Archive for April, 2009

The federal government recently required 19 of the nation’s largest banks to undergo “stress tests” (administered by the banks themselves) to gauge how well the banks would perform under extreme recessionary conditions. We’ve now learned that bank executives have been lobbying Washington to boost their scores before the results are finalized on Friday and released to the public on Monday, USA Today reports.

The Wall Street Journal says that Bank of America and Citigroup were among those banks that were told they have insufficient capital reserves.

There’s a lot at stake for the banks. If it’s determined that their capital reserves are too low, government regulators intend to make them buck up.

“The government could convert its stake in them to common shares, force them to raise money from investors or eventually release more funds from the Treasury Department’s $700 billion financial bailout,” USA Today said.  The idea is to make sure that banks have enough money to absorb ballooning losses from bad loans.

“They don’t want to do any of this,” Karen Shaw Petrou, managing partner at Federal Financial Analytics, told the paper, “because banks think they can make smarter business decisions when the government doesn’t intervene.” She added, “It’s disastrous for shareholders.”

Those banks that regulators decide do possess sufficient capital reserves aren’t exactly free and clear to do their own thing. They may or may not be allowed to repay the billions of dollars they received in taxpayer-funded bailouts. Most of the largest banks want to do so, mainly to avoid being hamstrung by executive compensation limits.

The actual usefulness of the stress test is already doubtful, for a variety of reasons. When the stress tests were devised a few months back, the Financial Times reports that an “adverse scenario” was defined as one where unemployment rose gradually to peak at 10.4% in late 2010.  Unemployment, as it turns out, has increased more rapidly than was projected, calling into question the relevance of what could already be an obsolete formula.

Even if you ignore the problems with the original adverse-scenario model, if banks succeed in tinkering with their scores, they’ll have succeeded in circumventing the purpose of the stress tests and turned them into a meaningless exercise. They’re kicking and screaming all the way, but since they have only themselves to blame for getting into this mess, I, for one, have little sympathy for them.

What’s your take?

American families aren’t yet willing to give up the family vacation, no matter how tight their finances, and state parks and campgrounds are being rediscovered.

Whether it’s a humble tent, cozy cabin or super-deluxe RV, vacationers are forgoing pricey resorts for the simple pleasures of communal showers and roasting hot dogs over an open fire. As the Maryland State Park Superintendant put it, “It’s extremely affordable when compared to the Magic Kingdom.”

In 2008, Kampgrounds of America reported a 21% increase in the first-time camping rate, while tent camping rose 16% at its 500 campgrounds nationwide.

The Baltimore Sun reports that this could be a very good year for the camping industry. Still, to lure more families who aren’t diehard campers, some private campgrounds are adding restaurants, fitness centers, free Wi-Fi, cable TV hookups, dog-walking services, movie nights and golf carts as transport.

Even state campgrounds are loosening their pet policy restrictions.

How about it? Will you be packing a sleeping bag this summer?

The Pleasance

If you’ve ever watched construction of new strip malls, residential subdivisions or industrial development, you know that one thing’s pretty certain: Once developed, most properties stay that way — forever.

But in cities like Flint, Michigan, which are coping with widespread blight brought about by massive foreclosures, streets, blocks and even whole neighborhoods of now-vacant properties may be razed, returning portions of this 34-square-mile city to something approximating “Flint Forest,” according to a fascinating New York Times story.

Turning back the hands of time could be a better alternative, city officials say, than watching empty homes become litter and dumping magnets taken over by drug dealers, prostitutes, squatters and opportunists who’ll strip anything of value from the homes.

Flint city officials are considering demolishing houses on selected streets even before they’re foreclosed on. There are about 75 neighborhoods throughout the city. The idea is to consolidate residential and retail centers inside city limits to a more viable size, centered around the heart of the city and potentially saving the city millions of dollars on police and fire departments and garbage collection.

The city of Flint is having a rough time of it, reeling from police and fire layoffs and a $15 million budget deficit. Some public schools will likely close. Roughly a third of the city’s population lives in poverty, the Times reports. The head of the local land bank says about 900 foreclosed homes in Flint have been acquired.

The concept of “planned shrinkage,” the Times says, became possible after the state changed its laws so that once properties become foreclosed on, they fall under the jurisdiction of county land banks. Other cities, like Little Rock and Indianapolis, have done the same thing.

Something similar to this happened in my own hometown, albeit on a much smaller scale. An abandoned gas station sat in the heart of town, right on Main Street, for years. As I remember, the underground storage tanks had leaked; the property may have been a Superfund site. It became a real eyesore. I’m not familiar with the details of how the property changed hands, but the publisher of our local newspaper purchased it. He turned a few acres with a grungy garage and weeds springing up through broken asphalt into a manicured public park with a bocce court, gazebo, gurgling fountain and walking paths. Local landscapers donated their time, trees and shrubs. Fittingly, what had become known to town officials as a nuisance is now called “The Pleasance.”

Is tearing down unkempt properties a viable option to control blight? Could doing so on a large scale, like in the city of Flint, transform magnets for crime into public spaces that enhance city life instead of detracting from it?

I planted a vegetable garden.

In my mind’s eye, it will be brimming over by mid-summer with a bounty of string beans, yellow wax beans, tomatoes, potatoes, zucchini, spaghetti squash, acorn squash and other delectables.

Right now, it’s a barren-looking rectangle, newly planted with my cool-weather crops — lettuce, snap peas, radishes and spinach.

Despite living for 14 years on well over an acre of land with good-looking topsoil, it’s just the third time I’ve attempted an in-ground vegetable garden. I was foiled early on by resident woodchucks who demonstrated their aptitude for razing beds of delicate coral bells, astilbe and other perennials in a single evening. But they’re not fussy, they’ll eat almost anything.

Of course, it’s a rare Connecticut homeowner who doesn’t have deer problems, and I, unfortunately, don’t fall into that hallowed category. The deer are comfortable enough in my backyard to give birth in the blackberry brambles. For a time, I was mesmerized by the fawns that raced around the lawn in circles; they were so close I could hear the sound of their pounding hooves. By that fall, my fascination with what a co-worker once called “rats on hooves” had worn a bit thin, as did my azaleas.

So my gardening of recent years was limited to a few potted tomato plants and a lone basil plant that nonetheless delivered up some great homemade pesto sauce.

Last year, I hastily threw some vegetable plants in a bare patch of earth and surrounded it all with plastic fencing. I made the mistake of anchoring the tomato seedlings to the fence itself, but as the tomatoes grew — hugely — their weight caused the fence to slowly implode toward the center. I could no longer walk inside, but I still collected a bounty — 130 tomatoes, 35 or so cucumbers and a half-dozen bell peppers.

This year, I decided to get serious, encouraged by woodchucks who seemed to consider the front yard beyond their God-given territory. So I expanded the original footprint of the 5′ x 5′ garden to 11′ x 18′, investing in a more durable 6-foot-high metal fence and posts.

While I’ve always enjoyed gardening just for the fun of it, my little experiment this year will be to measure how economical it is to grow my own produce. So as the garden grows, I’ll be tracking my output, weighing everything I get on my kitchen scale and calculating what it would cost to buy comparable veggies at my local supermarket.

I’ll share my progress with you from time to time, and by season’s end, I’ll report back with my final tally, weighed against expenses. (They were considerable, thanks to that fencing, which only comes in rolls of 50 feet. I needed 59 feet but couldn’t expand the garden further due to some serious tree roots and pre-existing shade.)

The garden will be planted with radishes, lettuce, snap peas, spinach, cucumbers, tomatoes, red potatoes, string beans, yellow wax beans, garlic, basil, acorn squash, spaghetti squash, zucchini and bell peppers.

Elsewhere on the property I have asparagus, chives, strawberries, cherries, gooseberries, blueberries, black raspberries and blackberries growing. Assorted critters usually get to the strawberries, blueberries, cherries and gooseberries first, partly because their output is not huge and it’s often not worth the trouble to do more than snack on a berry or two if I’m in that area. The wild brambles, on the other hand, cover a huge area in the backyard and during their peak in July, I feast on wild raspberries and blackberries with my morning cereal, bake berry crisps and drink berry smoothies.

There’s nothing like using the resources in your own backyard.

Manpower’s quarterly Employment Outlook Survey indicates that employers are forecasting largely flat job growth through the second quarter of 2009.

Manpower surveyed 31,800 employers, 15% of whom plan to expand their staffing levels between April and June, while a nearly equal amount, 14%, anticipate cutting their payrolls. However, the majority of those surveyed, 67%, said they expect no changes in staffing levels through early summer, according to the Manpower report.  (Roughly 4% of those queried remain undecided about hiring plans.)

The numbers, said Manpower CEO Jeffrey A. Joerres, illustrate employers’ delicate balancing act in seeking to churn out a profit without dismantling their workforce infrastructure.

Not surprisingly, the national survey also revealed that employers in nearly all industry sectors say they’ll be reducing their payrolls compared to the previous quarter. These sectors include mining, durable and nondurable goods manufacturing, wholesale and retail trade, information, financial activities, professional and business services, education and health services, other services and government. 

Employers in transportation and utilities, on the other hand, plan to keep hiring levels relatively stable for the second quarter. And while Americans may be scaling back their vacation plans, they still intend to travel somewhere, and as a result, leisure and hospitality employers anticipate more hiring activity. Employers in the battered construction sector are still projecting a negative outlook for this quarter, although it should be less painful than the previous quarter.

By geographic region, hiring in the Northeast is expected to be the most robust while employers in the Midwest and West are feeling less positive. Employers in the South, a heavily concentrated manufacturing region, project the weakest hiring pace during this period.  

Does Manpower’s employer survey hold any surprises for you? How is your employer’s business doing these days?

Earlier this year, I pledged to live a cash-only lifestyle. Well, as much as possible. Some things — like the cable bill — are better left to automatic bill paying. When I took this challenge on, I knew one large obstacle lay ahead: A Park City, Utah, vacation that I had committed to last summer. But I’m happy to report that a combination of planning and frugality resulted in an affordable and — most importantly — interest-free vacation!

Here’s how I did it:

• Lodging: 6 people, 5 nights — $350 per person.A friend took the reins on this vacation. She reserved the house, and the rest of us made our checks out to her.TRAVEL TIP: Travel during the off-season. We went in mid-March, at the start of the off-season to save money. We rented a three-bedroom duplex within walking distance to the Park City resort and downtown at a reduced rate because we waited until after the busy season was over. Plus, our late-season adventure afforded us beautiful weather and wide-open slopes.

• Airfare: $333 roundtrip.I booked a roundtrip coach flight from New York to Salt Lake City (direct going, one stop returning) online for $333 and paid with my debit card to avoid interest fees.TRAVEL TIP: Check out Kayak.com. The travel website cross-compares fares from hundreds of other travel sites and tracks price variances from day to day to help you pinpoint the best time to jump at a good deal. You can also set up “fare alerts” that send automatic emails when the prices drop for flights you’re interested in.

• Car rental: 4 people, 5 days — $90 per person.There was just no way around this expense. We visited several mountains within an hour’s drive from Salt Lake City — Park City Mountain Resort, Alta Resort, Powder Mountain Resort and Snowbasin Resort — making an SUV rental absolutely necessary.TRAVEL TIP: A friend negotiated the SUV rental at a mid-sized sedan’s price. All it took was a friendly inquiry at the rental company’s counter when he picked up the car. I suggest you try it too.

• Ski rentals and lift tickets: $134.That happens to be my total. I didn’t ski as much as the others did. But here are a few tips everyone can use to save.TRAVEL TIP: To avoid oversized baggage fees at the airport, we left our gear at home and rented equipment in Utah. Also, we rented everything for the week and purchased discount lift tickets in advance from one off-mountain rental shop and saved a bunch off day-of lift tickets and equipment rental charges at each individual mountain.

• Food and Drink: $199 per couple.As a group, we decided to stay in and cook instead of hitting expensive restaurants every night. Each couple was responsible for buying whatever they needed to create our respective culinary masterpieces. Leftovers were brought to the mountain the next day for lunch, and everyone grabbed an extra bag of chips or two for after-mountain snacks. This amount also includes the traditional post-mountain lodge drinks to warm us up before our trek back to Park City.TRAVEL TIP: My boyfriend and I religiously contributed to a change jar we started in April 2008. Before we took off for Utah, we cashed out $374. This completely offset our food cost and helped our lift ticket cause.

While the trip’s cost certainly wasn’t chump change, we cut corners where we could to make it manageable. Planning far ahead afforded all of us the time needed to set money aside and pay off our trip beforehand. Using cash while there ensured that memories, not the bills, were the only things left over once we arrived home.

Amish church leaders in northern Indiana have relented in shunning one modern amenity — unemployment checks — to help unemployed members of their community survive.

It’s no longer possible for many Amish to earn a living through farming, due to rising land prices. Up to half of Amish men in Indiana now work in factories, according to a Los Angeles Times story.

Amish religious beliefs normally frown on such things as electricity, insurance and automobiles (the local Wal-Mart in northern Indiana has a hitching post for horse and buggies), but repeated rounds of factory layoffs have forced elders to relax the rules. The unemployment rate in Elkhart and LaGrange counties, where Amish populations are centered, has reached about 19%, the Times reported.

Although furniture-making has always been a mainstay occupation for the Amish, local shops aren’t able to hire all of the available workers because the demand for furniture like Amish-made tables, which retail for between $750 and $2,200, is off, too.

It’s been said that this recession is unique in that it’s cut a wide swath through every segment of the population, hurting those at every income level, in every occupation and of every age.

How vulnerable is the industry that you work in?

Private student loan lenders are preparing to fight for their survival as the Obama administration seeks to end $94 billion in loan subsidies to private lenders that officials say could be put to better use by giving the money directly to needy students.

Revamping the student loan program could change how millions of college students finance their college education.

The government plan would change the way the student loan business has operated for the past 16 years. Currently, while some students do get loans directly from the Education Department, many others get their loans through the Federal Family Education Loan Program, through which private companies receive subsidies from the federal government. Students are directed toward one or the other, depending on school administrators’ preferences. President Obama would like all student loans to come directly from the government so that the enormous savings realized from the increased efficiencies of doing so could be redirected to low-income students in the form of Pell grants.

According to a recent Washington Post story, student loan companies claim the move would put thousands of industry employees out of work, increase the national debt and lower the quality of service to borrowers. Lenders insist that their marketing, customer relations, billing, and delinquent loan collection are important services, the New York Times reports. Supporters of the proposal say the move is long overdue, a no-brainer, in fact, and point out that the loan companies have collected lucrative fees with virtually no risk, since the government guarantees loan repayment up to 97%.

Detractors of the proposal include some lawmakers, several of whom represent the states where private student loan companies are based, who say the move would give too much control to government. The fact is, the government already had to step in to rescue the industry last year with the injection of additional funding to keep student loan financing alive. So why exactly do we need private student loan lenders?

I don’t know about you, but I’m getting tired of taxpayer money propping up private industry and I think private student loan lenders are dispensable. What’s your take?

Contrary to popular opinion, a recent MarketWatch story reports that so-called “sin” industries like tobacco companies, casinos and distillers haven’t been faring well in this recession. A few stock funds that espouse Catholic values, on the other hand, have done better.

It’s often been said that during tough economic times, liquor sales and gambling continue to thrive because consumers turn to them for cheap entertainment or escape from their problems. Read more »

Protests against big-government spending and the use of higher taxes to fund ballooning state and federal budgets are scheduled to take place today in cities nationwide.

The Tax Day Tea Party website lets visitors view what tea party activities are going on in their state. A quick check of what was in the works for my home state of Connecticut revealed that four “tea party tax revolts” were scheduled in scattered cities. A random sampling of a half-dozen other states indicated multiple tax revolts in every state I checked, to be held on street corners, parks, federal buildings, courthouses, town greens and libraries. Read more »