Prepaid debit cards are a nightmare.

If you have ever looked into one of these cards, you will be shocked to see just how bad they are.  Short of payday loans, it is hard to imagine a more predatory product.  Oh wait, there are those guys in the track suits from North Jersey.  They have a loan product that they would like to offer you.  Its a hard call between that and a prepaid debit card.

Remember, these are not loans.  That may be why they have so little protection.  They work when the consumer loads them a new deposit.

Sometimes, the vendor will charge a fee just for making a deposit.  That fee is often as high as $30 for the first $100 deposit!

Then there are weekly or monthly “service fees.” Sometimes, these are as little as $0.75 per week.  Other times, though, they are up to $5.  The BabyPhat Rushcard is “affordable!” It offers activation fees of just$19.95, “so that you don’t have to pay a monthly fee!”

The BankFreedom Card offers a $9.95 monthly fee and and a $4.95 fee to “cashload” the card.  I asked Kelly, the chat agent, to explain cash load.  She said “click here to take advantage of this deal.” I asked again.  She said “Bankfreedom is easy to use…forget about stamps!”  I asked her, “where is the Schumer Box, to honor the Truth In Lending Act.”  She said, “One million ATMs accept your BankFreedom Mastercard!”

Actually, I didn’t expect a Schumer Box.  These aren’t loans.  They are just deposits that are accessible through a card.  So, although they don’t come with any consumer lending protections, they still ought to be relatively free of fees because its almost entirely electronic.

The banks avoid these products.  Instead, the cards are offered by a bunch of never-heard-of-fly-by-night companies.  True, they partner with MasterCard and Visa, but they are themselves a mystery.

Yesterday, President Obama signed the Helping Families Save Their Homes Act into law.  What a relief!

There are two main features to this law:

First, it protects renters.  Renters have been one of the groups getting the collateral damage from the foreclosure crisis.  When an investor owner can’t pay his mortgage, he has to turn the home over.  In most cases, that means that the renters need to move on, as well.

Second, it includes a disclosure rule that requires companies buying mortgages on the secondary market to inform borrowers about who now owns their mortgage.

I have talked with so many people who are not sure who owns their mortgage.  I would say that this is a hard thing to understand.  I have tried to explain it numerous reporters.  Many are confused by the idea of a service and an investor on top of an original lender, possibly working with a wholesaler through a mortgage broker.

Definitely my broadcast news reporters couldn’t grasp it.

There are some other good features, too: a two percent cap on origination fees, and a “net tangible benefit” to borrowers during a refinancing.

The ABA and their bankers are a hard group to bargain with.  They have a lot of friends, particularly on the Financial Services Committee.  So, in a way, getting any kind of new law is great.  That said, this law is sort of misleading, because it does not come with the appropriate penalties for financial institutions who break its terms.

That’s because “curing” the problem does not require a systemic fix, but only a solution for the particular borrower.

Some people have pointed to a disconnect between low-income populations and environmentalism.

I have a friend who always reminds me that brownfields efforts often mask gentrification. She sees other problems: in those defining moments in budget battles at legislatures across the country, left-leaning groups often end up competing against each other for a finite sum of political power. Do we fund open space, or do we redress inequality in schools?

This plays out in a lot of ways.  In the United States, it has much to do with priorities in African-American communities: people care first and foremost about achieving financial security.  When environmental concerns emerge (environmental justice), they are often the product of partnerships driven by both whites and African-Americans.  Climate change in Bangladesh threatens the entire nation’s very existence.  The rise of sea level portend the possibility that the entire country could soon be under water.

Too, there is a recognition among many developing nations that escaping from poverty is a struggle that will fail or succeed within the constraints of fuel choices. Many third-world countries only have wood, charcoal, or coal to burn – nuclear power, solar, or wind are abstractions.

What ties these examples of resistance is that in both cases, it is low-income people who would pay the most for new investment in a greener economy.  It might even be thought of as a regressive form of taxation.

Alternatively, consider how environmental emergencies often impact communities differently.  The Ninth Ward in New Orleans has still not been redeveloped after Katrina.  Some say its not about the response, but about the a priori long-term inequalities in housing and neighborhood type that systematically sort minorities inot more vulnerable locations.  It’s not about need, perhaps, so much as it is about wealth, according to authors Donna Shai.  Those homes burning in Santa Barbara are going to get more funding, and they will be rehabilitated, before we are done with restoring the low-income neighborhoods gutted by outlash surrounding the beating of Rodney King.

Van Jones, a leader in Green Jobs, is working to reverse this very dynamic by finding ways for employment policy to collaborate with the new green movement. He’s going against a long-term problem.  Too many proponents of environmentalism come from the same well-off and largely white background.

People who meet Jones come away with a sense of resilience against any obstacle.  Still, many profess some doubts about his ideas.  Robert Stavins summed it up:

“Let’s say I want to have a dinner party. It’s important that I cook dinner, and I’d also like to take a shower before the guests arrive. You might think, Well, it would be really efficient for me to cook dinner in the shower. But it turns out that if I try that I’m not going to get very clean and it’s not going to be a very good dinner.”

Right now, Jones is the Green Jobs Czar in the Obama administration.  Its hard to know what that means, but it certainly is a platform to realize change.

Those efforts are laudible, and I support them.  Then again, the context of the distribution of wealth in this world reminds us of the fissure between environmentalism and class.  We know we need to worry about our environment.  We know that our future economy will be fundamentally thwarted without natural resources. We have one billion hungry people in this world – today.  For many of them, it is not pollution that undermines life, but about finding any way out of crushing poverty.

Today (Friday, May 15th) is the last day to comment on the proposed re-organization of Bank of America, specifically with how it introduces Countrywide into is larger corporate framework.

The address for comment is:

regs.comments@federalreserve.gov

The comments are due by 5 pm, EST.

Comments should focus on how the re-organization will accommodate the needs of the public.  Its an important opportunity, and while the regulatory invitation is not specific in what will be reorganized, it is safe to bet that it involves Countrywide and perhaps First Franklin (a subprime lending operation owned by National City and later by Merrill Lynch).

Comments could include concerns about credit cards, about consumer protections, about small business lending, or about the lack of publicly-available data to help regular people participate in this change.  Moreover, there are safety and soundness issues relative to why B of A needed so much money to make up its capital requirements.

Here is a form letter.

Adam M. Drimer
Assistant Vice President
Federal Reserve Bank of Richmond
P. 0. Box 27622
Richmond, VA 23261
RE:   Bank of America Corporation, Charlotte, North Carolina, and NB
Holdings Corporation, Charlotte, North Carolina; to acquire 100 percent
of the voting shares and thereby indirectly acquire Bank of America
North Carolina, National Association, Charlotte, North Carolina (in
organization).

Dear Mr. Drimer,   This letter is to comment on the proposed reorganization of Bank of America and to request an extension of time so that we can understand the purpose of this reorganization.  I represent (INSERT NAME OF ORGANIZATION AND DESCRIPTION HERE).  As Bank of America seeks internal reorganization it is out hope that this will facilitate better relationships with it customers and the communities and neighborhoods impacted by its decisions.   We have a number of concerns related to Bank of America’s business practices that we feel should be addressed before this reorganization is approved.   Bank of America fared poorly on the recent stress test.  We feel this will result in unnecessary and unwarranted reduction of credit to small businesses across the country and will contribute to increased unemployment throughout the country, leading to increased foreclosures.

Bank of America has cut off lines of credit to small business owners who have not defaulted on their payments who have excellent credit but serve tough markets.  We have seen a number of small locally based homebuilders who could benefit from the ARRA but who need that line of credit to pay employees until the contracts are signed and payment for the work comes in.

We are concerned that this “reorganization” does not address the performance of Bank of America, Countrywide, First Franklin, Home Service Loans and Wilshire as it related to home retention and loan modifications.  There are clear inefficiencies and we believe intentional efforts to stall home retention efforts for borrowers who are trying to avoid foreclosure.  It takes 10-30 days to get information that has been faxed to these divisions of BOFA into the system.  This delays the ability of housing counselors to keep delinquencies and retention costs manageable for their clients and to ensure that a SUSTAINABLE workout option is available.    We want to know how this “reorganization” will address the following questions.

How will this restructuring of Bank of America ensure fair and equitable capital flows to low-to-mod and communities of color?

How will this restructuring of Bank of America address sustainable homeownership for low-to-mod and communities of color?

How can we ensure that Bank of America develops models for pricing, securitizations, and regulatory/economic capital that considers on the front-end the impact on low-to-mod and communities of color and that efforts are recorded to show they mitigated any disproportionate impact on these communities.

Thank you for your consideration of this comment.

The more comments, the better.  Each comment counts as one additional concern.  Quantity is more important than depth.

Edmund Andrew’s story about his own  foreclosure and subsequent bankruptcy is illuminating.

Andrews is the economic reporter for the New York Times.  He has covered the rise and fall of mortage markets in our country since the beginning of the decade.  He gave some warnings to readers about the situation.  He should have known better.

Andrews mentions that he was earning $120,000 per year.  His new wife also was making a second, albeit much more pedestrian, salary.  She was probably making less than $30,000 in retail at a clothing store.  Nonetheless, they had a pretty good income.  Andrews’ only thorn was a $4,700 per month alimony payment.

As he recounts, he qualified for a $500,000 mortgage with American Home Mortgage.  They didn’t check out his cash flow.  They didn’t want to know that he was giving away about half of his after-tax take home pay to his wife.  They did notice that he had a second mortgage out, on his former home with his first wife, but that just meant that he would get a slightly higher interest rate.  He got a high-cost stated-income loan with almost 100 percent loan-to-value.  And, it carried an adjustable rate...doomed to reset in five years.

Well, it caught up with Andrews in a few years.  He had to refinance, but into a much higher interest rate loan.

What was really unbelievable was the incentives that faced him when it came time to deal with a loan in default.  As JP Morgan Chase, his loan servicer, explained it was not possible to modify his loan while he was current on his payments.  If he fell behind 90 days, then his loan would go to a different department.  Then it would be up for a mod, but it would probably be modified with no change in the principle due.  Monthly payments would probably increase.

These incentives are unfortunately all too normal. A professor at Valparaiso determined that while there were many modifications taking place, that as many as half resulted in a higher monthly payment for borrowers.  The logic of that is impossible to understand. It would seem that all of the efforts, which are difficult and require the participation of many institutions, are only leading to more situations that will end up in foreclosure.

Sheila Bair has some good ideas, but she is being countered by the big banks and some of the other regulatory institutions. For example, a study jointly authored by the OTS and the OCC points out that many loan modifications aren’t working.  They indicate that many are occuring.  Their lead comment is somewhat naive:

“Consistent with last quarter’s findings, the report also showed that re-default rates on modified mortgages were both high and rising during the first three quarters of 2008, with loans modified in the third quarter showing the highest re-default rates. For example, the percentage of modified loans that were seriously delinquent (60 or more days past due) after eight months was 41 percent for loans modified in the first quarter and 46 percent for loans modified in the second quarter.”

Then they note that one possible reason could be that most mortgages are getting these higher monthly payments.  Gee…what an interesting finding!