Economists are beginning to talk about America’s “lost decade.” The poverty rate has reached its highest level in 52 years and median household incomes for middle-class wage earners have fallen to their lowest point since 1997, according to statistics compiled by the Census Bureau.
This marks the first period ever when poverty rates were higher and median incomes lower at the end of a recovery than they were at the beginning, Arloc Sherman, a senior researcher at the Center on Budget and Policy Priorities, told the New York Times.
The poverty rate increased to 15.1 percent last year from 14.3 percent in 2009 – the third consecutive increase in that economic measure – as 2.6 million more people slipped below the poverty line, set a $22 314 for a family of four. Median household income, meanwhile, declined by 2.3 percent overall, but the decline (from a 1999 peak) was 12 percent for those at the bottom of the income ladder, compared with 1.5 percent for those at the top.
The statistics, included in the Census Bureau’s annual report on income, poverty and health insurance, were more distressing than most economists had predicted, underscoring what the worst recession since the Great Depression and a decade of widening income disparities have done to lower- and middle-class Americans.
“We’re risking a new underclass,” Timothy Smeeding, director of the Institute for Research and Poverty at the University of Wisconsin, Madison, told the New York Times. “Young, less-educated adults, mainly men, can’t support their children and form stable families because they are jobless.” he added.
More than 46 million Americans are now living below the poverty line, according to the Census Bureau. A separate report by the Brookings Institution estimates that another 10 million will join them by the middle of this decade.
The Office of the Comptroller of the Currency (OCC) has taken a quick look at a sample of foreclosure actions initiated by the nation’s largest loan servicers, and decided that a more extensive and more detailed review is needed to identify borrowers “who suffered financial injury as a result of errors, misrepresentations, or other deficiencies in the foreclosure process.” The expanded, independent review the OCC has ordered will cover 4.5 million loans on which foreclosure actions were initiated between January 2009 and December 2010.
To facilitate this review, the OCC has developed a streamlined, uniform complaint process through which borrowers who think they have been harmed by an improper foreclosure can file a formal complaint.
If the review finds that the foreclosure action was flawed, “appropriate restitution” will be required, Acting Comptroller of the Currency John Walsh said in announcing the initiative. The OCC will not use a “one-size-fits-all” approach, he emphasized, noting, “The nature and severity of any financial injury will be case specific, so remedies could vary substantially. All of this takes time,” Walsh added, [so] the full cost and full benefit of remediation will be known only at the end.”
The OCC and other banking industry regulators negotiated a consent agreement with 14 of the nation’s largest servicers resolving allegations of widespread foreclosure improprieties related to the “robo-signing” debacle that snarled foreclosure actions for months. The agreement requires the servicers involved to overhaul their foreclosure procedures, increasing oversight of third party vendors and adding a raft of consumer protections, among other changes.
The state attorneys general are pursuing a separate investigation of foreclosure abuses, but have yet to reach an agreement with targeted lenders on the procedural changes they will be required to adopt and the penalties they will be required to pay.
Noting those still open questions, Walsh said he is confident the federal bank regulators “will be able to harmonize the mortgage servicing requirements in our orders with those of other regulators, if and when they are reached. In fact,” he added, “I think it is absolutely essential that we do so.”
Financial industry efforts to combat cyber-crime appear to be making a small but notable dent in the problem. Although the number of cyber-attacks on financial institutions and their customers increased over the past 18 months, the losses resulting from those attacks declined, industry executives reported at a recent Congressional hearing.
“Statistics indicate that financial institutions are doing a better job of stopping fraudulent transactions from being created and from funds leaving the financial institution," William Nelson, president of the Financial Services Information Sharing and Analysis Center (FSISAC) told the House Financial Services Committee. The FSISAC is a voluntary organization of depository institutions, insurance companies and payment processors dedicated to fighting cyber fraud.
According to the group’s most recent report, members reported that 36 percent of on-line attempts to siphon money illegally from accounts succeeded in the first six months of 2010, down from 63 percent in 2009. The number of reported cyber-fraud attempts initiated but thwarted increased from 20 percent in 2009 to 36 percent during the same time period.
Industry executives testifying at the hearing attributed the improvement to a combination of increased vigilance by financial institutions and more cooperation between government and the private sector.
“No one entity has all the information; it takes teamwork to bring all the pieces together to complete the picture," Greg Garcia, an executive with Bank of America Corp., emphasized.
The progress in identifying and preventing cyber-fraud notwithstanding, financial institutions remain vulnerable to those attacks – partly because “great complexity and sophistication are not necessary for cyber-crimes to succeed,” Bryan Sartin, director of Investigative Response at Verizon Business, noted during the hearing – and partly because some of the most serious threats come from within the institutions.
"Organizations are working hard to build walls around their network infrastructure to keep people out but are having a difficult time defending against potential menaces that are already on the inside of the fence," Gregory Shannon, chief scientist for the CERT® Program at Carnegie Mellon University's Software Engineering Institute, warned.
More good news on the fraud front – mortgage-related fraud, which has been something of a growth industry, has begun to decline. That’s according to the industry trade publication, Mortgage Daily, which reports that its quarterly tally of civil and criminal cases involving mortgage fraud fell by 27 percent in the second quarter of this year compared with the same period in 2010, despite a 29 percent increase between the first and second quarters of this year.
The Mortgage Daily report attributed the second quarter surge primarily to a 15 percent increase in reported mortgage fraud cases in Minnesota, pushing the index for that state “to its highest level during any quarter” in the past five years.
Minnesota officials disputed the report’s characterization of the state as “a problem area for mortgage fraud,” pointing out that the fraud index tracks “fraud-related activity” not individual cases. As a result, four actions in one case would add four fraud activities to the total, a press release issued by the state, emphasizes.
The increase in the fraud index could also indicate that “regulators and prosecutors are more attuned to the problem and are bringing [more] cases,” Prentiss Cox, a foreclosure expert at the University of Minnesota, told Minnesota Public Radio.
Many of the cases that are surfacing now, and populating the fraud index, result from activities that occurred several years ago, Cox pointed out and do not necessarily indicate that mortgage-related fraud activity in the state is increasing now.
IN PLAIN SIGHT
Corporations don’t have to tap phones or mount hidden cameras in order to steal the secrets of their competitors; they can find pretty much anything they might want to steal published in plain sight on Facebook and other social media sites.
When a Hewlett-Packard vice president was writing at length about himself and his job on Facebook, he included detailed information about the company’s then secret plans to introduce cloud-computing services. HP’s competitors were very interested, to say the least. HP executives, presumably, were not amused.
Researchers trolling social media sites aren’t just looking for background information about prospective employees, although that is one focus of these searches; they are also looking for “competitive intelligence,” and, as HP’s experience illustrates, they are finding it in abundance.
“Social media has become a much more efficient way of getting information that could only be gotten in the past by things like surveillance,” Rich Plansky, senior managing director at Kroll, Inc., told Bloomberg News. Kroll, which provides investigative services to corporations, isn’t alone in its reliance on social media as an information source. More than 82 percent of the 150 companies responding to a Forrester Research survey last year said they, too, monitor these sites for competitive information.
Executives and employees at all levels should heed the warning implicit in this survey, Michael Fertik, chief executive officer of Reputation.com, Inc., told Bloomberg.
“Everybody who is in business with you, in a personal, professional, romantic, transactional relationship with you, is looking up information about you, is finding information about you, and then, most importantly, making decisions about what they find about you on the Internet,” Fertik said. “That’s why everybody has a need and obligation to themselves, to their family members, to their shareholders, to manage their footprint on the Internet.”