KeNo's Housing and Economic Portal: Wednesday December 23 Housing and Economic stories

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Card Firms Add Inactivity Fees to Slow Default Losses - (www.bloomberg.com) Amy Schiffman has had a Fifth Third Bancorp credit card for eight years to guard against unexpected overdrafts on her checking account. Now the bank wants to charge her $19 for not using it. “If you’re not thinking about the card, you might forget to pay the fee, and then you’ll be facing another late fee on top of it,” said Schiffman, 26, a Web designer in Lansing, Michigan. Credit card issuers, facing the highest level of delinquencies since April, according to Moody’s Investors Service, are reviving inactivity charges and reworking other fees in an effort to stem declining revenue. Fifth Third, based in Cincinnati, added the fee for the majority of its cards in June, in part to offset increasing servicing costs, said spokeswoman Stephanie Honan. “We want to encourage active use and management of the accounts,” Honan said. Inactivity fees have been used before, said Linda Sherry, director of national priorities with Consumer Action in Washington, who conducts the group’s annual survey of credit- card fees. Often they’ve been waived if the consumer used the card periodically, Sherry said. “If you’re keeping the card in a drawer because of the safety it provides, use it a few times in a year,” Sherry said. Managing Debt: Many U.S. consumers are trying to manage debt, which was $842.6 billion as of Nov. 18, down 1.7 percent from a year ago, by paying off credit cards and then not using them. They refrain from canceling them because that may hurt their credit scores, because their ratio of debt to available credit would go up, said Nick Bourke, manager of the safe credit-card project at the Pew Charitable Trusts in Washington. The so-called utilization rate helps determine a credit score. “If you’re trying to get out of debt, it’s a real problem,” Bourke said. If consumers use the cards, they add to their balances. If they don’t use the cards, they face a fee, he said. Fifth Third, Ohio’s largest lender, is the 16th-largest issuer of U.S. credit and debit cards, according to the Nilson Report, an industry newsletter based in Carpinteria, California. Larger card lenders are also testing fees for customers who don’t use the cards enough. Citigroup Inc. varies the interest rate it charges customers based on how often they use their cards, according to letters the company sent out in November to cardholders. Customers get back 10 percent of their total interest each month if they exceed a set amount of purchases. Rebate Varies: The amount of spending needed to qualify for the rebate depends on their payment history with the bank, the letters said. A customer with a $35 monthly finance charge may see a $3.50 credit in the same month’s bill. Customers can opt out, paying off existing balances under current interest rates until the card expires. They also may get lower rates if they agree to transfer other card balances to Citigroup, according to the letters. “These actions are necessary given the doubling of credit- card losses across the industry,” said Samuel Wang, vice president of public affairs at New York-based Citigroup. “Nearly all of our customers now have the opportunity to earn back a portion of the increase each month. We want to reward our customers for doing more business with Citi.” Fee Test: Bank of America Corp. is looking at annual fees ranging from $29 to $99. The charges were part of a change in terms for fewer than one-half of one percent of all Bank of America’s cards, said Anne Pace, a spokeswoman for the Charlotte, North Carolina-based bank. It’s a test, and the company hasn’t made any decisions about the wider use of annual fees, she said. “We’re trying to get a better understanding on the value customers place on their cards,” Pace said. “The fee is based on the type of card and the benefit it provides to the customers.”

Sprint Nextel provided law enforcement agencies with its customers' (GPS) location information over 8 million times between September 2008 and October 2009. - (www.wired.com) Sprint Nextel provided law enforcement agencies with customer location data more than 8 million times between September 2008 and October 2009, according to a company manager who disclosed the statistic at a non-public interception and wiretapping conference in October. The manager also revealed the existence of a previously undisclosed web portal that Sprint provides law enforcement to conduct automated “pings” to track users. Through the website, authorized agents can type in a mobile phone number and obtain global positioning system (GPS) coordinates of the phone. The revelations, uncovered by blogger and privacy activist Christopher Soghoian, have spawned questions about the number of Sprint customers who have been under surveillance, as well as the legal process agents followed to obtain such data. But a Sprint Nextel spokesman said that Soghoian, who recorded the Sprint manager’s statements at the closed conference, misunderstood what the figure represents. The number of customers whose GPS data was provided to local, state and federal law enforcement agencies was much less than 8 million, as was the total number of individual requests for data. The spokesman wouldn’t disclose how many of Sprint’s 48 million customers had their GPS data shared, or indicate the number of unique surveillance requests from law enforcement. But he said that a single surveillance order against a lone target could generate thousands of GPS “pings” to the cell phone, as the police track the subject’s movements over the course of days or weeks. That, Sprint claims, is the source of the 8 million figure: it’s the cummulative number of times Sprint cell phones covertly reported their location to law enforcement over the year. The spokesman also said that law enforcement agents have to obtain a court order for the data, except in special emergency circumstances. The information about the data requests and portal comes from Paul Taylor, manager of Sprint’s Electronic Surveillance Team. He made the revelations at the Intelligent Support Systems (ISS) conference, a surveillance industry gathering for law enforcement and intelligence agencies and the companies that provide them with the technologies and capabilities to conduct surveillance. The conference is closed to press, but Soghoian, who is a graduate student at Indiana University, obtained entry and recorded a couple of panel sessions, which he posted on his blog. In one of the recordings, Taylor is heard saying that the automated system was rolled out a year ago and that in 13 months it had processed more than 8 million requests for GPS data from law enforcement.

Job Cuts Loom as Stimulus Fades - (online.wsj.com) Highway-construction companies around the country, having completed the mostly small projects paid for by the federal economic-stimulus package, are starting to see their business run aground, an ominous sign for the nation's weak employment picture. Tim Word, vice president of Dean Word Co., a heavy-construction company in New Braunfels, Texas, said his income is now coming mostly from projects that are winding up. He said that in normal times he has about $100 million of signed contracts in hand. But that number has fallen to $30 million, and the pipeline is empty. In the past two years, his work force has shrunk nearly 40% to 260 from 420. "Having something to bid on is the lifeblood of the industry, and it's running out," said Mr. Word. He isn't sure what will happen next year without new projects. "There's no pavement fairy that's going to help." Since the recession began in 2007, employment in the construction industry has fallen by 1.6 million, the Labor Department says. Though the housing sector accounts for many of those job losses, road builders have also suffered, and executives in the industry expect layoffs to rise next year. More broadly, the Congressional Budget Office late Monday said it estimates that the federal stimulus package sustained between 600,000 and 1.6 million jobs in the third quarter, and raised gross domestic product by 1.2 to 3.2 percentage points higher than it would have been without the program. The construction industry's unemployment rate, including related extraction businesses, such as gravel processing, climbed to 19.1% in October, up from 10.7% a year earlier. The transportation and material-moving sectors saw unemployment rise to 11.6% from 7.9% over the same period. State officials and local contractors trace the industry's woes to the recession and the collapse of the residential and commercial real-estate markets. In addition, they cite the federal government's delayed plans to enact a transportation bill. In one version, the law would have provided $450 billion for highways and infrastructure projects over the next six years.

Report Cites Big Shortfall in Reserves at A.I.G. - (www.nytimes.com) The Bank of Japan accommodated demands by the government to combat deflation with a 10 trillion yen ($115 billion) program that economists said was insufficient to spark domestic demand. The central bank yesterday said it will offer three-month loans to commercial banks at 0.1 percent under the new facility. Governor Masaaki Shirakawa stopped short of boosting the monthly target for government-bond purchases from 1.8 trillion yen, a step analysts said may be taken within months. The decision followed escalating warnings from Prime Minister Yukio Hatoyama’s government about the danger of prolonged consumer-price declines, exacerbated by surge in the yen to a 14-year high. By contrast, Shirakawa, who meets with Hatoyama today, in recent weeks raised his economic assessment and announced plans to end some emergency lending programs. Shirakawa’s announcement “aimed to explicitly show the BOJ’s stance to cope with deflation and strong yen pressures proactively with minimum action,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo, who previously worked at the Bank of Japan. “We look for the bank to be eventually pushed into taking further actions to satisfy the government.” The yen slid yesterday after reports about the Bank of Japan holding its emergency board meeting spurred speculation officials would announce steps limiting the currency’s appreciation. It recouped losses after the release disappointed some investors.

Obama to Escalate Troop Surge in Afghanistan, Withdraw Just in Time for 2012 Election - (www.mcclatchydc.com) Looking to end one of America's longest wars, President Barack Obama will send another 30,000 U.S. troops to Afghanistan by next summer, but start to withdraw at least some American forces in July 2011. The first Marines could arrive in Afghanistan by Christmas, the vanguard of an accelerated buildup that would see all of the extra troops there by next summer. "I have determined that it is in our vital national interest to send an additional 30,000 U.S. troops to Afghanistan. After 18 months, our troops will begin to come home. These are the resources that we need to seize the initiative, while building the Afghan capacity that can allow for a responsible transition of our forces out of Afghanistan," Obama said in a speech to cadets a the U.S. Military Academy in West Point, N.Y. "I do not make this decision lightly," Obama said, stressing that he recognizes how weary Americans are with war, and how eager they are to focus most on rebuilding the battered U.S. economy. "If I did not think that the security of the United States and the safety of the American people were at stake in Afghanistan," he said, "I would gladly order every single one of our troops home tomorrow." New troops from the U.S. and its allies, Obama said, "will allow us to accelerate handing over responsibility to Afghan forces, and allow us to begin the transfer of our forces out of Afghanistan in July of 2011.

The hidden meaning of the hidden Starbucks logo - (www.blogs.reuters.com) Last week, Roy Street Coffee and Tea, located at the corners of Roy Street and Broadway in Seattle, opened. This is another one of those stealth Starbucks – Starbucks stores without the Starbucks name over the front door – the coffee giant has been opening in its hometown and in London as of late. Like the other shops of this new vintage, this one is appointed with antique-style furniture, retro lighting, and a distressed looking table top salvaged from an old ship. The rough-hewed interiors of these not Starbucks Starbucks haven’t really mattered to the journalists and bloggers who have been writing about them. They talk only about the naming patterns in Starbucks’ most recent branding strategy. To them, the names of the stores represent a brand crisis. Quite rightly, they point out, when a brand hides its own identity, it is in some ways admitting defeat, saying that its name – a central part of any brand – has lost value. When it comes to Starbucks, all of this is true, but the question is why? Why has the Starbucks brand lost so much value that it has to hide from customers and act like a small business? The answer to these questions rests with communities and consumers, what they care about and desire the most these days. Over the last several years, a quiet but decided shift in buying patterns has taken place. Really, there is something of a velvet revolt or a quiet rejection of brands going on. In the early years of this century, the then mayor of Baltimore Martin O’Malley begged Starbucks to come to his city. He thought these big name stores would lend his de-industrializing hometown a much needed upper-middle-class sheen. Same with the residents of Landsdowne, Pennsylvania. In 2004, the town had several mom and pops diners and coffee shops. One day, though, a team of local residents lined up in three rows of forty in an empty lot where a 7-11 used to be. When the photographer gave them the sign, they turned over the letters. Their message read: “Got Location! Need Starbucks!” Afterwards, the Greater Lansdowne Civic Association sent this “visual petition” to Starbucks headquarters. Landsdowne never got a Starbucks, but Benicia, California and a lot of other towns got plenty of Starbucks.