Archive for March, 2010

Yahoo's Adsense clone, otherwise known as YPN (Yahoo! Publisher Network), has been officially shuttered by the company. This is just another chapter in Yahoo's slow and steady march into irrelevance and mediocrity. How could a company that had SO...

New Feature: The Bankruptcy Word looks at the etymology of bankruptcy terms.  Matthew Knox is a first year associate in the bankruptcy section of Adair & Myers, PLLC, in Houston, Texas and enjoys learning about the exciting and storied world of bankruptcy. He can be reached at mak@am-law.com.

“Bankruptcy”

Where does the word itself come from? The textbook we used in my bankruptcy class in law school glossed over its origins in a way that hinted at mystery and controversy:

“[W]hether or not ‘bankruptcy’ derives from the Italian banca rotta or ‘broken [merchant's] table’… the clearest origins of United States bankruptcy law are to be found in England.”  (The Law of Debtors and Creditors, p. 107, 5th Ed. 2006, by current chair of the Congressional Oversight Panel and two-time Daily Show guest Elizabeth Warren, and Jay Lawrence Westbrook.)

Broken merchant’s table? Wait, what?

The story is that:

“In medieval Europe, a merchant who was unable to pay his bills was dealt with harshly: his creditors would come to the market and break his workbench over his head. Accordingly, the broken bench — banca rota in Latin — is both the legal and linguistic root of modern bankruptcy.” Harvey R. Miller & Chai Y. Waisman, Does Chapter 11 Reorganization Remain a Viable Option for Distressed Businesses for the Twenty-First Century?, 78 Am. Bankr. L.J. 153, 155 (2004).

Sandor E. Schick, on the other hand, takes thorough exception to this old saw in his article Globalization, Bankruptcy and the Myth of the Broken Bench, 80 Am. Bankr. L.J. 219 (Spring 2006). After sifting through the evidence, Mr. Schick concludes this is most likely a myth.

I’d be interested to know the truth because it would be telling either way. Frequently the roots of words and phrases themselves lie in the physical and literal events they came to symbolize, e.g. “deep pockets,” “purse strings.” The myth of the broken trade post leaps off the page, as opposed to the figurative use of the word. But more importantly, if true, a literal broken bench says much about the violent attitudes of punishment and deterrence towards debtors at that time. To this day, many potential debtors can’t help but associate similarly dark visions with the prospect of filing bankruptcy.

But if it is a myth, the perpetuation of that myth also says much about our views on bankruptcy, both now and then.

This association with violence is present in Edgar Lee Master’s poem “Hod Putt” from his 1916 opus, Spoon River Anthology:

Here I lie close to the grave
Of Old Bill Piersol,
Who grew rich trading with the Indians, and who
Afterwards took the bankrupt law
And emerged from it richer than ever.
Myself grown tired of toil and poverty
And beholding how Old Bill and others grew in wealth,
Robbed a traveler one night near Proctor’s Grove,
Killing him unwittingly while doing so,
For the which I was tried and hanged.
That was my way of going into bankruptcy.
Now we who took the bankrupt law in our respective ways
Sleep peacefully side by side.

Before we discuss the poem itself, it should be noted Edgar Lee Masters was an Illinois attorney who practiced with Clarence Darrow defending the poor before he struck it big with Spoon River. As you may recall from high school English, Spoon River was his frequently grim and acrid attack on narrow-minded hypocrisy in small towns.

“Hod Putt” is the first person we meet in Spoon River, the first tombstone after the morbid invocation in “The Hill.” Hod Putt relies on his profound misunderstanding of the “bankrupt law” to rationalize his evil acts of theft and murder. Indeed, he equivocates financial bankruptcy with moral bankruptcy to place himself on the same plane as the rich and presumably savvy Old Bill Piersol.

In “Hod Putt’s” equivocation, we see the same, unfortunate confusion of violence and bankruptcy as we do in the mist-shrouded origins of the word itself. But if Mr. Schick is right about the myth and as “Hod Putt” is so clearly wrong, these confusions should not remain.

Yet they do. Just this morning, a potential debtor asked me if her credit card company got a judgment against her, could she go to debtor’s prison. I assured her that a credit card company cannot compel a debtor’s incarceration on debt alone. Though this is true in the real world, this and other base notions linger in people’s minds when it comes to bankruptcy.

Have a suggestion for a future post of The Bankruptcy Word?  E-mail Matt Knox at mak@am-law.com.

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Reviewing the first quarter of post-Canning Day finances, I’m amazed to discover that I’ve not been spending as much money as I budgeted, and not anything near the amount that’s been flowing into the checking account. In fact, on average I’ve spent about $1,100 a month less than income!

The reason for this, of course, has been the part-time teaching, which will end in May and bring in nothing for two and a half months, when expenses rise into the stratosphere.

But…but my $805/month nondiscretionary budget, which includes those soon-to-be-stratospheric utility bills, is based on the bloated summer rates. So in theory, as long as I stay within the discretionary spending budget of $800, even in the summertime I shouldn’t be spending much more than $1,600 a month. In June and July, my income will drop to about $1,390 a month (maybe less, if I put my latest scheme in action—see below). That’s about $210 short. But with $3,400 sitting there from the first-quarter budget underruns, in theory it shouldn’t matter. Those two unpaid and two underpaid months would eat up only about $420 of the three thousand bucks residing there from the first quarter.

Here’s how this shakes out:

Yipe! The average monthly net left in my checking account, income minus expenses, has exceeded $1,100 a month!

Part of this happened because Social Security has been dragging its feet on withholding income tax from the benefit it’s paying. I’ve now asked three times and am assured that in April my SS payment will be $1,008, down from $1,257.

So, in April Social Security income drops about $250; in May teaching income drops in half and in May and June drops to zero. In August teaching income starts up again, with one paycheck that month, two a month from September through November, and one again in December. Net Fidelity income is $389 a month, giving me a net income of about $1,389 in June and July. For the entire year 2010, the result looks like this:

Can that possibly be correct? This suggests that teaching 3 and 2 and collecting $385 net a month from the Fidelity 403(b) will leave me with a surplus of over $9,000 at the end of the year!

Amazing, isn’t it…

Well, the state General Accounting Office demanded that I take a drawdown from my Fidelity 403(b), lest my request to collect my RASL be rejected. This worked contrary to my purposes, because that money needed to be left in investments in hopes that during the time I still have the strength to work, it will recover some of the losses incurred during the crash of the Bush economy. So I asked for $500, the least I thought I could get away with. The net on that is $389 a month.

The fact is, now that the first of the three annual RASL payouts has been approved and transferred to my keeping, it’s unlikely the RASL administrator is going to notice what’s going on with my drawdown. So, I’m thinking I should continue to draw down $500, but have only $100 deposited in checking, rolling over the remainder to my big IRA, which is professionally managed and doing quite well. Another advantage of this strategy is that it would drop my gross income into a lower tax bracket and might insure that none of my Social Security would be taxed at all.

To get 100 after-tax dollars in my sweaty little hand, I’d have to ask for a $125 transfer to checking (i.e., $125 – 20% tax = $100). This would leave $375 a month to roll into the IRA: $4500 a year. It would look like a $500-a-month distribution, but in fact the lion’s share would be extracted from the plain-vanilla 403(b)  into my better-managed IRA with no tax consequences.

In terms of my cash flow, what would happen? Collecting $100 instead of $389 a month would remove $2,601 ($289 x the remaining 9 months) from the bottom line above for 2010:

Okay. So, what if I cut Fidelity income to $100 a month for the entire year of 2011? Could I survive? Let’s assume a 3% inflation rate for expenses, since everything but our paychecks is going up fast. In this scenario, I again teach 3 & 2 instead of 3 & 3:

Huh. Almost $5,000 left at the end of the year. These figures translate to after-tax funds I can use to pay toward my share of the mortgage ($9,000 a year) in 2011 and 2012, delaying serious drawdowns from retirement savings another two years!

So, if there’s that much play in the budget, why on earth am I working at all? What would happen if I didn’t teach in 2011 but instead collected the net $389 on a $500 monthly drawdown from Fidelity?

Yes. The Copyeditor’s Desk, Inc., would earn enough to cover the shortfall and more over the course of a year. As we come to the end of the first quarter, the corporation is holding $2,218, and I’m doing precious little freelance work! Net after a 20% tax payout would be $1,774. That’s for a single quarter in which I’ve made no effort to find work.

Teaching one section would net $1,920, more than enough to break even.

I have to ask you, isn’t that the most amazing thing you ever saw? I can’t believe my expenses are that low in this four-bedroom house on a quarter-acre with a big pool and a forest of fruit and ornamental trees.

And yes, it has occurred to me to wonder if I’m being too frugal here. Surely I can afford to get my hair done by a better stylist than the $30 guy—last week he left me with a tuft sticking out at the neckline and a kind of box-like cap on top. Possibly I can afford to buy some clothes somewhere other than Costco. Or, who knows? Maybe I could even afford a cell phone.

I don’t feel like my life is pinched. I still shop at AJs and Whole Foods; I still buy plants at the fanciest nurseries in town. So…is this money happening, or what?

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God, how I hate waking up in the wee hours of the morning! Is anything, anything more annoying and frustrating?

I’m so tired I’m almost sick, and I can. not. sleep. Part of it is worrying about losing a chunk of cash in the mail just when I have to get a new crown…that money would have about paid for the dental work. Now I’ll have to raid savings to cover it. Part of it is worrying about how I’m going to get another raft of papers graded around the mass of choir rehearsals and performances that will occupy the rest of this week. Part of it is being pissed at having to get my teeth crowned as a result of all the bruxing I do out of stress and frustration. (LOL! “Why do the heathen grind their teeth?”) Part of it is worrying whether the IRS got my tax payment, since that went out in the same mail as the lost checks. Part of it is annoyance that Fidelity’s online statements are not current and that there’s no way to figure out which of the several accounts they’ve got up there corresponds to the money fund for which I have a book of checks, one of which I used to pay my taxes. Part of it is that it’s going to rain again, so the air is a little humid and vaguely uncomfortable. Part of it is disappointment that (I think) Funny lost the current March Madness round at Free Money Finance. Part of it is hunger. And part of it is just old-lady insomnia.

Yesh. At 9:30 this morning—now only five hours away—another mountain of muzzy student papers will come to light on my desk. The day will be occupied with classes through 1:45, at which point I have to drive to Costco for gasoline. Then it’s off to rehearsal.

This week the choir had rehearsals last night and has another rehearsal tonight, a performance tomorrow night, rehearsals and performance Friday, rehearsal and performance Saturday, rehearsal and two performances Sunday. When exactly I’m going to find time to read the mountain of student papers, to say nothing of my client’s first two draft chapters, I do. not. know!

Yesterday I didn’t get to his dissertation because I spent the most of the day writing the post that will come online in about two hours and arguing with the credit union and the post office. This morning at three o’clock I was in no condition to edit copy. And still am not: I’ve killed the last hour and forty-five minutes writing posts to cover the next two days.

Let’s see… 11:00 p.m. to 3:00 a.m., that’s four hours. It’s now  almost 5 o’clock. If by some miracle I can get back to sleep until seven, maybe I could eke a full six hours out of the night before I have to go to class.

And so, to bed…

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I was reading an article on CNBC.com (link below) that helps to illustrate just how much damage has been done to the US economy over the past two years. According to the article, the CBO (Congressional Budget Office) in 2008 was predicting that t...

FMF reports that he will name a winner of the current round tomorrow, Wednesday. If Funny makes it through this one, then we’ll be at the final, championship round! So that would give us a nice chance at winning $500 and clinch a $300 donation for the All Saints Choir.

If you haven’t voted in this round, it would be mighty lovely if you would. Just go here and, to vote for Funny, enter the word “Truth” in a Comment.

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As housing prices have collapsed from their halcyon bubble peak, many are peering out into the foreclosure landscape that is the current U.S. real estate market and are wondering if prices now fall in line with economic fundamentals.  The problem in many areas across the U.S. isn’t so much with housing prices but actual employment and wages.  Take for example cities like Detroit where homes can be had for less than the price of the cars they are producing.  At the crux of the banking bailout and its subsequent failure was that it only focused on aiding the stability of the current banking order.  As trillions of dollars have been funneled to prop up banks, in reality, little has been done in remedying the foreclosure crisis because at the core, prices were in bubbles.  The pop is always painful.  Trying to mitigate the problem has essentially created a transfer of wealth to banks where they now, after years of cronyism, can now offer principal reductions which actually had a place in what are known as cram downs through bankruptcy.  A pound of flesh was always extracted.

But let us return to current housing values.  Are prices cheap?

Source:  Chart of Day

On the surface, especially when you aggregate the U.S. into one data point, the above chart seems to show prices coming back in line.  But this is highly deceptive for a variety of reasons.  As we have noted, home prices should ideally be a function of local incomes and economic industries.  After all, these are the people that will live in these places and service the debt.  At times it appears those in Wall Street have never ventured out to actually see the cities where many of their toxic loans were made.  Not only do they not care, they have no idea what the local economy can support.  I recall that in 1929, at the height of the stock market right before the crash, a time when supposedly all was well 60 percent of Americans fell under the poverty line!  This egocentric view of Wall Street has not changed over the century.

And when we think of home prices, we first have to look at employment levels:

Gallup now has a poll tracking underemployment and we find that 20.2 percent of Americans fall in this category.  This is why in the midst of one of the most historical stock market rebounds ever, many Americans are unable to pay their bills.  This is another reason why in the middle of countless government programs, home foreclosures are still on pace for another record this year.  It has gotten to the point where some banks are offering a six month payment free plan where if unemployment hits you, then you can stop paying your mortgage (millions have already done so):

“(CNN Money) We’re planning to help recently unemployed homeowners by giving them the ability to pay as little as $500 a month on their mortgage, which is effectively less than the price of an average one-bedroom rental nationally,” Sanjiv Das, CitiMortgage’s president and CEO, told CNN Radio.

Borrowers are covered by the program for 90 days when they submit documents proving they are recent recipients of state unemployment benefits, Das said. Some homeowners may be able to get extensions after the 90 days expire, depending on their situation.”

As worthy a cause this may be, many Americans already know another option is available.  Renting.  All these banking bailouts and mortgage gimmicks have failed to address the actual underlying problems in the overall economy.  In fact, they try to return to the heyday of the housing and banking bubble.  As you have noticed, home values have not increased yet stock values of banks have soared.  This is no accident.

In states like California, home valuations are still in bubbles in many cities.  Let us take a look at California as one entity first:

One often used metric of home valuation is household income versus price.  Even after a 50 percent drop in home values in the state, home values are still too high with a home price to income ratio of over four.  Overtime it seems that a ratio of three seems to reflect a “fair” value and of course this depends on local economies since some states have higher wages.  It is important to note that California was actually in line with home values in 1970 and then went off on its own path.  But a state with a 12.5 percent unemployment rate, much higher than nationwide data, is hard to stand pat and justify sky high prices in certain areas.  In some regions like Riverside County homes with five figures can now be found.  Yet this correction means little to the middle class if they have no job or fear being cut.  There can be no sustained housing recovery without having an economy to back it up.

Now we can use Nevada, Arizona, and Michigan to show really “affordable” housing but again looking at this in context of employment it doesn’t really show the entire story.  Let us rather look at a diverse market area like Los Angeles County since this is a good example of an overpriced region that has corrected fiercely yet is still overpriced:

Prices in Los Angeles County have fallen by 42 percent from their peak. Although this correction seems significant the median price is still $315,000 while the median household income is at $70,029 (a ratio of 4.4).  Much of this is skewed since lower priced areas are the bulk of recent home sales.  In some cities the ratio is over 7.  Now compare this to values in 2000 when the median home price was $187,000 and median household income was approximately $50,000 (a ratio of 3.74).  Keep in mind this is based on 2008 Census data.  Since then, the unemployment rate in Los Angeles is now over 13 percent meaning the underemployment rate is up to 25 percent.

It is easy to get caught up in the depth of price cuts but prices have fallen for an important reason.  They were overpriced.  The question now centers on economic valuations and many areas are still in deep economic trouble and home prices do not reflect these new realities.  That is why for most Americans, when they hear about an economic recovery to them it centers around employment.

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{grump!} It’s not like I didn’t have enough screwing around to have to do…

Apparently the Post Office lost an envelope sent to the credit union containing three checks, one for my personal account and two for the Copyeditor’s Desk account. It was a printed envelope from the credit union, so the address was correct, and I distinctly remember checking to be sure each item in the the fistful of mail I stuffed in the mailbox had a stamp on it. So I guess all those checks are just gone. Today I’ll have to call the issuers and tell them to stop payment and send me new checks.

Problem is, one of them came from Google Adsense, where it is dead impossible to reach a human being. The only way to make Google reissue a check will be to go to a particularly annoying, frustrating website and claim never to have seen the thing. Doing that will mean

a) I’ll have to lie, because I most certainly have seen and endorsed the damn thing, and
b) it will be another two months before I get another payment.

Problem with using the Google web annoyance is that if I claim not to have received the check and then it arrives at the CU and gets deposited, then it will look like I’m trying to steal from Adsense. Google is notoriously inclined to simply cut off customers it thinks aren’t dealing straight with Adsense. So, I guess the better part of valor is just to eat the $157.

Damn it. The specific reason I did this was that it is a freaking hassle to drive way to hell and gone to the West campus just to deposit a couple of checks. It consumes gas unnecessarily, and it expends pretty close to an hour of my time. The West campus stands in the middle of a down-at-the-heels bedroom community with no commerce where I might get any other errands done while I’m over there. I take that back: there’s a Costco in that general direction, but it’s an extra stretch and more wasted gasoline up the freeway, and a Lowe’s and a Home Depot at the freeway intersection. Not that I shop at either of those places much anymore.

So, to avoid hassle I’ve brought a basketful of extra hassle down on my head.

But the big concern about this is that when I drove over to the nearby post office and dropped that envelope in the mailbox, I also mailed my tax returns. Yesh. Both the personal and the corporate returns. For both the state and the feds. And I sent Tax Lady her payment in the same outgoing mail drop.

It looks like TL cashed at least one of her checks, the one I wrote on the corporate checking account; the second was written on a Fidelity money market account, along with the check to cover the federal tax. So if she got her envelope, presumably the Post Office didn’t lose everything I tried to send that day. I’ll have to get into the Fidelity account online—another fine little hassle—to see if the feds have cashed the check for their pound of flesh.

Where the PO is concerned, I’m afraid I can’t call any kettles black. I add my own extravagant incompetence to everyone else’s. It’s a wonder the human race gets anywhere at all.

Yesterday in my senility I utterly FORGOT that the 101 students were supposed to be at the library hearing a talk from our most accomplished and lively librarian! We blew away an hour and a half chatting about research methods in the classroom, and none of  us, not a one, remembered that we were supposed to be elsewhere. That was because…

a) I had totally spaced any memory of this appointment; and
b) When I posted an announcement to the young things in BlackBoard, I forgot to hit “e-mail to all recipients,” and, as usual, none of them checked the class announcements board.

So, this truly wonderful librarian showed up in the computer classroom and stood around for half an hour wondering where the hell we were.

Arghhhh!

Yesterday, too, I had such a blinding headache I began to wonder if I was having a stroke. It actually made me dizzy…felt like I was listing to the right as I was trying to drive and walk. Wasn’t, though; it just felt that way.

And of course in this general state of misery I had a meeting before classes and then had to drive from North Phoenix to South Scottsdale after spending four hours in front of classrooms full of late-stage adolescents. There Poisoned Pen Press gratefully accepted the novel I’d just finished editing but had no new work for me.

Fortunately I have some paying work to do today…though I will say, I don’t feel like doing any work, much less of the paying variety.

Driving from pillar to post yesterday, I was regaled by Tony Judt’s unholy tale of his trials with ALS on NPR’s Fresh Air. It’s a gut-wrenching story. You’d like to say you can’t even imagine what it would be like to live through such a horror and then die of it. But you can: Judt describes it with vivid clarity.

It’s one of those moments that brings to mind one’s own mortality. Please, God, let me drive my car off a cliff, let me die in a plane crash, let me drop dead of a heart attack. I think if I received a diagnosis like that, the first thing I’d do is pick up my father’s pistol and blow my brains out. Judt at least has his family around him and apparently has the resources to hire in-home nursing care. I have no one but my son, who has to work and could not devote three to ten years to caring for a dying woman. He would have to leave me to waste away alone in a nursing home.

Having chosen not to exit pursued by a bear, Judt—an eminent historian—has written a new book addressed largely to young people, Ill Fares the Land. The NPR site features an interesting out-take from its introduction. Says he:

Something is profoundly wrong with the way we live today. For thirty years we have made a virtue out of the pursuit of material self-interest: indeed, this very pursuit now constitutes whatever remains of our sense of collective purpose. We know what things cost but have no idea what they are worth. We no longer ask of a judicial ruling or a legislative act: is it good? Is it fair? Is it just? Is it right? Will it help bring about a better society or a better world? Those used to be the political questions, even if they invited no easy answers. We must learn once again to pose them.

The materialistic and selfish quality of contemporary life is not inherent in the human condition. Much of what appears ‘natural’ today dates from the 1980s: the obsession with wealth creation, the cult of privatization and the private sector, the growing disparities of rich and poor. And above all, the rhetoric which accompanies these: uncritical admiration for unfettered markets, disdain for the public sector, the delusion of endless growth.

We cannot go on living like this. The little crash of 2008 was a reminder that unregulated capitalism is its own worst enemy: sooner or later it must fall prey to its own excesses and turn again to the state for rescue. But if we do no more than pick up the pieces and carry on as before, we can look forward to greater upheavals in years to come.

Just so.

The news of the day continued with reports of crazed right-wingers planning to murder police officers and foment a rebellion against the federal government. That, to my mind, is far scarier than anything our enemies among the fundamentalist Moslems can do. IMHO, unless something is done about the growing schism in this country, within 20 to 50 years we will be looking at civil war.

To top it all off, I got a truly nasty e-mail from someone on the choir informing me she doesn’t know who I am and does not care to hear anything from me. F*** you very much.

Sometimes I get out of patience with life.

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According to various published reports, the US Treasury Department has officially set the wheels in motion regarding the sale of their $32 billion stake in Citigroup. The government has hired Morgan Stanley (I wonder how they were selected) to ma...

Wow! Thanks to the kindness of Funny’s readers, a great raft of choir members, and every friend new and old I can pester, we’ve reached the “Final Four” round of Free Money Finance’s March Madness contest!

This means that Funny is getting very close to winning $300 or $500 for All Saints’ wonderful choir! I wish you could all be here to enjoy the amazing music that has graced the Lenten and holy week season. This church’s music program is one of the city’s most radiant cultural gems. And the church itself engages in a wide span of good works that care for people from childhood through old age.

So, please be sure to go to the current FMF March Madness round and vote for Funny’s post, “Truth, the Highest Thing that Man May Keep.” Every vote for “Truth” is a vote to keep music a vibrant part of our cultural lives.

Here’s a video of Karl Jenkins speaking about his Stabat Mater, which we’ll will be singing for Easter. You can get a flavor here of this amazing vocal tour de force.

Vote!

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