Receiving Wide Coverage ...
Collecting: The federal government is increasingly garnishing student loan borrowers' Social Security checks to recover unpaid student debt "most of it borrowed years ago to cover their own educations but some used to pay for their children's schooling," according to a report from the Government Accountability Office. Since 2001, the government has collected more than $1 billion from Social Security recipients of all ages to cover unpaid student loans, with $171 million coming in fiscal 2015 alone. That one-year total is up 440% since 2002. Most of the affected recipients are over age 50 and collecting disability benefits, the Wall Street Journal reports.
In a related story, the American Bar Association and four lawyers are suing the Department of Education demanding to know why they were rejected from a loan-forgiveness program for which they thought they had qualified. Under a federal program, certain borrowers are eligible to have their student loans forgiven if they work at least 10 years in a public service job. According to the suit, filed in U.S. District Court for the District of Columbia, some borrowers, including the four attorneys, received approval on their loan certification forms but were later told they were no longer eligible because the rules had changed without notice.
And Sheila Bair, in an op-ed, has her own take on how to handle student loan debt. "Borrowers would fulfill their obligations to taxpayers by paying a fixed percentage of their income over an extended period of years."
Wall Street Journal
Another headache: Regulators were highly critical of Wells Fargo's "living will," which they rejected last week while passing four other banks. Not only did they impose penalties on the bank, prohibiting it from creating new international units or acquiring nonbank subsidiaries – the first time the Federal Reserve and the FDIC have done so – but they were also put off by what they considered to be the bank's rather lackadaisical attitude toward the test. According to the Journal, the regulators said Wells failed to complete an assessment of how it would keep operating critical services during a potential bankruptcy. When it came to Wells' plan for reorganizing units it owns, "it is unclear whether or under what circumstances [Wells] would take action or what type of actions it would consider taking."
White elephant for sale: The world's largest trading floor, 40 feet high and bigger than a football field, is now largely abandoned and up for sale. Built in a Stamford, Conn., office building in the 1990s for Swiss Bank Corp., the property has been vacated by its tenant, UBS, which in the 1990s merged with its Swiss-based competitor. The property is expected to be sold for well below its $149.4 million mortgage. The Stamford office market has one of the highest office vacancy rates in the U.S., at more than 30%, the Journal said.
In Carson's defense: On Tuesday we shared a New York Times editorial that was harshly critical of Dr. Ben Carson, President-elect Trump's choice to run HUD, accusing him of betraying "a distressing ignorance" of HUD and housing policies. Well, according to Journal columnist Jason Riley, maybe that ignorance is a good thing. "There are few if any federal agencies in greater need of a makeover than HUD, and that makeover is unlikely to come from the type of 'expert' at the helm who would appease Dr. Carson's critics," he writes. "It's HUD's view of housing that is warped, not Dr. Carson's. Mr. Trump has tapped a nonpolitician to clean up a mess created by political pros and bureaucrats who have an agenda that often differs from the needs of the poor. Let's see if Dr. Carson is up to the job."
Financial Times
Terminated: New York Community Bank and Astoria Financial, which agreed over a year ago to merge, have decided to terminate their agreement. According to the FT, the two banks decided to end the plan "after failing to get timely approval from regulators for a transaction that would have created a new 'systemically important' bank." "The hiccup highlights the barriers to consolidation of the highly fragmented U.S. banking sector," the FT commented. "Regulators have made combinations of the largest lenders all but impossible and are also scrutinizing takeovers of second and third tier banks more closely."
Good omen: Jefferies, which is often seen as a bellwether for much larger investment banks, said fiscal fourth-quarter earnings quadrupled, "fanning hopes of brighter prospects for the bigger Wall Street banks." Net income for the quarter ending in November jumped to $87 million from $20 million in the year-earlier period as revenues from fixed-income sales and trading jumped more than 16-fold.
New York Times
Fee hungry: It turns out that small banks charge nearly as much as big banks for overdrafts, according to a study by the Pew Charitable Trusts. The study found that small banks typical charge a $32 overdraft fee, versus $35 charged by big banks. All 45 of the smaller banks Pew studied allow customers to run up daily fees of at least $90, while many allow customers to go way over that.
Quotable ...
"Some smaller banks are far more addicted to overdraft fees than bigger banks." – Lauren Saunders, associate director of the National Consumer Law Center
