With all the talk about scams and frauds and new government regulations, it is disturbing to me that there are still “credit counselors” and mortgage lenders out there preying on the desperate. Many of, if not most of, the credit counselors who offer to get people out of credit card debt are predatory lenders. Some are affiliated with the credit card companies and operate to discourage consumers to declare bankruptcy, even when that financial option might be the best available. Some of these “counselors” often do nothing more than take a fifteen year debt and convert it to a thirty year debt. Yes, the result is “lower monthly costs”, but the overall cost is criminal, and do nothing for the borrower except offer a band-aid for a gunshot wound.
The credit card companies are just as bad. Their slick advertising campaigns mask usurious rates that would have been illegal a few years ago, and quite frankly, I don’t know why they’re not illegal now. They can change rates “at any time, for any reason” provided they notify the card holder of the change. There is a bill pending, the so called “Credit Card Reform Act of 2008” that may attempt to address some of these ills, but there is no mention of limiting rates credit card companies can charge. There is an attempt to end the ubiquitous “double cycle” billing method which averages out the balance from two previous bills, so the consumer gets billed for retroactive interest even if they paid off the balance. (www.money.cnn.com/2008/07/21/pf/consumer) Even though the banking industry is opposed to the changes that this act will attempt to address, most consumer advocates complain that the proposed changes barely scratch the surface of what is needed.
There are still mortgage companies offering 97% mortgages and other financial options that got us into this mess to begin with. It is probably wishful thinking to believe that government can cure these ills. As long as there are people desperate enough, or uneducated enough to borrow money under punitive conditions, there will be lenders available to them. I want to, in the very least, add my voice against such practices. To me, the practices that are currently the norm in the credit card industry are nothing more than a legal scam, as wrong and as damaging as the illegal scams that grab the headlines.
By Myron Gushlak
Monday, March 9, 2009
Monday, March 2, 2009
Scam or Charity?
It is a scam if we give someone something and get nothing in return. But not always. Sometimes we give something away with no expectation of return, and that is called charity, and not a scam at all. So where does the billions of dollars of aid that the United States gives to Africa fit into that equation? There has been a re-examination of that aid due to the massive amount of attention received by Dambisa Moyo, often referred to as the “anti-Bono.” Moyo is a leading economist and policy maker in the United States and served as the head of Economic Research and Strategy for Sub-Saharan Africa. (www.brookings.edu/articles) She is the author of Dead Aid, hence her comparison to Bono.
She argues in her book that Western aid to Africa, a pet topic of mine over the past year, has not only perpetuated poverty but also worsened it. She points to China to support her argument where there are 3.1 billion people. Forty years ago, China was poorer than many African countries. Today they have money that they earned from what they built, working hard to create a system where they were not dependent on aid. China now lends money to the United States. She believes that aid to Africa has held it back. “You get corruption-historically, leaders have stolen money without penalty- and you get dependency, which kills entrepreneurship. You also disenfranchise African citizens, because the government is beholden to foreign donors and not accountable to its own people” Moyo argues. (www.NYTimes/Questionsfor)
What she recommends in lieu of charity is to microfinance – to give people jobs. That resonated particularly with me because she cites Kiva (www.Kiva.org) as a suitable place to begin to truly help Africa. Kiva has been targeted in the past year by my own charitable foundation, (www.MyronGushlakFoundation.com)
Anyone who has spent any time parenting knows that this is a central dilemma. When to help and when to stand by and let your child fall. At some point, the offer of aid becomes a weapon creating a dependency that will guarantee compliance with what the giver wants to get in return. Aid can “buy” political compliance, as well as pave the way for favorable trade terms for the giver. So the original question stands, is it charity or is it a scam?
By Myron Gushlak
She argues in her book that Western aid to Africa, a pet topic of mine over the past year, has not only perpetuated poverty but also worsened it. She points to China to support her argument where there are 3.1 billion people. Forty years ago, China was poorer than many African countries. Today they have money that they earned from what they built, working hard to create a system where they were not dependent on aid. China now lends money to the United States. She believes that aid to Africa has held it back. “You get corruption-historically, leaders have stolen money without penalty- and you get dependency, which kills entrepreneurship. You also disenfranchise African citizens, because the government is beholden to foreign donors and not accountable to its own people” Moyo argues. (www.NYTimes/Questionsfor)
What she recommends in lieu of charity is to microfinance – to give people jobs. That resonated particularly with me because she cites Kiva (www.Kiva.org) as a suitable place to begin to truly help Africa. Kiva has been targeted in the past year by my own charitable foundation, (www.MyronGushlakFoundation.com)
Anyone who has spent any time parenting knows that this is a central dilemma. When to help and when to stand by and let your child fall. At some point, the offer of aid becomes a weapon creating a dependency that will guarantee compliance with what the giver wants to get in return. Aid can “buy” political compliance, as well as pave the way for favorable trade terms for the giver. So the original question stands, is it charity or is it a scam?
By Myron Gushlak
The Perfect Scam
Add Steven Speilberg, John Malkovich and Mets owner, Fred Wilpon to the list of thousands of people or groups who were victimized by Bernard Madoff’s Ponzi scheme. (s.wsj.net/public/resources/documents/st_madoff_victims) The list is international in scope and public knowledge of the victims is added to daily as people join in on lawsuits trying to recover lost funds. The prurient details of actual amounts of money lost isn’t always available, but probably no one’s losses will exceed the seven billion dollars of the Fairfield Greenwich Advisors group who lost half of their fourteen billion dollars in assets.
More names will undoubtedly be added to the list as individuals and corporations seek to recover lost funds. Many of the more public names will find there way to Entertainment Tonight, but I think I think Phyllis Molchatsky’s reaction to her losses was the most interesting of any I’ve read about. She is suing the SEC alleging negligence in their failure to detect Madoff’s scam.
As I mentioned recently, even if Madoff bought estates or artwork every day for the past ten years, those real assets are around somewhere. Finding those assets may be the new century’s version of searching for sunken pirate treasure depending on how shrewd Madoff was in hiding his ill-gotten gains. I haven’t read anywhere whether or not he plans to cooperate with authorities in locating the lost empire’s wealth. But this story is just beginning.
During the last century, film director Alfred Hitchcock was a guest on the Johnny Carson version of The Tonight Show. Johnny asked the reigning king of crime and horror movies whether he thought that anyone ever committed the perfect crime. Hitchcock’s response, in his unique breathless delivery, was that he was certain that perfect crimes were committed every day. They were never uncovered, never even recognized as crimes. That’s what made them perfect.
Which of course makes me wonder, has there ever been a perfect Ponzi scheme? Has anyone ever bilked billions or even millions from investors, and then slowly and systematically lost money so that those investors never even knew they were never actually invested in anything? Probably not, at least not with that amount of money. But I wonder on a small scale if little Ponzi schemes aren’t taking place every day, never to be discovered. It’s only a perfect crime if you don’t get caught.
By Myron Gushlak
More names will undoubtedly be added to the list as individuals and corporations seek to recover lost funds. Many of the more public names will find there way to Entertainment Tonight, but I think I think Phyllis Molchatsky’s reaction to her losses was the most interesting of any I’ve read about. She is suing the SEC alleging negligence in their failure to detect Madoff’s scam.
As I mentioned recently, even if Madoff bought estates or artwork every day for the past ten years, those real assets are around somewhere. Finding those assets may be the new century’s version of searching for sunken pirate treasure depending on how shrewd Madoff was in hiding his ill-gotten gains. I haven’t read anywhere whether or not he plans to cooperate with authorities in locating the lost empire’s wealth. But this story is just beginning.
During the last century, film director Alfred Hitchcock was a guest on the Johnny Carson version of The Tonight Show. Johnny asked the reigning king of crime and horror movies whether he thought that anyone ever committed the perfect crime. Hitchcock’s response, in his unique breathless delivery, was that he was certain that perfect crimes were committed every day. They were never uncovered, never even recognized as crimes. That’s what made them perfect.
Which of course makes me wonder, has there ever been a perfect Ponzi scheme? Has anyone ever bilked billions or even millions from investors, and then slowly and systematically lost money so that those investors never even knew they were never actually invested in anything? Probably not, at least not with that amount of money. But I wonder on a small scale if little Ponzi schemes aren’t taking place every day, never to be discovered. It’s only a perfect crime if you don’t get caught.
By Myron Gushlak
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