On the Money: News and Articles

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SEC wants to replace Edgar with an updated system

On the Money From the December 5, 2008 print edition Ralph Waldo Emerson once said, “Can anybody remember when the times were not hard and money not scarce?” That time certainly isn’t today. Money is scarcer than ever, and it seems every new financial decision is harder than the last. In the face of difficult decisions, it’s natural to search for additional and more meaningful information. Good decisions flow from good, truthful and complete information. For investors, the search for good information begins with the Securities and Exchange Commission. Most individual investors access company information using third-party services, such as Yahoo Finance, Bloomberg, etc., rather than the SEC’s Edgar system. The Edgar system presents massive amounts of data, but isn’t an effective distiller of information. Therefore, in June, the SEC announced it eventually would replace Edgar with a new interactive “company file system.” The plan is to improve how it acquires information from public companies, mutual funds, brokers and other regulated entities, and how it makes that information available to investors and the public. This effort has been named the “21st Century Disclosure Initiative.” Its goal is to modernize the disclosure system, so that information is more useful and transparent to investors, the marketplace and the SEC, while using all the conveniences and efficiencies of modern technology. The initiative has three phases. In the first phase, SEC staffers will prepare a high-level plan to help the SEC make the transition to the company file system. That’s under the guidance of Rutgers University professor Bill Lutz, who teaches English, is an attorney and has written 17 books.Useful information must be easily understood, in plain English. Lutz is already a consultant on plain language to the SEC, and helped prepare the SEC’s “Plain English Handbook.” He’s also the author of “Doublespeak: From Revenue Enhancement to Terminal Living” (1989). This first phase is due to be completed by Dec. 31. In the second phase, the SEC will establish a Federal Advisory Committee, which would review the plan and make recommendations to the SEC for implementing it. This phase is to be completed in early 2009. In the final, multiyear phase, the SEC will consider and begin acting on the advisory committee’s recommendations. The public will be invited to make comments. The SEC hopes the study will be a fundamental rethinking of financial disclosure, with emphasis on investors’ perspective. Another purpose is to match today’s information technology capabilities with investors’ needs and the SEC’s regulatory aims. The study will include a review of all SEC forms (there are at least 160 in use today), with a special focus on redundancy. The study also will focus on how to get the information to investors more quickly, and how to enable the investor to compare data that’s filed with the SEC. The company file system is at the heart of the 21st Century Disclosure Initiative. The SEC hopes it would be dynamic, accessible, easier to use than Edgar and of high quality, enabling the SEC to better fulfill its mission of protecting investors, maintaining orderly markets and facilitating the formation of capital. The system would collect core information about an entity in a central and logically organized interactive data file. Companies would supplement that information with the same periodic and transactional information that’s currently required by SEC...

Convertible debt buyers may be looking to take over company

On the Money From the October 3, 2008 print edition When raising cash for a new company, there are basically two things that a firm can do: Borrow money from a lender in exchange for a promise to pay later. Or, accept money in exchange for stock. Debt holders receive a promise to repay in cash. Equity holders become part-owners of the firm. When these two methods are combined, the arrangement becomes a “convertible debt.” A convertible debt (or convertible debenture) is a type of loan that can be converted into shares of stock rather than be repaid in cash, usually at some predetermined discount rate. The investor in the new company then has the best of both worlds – a promise of specific cash repayment, or if the new company does well, the ability to become a stockholder and share in the success. This type of security is especially favored for publicly traded companies, because there’s already a trading market for the stock. However, there is a dark side to convertible debentures that’s worth exploring. Since the conversion to shares of stock is based upon the price per share, the company’s wants its share price to rise so that it relinquishes less ownership percentage to the investor – the “holder” of the convertible debenture. On the other hand, the lower the stock price per share, the more ownership percentage the investor receives in exchange for the funding. For example, a company borrows $10,000, its share price is $1, the conversion discount rate is 10 percent and the firm has 100,000 shares outstanding. If the stock price remains at $1 per share, the holder of the debenture will be repaid with 11,111 shares of stock ($10,000 divided by 90 cents), representing a 10 percent ownership in the company. However, if the share price drops to 25 cents per share, the investor will be repaid with 44,444 shares – almost a 31 percent ownership share. Simply put, the lower the price per share, the more ownership the investor receives. Therein is the danger. If the investor has an underlying motive to take control of the company, they’ll attempt to make the conversion price as low as possible – forcing the firm to issue enough stock so that the investor becomes the controlling shareholder. Investors usually demand certain conversion provisions before the initial investment. So here are some warning signs that a convertible debenture is actually a snake in the grass, coiling to take over the company. Multiple conversion provisions – The heart of the convertible debenture is its conversion provision. In a friendly debenture, there will be one conversion event for the total amount of the investment. If there are multiple conversion events specified in the documents, for only a portion of the amount invested (the actual amount being determined by the investor), the unfriendly financier is attempting to control conversion over time while the share price declines. Penalty provisions that change the discount, not the interest rate – In typical loans, late payments usually trigger an additional payment, the “late fee,” in the form of cash. However, if penalties are expressed by an increasing discount rate, it’s a clear sign that the investor is after ownership of the company, not being repaid in cash. This provision is particularly dangerous when...

A voter’s guide to fiscal, monetary policy basics

On the Money From the August 1, 2008 print edition With the Democratic national convention just a few weeks away, we move into that period of time occurring every four years where political slogans and sound bites rain down-creating the proverbial great flood of ancient times. Insistent campaign promises, ranging from thoughtful to ridiculous will saturate our eyes and ears over the next several months. While much of the political process is the zealous gathering of support through emotional appeal, there is in fact some quantitative basis underneath these rallying battle cries. Here’s a summary look at the theoretical relationships between government and money. The government has two major tools for achieving economic health: fiscal policy, through which it determines the appropriate level of taxes and spending; and monetary policy, through which it manages the supply of money. Since the Depression, the federal government has tried to create a combination of fiscal and monetary policies that will allow sustained growth and stable prices (no inflation). The primary tools of fiscal policy are spending and taxation. The deliberate manipulation of government purchases, including military (funding a war, for example), public works projects, scientific research are designed to achieve a balance between full employment, price stability (restrain inflation), and economic growth. The government has income from only one primary source-taxes. Therefore manipulating tax rates, rules and structures, tax incentives for certain activities (such as investment in long-term assets) are designed to control both the income level of the government and individual disposable income. The development of fiscal policy is an elaborate process. Each year, the president proposes a budget, or spending plan, to Congress. This is why budget issues are central to a candidate’s success. It will be the successful presidential candidate who initiates the government spending process. Virtually every campaign initiative will have an effect on the budget. Taxation policy affects us more directly. The overall level of taxation is decided through budget negotiations. Although the government ran up deficits, (spending more than it collected in taxes) during the 1970s, ’80s, and the part of the ’90s, the populous generally believe budgets should be balanced. Historically, most Democrats are willing to tolerate a higher level of taxes to support a more active government, while Republicans generally favor lower taxes and smaller government. If you keep all this in mind, it will help you to better evaluate campaign promises and proposals. Although not nearly as emotionally evocative, monetary policy is also central to the government’s role in the economic life of the nation. The job of managing the overall economy shifted substantially from fiscal policy to monetary policy during the later years of the 20th century. The Federal Reserve uses three main devices for maintaining control over the supply of money and credit in the economy: open market operations, the reserve level required by banks, and the discount (interest) rate. Although not as obvious as interest rates, the most important is open market operations, or the buying and selling of government securities. To increase the supply of money, the Federal Reserve buys government securities from banks, other businesses, or individuals, paying for them with a check or a new source of money that it prints. Reserve limits for deposit-taking institutions specify how much money is set aside; either as currency in their vaults...

Financial frenzy feeds fraud; don’t become a victim

On the Money From the June 6, 2008 print edition Economic conditions remain challenging. Fuel prices are climbing to unprecedented heights, the number of home foreclosures is setting records, and the financial markets have more volatility than ever. As consumers and business owners work to survive the assault on predictability, it’s appealing to take on additional debt, with the idea that current conditions are temporary. Unfortunately, purveyors of illegal money schemes know this as well. A colloquial phrase says, “I’ll whip them into a frenzy.” Obviously, in a frenzy, people are less likely to make considered decisions. That opens the door to fraud schemes, especially those that involve “borrowing” money on a promise of relief or gain. It’s not long before the victims have more debt than they can handle. Therein is the vulnerability. According to the bureaus of economics and consumer protection of the Federal Trade Commission, an estimated 13.5 percent of U.S. adults — 30.2 million consumers — were victims of one or more frauds in 2005, and there were an estimated 48.7 million attempts of frauds during the year. While the report covered 14 types of fraud, the top four were: weight-loss products, foreign lotteries and buyers’ club memberships, prize promotions and work-at-home programs. It’s important to note that prize promotions include those that require attendance at a sales presentation to obtain the promised prize. Knowing what to watch for is one thing. However, knowing what makes a person more susceptible is far more beneficial. It’s easier to avoid a disease if the person knows they have a predisposition to it. Therefore, here’s the knowledge that can guard you against fraud in times of frenzy. According to the FTC report, “Those with too much debt experience more fraud.” Those who have more debt than they can handle are more likely to be victims of all sorts of frauds, whether or not they’re related to debt, such as advance fee loans, credit repair and debt consolidation. For example, people with more debt than they could handle were more than three times as likely — 6.6 percent — to purchase a fraudulent weight-loss product than those who didn’t have an uncomfortable level of debt, 1.8 percent, according to the report. Those who had too much debt also were more likely to become victims of fraudulent prize promotions and foreign lottery swindles. Recognizing that an uncomfortable level of debt may predispose a person to a swindle is but the first step toward protection from fraud. The second is to be aware of the pitch methods used by con artists. The Internet gets lots of attention because of much nefarious behavior. But unscrupulous promoters use the printed page as their No. 1 method in schemes. Apparently, if it’s published on paper and we hold it in our hand, credibility is automatic. However, the Federal Trade Commission reports that 27 percent of the time, fraud victims learned about offers through print advertising — direct-mail advertising (including catalogs), newspaper and magazine advertising, and posters and fliers. Direct mail was the most common form of print advertising cited, and was the vehicle used in 16 percent of all fraudulent offers. Newspaper and magazine advertising accounted for 10 percent. The Internet was in second place, 22 percent, via general websites, auction sites and email. General...

Aunt Millie goes to Bagel Land, and more jargon

On the Money From the March 7, 2008 print edition There seems to be no end to the desire of one group of people to attempt to confuse another. For example, doctors use jargon to confuse patients — and maybe to justify high fees. Acronyms that acquire phonetic pronunciation in government are enough to send even the brightest of civilians babbling into the hills. In fact, an equally frightening phrase describes the process of creating pronounceable acronyms. It’s called “acronym-initialism-hybriding.” Of course, the world of finance is no different. Here’s a look at some of the latest jargon, slang and acronym-initialism-hybrids. Aunt Millie — an uneducated or unsophisticated investor. The term is considered a derogatory remark in the financial sector, often used to refer to poor investment choices. Bagel Land — The imaginary place a stock or other security goes when its price approaches zero. This usually results from one or more major problems that may not be resolvable. This term describes a formerly popular company that has fallen from grace — as opposed to a penny stock or other historically low-priced security. 3-6-3 Rule — Refers to an unofficial rule under which the banking industry once operated. The reference describes how bankers would give 3 percent interest on depositors’ accounts, lend the depositors money at 6 percent and be playing golf at 3 p.m. Burn rate — The rate at which a new company uses up its venture capital to finance only overhead before generating positive cash flow from operations. It’s usually quoted in terms of cash spent per month. Chastity bond — A bond designed to prevent unwanted takeovers by having a maturity that’s automatically activated once a takeover is complete. Diworsification — The process of adding to a portfolio in such a way that the risk/return tradeoff is worsened. Of course, this is the opposite of “diversification,” which reduces risk and can increase returns by minimizing the negative effect of any one asset on the entire portfolio. Financial pornography — Used to describe sensationalist reports of financial news and products causing irrational buying that can be detrimental to investors’ financial health. Media’s short-term focus on a financial topic can create anticipation that clouds investors’ decision-making ability. Spiders (SPDR) — An “acronym-initialism-hybrid” form of “Standard & Poor’s Depository Receipt.” SPDR is an exchange-traded fund that tracks the S&P 500 Index. Each share of a spider contains one-tenth of the S&P index and trades at roughly one-tenth of the dollar-value level of the S&P 500. Straight Through Processing (STP) — A concept that would optimize the speed at which transactions are processed. Electronic information would be transferred from one party to another without manually re-entering the same pieces of information. It’s a major shift from present-day T+3 (waiting three days from the date of the trade to settle), trading to same-day settlement. Tip from a dip — Advice from a person who claims to have inside information — such as substantially higher-than-expected earnings or government approval of corporate mergers — that would affect a stock’s price but actually doesn’t. These people should be avoided at all costs. Besides, it’s illegal. War babies — A name given to securities in companies that are defense contractors. A gentler term is “defense stocks.” Good examples are firms that build aircraft and ammunition. When a war is imminent, these stocks tend to outperform the...

In short selling, it’s sell high, buy low and maybe anger some

On the Money From the February 1, 2008 print edition There’s an old joke that says, “Want a hot tip? Buy low, sell high.” Of course, that “tip” will only be “hot” if the price is also rising. Recent indicators all around us are signaling a very cool market. Some speculate a recession is near. That usually means falling stock prices. Therefore, the old hot tip of “buy low, sell high” might not come to pass anytime soon. So, how about a new tip? Sell high, buy low. In the dice game of craps, that’s called betting against the dice, or “don’t pass.” In the more scholarly circles of finance, it’s known as the “short sale.” In other words, while everyone else is bemoaning the decline in the price of the stocks they bought low with the hope of selling high, the short seller happily watches the prices fall. But how do you sell something you don’t already own? Here’s an examination of short selling. A short sale is the sale of a stock you don’t own — yet. Investors who sell short believe the price will fall. If the price drops, they can buy the stock at the lower price and make a profit. On the other hand, if the price of the stock rises and you buy it back later at the higher price, you will incur a loss. When you sell short, your brokerage firm loans you the stock. The stock you borrow comes from either the firm’s own inventory, the margin account of one of its clients or another brokerage firm. The practice of “naked short selling” is selling the shares without first arranging to borrow them. As a basic example, Quirky Telecom Inc. is trading at $80 a share. The investor borrows shares of Quirky Telecom Inc. stock at $80 a share and immediately sells them. Later, Quirky Telecom’s stock price declines to $60 a share, and the investor buys shares back on the open market, replacing the borrowed shares. The investor can’t realize the profit until they buy back shares of Quirky Telecom on the open market. The profit is $20 a share, less commissions and fees, of course. Voila — sell high, buy low. However, if the price rises, the investor loses money, possibly an unlimited amount, since a stock price can theoretically rise indefinitely. Just as people who bet against the dice at the craps tables aren’t very popular, short sellers often are regarded with disdain and distrust. In fact, short selling wasn’t always legal. In the 18th century, England banned it entirely, since the practice was thought to have escalated the dramatic downturn in the Dutch tulip market in the 17th century. Rule 10a-1 of the Securities and Exchange Act of 1934 banned short selling during a downtick. A downtick is when a transaction occurs at a price below that of the previous transaction. That rule was ended in 2007. The Investment Company Act of 1940 banned mutual funds from short selling. That law was lifted in 1997. Certain market conditions generate mass short-selling activity, particularly during “bubbles,” times of irrationally high prices. During such periods, short sellers hope for a market correction. Significant positive news announcements often cause the market to react illogically, simply because of media attention. Short sellers...

No redemption under new law actually is good news

On the Money From the January 4, 2008 print edition Colorado has new foreclosure laws, as of Jan. 1. Colorado House Bill 1157 went into effect then, enacting dramatic changes in an attempt to improve and simplify the foreclosure process, while also providing property owners with more realistic prospects of retaining ownership. The essence of the changes revolves around two words: “cure” and “redemption.” The cure period is the time between the commencement of foreclosure and the initial sale date. This time span has been increased from 45-60 days to 110-125, (215-230 for agricultural land). Owners now have about four months to work with their lender and cure the default, stop the foreclosure and retain their property. However, the concept of “redemption” — which is the ability to redeem after the sale for up to 75 days — is extinguished. The good news is that it’s far easier to cure than to redeem. In other words, it’s far easier to conquer the disease than to attempt resurrection after demise. “Cure” means to arrange with the current lender (almost always the foreclosing party), to remove the default before the sale. Often, that means a loan modification. Unless there’s a significant amount of equity in the property, lenders prefer modification to foreclosure. Some examples of loan modifications include: Extension — Missed payments are added to the loan amount, and the term of the loan is extended by the number of missed payments. Forbearance — The lender simply delays filing a foreclosure even though they have the right to do so. Refinance arrears — The delinquent amount is refinanced and added to regular payments for a period of three to six months. Pricing — The interest rate or term is modified to reduce the monthly obligation. The new law facilitates these methods, and even more creative approaches, such as adding additional non-real estate collateral. Before HB 1157, “redemption” meant the former owner, in order to get back his property, had to pay the successful bidder at the foreclosure sale within 75 days. That payment would include fees, accrued interest and other charges associated with the foreclosure action. But now, that possibility is gone. Redemption was nearly impossible anyway, since it required an owner to qualify for a new loan while having a pending foreclosure on their credit report. Colorado’s foreclosure structure always has been debtor/owner friendly, and remains so even with the legal changes. Colorado is the only state to require foreclosures to be conducted by a public trustee in each county. The governor appoints them. Some states follow the “title theory” of mortgages. That is, the borrower doesn’t actually keep title to the property during the loan term. But Colorado follows the “lien theory” of mortgages. The mortgage only creates a lien on the property. The property owner retains all rights of title, possession, rights to collect rents, etc. As a final safeguard for the property owner, the procedures governing a public trustee foreclosure are set by statute, and must be followed precisely. If foreclosure procedures aren’t followed exactly, the foreclosure sale can be invalidated. With the recent turmoil in the credit markets, the law also is intended to shield homeowners from foreclosure vultures who appear during the redemption period, not the cure period, to loan money at “resurrection rates.” It’s nearly...

Crunch leads to renewed scrutiny of credit scores

On the Money From the December 7, 2007 print edition The mortgage credit crunch not only is affecting interest rates quoted to home buyers, but also is triggering changes in less-visible areas, such as minimum credit scores — specifically, the ubiquitous FICO score. FICO scores are the product of the Fair Isaac Corp. (founded in 1956 by engineer Bill Fair and mathematician Earl Isaac). The three major credit-reporting agencies supply them. Though there are other scores available, the majority of lenders still rely on the FICO. FICO scores range between 300 and 850. In the past, traditional ratings were as follows: excellent, more than 750; very good, 720 or more; acceptable, 660 to 720; uncertain, 620 to 660; and risky, less than 620. The “Classic FICO” risk scores rank consumers according to the likelihood their credit obligations will be met. However, any model used to predict the future has only one source of information — the past. Credit performance by consumers is no different. In other words, given that the overall environment remains relatively constant, past behavior may be cautiously relied upon to predict the future. Imagine how quickly the past would become obsolete in the face of a dramatic change in the fiscal environment. An extreme example might be the nationalization of all property. (Nationalization is the act of taking assets into the public ownership of a national government, without compensation.) A FICO score would, of course, be rendered useless in the face of such a dramatic transformation. On a smaller scale, increasing influence by external sources such as the Federal Reserve, politically inspired regulation, underwriting shifts that limit borrowers’ behavior and even injection of international cash can alter environmental circumstances — breaking the link between past and future necessary for reasonable predictive modeling. Furthermore, companies that supply information to Fair Isaac are changing their practices, compromising some of the calculations. For example, a class-action suit filed in March in U.S. District Court for the Southern District of Florida charged that American Express and Citibank are depressing large numbers of clients’ scores by withholding credit-account limits from the three dominant credit bureaus. Without credit limits or account maximums, the plaintiffs say, the FICO software often penalizes the borrower. In response to increasing uncertainty and possible unreliability of predictive FICO scores, underwriting criteria are shifting. Though the FICO score may be unstable, higher is still better than lower. Therefore, the traditional cutoff point between prime and subprime loans, previously 620, has moved upward. Some mortgage companies are posting 680 as the new demarcation line. Webster Bank, a wholesale lender based in Connecticut, increased its cutoff to 680 last August, with full documentation of applicants’ income and assets. For the average borrower, that means a renewed scrutiny of their FICO score. The score is comprised of: 35 percent on payment history (timing), 30 percent on the total amount currently owed, 15 percent on length of credit history, 10 percent on the number of new credit accounts (fewer is better) and 10 percent on the mix of credit accounts, mortgages, credit cards, installment loans, etc. The best way to improve the score is to pay bills on time. Installment loans, borrowing a set amount to purchase nonperishable goods, are given more weight than credit cards. The FICO model gives the majority of...

How to avoid the mortgage foreclosure rescue racket

On the Money From the November 2, 2007 print edition In the second quarter of 2007, about 10,017 fresh foreclosure filings were made in Colorado, an increase of 6 percent over the first quarter. In 2006, there were 28,435 foreclosure listings — and officials at the Colorado Department of Housing estimate that number will reach 36,000 by the end of 2007. As the credit markets continue to flounder, many homeowners facing foreclosure seek ways to avoid losing their homes. One foreclosure rescue company proclaims, “The rescue process is a simple one. Unlike conventional lending institutions that check multiple things such as credit, tax returns, assets, and income, our loans are based upon the value of the real estate or collateral securing the loan.” Statements like that set the stage for one of the most heavily promoted methods of avoiding foreclosure — the “sale and leaseback” of the property. Businesses have used this method to raise cash by selling assets. But in this distressed personal mortgage market, as the method is used to enable people to stay in their homes and avoid foreclosure, some are losing their homes because of unscrupulous financial vultures. The owner of the home sells the property to an investor, and then enters into what amounts to a rent-to-own agreement. Theoretically, the investor pays off the mortgage that was in default and steps in as the new lender/owner/lessor. As soon as that happens, the homeowners find themselves in the dangerous jungle of rent-to-own swindles, also called the “foreclosure rescue racket.” While statistics on these schemes are hard to come by, law enforcement authorities confirm that foreclosure scams are rising sharply. A number of states have enacted new laws to combat this. Colorado enacted related legislation in 1991. The 2008 legislative session will consider proposed bills that address predatory lending. Even so, according to MSNBC, the Better Business Bureau has received complaints from across the country about foreclosure rescue companies. A majority are located in Colorado, Georgia and Florida — states with the highest foreclosure rates. For anyone considering entering into a rent-to-own agreement, whether as a first-time buyer or in response to foreclosure, Title 5, “The Consumer Credit Code” of the Colorado Revised Statutes, is a must-read. In particular, Title 5 Article 10, Part 5 sets forth that a Rental Purchase Agreement shall not require any of the following: Assignment of earnings. No lessor shall accept an assignment of earnings from the lessee for payment. However, a lessee may voluntarily authorize deductions from his earnings. Confess judgment. To “confess judgment” means abandoning your rights to due process ahead of time, and consenting to immediate execution of a judgment. Waivers. No lessor may require a lessee to waive service of process or to waive any defense, counterclaim or right of action against the lessor. In other words, “hang on to your rights.” Breach of the peace. The lessor cannot unlawfully enter the lessee’s premises or commit any breach of the peace while repossessing the property. Garnishment of wages. No lessor may require a lessee to authorize a prejudgment garnishment of the lessee’s wages. Balloon payments. A lessee shall not be required to make a payment in addition to regular lease payments in order to acquire ownership of the lease property. Finding any of these provisions in a rent-to-own agreement...

Government offers financial literacy campaign

On the Money From the October 5 2007 print edition In 2003, the Fair and Accurate Credit Transaction Act (FACTA) was enacted. It included the formation of the Financial Literacy and Education Commission. Given the recent turmoil in the credit markets, let’s examine what the commission has to offer. The legislation states, “The Commission shall serve to improve the financial literacy and education of persons in the United States through development of a national strategy to promote financial literacy and education.” Twenty federal agencies contribute to the commission. To reach the widest number of people possible, the commission established a Web site (www.MyMoney.gov) and a toll-free telephone number (1-888-MYMONEY) to coordinate the presentation of educational materials from the federal agencies that deal with financial issues and markets. There are 11 categories, each with plenty of information, including budgeting and taxes; home ownership; privacy, fraud and scams; and starting a small business. Additionally, the Web site provides tools and resources, including financial calculators, financial education grants, member agencies and public service announcements. MyMoney.gov is available in both English and Spanish. The primary document that describes the commission’s plan is titled, “Taking Ownership of the Future: The National Strategy for Financial Literacy.” It’s a comprehensive (162 pages) blueprint for improving financial literacy in America. It covers 13 areas of financial education and contains 26 specific calls to action. You can download it from www.mymoney.gov/pdfs/add07strategy.pdf. The commission also provides a free “My Money” Tool Kit. In addition to being available on the www.MyMoney.gov Web site, the kit may be ordered by phone by calling 1-888-696-6639, between 6 a.m. and 6 p.m. Mountain Time (except federal holidays). The tool kit contains these publications: Consumer Action Handbook — A resource directory that provides information on how to contact specific businesses and local consumer protection offices. Consumer Advisory on Forex Fraud — Contains information about foreign currency fraud. Consumer Information Catalog — Presents a listing of consumer education resources. Get the Facts on Saving and Investing — Provides helpful tips and worksheets for calculating net worth, income and expenses. Insuring Your Deposits — Information about how FDIC insures deposit accounts at banks and savings associations. Money Smart — Learn about the FDIC’s financial education program for adults. Questions You Should Ask About Your Investments — Gives advice on questions to ask before investing. Social Security, Understanding the Benefits — Provides guidance for retirement, disability, survivor’s benefits, Medicare and Supplemental Security Income. In June, the Financial Education and Literacy Commission, chaired by the U.S. Treasury Department, visited Boston for a discussion on successful financial education programs to improve homeownership. “Homeownership is a journey, not a destination,” said Dan Iannicola Jr., the Treasury’s deputy assistant secretary for financial education. “Good homeownership counseling services need to be available before, during and after the purchase transaction.” The discussion focused on helping home buyers better understand the terms of their mortgages to help them stay in their homes. Homeownership counseling can reduce 90-day mortgage delinquencies by 19 percent, according to a 2001 study. Given the current condition of the credit markets, has the commission been effective? The Senate Subcommittee on Oversight of Government Management thinks not. The Government Accountability Office reported to the subcommittee in April that, “The national strategy for financial literacy serves as a useful first step in focusing attention on financial...

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