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Tag Archives: Washington bankruptcy

Harrisburg is broke! Chapter 9 Bankruptcy looming for the city of Harrisburg, PA. The capital of Pennsylvania goes bust!

Special thanks to the American Bankruptcy Institute (of which I am honored to be a member) for this news flash; The city of Harrisburg, Pennsylvania makes an emergency Sunday 9/12/10 appeal for $3.6 million to avoid going bust.

"The State of Pennsylvania is speeding payments of $3.6 million to its debt-laden capital, Harrisburg, to prevent the city from defaulting on a general obligation bond, Gov. Edward G. Rendell said on Sunday, the New York Times reported today. To help the city with its cash flow, the state is fast-tracking payments, which were already in progress, of $1 million for fire protection and $2.6 million for an annual pension fund payment. This month, Harrisburg said that it did not have the money to make a scheduled bond payment of $3.3 million on Sept. 15. City Council members met in early September to discuss a possible chapter 9 filing. Governor Rendell, however, said that bankruptcy should be a last resort for Harrisburg and that missing a bond payment was not an option because a default could have repercussions for other municipalities in the state." American Bankruptcy Institute, September 12, 2010 news-flash.

Is $75,000 the magic number? Study finds no exta happiness above $75k, with one exception.

After achieving an annual household income of $75,000, more income does not correlate to greater happiness, reports a study featured in the Proceedings of the National Academy of Sciences. The "Proceedings", known as the PNAS, is the official journal of the United States National Academy of Sciences. PNAS and is an important scientific journal that printed its first issue in 1915 and continues to publish highly cited research reports, commentaries, reviews, perspectives, feature articles, profiles, letters to the editor, and actions of the Academy.

Beyond household income of $75,000 a year, money "deos nothing for hapiness, enjoyment, sadness or stress," the study concluded, as reported by Phyllis Korkki in the New York Times, on September 12, 2010.

The National Academy of Sciences was founded in 1863. The NAS is a private institution, but is recognized and prestigiously chartered by the U.S. Congress, with the goal to "investigate, examine, experiment, and report upon any subject of science or art." By 1914, the Academy was well established, and the content therein is generally regarded as well vetted.

The study, as explained by one of its authors Princeton professor (emeritus) of psychology Daniel Kahneman, relates that it’s not so much that money buys you hapiness, but that if you are miserable and earn less than $75,000 household income per year, a little money will decrease your misery…until you reach the household income annual income level of $75,000. After achieving $75,000 annual household income, adding more money will not make you any less miserable, it seems, according to the study. Says professorKahneman "the lack of money no longer hurts you after $75,000".

Professor Kahneman (a nobel laureate in economics) relates that "Many people want to make a lot of money, but the benfits of having a high income are ambiguous. Wealthy people can buy more pleasures, but studies suggest that wealthier people "seem to be less able to savor the small things in life." reports journalist P. Korkki in the Sunday, September 12, 2010, NY Times.

There may be one exception to the $75,000 rule. A 2007 article found in The Journal of Happiness Studies indicates that those people who have "strong financial aspirations" are unhappy without higher income. A study of 18-19 year old college freshmen found that those expressing a desire for a high salary generally achieved those goals 20 years later: "individuals with strong financial aspirations are socially inclined, confident, ambitious, politically conservative, traditional, conventional and relatively less able academically, but not psychologically distressed" which means that they do tend to achieve their higher financial goals and are thus made emotionally happy. It seems that some people are "hard-wired" to want more money, even from a young age, and failing to achieve that, they fail to achieve a reasonable degree of satisfaction.

Professor Kahneman seems to agree with the 2007 study, that a young person "wanting money is not a recipe for disaster, but [that same young person] wanting money and [eventually] not getting it – that’s a recipe for disaster." as quoted 9/12/2010 in the NY Times.

IDEAS FOR ACTION: NY Times Journalist P. Korkki says that the recession is causing more people to place the financial rewards of a career first; job/career satisfaction choices now often take a back seat to financial gain. Ms. Korkki notes that career counselor Nicholas Lore (founder of the Rockport Institute, a career coaching firm) warns that emphasizing higher income over satisfaction when making a career choice or job change can lead to (a) dissatisfaction and quite ironically can lead to, (b) failure to achieve the hoped for higher income. Counselor Lore relates that if you don’t like accounting but choose to become an accountant, "Chances are you’re not going to be very good at accounting," and that eventually your salary will reflect that. "Generally, people flourish when they’re doing something they like and what they’re good at."

Special thanks to NY Times journalis Phyllis Korkki for the content of this post. http://www.nytimes.com/2010/09/12/jobs/12search.html

Fed and FDIC Testimony on Dodd-Frank Financial Reform Legislation: Lessons Learned

Federal Reserve Chairman Ben S. Bernanke praised the new Dodd-Frank financial regulation legislation and offered a frank appraisal of his mistakes since 2006 in September 2, 2010 testimony before the Congressional Financial Crisis Inquiry Commission.

It should be noted that September 15, 2008 (just next week) marks the two-year anniversary of the bankruptcy filing of Lehman Brothers. NY Times columnist Sewell Chan notes that the Lehman failure was the “nadir”, or lowest, moment of the financial crisis.

“The Dodd-Frank legislation gives the Federal Reserve Bank oversight over the largest financial institutions, including those that are not banks (such as American International Group, or “AIG” – JHM). It gave the Fed a prominent role in the Financial Stability Oversight Council, a body of regulators with the power to seize and break up a systemically important company if it threatens economic stability. The Federal Deposit Insurance Corporation would manage that [breakup] process, known as resolution.” writes Mr. Chan.

Mr. Bernanke recounted his errors, indicating that he was wrong in 2007 when declaring that the subprime mortgage crisis could be contained and would not infect nor destabilize other parts of the financial system. Mr. Bernanke denied allegations that the Federal Reserve bank was at least partly responsible for the housing price bubble by keeping interest rates too low during the 2002-2004 period. An implication of Mr. Chan’s summary of Mr. Bernanke’s testimony before Congress appears to be that Mr. Bernanke now believes that trying try to identify a “bubble” in the economy early enough is part of the Fed’s charter. If such a “bubble” could be identified early enough to justify Fed action, the Fed could decide to increase interest rates so as to slow down the growth of the bubble.

Here is the link to the interesting NY Times, September 3, 2010 article.

Ideas for Action: Few of us have the resources and knowledge available to Mr. Bernanke. However, starting to keep a family budget, carefully monitoring your spending, and creating a savings plan for both retirement and “rainy days” are among the prudent steps that we all can take to keep financial problems from becoming too big to handle.

Is Bankruptcy the same everywhere? An Irish perspective.

Is bankruptcy the same everywhere? Let’s compare Ireland with the USA. All of the statistics that follow are from 2009 data.

– Population: USA 310,178,000. Ireland: 4,178,000.

– Bankruptcies: USA: 1,572,597. Ireland: 17.

– Bankruptcies as a percentage of population: USA 0.5% (one-half of one percent); Ireland: 0.0004% (four one-millionth of one percent). In other words, USA had 12,500 percent more bankruptcies than Ireland.

The bankruptcy process in Ireland is nearly non-existent. Ireland does not offer its citizens a “fresh start” like America’s Chapter 7 bankruptcy process, nor does it offer a reasonable partial debt repayment plan like America’s Chapter 13 bankruptcy process.

In Ireland, people cannot use bankruptcy as a meaningful tool to deal with their debts. Irish debtors are vulnerable to constant lawsuits, harassment and garnishments because the Irish bankruptcy process is so strict and inflexible.

Should you file bankruptcy in Ireland, you are forced to repay creditors for at least twelve years, and only then if your creditors agree by a majority vote that such a “short” period of twelve years is reasonable, and that the amount you propose to repay is reasonable. Even worse, once you start a bankruptcy in Ireland, you cannot get out of the bankruptcy nor end it until your creditors agree by a vote that you should be allowed to exit the Irish bankruptcy system. Irish debtors have been known to be required to stay in bankruptcy, repaying their creditors, for as long as 29 years.

Reform legislation is pending in Ireland, but even the proposed law changes in Ireland are worse than what American bankruptcy law provides for its citizens today. The new Irish proposals still have no “fresh start” like America’s Chapter 7. The new Irish proposals suggest that debtors be forced to remain in bankruptcy for at least six years, repaying substantial portions of income to creditors, in what might be called an “earned start”.

“Current Irish bankruptcy laws misunderstand the nature of debt in [Ireland]. They’re designed to protect the general public from Dickensian villains who won’t pay their debts, not designed to facilitate the desperate thousands who can’t.” writes Patrick Freyne in “The Irish Times”. “It was a case of saying ‘listen, let’s make him bankrupt and don’t let him into business [for at least 12 years while he repays his debts] so others don’t lose money.’ But 90 per cent of those in trouble are honest decent people who lost money through no fault of their own.” says Irish chartered accountant Jim Stafford.

Many people are no less in debt in Ireland than are many Americans. Irish consumers had very little consumer debt in the 1980s, but this changed dramatically through the 1990s and into the 2000s. Many families and small businesses in Ireland now face the same level of debts as do struggling American families, as they have borrowed against (now disappearing) home equity and taken advantage of easy-to-obtain consumer credit such as vehicle loans and credit card loans.

Read about the Irish personal debt crisis and the historical reasons why Irish bankruptcy law is so strict and difficult.

Ideas for action: Accept the gift of what the US Government has declared available, which is a “fresh start” in Chapter 7, or a much gentler partial debt repayment in Chapter 13. While you are at it, thank God for the US of A.