DiscussionDIVAS

Women! In the news

Will France ban the Burqa? | The price of taking a husband’s name | Blanche Lincoln, financial reform Tigress | Jan Brewer, Sherriff of the West | Fast-growing female-led companies

Will France ban the Burqa?
French President Nicolas Sarkozy says a bill to ban veils covering women’s heads in public places could come in May. Obviously this is quite controversial is essentially targeted at Muslim women who wear veils, like the niqab (full veil where just eyes are seen) as part of their religion.

Sarkozy sees veils as harmful to women’s dignity with no place in French society, but a bill could be unconstitutional.

What do you think?

Looking ahead to 2010

2010 Census We’ll get a fresh look at U.S. demographics with the 2010 Census, which will count same-sex couples for the first time. The Census results influence Congressional districts and funds going to government-funded services like schools. As a side benefit, new census readers will mean an injection of about 1.2 million temporary jobs into the economy. The Year of the Tiger No, not that Tiger! (For good or bad, 2009 was his year.) Rather, the 2010 Year of the Tiger refers to the Chinese New Year, which begins on February 14 (it changes each year based on the moon). The tiger is one of 12 animals associated with the Chinese lunar calendar, with each bringing certain characteristics to the year. Think courage in the year of the Tiger. Estate tax Unless you fall into the 0.2% of America’s wealthiest people, this won’t apply to you, but you’ll hear a lot about it in the news. In a nutshell, prior to 2010, big estates were subject to an estate tax of 45% on assets above $3.5 million. But after nine years of phasing out the tax under a law passed by Congress in 2001, the estate tax—or “death tax” as Republicans like to call it—completely disappears. The Wall Street Journal reports some wealthy Americans were clinging to life to avoid the taxes by passing away in 2010. The reprieve only lasts a year. In 2011, the tax increases to 55% on assets over $1 million. Congress will likely take up the issue in 2010. Roth IRA conversions

December zingers: Avatar, record number of women win Nobel prize

Every December we round up a few factoids—zingers—from the week to throw out at the holiday parties. Here goes:

The movie Avatar cost in the neighborhood of $300 million and may be the most expensive film ever made
Complete with blue people who speak a language made up specifically for the film, Avatar is a 3D, digital extravaganza about a paralyzed soldier who escapes to a fantastical planet called Pandora (the blue people have tails). The movie took four years to produce and new cameras were invented to film it. Whose baby is this? James Cameron’s—director of the highest grossing film ever, Titanic. So, he has a track record! The film launches Dec. 18 and so far the early reviews are good.

Twenty-one million people are “underbanked”
Under what? Underbanked, says the FDIC, which estimates that about 21 million people who don’t have bank accounts use alternative forms of banking, say a check cashing service or a payday loan shop, all which take hefty fees. About 9 million don’t have bank accounts at all, with minorities and low-income people making up the majority of these groups. The FDIC works with banks to try to get some of these folks banking services.

Casual sex is not so damaging on the psyche
Young, unattached adults engaging in casual sex aren’t at “increased risk for harmful psychological outcome compared to those in more committed relationships.” That’s according to a new study publishes in a health journal from the Guttmacher Institute. The paper apparently refutes abstinence only teachings that warn that casual sex is hard emotionally, and says the focus should be on safe sex. The Onion, however, claims it’s only rewarding “for the first few decades.”

Five women accepted the Nobel Peace Prize in Sweden, the most ever
Since 1901, 822 Nobel prizes have been awarded and just 40 women have won during that time—five of them this year. One of them, American Elinor Ostrom, was the first woman to win the prize for economics.

Cash for caulkers

How about some cash in return for weatherizing your home? Or a job? How about both?

It’s the latest idea circulating in Washington—government cash incentives to encourage you to plug up those drafty houses, insulate them, and switch to efficient light bulbs.

If the title “cash for caulkers” rings like “cash for clunkers,” that’s the point. The clunkers program was wildly successful, with almost 700,000 (lots of Ford Explorers), turned in. Car sales shot up. (We’ll note that the DIVA-mobile, a 1994 Volvo, did not qualify as a clunker.) 

Two birds with one stone
 “Cash for caulkers” is the brainchild of one of Silicon Valley’s most prominent venture capitalists, John Doerr. As described by the New York Times, the program could reduce energy usage and costs, and also create jobs—for the caulkers! This particular program would cost $23 billion over two years, though no word on exactly how it would be paid for (assume taxes).

And while the environmental element is a nice bonus—climate talks are building heading ahead of the crucial Copenhagen summit next month—job creation is on everybody’s mind in Washington these days. 

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The Weekly DIVA: Shopping, anyone? Consumers in the driving seat

 A year ago, when all hell was breaking loose in the economy, shoppers spent 7% more at stores during the weekend following Thanksgiving than they had the year before. What a difference a year makes. Or does it?

Since last November, the market took a nose dive, then recovered by 63%. Unemployment climbed to 10.2%. People stopped spending and the savings rate shot up to 5%. 

Now, with just two weeks left to go before the holiday shopping season officially kicks off, the question is, does the consumer feel confident enough to go holiday shopping?

The “season” officially commences on Black Friday, the extravaganza shopping day on the Friday after Thanksgiving when consumers line up outside of stores hoping to take advantage of the deals and discounts. Last year a Wal-Mart employee was trampled to death in a frenzy after the store's doors opened to the public. This year Wal-Mart has taken several steps to make the experience safer, including keeping stores open from Thanksgiving into the next day instead of closing and having everyone line up outside to await the big morning open.

The forecast

Banking on Innovation

Seems like everywhere you turn these days, something needs money.

The U.S. says 10 of the big banks need a combined $75 billion on top of the billions they’ve already received. General Motors says it’s still burning through cash—about $110 million a day—and has until June 1 to avoid bankruptcy. California could need about $20 billion to close another budget gap, and the list goes on and on.

Meanwhile, the U.S. government isn’t asking for money but it certainly is busy spending it. On Thursday, President Obama revealed details of his proposed 2010 spending budget to the tune of $3.5 trillion. The budget does include 121 different spending cuts that amount to $17 billion.

Some of the cuts include money for hydrogen-fueled cars as electric cars gain momentum, and a $632,000-per-year educational attaché in France among others. Excuse me?

 

The Defense Department gets the most money in the new budget—$664 billion, and the Environmental Protection Agency gets the biggest boost, up 35%. Of all 11 agencies, Health and Human Services was the only one that saw a budget cut, by 2%. See breakdown.

Inside the budget and the White House, charity

Somewhere in this massive proposal is a request for $50 million to start the Social Innovation Fund to help some non-profits grow. Michelle Obama announced this tidbit on Monday in New York, at an event honoring the 100 most influential people as chosen by TIME Magazine.

The Obamas bring strong public service backgrounds to the White House—she was executive director of the non-profit Public Allies in Chicago; he was a community organizer. The family hosted a national day of service the day before taking office, and in April Obama signed the Edward M. Kennedy Serve America Act into law. The act provides billions of dollars to grow AmeriCorp from 75,000 members to 250,000 strong by 2017. Michelle Obama has been volunteering since arriving in Washington, and recently caught flak for wearing expensive designer “tennis” shoes to a soup kitchen.

In her remarks about the new fund, Michelle Obama said, “The idea is simple: to find the most effective programs out there and then provide the capital needed to replicate their success in communities around the country that are facing similar challenges. By focusing on high-impact, result-oriented non-profits, we will ensure that government dollars are spent in a way that is effective, accountable and worthy of the public trust.” Read her full remarks.

The big picture

In general it was a big week for philanthropy. In addition to the Social Innovation Fund, the Bill and Melinda Gates Foundation announced $100,000 grants to 81 projects employing innovative strategies to improve health conditions in developing nations. And the Ford Foundation is said to be donating $50 million to a group that helps cities buy foreclosed homes. At a time when so many for-profit organizations are seeking a little charity, it’s nice to see that some money is going toward new ideas and people in need. Seems like some of those for-profit organizations might benefit from a little innovation too.

The stress test

You’re going to be hearing a lot about “the stress tests” during the next week, so we’re explaining why.

First off, the stress tests are an analysis conducted by the government on how healthy the nation’s 19 largest banks would be if the economy worsened. The banks under review received TARP (Troubled Asset Relief Program) funds last year, in some cases up to $45 billion.

 

What’s happening?
On Friday the government will release details of the test methods used, and will reveal preliminary findings to each bank privately. Final, public results are expected on May 4.

Why are the stress tests so important?

The government says the stress tests will help determine: 1) if it’s ok for the banks to pay back the TARP money, or, 2) which banks may need more money to stay afloat. The banks will have until Tuesday to dispute the results.

The test results are important to the banks, some of whom would like to unload their TARP funds. Holding on to government money subjects them to potential restrictions on compensation and bonuses—something most banks want control of themselves. If the results reveal weakness, some worry that the government, which has shown a willingness to take shares in the banks, could require management changes like they did at General Motors.

The results will also likely be important to the markets, which are looking for signs of recovery in the financial sector.

How are the banks doing?

In the last two weeks several major banks reported that they made money in the first quarter of this year, giving some reason to feel encouraged that the industry is making headway toward stabilizing and pulling itself out of this quagmire.

The big picture

The stress tests are cause for stress between Washington and Wall Street. Banks want their autonomy and the government wants to ensure that the economy doesn’t collapse. Washington wants to know that there’s enough money at banks to keep loans flowing and avoid another freeze-up. But by refusing to take back TARP funds they maintain some power over the banks. You can bank on a battle once the results are released.

So..........we're twittering! We're posting links to interesting stories everyday on Twitter so you can keep up with us and the news through the week: www.twitter.com/discussiondivas

Market recovery rests in Washington

The government threw more money at the economy this week but the stock market continued to plunge downward. What's wrong with this picture?

First, a recap
The Dow opened the week just above 7,000 and immediately took a nose dive. By Friday morning it was trying to recoup some losses but for most of the week traders seemed to watch its fall in shock. Citigroup, once one of the largest banks, traded at under $1. Markets fell globally. 

Meanwhile, on Capitol Hill, Fed Chair Ben Bernanke, Treasury Secretary Timothy Geithner and the head of the Office of Management and Budget Peter Orszag were busy outlining new government programs and defending existing ones, all of which they hope will save the economy.
The new stuff
The government released details on two economic recovery programs that we’ve already heard about:

1) They announced specifics on who is eligible for the $75 billion loan modification program to help homeowners on the cusp of foreclosure stay in their homes, and outlined how the program will work. The idea here as we've discussed before is to find a floor for home prices by preventing more foreclosures from going on the market, which drags down home prices overall. The details announced this week give incentives for lenders to modify people's existing loans to make them more affordable.

2) The government also released details about TALF (Troubled Asset-Backed Securities Loan Facility), which taps the previously approved $700 billion TARP (Troubled Assets Relief Program) money for loans meant to get credit flowing back into small businesses, car financing and student loans.

More on TALF
Many say TALF is key to getting money flowing again, particularly to small businesses. Because that sounds so wonky, and kind of makes you wonder what it really means in real-people terms, we're thinking about it like water, which needs to flow to keep crops alive. If all the water is being held back by a dam, then the crops suffer and might die. Likewise, if all the money needed to run or start small businesses or help people get college loans is dammed up at the bank, then money isn't flowing in a way that keeps the economy growing. Make sense?  

So, TALF specifically targets this problem, with the intention of providing up to $1 trillion in lending. Basically, the Fed and Treasury will lend money to investors to buy highly rated asset backed securities (securities made from bundled up car and credit-card loans), which in turn provides the money to let more of these loans be made.

The big picture
The markets are all about confidence and right now they have none. They are looking to Washington for guidance and answers that the economy and the world aren't headed into the next Great Depression. It seems unreal, doesn't it? That so many smart people could be at the helm of the country's financials and trying to make a difference and yet the foundation feels like sand, slipping away beneath us. Of course TALF may need some time to get working. The lending is set to start March 25, but the market clearly didn't seem to care. We’ve raised the question “who’s in charge” because it seems with so many top people on the Hill and countless speeches by Obama, there still isn’t enough certainty about these plans to help soothe the markets. Why? Because general sentiment is that things are much worse than people really know.  

NOTE: If you haven't taken our quick survey, we hope you will. We're getting great feedback and you'll start to see some changes reflected immediately. We'll also post some charts next week of some of the results so you can see them too.

The Housing Crisis: We're all in this together

We're breaking down the proposed housing plan for you. Why? Because even if you didn't take out a mortgage that you can’t afford and even if you're not "under water,” this plan affects us all in one way or another.

 

Why does the plan affect me?

For one, the rising tide of foreclosed homes—2.3 million in 2008—is a big reason why home prices keep falling. Foreclosed homes dragged down the median home price to $180,100, lower than in 2004 when the mortgage lending frenzy was in full swing. Low home prices are a problem because it means many people have mortgages worth more than their homes, but it’s the fact they’re still falling that’s more worrisome.

 

Many economists agree that “finding a floor” for home prices, meaning stopping them from falling further, is key to the economy’s overall recovery. Why? If home values are stable, then banks feel less nervous about loaning money that might not be paid back because the value of the home fell below the mortgage.

 

The flow of credit (loans) is crucial to making our economy work and if it’s too difficult to get or too expensive, even for people who can afford to pay back a loan, then the system is still stuck. And that’s bad for the economy, the market, and so on. Make sense?

 

Additionally, the plan may impact people simply by not including them as eligible for aid, possibly millions of people whose homes have lost too much value. More details will come on March 4 but here's what we know now:

 

• Cost: $75 billion. You'll see references to $275 billion, which includes $200 billion to encourage more lending from Fannie Mae and Freddie Mac, the big U.S. home lenders. 

• The $75 billion is to help about 9 million people in two categories: 1) those who can't meet their monthly payments and are on the brink of foreclosure (lots of subprime loans here), and 2) those who can meet payments but whose mortgages are bigger than their home price (i.e., the mortgage is $300,000, the home is worth $295,000).

• The plan doesn’t help those with loans above $417,000 (jumbo loans), with loans not guaranteed by Fannie and Freddie, or those whose mortgages exceed 105% of the home's current value (i.e., the mortgage is $300,000 and the home price is $270,000). 

• Help will come in two forms: 1) the government will pay lenders an incentive to modify home loans so that monthly payments are equal to 31% of the owners pre-tax pay, and subsidize any difference, and 2) will loosen restrictions to make it easier for people to refinance loans guaranteed by Fannie and Freddie.

• The money will come from the Troubled Asset Relief Program (TARP), the $700 billion Congress allocated in the fall to assist banks and the financial sector, meaning Congress doesn't have to approve the use of the money again.

 Read the government fact sheet on the plan.

The big picture

Critics wonder if the plan bails out people who lied about their income to get a loan. In telling NBC about the plan, FDIC Chairwoman Sheila Bair said, "Thereare moral hazard issues here." And she goes on to make the point that by keeping these homes out of the market, meaning not for sale, it helps stabilize home prices. And that, we can probably all agree is something we can live with.