Here’s a troubling report: More people are taking hardship withdrawals from their 401(k) plans, or borrowing against their retirement accounts.

According to Fidelity Investments, which administers 401(k) plans with 11 million participants, 62,000 workers initiated a hardship withdrawal in the second quarter.

That’s up from 45,000 in during the same three months (April through June) in 2009.

About 22% of all accountholders now have outstanding loans against their retirement accounts, up two percentage points from last year.

It’s pretty clear that too many Americans are still struggling to make ends meet.
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Chairman Ben Bernanke says the Federal Reserve still has ways to rescue our flagging economic recovery.

Regrettably, it seems most of those options involve pushing interest rates even lower than they are right now.

Good grief. Does Mr. Bernanke really think the economicrecovery is faltering because interest rates just aren’t low enough?

We know everyone was upset last week when existing home sales fell 27% in July.

But does he really think we’re not buying houses because mortgage rates are too high, when the average 30-year fixed-rate loan is going for 4.59%?

How cheap does he think mortgages need to be?
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The debate over the Federal Reserve’s punishing interest rate policy moves to the central bank’s annual party, I mean symposium, in Jackson Hole, Wyo., today.

Raghuram Rajan will carry the banner for all of us who have endured two years of lower and lower returns on our savings.

The University of Chicago professor, and former chief economist for the International Monetary Fund, will tell the Fed that it simply has to raise the rate banks charge each other for overnight loans by at least 2 percentage points.

The Fed has the overnight rate currently set at 0% to 0.25%, which means banks can get money for virtually nothing, and that’s why they can pay us virtually nothing for our savings.

Note that Rajan isn’t urging the Fed to go hog wild and allow interest rates to rise to market levels.
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A new report by TransUnion says we’ve cut the amount we owe on our credit cards to the lowest level in more than eight years.

The average combined debt for bank-issued credit cards – typically Visa and MasterCards — fell to $4,951 by the end of June, down 13% from $5,719 in at the end of June 2009.

Those balances range from a high of $7,148 in Alaska, to a low of $4,753 in Alabama.

The credit reporting agency said it was the first time our combined credit card debt had fallen below $5,000 since early 2002.

The optimistic spin to put on this is that we’re all making a determined effort to pay down our balances. And there’s undoubtedly a lot of truth to that.

But you can’t ignore the fact that at least some of the decline was due to all of the bad credit card debt the banks have written off this year.

Click here to read more about the latest report on credit card debt.

As we had feared, ShoreBank was among the eight banks regulators seized over the weekend, pushing the total number of failed banks to 118 for the year.

ShoreBank was the first bank we can recall that actually failed while it was in any of our rankings of the top CD rates and savings accounts.

In this case, the Chicago-based bank was third on our list of the best nationally available 6-month CD rates, offering 1.19% APY on a 6-month CD.

We urged savers to hold off buying certificates of deposit from ShoreBank until it was closed and its deposits sold to a new owner.

That has now been done.

All accounts have been transferred to Urban Partnership Bank, a newly formed company led by ShoreBank’s management and backed by money many of the nation’s biggest banks, including Citigroup, Bank of America, JPMorgan Chase and Goldman Sachs.
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Why aren’t savers marching on their local banks and demanding better rates?

I suspect it’s because we don’t have anyone to get us organized and out the door.

Foreclosures are an easier, more emotional topic to get up in arms over.

Many left-leaning community, religious and labor groups have been organizing protests about the way banks are treating families who fall behind on their mortgage.

I went to one last week to see what it was like.

About 100 protestors gathered in front of the Bank of America building in Chicago before taking their bullhorns right into the ornate lobby.
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Pawn shops. Payday loan stores. Check cashing services. Tax preparers hawking refund anticipation loans.

In Broke, USA, author Gary Rivlin gets cozy with giants of what he calls Poverty, Inc. — the multi-billion dollar industry of making money off the poor.

It’s shocking how open these guys are in discussing their work him.

He must have been a sympathetic listener who seemed to accept that the creators of this financial underworld actually has its customers’ best interests at heart — despite the backbreaking fees and triple digit interest rates.

But that’s certainly not how these morally-challenged manipulators are portrayed in Rivlin’s book.
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For the second week in a row, regulators seized only a single bank at the close of business on Friday.

And once again the lone bank taken down was in the Chicago area.

This time the Federal Deposit Insurance Corp. and Illiniois Department of Financial and Professional Regulation closed Palos Bank and Trust Co. in Palos Heights, Ill.

Its deposits were transferred to First Midwest Bank., based in Itasca, Ill., and all Palos Bank branches have been reopened under First Midwest management.

That brings the total number of failed banks to 110 for the year.

Credit cards used to flood campuses at the start of the school year with booths that offered free T-shirts, hats and other giveaways in an effort to sign-up new customers.

But the Credit Card Accountability, Responsibility and Disclosure Act put an end to that this year.

Credit cards can no longer offer free stuff if they’re soliciting customers on campus. Applicants between 18 and 21 must also prove they earn enough money to pay the bill or get mom and dad to cosign the agreement.

The act is trying to curb credit card debt among college-age consumers, which has increased in recent years.

A whopping 82% of college students don’t pay off their balances each month, according to a 2009 biennial study by Sallie Mae, the big student loan company.
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Lance Dickie, an editorial writer at the Seattle Times, has an idea for how “Congress and the Obama administration can help rebuild household solvency by rewarding savers.

“Adjust IRS rules so the first $1,000 of interest income is not subject to taxes. Allow tax filers to deduct a grand from their tally of interest earned.

“Quit penalizing people trying to set money aside so they can pay cash for things instead of relying on credit cards. In the universe of skimpy interest rates on plain-vanilla savings and money-market accounts, forgiving the first $1,000 of interest earnings speaks to a healthy amount of cash.”

Click here to read Dickie’s entire column advocating for this income tax deduction on savings.

Since the Federal Reserve has deliberately driven the interest rates savers earn to artificially low levels, anything the government does to boost the effective return on CDs or savings accounts seems like a good and fair idea to us.
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Hooray for federal Judge William Alsup of California.

At the end of a two-week trial he’s ruled that Wells Fargo secretly and deliberately manipulated the way it processed checking account transactions in order to ding its customers for more overdraft fees.

Alsup ordered the bank to pay customers $230 million in restitution – but don’t sit by the mailbox waiting for your check.

Wells Fargo says it’s “disappointed” in the ruling and plans to appeal.

At issue was the bank’s 2001 decision to processes a customer’s largest purchases first, rather than deducting each transaction in the order in which it occurred.

Wells Fargo also instituted a policy of automatically extending overdraft protection to its checking account customers.
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Yes, we’ve written about why you should just say “no” to overdraft “protection before.

But we’ve got to revisit this topic one more time for two very good reasons:

Reason 1. The deadline for banks and credit unions to get you to enroll in overdraft protection is Sunday (Aug. 15).

Reason 2. A new report says some banks and credit unions are aiming their marketing campaigns at customers who have paid these outrageous fees in the past – and are most likely to pay them in the future.

That study from the Center for Responsible Lending blames banking industry consultants for the widespread use of that strategy.
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Only one bank was seized by regulators on Friday, pushing the total number of failed banks to 109 for the year.

The Federal Deposit Insurance Corp. and Illiniois Department of Financial and Professional Regulation closed Ravenswood Bank in Chicago.

Its deposits were transferred to Northbrook Bank and Trust Co., based in Northbrook, Ill., and all Ravenswood branches have been reopened under Northbrook management.

We recently received an email from Citimortgage, urging us to enroll in its “BiWeekly Advantage Plan.”

After you sign up, the plan automatically withdraws half of your regular monthly mortgage payment every 14 days for a total of 26 drafts a year.

It’s the equivalent of making 13 monthly mortgage payments a year, instead of 12.

Now paying your mortgage off more quickly is usually a good thing that will literally save tens of thousands of dollars in interest costs.

But — and you knew there had to be a but — signing up for bi-weekly payments through Citimortgage is a costly proposition.
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Corporate America needs a quick refresher course in Capitalism 101.

Here it is.

Companies are not supposed to hoard large sums of cash.

The shareholders who own those companies expect them to do one of two things with the profits they earn:

• Spend excess cash to grow the business and make our shares more valuable.
• Or raise the dividend and give it to us.

Right now, far too many companies are doing neither.

According to Standard & Poors, non-financial companies in the S&P 500 are just sitting on a record $837 billion in cash.
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Don’t miss Stephen Colbert’s hilarious rant against the recently passed financial reform bill and the possible appointment of Elizabeth Warren to run the new Bureau of Consumer Financial Protection.

While Colbert conceded that Warren is a “damn fine looking regulator,” he thinks she’s “clearly prejudiced against lenders.”

When he brings on Rep. Barney Frank to defend “coddling consumers,” the co-author of the bill backs Warren, calling her “an extraordinarily zealous pragmatist.”
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We were breaking furniture around Bankaholic World Headquarters yesterday afternoon after Randolph Bank limited its high-yield checking account to North Carolina residents.

In this lousy market, the Extra-Mile Choice account was a real deal.

We first wrote about it less than two weeks ago, and the bank had just gotten its online application working the day before it closed the account to most savers.

After we calmed down a bit, we reflected on how unfair it was to get angry at small banks like Randolph. They are not the ones to blame for the fact that it’s almost impossible to get a reasonable return on our savings.
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As you may recall, we thought that making the new Bureau of Consumer Financial Protection a part of the decidedly consumer-unfriendly Federal Reserve was a terrible idea.

But President Obama has a chance to make at least some amends by appointing Elizabeth Warren as the bureau’s first director.

As we’ve said before, Warren has been one the smartest and most relentless consumer advocates throughout the financial crisis. She’s even written one of the best personal finance books around: All Your Worth: The Ultimate Lifetime Money Plan (Simon & Shuster, $9 at Walmart).

The new consumer protection bureau was her idea and if it’s going to work, if it’s truly going to contribute to creating a safe and sound financial system in this country, then it needs someone like her at the top.

In fact, it needs HER at the top.
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Another five banks were seized by regulators yesterday, pushing the total number of failed banks to 108 for the year.

The failed banks were in four states – Florida, Georgia, Washington and Oregon – and the Federal Deposit Insurance Corp. immediately sold their deposits and branches to other banks.

Those branches reopened this morning under the management of their new owners

The failed banks are:
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A new study quantifies what most of us already know: More Americans are in financial trouble now, than in a very long time.

At least 25 years according to Yale University political scientist Jacob Hacker, who lead the research team whose work was paid for by the Rockefeller Foundation.

The study concluded that families became financially insecure when two things happen:

• The experience a major loss of income (25% or more) or big, out-of-pocket medical expenses, and…
• They don’t have enough money saved to replace those losses.

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Seven more banks were seized by regulators last week, pushing the total number of failed banks to 103 for the year.

At this rate, it appears more FDIC-insured banks will be shuttered this year than in the three previous years combined (130 in 2009, 25 in 2008 and three in 2007).

The banks closed on July 23 were in seven different states, from Oregon to Florida. They were:
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Just one more thought related to Thursday’s post about Ed Whitacre’s ruthless replacement of GM’s top management.

A lot of people were really angry when the federal government spent $86 billion to bailout General Motors, Chrysler and GMAC Financial (GM’s old financing operation now known as Ally Financial).

$86 billion!

But a new analysis by the Detroit Free Press says the government will probably get back more of that money that we thought.

Perhaps as much as $74 billion when all is said and done.

That would put the actual cost of saving the American auto industry at a far more modest $12 billion.
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A little more than a year ago I wrote a post called “Invest in the ‘New GM?’ I don’t think so.”

The thrust of the post was this:

I understood the government’s desire to sell its 60% stake in the bankrupt automaker as soon as possible. But “I wouldn’t invest a dime in the new GM” until someone got rid of “all those GM executives who wrecked the company.”

Well, I’m here to tell you that someone did.

General Motor’s post bankruptcy Chairman and CEO Ed Whitacre, Jr.
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Just A few more thoughts on yesterday’s post about Bank of America’s lost revenue.

Of course Bank of America chief executive Brian Moynihan isn’t going to let us keep our $4.3 billion without a fight.

“The Charlotte, N.C. lender is scrambling to raise fees on some customer accounts or encourage the use of more bank services to offset the losses,” according to the Wall Street Journal.

Or, as the hometown Charlotte Observer put it: “Bank of America customers will see quite a few changes in coming months, from higher minimum balances to ‘transformational new products’ in checking, as the bank figures out how to make up revenue it will lose as sweeping new regulations take effect.”
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Everyone on Wall Street is bemoaning the $4.3 billion in revenue Bank of America expects to lose each year due to all of the new rules and regulations emanating from Washington.

But all of the gloomy news stories about the bank’s latest earnings report, in which it details those revenue losses, fail to recognize a pretty simple fact:

It’s a good thing for most of us — and Bank of America’s just deserts.
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Friday is always doomsday for failing banks. That’s when regulators swoop in, seize their assets and sell them to new owners.

Six banks – three in Florida, two in South Carolina and one in Michigan – were seized and sold on July 16, bringing the total for the year to 96 failed banks.

They were:
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Banks are now promoting reward programs for their debit cards in an effort to get customers to use them more often.

But take heed: These programs aren’t always free.

Enrolling in a reward program that offers points or cash rebates often means you’re signing up for something most debit cards don’t have – an annual fee.

Chase charges $25 a year to be part of its debit card reward program, as does Citizens Bank. One U.S. Bank program costs a whopping $55.
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These are the 10 stocks in the Standard & Poors 500 that had the worst week from Friday, July 2 through Thursday, July 8, according to Capital IQ:

These are the 10 stocks that posted the biggest percentage gains:
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We had hoped that most banks would follow the lead of Citibank and Bank of America, and not pressure customers to sign up for overdraft protection.

Hah. That was wishful thinking.

The Consumer Federation of America says 13 of the country’s 15 biggest banks – all of them except Citi and Bank of America — are pushing customers to voluntarily sign up for a program that’s costing them $23 billion a year in fees.

Doing so will allow those banks to continue charging fees of $25 or more each time you overdraw your checking account with a debit card.
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It seems you don’t have to be a sleazy payday loan store to offer payday loans these days.

According to a new report from the National Consumer Law Center supposedly respectable banks are getting in on the action, too.

Of course they don’t call them payday loans, because of the horrible connotation that carries.

Instead they’re called account advances and peddled to customers whose paychecks are directly deposited into their checking accounts.
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