure was changed to allow closer congressional oversight. But Obama took advantage of the congressional break to install Cordray, a former Democratic attorney general of Ohio.
Cordray said he would immediately “begin working to expand our program to nonbanks, which is an area we haven’t been able to touch up until now.”
That change will likely start within weeks.
Agency officials who are supervising big banks have already been trained to examine nonbank financial firms.
Still, some areas of consumer finance will remain outside the bureau’s reach.
Aside from payday, mortgage and student loan companies, the consumer protection bureau can supervise only nonbank companies it defines as “larger participants” in their markets.
In June, the agency sought public comments on a proposal to supervise major debt collectors, credit reporting bureaus, check cashers, issuers of prepaid debt cards and debt-relief companies.
The comment period has ended, and the agency is reviewing the responses. It’s not clear how long the review will take.
Once the comments have been reviewed, the proposal must be revised, subjected to further public comment and then approved by the White House. This could take months or years.
If the agency’s proposal is approved, it will be able to send inspectors to credit bureaus and others that meet the “large participant” definition.
Here’s a guide to the powers that the CFPB now holds over different categories of companies:
Nonbank mortgage lenders and servicers: These companies have been subject to existing laws and rules, but the agency was unable to supervise them without a permanent director. With Cordray’s appointment, the CFPB can have officials monitor mortgage lenders and servicers.
That might discourage any from using “robo-signers” to foreclose on borrowers without doing the required paperwork. That practice became widespread over the past decade, and no federal agency was responsible for cracking down.
Payday lenders: Companies that make short-term loans to borrowers with weak credit already are governed by federal laws such as the Truth in Lending Act. But there’s been no federal oversight to make sure they comply.
The CFPB can now send examiners to payday firms it suspects of illegal or abusive practices. The agency wants to make sure they disclose the full cost of a loan up front so consumers can make an informed choice.
Private student lenders: CFPB examiners have gained the authority to examine these companies. The federal government has been cracking down on for-profit education companies whose graduates can’t find jobs and have little chance of repayment. The CFPB can now require these lenders to follow existing rules and write new ones intended to guarantee that they lend fairly.
Prepaid debit card companies, credit bureaus, money-transfer companies, check cashers, debt relief services: These companies are subject to federal laws. But they’ve faced little oversight in the past. The CFPB proposed in June identifying major participants in these markets to make sure they’re following the rules. It’s unclear when that proposal might take effect.
Big banks: Banks already are overseen by the bureau, so nothing much will change as a result of Cordray’s appointment. Since its creation, the agency has been placing full-time examiners in the nation’s biggest banks to enforce laws and rules. It can require them to file regular reports, monitor risks they might pose to consumers and write new rules.
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2011年12月29日星期四
U.S. mulling Yemen’s Saleh travel request: official
HONOLULU (Reuters) – The U.S. government would only allow Yemeni President Ali Abdullah Saleh to travel to the United States for “legitimate” medical treatment, and is now considering the request, a senior Obama administration official said on Monday.
The official said Saleh’s office recently contacted the U.S. embassy in Sanaa to say the president plans to leave Yemen soon and wants to get specialized care in the United States related to injuries he sustained in a June assassination attempt that forced him into hospital in Saudi Arabia.
“The request for approval for President Saleh to travel to the United States is currently under consideration. The only reason that travel to the United States by President Saleh would be approved would be for legitimate medical treatment,” the official said.
On Saturday, just hours after his forces killed nine people who had demanded he be tried for the killings of demonstrators over the past year, Saleh said he would leave for the United States and give way to a successor. He did not say when he would depart.
The Yemeni leader said he would undergo some medical tests but characterized his intended trip as one of temporary exile.
“I will go to the United States. Not for treatment, because I’m fine, but to get away from attention, cameras, and allow the unity government to prepare properly for elections,” he said.
“I’ll be there for several days, but I’ll return because I won’t leave my people and comrades who have been steadfast for 11 months,” Saleh said.
Increasing bloodshed and political uncertainty in Yemen is a major concern to its neighbor Saudi Arabia and Saleh’s former supporters in Washington, who worry the country’s al Qaeda wing could gain control of key oil shipping routes in the chaos.
President Barack Obama‘s top counter-terrorism official John Brennan called Yemen’s acting leader on Sunday to emphasize the need for Yemeni forces “to show maximum restraint” when dealing with demonstrations, White House spokesman Josh Earnest said in a statement issued in Hawaii where Obama is vacationing.
In his phone conversation with Yemeni Vice President Abd-Rabbu Mansour Hadi, Brennan also called for all sides in Yemen’s political transition to avoid “provocative acts that could spur further violence.”
Hadi told Brennan he has launched an investigation into the deaths and injuries that occurred and said he would do his utmost to prevent further bloodshed, Earnest said, adding both officials agreed it was important to stick to the transition path leading to the February 21, 2012, presidential election.
“Mr. Brennan told Vice President Hadi that the United States remains a strong and fervent supporter of the Yemeni people in their quest to realize their richly deserved aspirations for security, political stability, representative government, and economic prosperity,” Earnest said.
Hadi on Sunday urged Saleh’s foes and loyalists to commit to a truce.
(Reporting by Laura MacInnis; editing by Anthony Boadle)
This article is from http://tourism9.com/
The official said Saleh’s office recently contacted the U.S. embassy in Sanaa to say the president plans to leave Yemen soon and wants to get specialized care in the United States related to injuries he sustained in a June assassination attempt that forced him into hospital in Saudi Arabia.
“The request for approval for President Saleh to travel to the United States is currently under consideration. The only reason that travel to the United States by President Saleh would be approved would be for legitimate medical treatment,” the official said.
On Saturday, just hours after his forces killed nine people who had demanded he be tried for the killings of demonstrators over the past year, Saleh said he would leave for the United States and give way to a successor. He did not say when he would depart.
The Yemeni leader said he would undergo some medical tests but characterized his intended trip as one of temporary exile.
“I will go to the United States. Not for treatment, because I’m fine, but to get away from attention, cameras, and allow the unity government to prepare properly for elections,” he said.
“I’ll be there for several days, but I’ll return because I won’t leave my people and comrades who have been steadfast for 11 months,” Saleh said.
Increasing bloodshed and political uncertainty in Yemen is a major concern to its neighbor Saudi Arabia and Saleh’s former supporters in Washington, who worry the country’s al Qaeda wing could gain control of key oil shipping routes in the chaos.
President Barack Obama‘s top counter-terrorism official John Brennan called Yemen’s acting leader on Sunday to emphasize the need for Yemeni forces “to show maximum restraint” when dealing with demonstrations, White House spokesman Josh Earnest said in a statement issued in Hawaii where Obama is vacationing.
In his phone conversation with Yemeni Vice President Abd-Rabbu Mansour Hadi, Brennan also called for all sides in Yemen’s political transition to avoid “provocative acts that could spur further violence.”
Hadi told Brennan he has launched an investigation into the deaths and injuries that occurred and said he would do his utmost to prevent further bloodshed, Earnest said, adding both officials agreed it was important to stick to the transition path leading to the February 21, 2012, presidential election.
“Mr. Brennan told Vice President Hadi that the United States remains a strong and fervent supporter of the Yemeni people in their quest to realize their richly deserved aspirations for security, political stability, representative government, and economic prosperity,” Earnest said.
Hadi on Sunday urged Saleh’s foes and loyalists to commit to a truce.
(Reporting by Laura MacInnis; editing by Anthony Boadle)
This article is from http://tourism9.com/
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