Sunday, December 14, 2008

Changing Local Economic Picture

FDIC Bank Takeovers

Retroactive Medical Charges to Medicare Patients

State Legislatures "Cuckoo"

Media Convergence

The local economic picture is always changing. Daily in recent months there have been a never-ending number of national and local news stories that tweak my thoughts. FDIC Problem Bank List was one such recent story by Laurie Kulikowski at thestreet.com

I wonder what others observe happening in their communities influencing banking and local business compared to what I'm observing here in Southern California's northeastern Los Angeles, San Bernardino and Orange Counties?

Only a few months ago our local area was impacted by the U.S. Federal Deposit Insurance Corporation takeover of Indy Bank that had a nearby branch. Rumors had spread prior to that event about the questionable status of a long respected banking institution, Pomona First Federal Savings and Loan, that had successfully first publicly offered stock only a few years ago.

I was told about one PFF depositor so concerned about the institution's rumored financial status that they had transferred all their funds to Indy Bank, where ironically soon after, Indy was taken over by the FDIC renewing that depositor's anxiety. The government's poorly handled takeover triggered lines of depositors frantic to withdraw their funds before officials were finally able to reassure customers most of their money was safe.

Televised L.A. area news scenes reminded me of the seasonally popular Jimmy Stewart movie, "It's A Wonderful Life" in which his character is a banker faced with a run on his bank. Locally, subsequent FDIC takeovers of financial institutions have been handled with more finesse that outwardly has alarmed the public less. Ultimately, our U.S. govt. took steps to increase insured deposit amounts that also alleviated many individuals concerns.

Since then I have observed changes that have affected every bank branch in our city. Bank of America acquired Wall Street financial company Merrill Lynch. The other shoe has dropped however, since the current news is this joining of institutions will result in thousands of jobs lost across our country. Happy Holidays, workers! J. P. Morgan Chase absorbed Washington Mutual which was one giant eating another. Meanwhile, Citibank was reported to be on shaky ground needing more financial support.

Just a few weeks ago another area financial group, Downey Savings and Loan, thought to be careful, conservative and cautious with their investments succumbed to the deterioration of their institution's value. I learned depositors would generally be protected, but those with stock in the institution, many of their own employees, would likely incur loss. For some staff the lost dollars would be a major portion of their retirement funds.

The scenario described to me was that in an FDIC take over the officials would likely walk through the door on a Friday at closing time, then reopen the office the following Monday with little or no disruption in business for customers. A week after learning this, I read in the paper that's exactly what happened at Downey. That same Friday to the surprise of many a similar FDIC takeover occurred at PFF. A Los Angeles bank that had earlier been announced as combining with PFF had their proposed transaction denied by government officials due to that bank's own financial weakness so in stepped the FDIC.

Recently I read U.S. Bank has negotiated purchase of both Downey and PPF. I just can't keep up with who owns what, which name goes with what institution any more, and exactly what financial group I'm doing business with. Perhaps it doesn't really matter since it may all change again next week or next month. I wonder if any of these institutions are borrowing money from me (the taxpayer billions, or is it trillions now, coming from our U.S. Treasury)? I just double-checked and quadrillion comes after trillion, but the information said numbers higher than that are rarely used. Oh, yeah?

I believe I read Citibank was one of the first banks to benefit by borrowing from that initial 700 billion. The Troubled Assets Relief Program, called TARP, will distribute our money. If figures I read earlier still prevail, I think it's been nothing short of criminal Citibank was given the financial deal they received at taxpayers expense – that's your money and mine they received and they're not paying much for it. You can bet if we're borrowing from them they'll have no reservations about what they charge us. They certainly didn't when I returned to college years ago and needed money.

One other change in local business transactions has occurred with my doctor. A few months ago I received a long bill from my medical doctor's billing office suddenly charging me for a litany of services beginning as far back as 2006. Ostensibly these are for amounts over and above what Medicare and my supplemental insurance would allow as payment for my doctor's billing charge. I'm now being charged retroactively for that difference. I wonder if this is happening to others across the country?

The rest of my community shows me two or three closed businesses in each of most small but once busy prosperous strip malls. Once filled storefronts similarly located in surrounding cities showcase a like number of empty shops. Several months ago a large private family restaurant, long a hallmark for many years in a heavily trafficked location, suddenly closed. They were located in a prime spot with ready access to a major freeway and a cross street on a well-traveled boulevard featuring numerous businesses but absent close competing family restaurants. My mother and our family used to enjoy eating there. I guess they could no longer survive despite so many years in business.

I'm not even including here all the newspaper items I see about local retail businesses announcing closing, going out of business sales. Linens 'N Things, Mervyns Department Store readily come to mind. Circuit City is still open locally but nationally they filed for bankruptcy. Then there are the national and local companies, also car dealerships that are shutting down. Obviously in all these instances, there's the human factor. I think of all these people affected whose numbers are continuing to increase. How many are or will be without jobs and money for needed food, clothing, housing and healthcare? Where does help for them come from?

I wonder how many others are seeing similar scenes or observe other scenarios where they live?

I have grave doubts we can expect our California State Government to be in a position to help residents. The last I heard one of their solutions to aid also long-suffering education needs was to alter the payoffs of the State Lottery so there could be more small winners with a reduced single large payout to only one winner. I'm sure every resident looks to that solution to minimize educational shortfalls and for financial security.

Probably, those of you who don't live in California aren't aware of just what dire financial straights this State is in. Some other States are in difficulty, too. There's a tragic-funny article posted by Jane Wells at CNBC that includes a short video clip of public policy expert Joe Kotkin of Chapman University wondering if this is "Cuckoo Land" that "...both parties live in and refuse to leave, no matter what." (short NYT ad at clip's beginning)

More and more I become convinced locally and nationally almost everyone in legislative office should be pitched out on their ear and replaced. Don't any of them realize that if there was ever a time when rigid ideology needed to be set aside with an eye toward compromise for the good of our State and our country, this is that time? They're all a bunch of Neros, fiddling while Rome burns. I hope we're all spared shock one day when we awaken to the realization their stubbornness and ineptitude has resulted in a foreign nation owning our country.

Our State's economy, let alone our national economy and that of the world, gives me motivation to keep working however little or much as I can. Is Wall Street willing or in a position to be able to loan money to any States in financial difficulty? Does the Federal Govt. have loans for these States? Our State Legislature fumbles along busily disagreeing on action of any consequence to rectify our existing problems. Do other States Legislatures demonstrate the same sort of lack of action?

Perhaps the day comes when loans to anyone or any group is out of the question. Perhaps the only solution is the dreaded belt tightening and cutbacks well beyond what many individuals are already doing. We can be assured that those who are least in a position to cut more will likely bear the brunt of most loss.

Traditional news gatherers and writers add to the human element faced with a potential narrowing of employment opportunities. The congruence of print with the Internet is significant on its own, but the timing coinciding with the financial crisis lends its own exacerbation of the problems such workers experience. The most recent newspaper with survival threatened is the Los Angeles Times as the Chicago owner petitions to file for a bankruptcy that also includes his Chicago Sun paper. The Detroit Free Press is reported to be ending most home delivery of their newspaper but will expand their Web Editions.

I do have confidence we will ultimately have universal financial recovery. I wonder if meaningful and accurate distribution of news to the masses will temporarily decrease until everyone readily has inexpensive access to the Internet. Meanwhile, I'm not brooding, but directing my energy elsewhere. Wondering what to expect between now and then does give me pause for thought.

5 comments:

  1. All of these issues start to look like a tsunami engulfing life as we know it. I think think this is more likely a shift in the the smoke and mirrors that have created our image of our lives. It's still scary, but if it gets us back to reality then it may be long overdue.

    My great-uncle used to borrow money for seed in the spring and pay it back in the autumn after harvest. Now we borrow in preference to delaying gratification, we've outsourced most of our domestic means of production, and our economic "growth" has been centered on mergers and acquisitions consuming small businesses and creating oligopolies that are no longer economically viable.

    The medical billing? When I was a medical group administrator, at least twice a year I had a billing service come in and blow in my ear telling me that if I hired them they could recover thousands in uncollected receivables. In almost every case their strategy was to rebill everything to the patient (the insurance companies were a dead end) and there were always patients who would respond by paying, and then those patients almost always left our practice. The reason your doctor's billing service didn't dun you in 2006 was most likely because you weren't responsible for the charges under the terms of his contract with your insurance, and you should challenge that bill. Come on, Universal Healthcare!

    Please forgive the long comment.

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  2. AQ: Your comment length is welcome so nothing to forgive. I've tended to some long ones elsewhere, too, maybe even on your blog.

    Thanks for the info on the medical charges. The company that billed me has been an HMO affiliated service group to which my doctor has apparently now turned over billing for all his patients who don't even have their HMO. I know doctors keep having Medicare cut back their fees (just as they have for Rehab,) but I thought a recent cut was reinstated for physicians.

    I surely will be checking into it with my insurer. Is this more duplicity in the financial and health insurance business?

    I wholeheartedly agree with your view that we're long overdue for this financial reckoning. I've long thought the whole concept of delayed gratification was lost to society.

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  3. This is jaw-dropping. I can't believe what's happening. Thanks for visiting my blog, which sent me over here to read what you have to say here.
    Wow. I guess I live in a fools' paradise.
    I knew it was bad, but THAT bad???
    Ouch.

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  4. Hattie: Right, it's "THAT bad"! This is just a micro picture and is why I'd like to know what others are experiencing where they live.

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  5. Each day brings more bad news of giant companies in big trouble. I hope that Mitch McConnell and John Bonheur won't throw a monkey wrench in President Obama's economic recovery plan. This will be a real test of the Presiden't ability to reach across the aisle.

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