Volcker rule: Why it matters to consumers

This article was originally published by Bankrate.com on Friday November 11, 2011.

By Katherine Reynolds Lewis • Bankrate.com

Halting proprietary stock trading

Federal regulators in early October proposed new regulations aimed at stopping banks from trading for their own profit.

The so-called Volcker rule, named after former Federal Reserve Chairman Paul Volcker, is part of last year's Dodd-Frank Act, the sweeping financial reform law approved by Congress last year.

While high finance and hedge fund investments may seem far removed from your everyday life, consumer advocates and analysts say the stakes for the new law are high. Ultimately, the outcome matters to your pocketbook. Already, JPMorgan Chase & Co., Goldman Sachs and Morgan Stanley have closed or announced plans to shut down their proprietary trading divisions in anticipation of those activities being banned.

With the Office of the Comptroller of the Currency accepting comments on the proposal through Jan. 13, 2012, here's your chance to weigh in on guidelines for the U.S. financial system. The Volcker rule could affect your financial life in several ways.

Promoting bank stability

The overriding aim of the Volcker rule is to promote stability in the banking system and help to prevent a repeat of the financial crisis in 2008. The near-collapse of Lehman Brothers and American International Group, or AIG, prompted Congress to pass an unprecedented $700 billion government bailout in 2008.

How flexible work actually works

Imagine unlimited paid vacation and sick leave, with no mandated office hours. Chaos, right? Not according to a handful of award-winning employers profiled in a new report on effective workplaces.

This article was originally published by Fortune.com on Wednesday, Nov. 9, 2011.

By Katherine Reynolds Lewis, contributor

FORTUNE -- At MeetingMatrix International, a communications firm based in Portsmouth, N.H., employees have no defined work schedules, unlimited paid time off, and meetings are optional. How do they ever get any work done? That's actually the only thing that matters: results.

MeetingMatrix executives point to longer customer support hours, increased sales during a down economy, and 100% retention as evidence that their focus on the end results -- and not hours in the office -- works.

"When you start treating people like adults, they start acting like it," says the company's CEO Jmichaele Keller, who in 2008 shelved his company's employee monitoring systems in favor of a more flexible approach. Under the new regime, "people have a lot of ability to shape what is going on in their world and not a lot of micromanaging.... There really is no direct tie in an office environment between the amount of time spent and the productivity of that individual."

D.C. area housing market feels the pinch from lower jumbo mortgage limits

This article was first published on Saturday, November 5, by the Washington Post.

By Katherine Reynolds Lewis

Srinivasan Soundararajan and Jennifer Nordin have been thinking about selling their Potomac townhouse and moving into a detached house for some time. With two small children, 1 and 3 years old, they are beginning to outgrow their three-bedroom house.

This past summer, the couple stayed out of the market because of Congress’s gridlock over the U.S. debt ceiling; they feared that a spike in interest rates could disrupt a pending house purchase. Once lawmakers agreed to raise the ceiling, they started looking at houses again.

Now that they’re close to making an offer on a property, a change in federal housing policy has hampered their plans.

On Oct. 1, Fannie Mae and Freddie Mac lowered the maximum size of so-called jumbo mortgages that they would back to $625,500. Before Oct. 1, Washington-area mortgages as big as $729,750 could be purchased by Fannie and Freddie and repackaged to sell to bond investors, or guaranteed by the Federal Housing Administration. The change was the result of a law Congress passed in 2008 to stimulate the housing market in the depths of the crisis.

As a result, the upper end of the Washington real estate market is feeling the pain as buyers have fewer options to finance the purchase of a house. And sellers, like Soundararajan and Nordin, feel the change constrains the pool of potential buyers for their townhouse, which they expect to list at $725,000.

“It would definitely affect the ability of someone to buy our house,” said Soundararajan, a 43-year-old attorney, noting that his sale price equals the new cap plus a down payment of $100,000. “That’s not a first-time buyer. We’re going to lose that market.”

Fed: Drags on economy worse than thought

This article was originally published by Bankrate.com on Wednesday November 2, 2011.

By Katherine Reynolds Lewis • Bankrate.com

Federal Reserve Chairman Ben Bernanke defended the central bank's efforts to stimulate the economy and encourage job creation while expressing sympathy for the frustration many Americans feel at the slow pace of economic recovery.

At a press conference following the regular Federal Open Market Committee meeting today, Bernanke acknowledged criticism from Republicans in Congress, GOP presidential candidates and Occupy Wall Street protesters.

"I certainly understand that many people are dissatisfied with the state of the economy. I am dissatisfied with the state of the economy," Bernanke said. "Increased inequality has been going on for at least 30 years."

The Fed intervened in 2008 to prevent the dire consequences of a financial sector collapse, not simply to shore up investment bankers' salaries as some protesters claim. "We were trying to protect the financial system to prevent a serious collapse of the financial system and the American economy," he said.

Bernanke's remarks came after the FOMC members voted to keep the federal funds rate near zero and maintain the current levels of monetary policy accommodation, while noting that more policy options remain if economic conditions worsen.