Tuesday, January 11, 2011
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The Circle Goes 'Round and 'Round
Welcome to 2011, the year of great change in the financial services industry.
Changes brought about in the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama in July, will be enacted. This reform was in response to problems revealed during what's being called the Great Recession.
Whether these actions would have been necessary had previous administrations not repealed protections set in place after the Great Depression remains in question. But that is the subject of an entire article in itself.
Several details of the 2,300 page Dodd-Frank Act are still being sorted out. Here we'll discuss those we can expect to see coming soon.
The most significant protections in the bill involve new regulatory bodies. Gone is the Office of Thrift Operation (OTS), created in the wake of the Savings and Loan crisis in the late '80s. The agency will be dissolved one year after the Act's ratification.
Its responsibilities will be broken down among three existing agencies. The Office of the Comptroller of the Currency will oversee federal thrifts, the Federal Reserve Bank for savings and loan holding companies and the Federal Deposit Insurance Corporation for state thrifts.
Two new agencies will emerge in its place. The Financial Stability Oversight Council (FSOC) has already met twice and the Consumer Financial Protection Bureau (CFPB) will be an independent agency within the Federal Reserve System.
The Council includes heads of most of our nation's regulatory agencies and monitors our financial systems to pinpoint risk. It's expected that those institutions with assets over $50 billion deemed "too big to fail" during our economic crisis will eventually be subject to new requirements separate from their smaller counterparts. But this will take some time to assess and implement.
The Bureau bears the responsibility of enforcing consumer protection laws. It will closely examine questionable practices to change or create rules regarding consumer financial products and services. It will also allow examiners to participate in audits by the other agencies.
Large banks will face heightened capital and liquidity requirements. Financial institutions with assets below $10 billion are exempt from direct bureau oversight and will continue to be examined by their primary regulator under guidance from the CFPB.
The law also requires consumer credit reporting bureaus to provide a free credit score along with your annual credit report. Reporting bureaus must also improve the way they handle consumer complaints and establish a national hotline to file those complaints.
Deposit insurance limits are permanently raised to $250,000 for all noninterest-bearing transaction accounts through January 1, 2013. Previously, an institution had to participate in the optional Transaction Account Guarantee program for its customers to receive this protection. Interest bearing accounts earned this same level of permanent coverage under separate legislation in August 2010.
Merchants will see two benefits in this Act. Interchange fees on debit card transactions will be regulated. An interchange fee is assessed by processing companies each time a merchant accepts a plastic payment to cover costs associated with performing the transaction. The merchant never knows how much that fee will be as it differs by type of card and issuer. Credit card purchases are not affected by this regulation.
Merchants are now also permitted to offer a discount for cash purchases. But they cannot charge differently for charge transactions based on which type of credit card is provided.
Implementation of this bill is being delayed due to budget constraints. And debate ensues as to whether the measures are too restrictive, whether lawmakers were overreacting to current conditions or safeguarding our nation's financial security.
Yet this bill was designed to protect future generations from the economic collapse we're emerging from right now. One can only hope the lesson was truly learned this time. For if our children follow our footsteps and continue to put self-interest above the overall good of the American people, we will find that circle revolving back around once again.
New Gadgets for 2011 Unveiled
It's Show Time!
The annual Consumer Electronics Show (CES) wrapped up this past weekend in Las Vegas. Didn't make it out there? Here's what you missed.
Motorola's Xoom is expected to give Apple's iPad a run for the money. It has more features than the iPad and will run the latest version of Google's Android operating system. It comes standard with front- and rear-facing cameras, one that records in HD. It has a larger screen with higher resolution than the iPad, supports Adobe Flash and runs on the Verizon network rather than AT&T. Watch for Xoom to reach the market first quarter 2011 in 3G, upgradable to 4G later this year.
Gamers are anxiously watching development of the Razer Switchblade, designed to bring PC gaming into the palm of your hand. It features a touch screen and dynamic tactile keyboard rather than using a mouse. No production date has been set.
Toyota's Entune telematics service brings your favorite apps right to the dashboard of your car. Search Bing for a nearby restaurant, order movie tickets, jam to Pandora or iheartradio via a touch menu on the car's LCD screen. Or use voice command via Bluetooth. Toyota hasn't spilled the beans as to which models will offer Entune but it only works in navigation-equipped vehicles.
Blu-ray made it happen with movies, Nintendo with games. Now Toshiba is working to bring glasses-free 3D to a laptop. The Toshiba Qosmio isn't quite ready for market yet. Stay tuned.
Perhaps the loudest buzz was heard when Lady Gaga unveiled a pair of Polaroid sunglasses. Hidden inside is a digital camera. Price and availability were not announced. The gadget wasn't the most innovative on display at the show, but anything Lady Gaga does creates quite a buzz.
Mitsubishi's 92-inch 3D TV will go on sale later this year. It's expected to cost about $6,000 and left many unanswered questions. Like "How do I get this into my house?"
Fulton Innovation developed an eCoupled wireless charging surface that can heat specially made cans of Campbell's Soup right in the can. More unanswered questions here, such as how to open the hot can without getting burnt.
Perhaps the most beneficial product introduced was by Withings. It couples a blood pressure cuff with an iPhone app that lets you and your doctor monitor your blood pressure. It even charts changes over time.
Meanwhile, folks in Detroit struggle to stay warm indoors at the 23rd annual North American International Auto Show. Deemed to be among the most prestigious auto shows in the world, it offers a peak into where the auto world is heading.
Porsche returned to the show this year after sitting out the past four. Rolls-Royce and Lamborghini usually skip these events but didn't miss this one.
Porsche showed the future of its racing program with its 918 RSR. The 767 hp hybrid is considered one of the best on display.
Electric cars are the theme of this show. Tesla unveiled a Model S sedan version of its popular Roadster.
North Carolina manufacturer Inizio showed a prototype of its electric supercar Li-Ion. It will cruise 250 miles before needing to recharge and hit top speeds of 170 mph. Zero-to-60 speed is 3.4 seconds.
All of this new technology brings hope in American ingenuity. In turn, it should bring new jobs to the workplace and get the economy flowing once more.
Employment and the level of unemployment are one of the driving forces in the economy. Jobless claims have been dropping over the holiday season, to 409,000 in the January 1 reporting week. This followed the second best reading during the recovery, 391,000. The four-week average is down 3,500, or nearly 20,000 from a month ago. Continuing claims also dropped down 47,000 in data for the December 25 week to 4.103 million. The four-week average of 4.123 million is about 100,000 lower than the prior month.
A barometer of the available jobs, the Monster employment index fell four points to 130 to showing a slowing volume of online recruitment in December. This includes state and local government hiring.
The bright news is that the unemployment rate dropped from 9.8 percent to 9.4 percent in December. Private and non-farm payrolls both increased. Overall payroll employment in December gained 103,000 jobs! The private sector payrolls increased 113,000 in December. Leisure and hospitality increased by 47,000 while health care rose 36,000. Also, professional and business services gained 7,000 and were led by temp hiring, up 16,000. Wages remained fairly constant, with hourly pay increasing 0.1 percent.
Over all, positive news in the employment arena for the start of a new year!
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