Homeowners Exhale as Fed Reverses Course on Mortgages

This article was originally published by the Fiscal Times on Tuesday, Feb. 15, 2011.

By Katherine Reynolds Lewis

Millions of homeowners facing foreclosure dodged a bullet when the Federal Reserve Board changed course on proposed changes to mortgage rules, instead deferring to the nascent Consumer Financial Protection Bureau in the first skirmish over regulatory authority under last year’s sweeping financial reform legislation.

A coalition of consumer groups took the unprecedented step of asking the Fed to withdraw two sets of rule proposals on consumer mortgages and turn them over to the new bureau created by the Dodd-Frank Act. In a brief statement this month, the Fed cited more than 5,000 comments received on the matter and said it plans to wait for the bureau, which will take over authority on consumer mortgage rules in July 2011.

If the Fed had finalized the rule proposals, it would have eliminated a longtime consumer right to void a mortgage under certain circumstances, one of the best tools homeowners have to halt foreclosure. Consumer advocates say the rule also would have opened the door to risky reverse mortgages, and would allow changes in advertising that would permit false statements.

Nearly 11 million Americans owe more on their homes than the properties are worth, and 3.4 million homes have been lost to foreclosure since the recession began, according to CoreLogic. The foreclosure crisis has spawned accusations that lenders used improper documentation and procedures to seize homes, prompting investigations by state attorneys general and members of Congress, as well as lawsuits estimated to end up costing banks as much as $52 billion.

The Fed’s proposed rules "would have been disastrous for homeowners … At the time of the worst foreclosure crisis in anyone's memory, they were pulling the rug out from the most vulnerable consumers this law intended to protect," said Nina Simon, director of litigation at the Center for Responsible Lending, which filed joint comments with the National Consumer Law Center, the National Fair Housing Alliance, Consumers Union, the National Community Reinvestment Coalition and other consumer groups.

Treasury Plan to Wind Down Fannie and Freddie

This article was originally published by the Fiscal Times on Friday, Feb. 11, 2011.

The Obama administration released a white paper proposing the gradual winding down of Fannie Mae and Freddie Mac and overhauling the mortgage securities market.

By Katherine Reynolds Lewis

The Obama administration Friday laid out an ambitious vision for U.S. housing finance reform, in which the government gradually diminishes its role and private investors return to the mortgage securities market.

But the plan doesn't specify how to overhaul or eliminate Fannie Mae and Freddie Mac, instead setting out three possible options for the mortgage giants, which have been operating under government conservatorship since September 2008. Under the landmark Dodd-Frank financial overhaul legislation approved last year, the Treasury Department was supposed to present to Congress by Jan. 31 a report on the government-sponsored enterprises (GSEs) to help lawmakers write legislation to reform the agencies.

"This is a plan for fundamental reform — to wind down the GSEs, strengthen consumer protection, and preserve access to affordable housing for people who need it," said Treasury Secretary Timothy Geithner in a statement. "We are going to start the process of reform now, but we are going to do it responsibly and carefully so that we support the recovery and the process of repair of the housing market."

At stake are the health of the real estate market, economic growth and, some argue, the future of the 30-year fixed-rate mortgage. The challenge for policymakers is to attract private investors back into the mortgage market while retaining the benefits that Fannie and Freddie established — a liquid secondary mortgage market and greater access to homeownership. The administration and lawmakers are also attempting to prevent a repeat of the excessive risk-taking and inadequate supervision of the housing market that led to the 2008 financial crisis, while reassuring foreign investors in housing bonds and U.S. government debt.


Whistleblower Rule: Business Leaders Want it Changed

This article was originally published by the Fiscal Times on Monday, Feb. 7, 2011.

The SEC will soon issue a rule giving corporate whistleblowers the chance to collect big money for reporting securities violations, but the business community fears a wave of frivolous claims.

By Katherine Reynolds Lewis

In his continuing outreach to business leaders, President Obama spoke at the U.S. Chamber of Commerce this morning about global competition, technological innovation and the outdated or unnecessary government regulations. But a major concern of many corporate leaders is a proposed federal rule giving corporate whistleblowers an opportunity to collect hundreds of thousands of dollars for reporting securities law violations. The rule has alarmed the business community, which argues that the plan would encourage frivolous claims and undermine a decade of work to provide safe reporting channels for whistleblowers.

By April 17, the Securities and Exchange Commission must give final approval to the rule, which Congress ordered as part of the Dodd-Frank financial overhaul law aiming to prevent a repeat of the 2008 financial crisis.

Corporate lawyers and lobbyists have asked the SEC to require whistleblowers to report problems internally before going to the government, to limit the people eligible to collect a bounty and to extend the time a company has to correct violations. On the other side, lawyers who represent whistleblowers say the provisions the SEC proposed are needed to protect tipsters from retaliation and prevent corporate cover-ups.

The rulemaking is the latest in a series of government attempts to encourage corporate employees with knowledge of fraud or other violations to come forward. The Sarbanes-Oxley Act of 2002 — which Congress passed in response to accounting fraud at Enron, WorldCom and other corporate giants — required companies to establish internal reporting programs and made boards of directors and top executives personally liable for neglecting to investigate fraud complaints. In both 2001 and 2008, scandals over the activities of publicly traded companies quickly spread from the stock market to the broader economy, affecting everyday Americans as well as shareholders.

"This is one of the most explosive issues that has come up in a while for such a broad group of companies," said Alice Joe, a senior director at the U.S. Chamber of Commerce, which represents more than three million businesses. "Our companies have spent millions of dollars over the past 10 years trying to build up these compliance programs. Now you've got a rule that the SEC has proposed that is going to incentivize whistleblowers to completely bypass these systems."

Use the Web to save $8,000 a year

This article was originally published by MSN Money on Monday, Jan. 31, 2011.

Smart shoppers use the Internet to save a bundle through comparison sites, coupons and online services. Just be sure you're not wasting time and money to save a buck.

By Katherine Reynolds Lewis

Savvy Internet users can save nearly $8,000 a year through smarter shopping, online discounts and Web-based services such as bill paying, according to a report compiled for the Internet Innovation Alliance.

Gale Swanson, 53, can attest to the value of an Internet connection. Since her children gave her a computer in 2009, her Web usage has saved her more than $5,000 on gifts, entertainment, food and travel purchased through the Internet -- and ended her weekly trips to Big Lots and Wal-Mart.

"Because I'm on a fixed income and a budget, I have to make sure I don't spend my money frivolously," said Swanson, a retired office manager in Van Nuys, Calif. "The ease of being able to find things that are discounted is great."

Expanding management: The delicate art of sharing control

This article was originally published by Fortune.com on Monday, Jan. 24, 2011.

While the thought of sharing control of your company can be nerve-wracking, those who have been through the transition swear by having a second set of hands. As long as they're the right hands.

By Katherine Reynolds Lewis

Since founding Secure Enterprise Computing in 1998, chairman Randall Bennett has seen business boom -- and bust. But when the demand for security technology began to crest a couple years ago, he knew that he didn't want to miss the opportunity to grow his company. He also knew that to ride the wave, he'd need to expand his leadership team and share control of the business.

"You can have 100% of nothing or 50% of millions," Bennett says. "I've seen a lot of entrepreneurs fail over the years. They're not able to give up [control]."

The solution: bringing on Robert Pickens as president and chief operating officer of the Morrisville, N.C.-based firm last year. Pickens advocated a narrower strategic focus and implemented quarterly reports and a suite of metrics that give top managers an up-to-date picture of how the business is doing. With Pickens heading up operations, Bennett now has more time to develop new business and serve as the face of the company at community and industry gatherings.

Expanding the leadership team is a natural step when a company's growth outpaces the skill set or capacity of its original founders. Google's Larry Page and Sergey Brin looked to Eric Schmidt when the time was right (The company has entered a new phase, with Page soon taking the CEO reins and Schmidt moving into the executive chairman role.). Facebook's Mark Zuckerberg sought out Sheryl Sandberg. It's a tried and true part of a start-up's growth path, but it's no simple task.

"How do we make sure we preserve the culture and all the wonderful insights and talents that our founding team members were able to inject, while making sure we have a management bench that will maximize our chances of success?" asks Phil Dur, managing director at Investor Growth Capital, an expansion-stage venture firm. "You can have a good product and good market opportunity but if you don't have good management, you don't have much at all."

Reforming Fannie and Freddie: a $6 Trillion Dollar Problem

This article was originally published by the Fiscal Times on Sunday, Jan. 23, 2011.

As the administration prepares its proposals for overhauling Fannie Mae and Freddie Mac, the housing industry and public interest groups are floating ideas of their own.


By Katherine Reynolds Lewis


As the Obama administration struggles to draft a report to Congress on how best to overhaul Fannie Mae and Freddie Mac, industry and public interest groups are promoting plans of their own for the two mortgage giants.

The proposals range from replacing Fannie and Freddie with new, chartered private firms to gradually shrinking and privatizing them. After the housing bubble burst, leading to the worst recession since the Depression, the government stepped in to secure the companies’ $6 trillion worth of U.S. mortgages in order to avoid an even worse financial calamity.

The Treasury faces a Jan. 31 deadline under the Dodd-Frank law to make recommendations on the future of Fannie and Freddie, although the Fiscal Times reported last week that they may miss the deadline because of sharp divisions within the administration. The stakes are high: Economic growth, return of private capital to the housing market, resilience in the event of future crises and continued consumer access to 30-year fixed-rate mortgages all hinge on the right strategy.

Most interested parties agree on the basic outline of a new structure that would divide the functions of Fannie and Freddie between government and the private sector in order to shift the mortgage securities market back to private investors while ensuring Americans' access to affordable housing and credit.

Administration Split Over Fannie Freddie Strategy

This article was originally published by the Fiscal Times on Thursday, Jan. 20, 2011.

With a Jan. 31 deadline looming for making recommendations, the Obama administration is badly divided over how to reform Fannie Mae and Freddie Mac, the financially strapped and controversial mortgage giants.

By Katherine Reynolds Lewis

The Obama administration is sorely divided over how to reform Fannie Mae and Freddie Mac, the controversial mortgage giants. Sources familiar with the discussions raise the possibility that the White House will miss its statutory deadline for submitting recommendations to Congress.

The dispute pits White House economic advisers, who favor merely offering lawmakers a menu of possible next steps without committing to a specific direction, against officials at the Treasury and Department of Housing and Urban Development, who want to endorse an explicit federal guarantee for the mortgage companies and throw the administration's support behind it, the sources said.

The controversy is as much over strategy as substance. White House advisers aren’t certain whether going out on a limb with a specific plan will drive reforms of the federal housing finance program in a constructive way, or present an easy target for opponents. Administration officials who object to offering an explicit guarantee so early in the process say it would make it harder to negotiate a compromise. Instead, they argue, the administration would be better off laying out a range of options, to give them maximum flexibility in talks with Democratic and Republican lawmakers and industry officials.

The government currently supports 97 percent of the mortgage market, and the two entities own or guarantee nearly three quarters of that amount, or $6 trillion in debt, which policy experts and stakeholders agree can’t be indefinitely sustained.

Making the Decision to Replace Yourself

This article was originally published by the New York Times on Thursday, Dec. 23, 2010.

In early 2008, Matt Dorey, founder and chief executive of Curve Dental, was at a loss. Three years into building a comprehensive Web-based software package for dentists, he felt the product was ready, but he was not sure how to make Curve a market leader. “The company was getting complicated,” Mr. Dorey said. “I was starting to become conscious of what I didn’t know. It was almost a feeling of loneliness.”

Then he learned of a chief executive, Jim Pack, who was looking for new opportunities after a private equity firm bought his medical-billing software company, AdvancedMD. Mr. Dorey reached out with a LinkedIn invitation. “This was someone I had been following for four years,” he recalled. “He was really open about sharing knowledge and letting us know about the challenges we face. I immediately knew there was nobody better to be the C.E.O. of this company.”

Mr. Dorey enlisted his board and top executives in a monthslong campaign to woo Mr. Pack, who ultimately agreed. Since Mr. Pack took over as chief executive in January 2009, Curve Dental has more than doubled its staff and has introduced its software to the American market, gaining share in more than 40 states and increasing its customer base fivefold. Picking the right replacement, Mr. Dorey said, “was the most important decision I’ve ever made at Curve and probably will ever make.”

Turning over your company to a successor is not to be taken lightly. And in many cases, sticking it out might be the better option, especially if you can delegate those parts of your job that have become unmanageable. But in some instances replacing yourself at the helm makes sense. Based on the experiences of small-business owners, this guide offers suggestions on how to make that decision and accomplish the transition as painlessly as possible.

HOW DO YOU KNOW? Ironically, the qualities that help you succeed as an entrepreneur — relentless optimism, willingness to tackle any challenge, a stubborn belief in yourself and your business — also make it hard to assess your own weaknesses dispassionately. But one individual rarely possesses all the varied skills and experiences needed to take a company from idea to product introduction to sales growth to institutionalizing operations. When you hit your limit, you and your company may benefit from a leader with a fresh set of eyes and a different skill set.

Rough Unemployment Road for Men Could Be Ending

This article was originally published by the Fiscal Times on Thursday, Dec. 23, 2010.

While women fared much better than men throughout the recession, the gap in the unemployment rates between men and women is beginning to narrow as more and more men are going back to work.

By Katherine Reynolds Lewis

Nearly two years after being laid off from his information technology sales job, Alan Yellowitz of Fairfax, Va. finally landed a job. He's making less than half of the $200,000 to $300,000 a year he once earned, but it's enough to keep the lights on, pay the mortgage and feed his family of four. "After 22 months of unemployment, we feel like we can breathe again," said the 47-year-old Yellowitz. "It's still somewhat rough. We’re still digging out of a hole. But getting a regular paycheck every two weeks feels amazing."

Yellowitz was a casualty of what some call the “mancession", more than two years of rampant unemployment that disproportionately hurt men more than women. Men did so poorly because far more of them worked in industries hit hard by the economic downturn – particularly manufacturing, construction and financial services. Women, by contrast, are disproportionately represented in sectors that are more resistant to economic cycles, such as health care and education.

With the recession officially over and the job market slowly improving, long-time unemployed workers like Yellowitz are beginning to find work. While the unemployment rate for men dropped by nearly a full percentage point to 10.6 percent in November from its 11.4 percent high last October, the female unemployment rate is holding steady near its 8.8 percent high of October 2009. Even though the uptick in employment for men is still relatively small the data suggest that the jobs now opening up are going to men more than to women.

"Men's unemployment rose faster and further than women's, but it has since recovered somewhat. In contrast, women's unemployment, while having peaked lower, hasn't actually come down," Betsey Stevenson, the chief economist at the Department of Labor, said in an interview with The Fiscal Times. "It does seem like the recovery has been more beneficial to men at this point. Some of this has to do with where the cuts [were] the deepest and where we [have] been able to add some jobs back."

One important question yet to be answered is whether males are merely bouncing back from the extreme job losses suffered during the Great Recession, or whether we are seeing the long-predicted turning point in the labor market in favor of women. Women hold an edge in the job market in part because they hold the majority of advanced degrees, and some experts believe that employers will hire and promote women to higher levels as a result. Thus far, the average woman still earns less than a comparable man, even when adjusted for hours worked and time out of the labor force.

House Republicans' Latest Fight Against Derivatives Reform

This article was originally published by the Fiscal Times on Thursday, Dec. 16, 2010.

Two House Republican lawmakers want financial regulators to slow down new rules for derivatives trading to avoid the effects on big corporations.

By Katherine Reynolds Lewis

Two key Republican lawmakers urged financial regulators to slow down the progress of new rules for the nearly $500 trillion over-the-counter derivatives market, an early sign that the new Republican House majority aims to delay and scale back the landmark financial regulatory overhaul that President Obama signed into law in July.

"As our economy slowly recovers, we have serious concerns that the Dodd-Frank bill for Wall Street reform will force American companies, which did not cause nor contribute to the financial crisis, to move billions of dollars in capital onto the sidelines to comply with the law," Reps. Spencer Bachus, R.-Ala., and Frank Lucas, R.-Okla., wrote in a letter dated Thursday, Dec. 16, to the heads of the Treasury Department, Securities and Exchange Commission, Federal Reserve Board and Commodity Futures Trading Commission. The two are the incoming chairmen of the House Financial Services and Agriculture Committees, respectively.

The Republicans' strategy is to delay implementation of the Dodd-Frank legislation until 2012, in hopes that a new Republican president and Senate will roll back or repeal the law, said David Min, associate director for financial markets policy at the Center for American Progress.

"They're trying to run out the clock a little bit," Min said. "They will try to delay the process through hearings, through tough letters and proposed legislation, but ultimately the presidency is held by Obama and the Senate is held by Democrats."