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April 30, 2010

Foreclosure: Tell it to the AG

If you want to speak to Florida's Attorney General about foreclosure or loan modifications or mortgage fraud, here's your chance.4823741.thl.jpg

Saturday, May 8, in Miami, Attorney General Bill McCollum will be on hand for a Mortgage Fraud Community Forum. He's hosting the event with Florida's Interagency Mortgage Task Force.

The session is on "The Housing Crisis, Who to Trust and Where to Turn."

It's open to the public and free, but reservations are required. Call 877-385-1621.
It will be held from 10 a.m. to 4 p.m. at Miami Dade College, Wolfson Campus, Chapman Conference Center, 300 N.E. Second Ave.

The AG's office says you can get help on how to face foreclosure, housing scams, mortgage fraud, loan modifications and finding legal assistance.

Certified housing counselors, volunteer lawyers, as well as representatives of Bank of America, JP Morgan Chase, Wells Fargo/Wachovia and SunTrust will be on hand.

Also attending will be representatives of:
Florida Department of Law Enforcement, Office of Financial Regulation, Department of Business and Professional Regulation, Florida Bar, Dade County Bar Legal Aid Society, Cuban American Bar and the Collins Center Foreclosure Mediation Program.

For more information, go to

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April 29, 2010

Foreclosure fraud Investigation

Florida Attorney General Bill McCollum's office is looking into allegations that one of Florida's largest foreclosure law firms Florida Default Law Group is giving courts faulty or fabricated paperwork.

The AG's web site says its Economic Crimes Unit in Fort Lauderdale is looking into charges that the faulty paperwork is "due to the mortgage crisis and thousands of foreclosures per month."

Calls to the Tampa headquarters of Florida Default Law Group were not returned.

The AG's office said Florida Default Law Group appears to be a client of Lender Processing Services, another firm that the AG's office is investigating.

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Risk: The list

People are afraid of what could happen to their money, their investments, their financial life.


And they have great reason to be, after all that's been uncovered since the meltdown of 2008.

If you made a list of what the threats are, you might also see what options you have for facing each one.

A little planning might lead to a bit more security.

Here's a great list of life's biggest risks.

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April 28, 2010

Easy way to pay down debt

.... Reading this morning about low-cost, no-cost ways for people to get financial advice, such as, a recent start-up, and some others. Sometimes, the lowest-cost ideas really do work.k0611252.jpg

I like Bill Hardekopf's suggestion that you try making twice-a-month payments on your credit cards, rather than once a month. Hardekopf is CEO of His idea: Cut your regular payment in half, send it in twice a month and you'll save on interest, which is charged daily, by reducing the balance more quickly. Plus, by paying 26 times a year, it's the same as making one extra monthly payment every year. Working down that debt, little bit by little bit, is just as important as working it down in bigger steps.

You can catch me on TV tonight. On Nightly Business Report on PBS. It's a short commentary on what we're learning big investors were doing that individual investors cannot do.

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April 27, 2010

Florida consumer confidence rises: First rebate, then celebrate

Florida's consumer confidence figure surged to the highest point in two and a half years, the University of Florida reported this morning.

Looks like those appliance rebates and the homebuyers tax credits made us feel pretty good about the economy and our finances, says survey director Chris McCarty.

The April reading of 77 was the highest since October 2007, when it was 70.

“Florida’s consumers have been full of surprises the past several months,” McCarty said. “Much like the reading for January, this rise in confidence was completely unexpected. Last month Florida broke its all time record for unemployment at 12.3 percent. Yet Floridians are far more optimistic this month than last."

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April 22, 2010

Deluded? Why don't people recognize that stocks went up?

Maybe we’ve faced too many harsh financial realities. Maybe we can’t face up to what’s out there now.1194989155693659407aiga_stairs_up_.svg.thumb.png

But it’s hard for me to figure out why when the reality is a good thing, we think it’s not.

Franklin Templeton reports that two-thirds of people surveyed think the stock market declined or was flat last year.

Thing is, the U.S. stock market was up last year. Up strongly.

How to explain this?

From David McSpadden, senior vice president of Global Advisory Services for Franklin Templeton Investments:

“Despite the recovery we saw in 2009, when investors look at their investments or 401(k) statements, their balances are often still not at the levels they were before the decline. So the perception is that last year’s stock market returns were still negative or flat. This misperception, and the continued sting of the 2008 market downturn itself, are fueling investors’ hesitancy to put money back into equities. That means many of them will continue to miss out on the market rally we’ve been experiencing, further impacting their ability to rebuild their savings.”

You really do make your own fate, sometimes. This time, it's wrong-headed and in the long run, it will hurt.

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Tax season tally

Who says all we want in the news is the latest celebrity scandal?

Here's a little bit of bookkeeping on my beat:

You asked more than 500 questions about taxes.

That's the tally of phone messages and emails I received during tax season 2010.

And that's in a year when the changes in tax law weren't as confusing as previous years.

You may not remember all the trouble people had with casualty losses following Hurricane Wilma, but I won't forget the onslaught of confused readers who just didn't know how to handle them on their taxes.

This year, I thought, was a quiet one. 500 questions. That's all.

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April 21, 2010

My wished-for financial reforms

Hey, don't want to read my whole column that was published today?

Then read this part.

The Great Depression brought us the Securities and Exchange Commission. The Great Recession should bring us something equally important.

Here’s my list of the reforms we need:

-Financial products sold to consumers should be made clear and easily comparable, from one seller to another. The financial services industry isn’t doing this. Is it possible that here in the middle of the nation’s foreclosure crisis, many South Floridians didn’t understand exactly what they were getting into when they signed their mortgages?

-The clarity rule should cover the financial products that most people buy. Like auto loans. And payday loans. Auto loans from dealers were exempted from the consumer reform bill that the House passed. And that’s almost as big an industry as credit cards, which we managed to re-regulate. Now, payday lenders are pushing hard to get their own loophole.

-Anyone offering financial advice to consumers should be regulated by the same rule. I want a fiduciary standard, which means simply they have to put the customer’s interest first, no matter what. I want this to apply no matter where the advice-giver works – a bank, a brokerage or an investment advisory firm.

-Financial institutions, which had government bailouts when the crisis came, must contribute to a fund to provide for future bailouts if needed. (They already do this with FDIC insurance. Strong banks are the ones paying the premiums used to cover the deposits of the failed banks. It’s a model that’s worked for decades.)

-Derivatives, which had a huge part in creating the financial crisis, should be traded out in the open. We need to know how large this market is and which way it is flowing.

-Too big to fail? I’d just like to feel confident that our regulators have a full picture of the risks facing our financial system every single day. I want them to require banks to operate like banks that depend primarily on their customers for their profits, rather than as clearing houses that off-load nearly all risks on to a marketplace that eventually affects ordinary investors. Regulators should tell banks to stop borrowing excessively so they can act like traders on Wall Street. They should force banks to stop hiding how much debt they really have.

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April 19, 2010

Goldman, let's talk

Okay, let’s play a game. Match the quotes to who said them:

"Tricking an investor into taking a risk is theft by another name."

Derivatives are "financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

“We’ve lost our moral compass.”

Ready? The quotees are:

President Bush, as he signed the Sarbanes-Oxley Act into law.

Warren Buffett’s letter to shareholders, 2003.

Then-New York Stock Exchange chairman Richard Grasso in 2002. He later lost his job in a dispute over excessive compensation

Hope you noticed that no one was talking about Goldman Sachs.

The point of playing this little game is to deliver this lesson:

The warning, followed by the blow-up, and the promise to do better are a regular part of the picture when you’re out here, on the outside, looking in, at Wall Street.

As an individual investor, you should get used to this. It's a cycle.

If you haven’t developed some sort of personal armor against Wall Street after this decade, what’s wrong with you?

It’s a question. You should consider it.

Here’s another one:

If Goldman Sachs is charged with fraud, who isn’t?

Who else should be charged?

What else do we not know now?

That’s the first thing that went through my mind last Friday.

Then in about a half-second, I thought of White House Chief of Staff Rahm Emanual's no good crisis should be wasted motto.

Ticking off the list, from Madoff to Stanford.

Just last week, a colleague and I were talking about how amazing that with the litany of scandals and the horrid economy and the billions spent on bailouts, that there would be no reforms, it looked like, to come out of this?

What a waste.

Tell me what you think.

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Condos: In case you missed it

Here's a link to my story from the weekend about the collapse of the condo market....

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April 16, 2010

SEC: Goldman fraud

Goldman Sachs charged with fraud. Market falls, bonds rise. What a day after Tax Day!

The Securities and Exchange Commission alleges that Goldman did more than mislead investors when it repackaged really bad subprime mortgages. The SEC charges Goldman failed to tell anyone that one of its big hedge fund clients helped to create these bad securities and also bet against them. It sold them anyway.

Goldman's bum's rush caused investors to lose $1 billion, the SEC said.

Goldman said the "SEC’s charges are completely unfounded" in a statement and said it would vigorously defend the firm. Paulson & Co., the hedge fund, pointed out that it was not charged and its statement said the firm did not sponsor, initiate or market the securities involved.

I don't know who woke up over at the SEC, but I can tell you, the public will be glad to see such huge, powerful, important firms taken to task.

You can read the SEC complaint here:

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April 15, 2010

Face it, it's April 15

I don't know why you'd ruin a perfectly nice day by filling out your tax return, but, hey, in case you didn't notice, while you were filling up your travel mug with your free Starbucks coffee or grabbing those free mini-cupcakes at Cinnabon or making that sign for the Tea Party protest at the court house, the real reason for all this rather giddy stuff is, at the bottom of it all, money.gwil12509.jpg

Tax day is here.

You have until midnight to file.

And if you haven't, you have about 3 million Floridians alongside you. More than 600,000 of those will likely file an extension, so they're not rushing to the post office today.

Some basic help:

Here's the form for filing an extension. Just open it up, print it out and send it in, if you can't get your taxes done today. You still have to send your check, however, if you owe, by midnight.
Download file

Here's where you can find some help with your return:
South Florida Internal Revenue Service offices will be open until 6 p.m.
Broward County: 7850 SW Sixth Court, Plantation.
Palm Beach County: 1700 Palm Beach Lakes Blvd., West Palm Beach

Here's where you can ask for tax preparation assistance
In Broward, call 211 to find a Volunteer Income Tax Assistance site. Or, go to and enter Vita Sites in the search box.
In Palm Beach County, 11 Vita sites will be open Thursday. To find a list, go to
Or, call the IRS hotline for Vita sites, call 800-906-9887.

And here's where you'll find late post office hours:

These South Florida Post Offices will have employees in the parking lot until midnight to take your returns and give them that all-important April 15 postmark. (The retail operations close at 9 p.m. in West Palm Beach and Miami, and at 7 p.m. in Fort Lauderdale, so if you need stamps, you need to get there earlier.)

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April 14, 2010

Loan modifications: Progress, but not keeping pace with foreclosure crisis

Mortgage lenders in March doubled the number of home loans permanently modified, compared to January.

Still, only 30 percent of troubled home loans have a new deal or are in a trial loan modification, according to a Treasury report on the Making Home Affordable program.

South Florida remains one of the busiest areas in the nation for loan modifications. The Treasury Report showed that the Miami-Fort Lauderdale-Pompano Beach metropolitan area accounted for 4.7 percent of loan modification activity under the Obama program.

Yet the foreclosure crisis is unlikely to be stopped by those efforts, says the watchdog agency that is monitoring the federal government’s bailout program.

The Congressional Oversight Panel issued a separate report saying that the Obama Administration’s foreclosure prevention program "will not reach the overwhelming majority of homeowners in trouble."

The Treasury Report showed that permanent loan modifications have been arranged for 227,922 home mortgages. That’s nearly twice the 116,297 permanent modifications reported in January. In total, almost 3.4 million mortgages for which the payments are at least 60 days delinquent lenders are eligible for the program.

Bank of America, with the largest portfolio of troubled loans, has arranged 32,900 permanent loan modifications, from more than 1 million eligible mortgages.

JP Morgan Chase, with more than 431,000 eligible troubled mortgages, has permanently modified 31,460.

The Treasury estimates that borrowers save $500 a month through a loan modification.

But the Congressional Oversight Panel noted that the program lags behind the pace of the housing crisis. Last year, 2.8 million homes went into foreclosure, it said.

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Tax Day: Here's your extension form

If you just can't meet the April 15 federal income tax deadline, you can easily get another six months to send it in.

Just go here and print a copy. It's form 4868, the request for an automatic extension for your 2009 taxes.

Download file

Remember, though, that the extension is for your return only. You still must pay your taxes by midnight Thursday.

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More loan modification help in Miami

This just arrived from Chase, a major mortgage lender in South Florida:

Chase Homeownership Assistance Event
8 a.m. to 8 p.m. April 15 to 19
InterContinental West Hotel, 2505 North West 87th Avenue, Miami.

Chase has invited 20,000 South Florida homeowners who:

-- are behind in their mortgage payments and have not contacted Chase

-- have started the mod process but have not.submitted all the paperwork,

-- or who have completed the trial period but have not signed their final permanent modification agreement documents.

Local Chase loan advisors will walk customers through the options available. The goal is to keep customers from falling into foreclosure.

The event is open to all homeowners with Chase, EMC or WaMu mortgages.

Chase also operates 11 Chase Homeownership Centers in Florida, open six days a week to help homeowners.

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Talking taxes

From Marketplace Money:
Tax day: Annual whack upside the head
Commentator Harriet Brackey says the pain you feel on tax day isn't all bad.
You can listen to what I said on National Public Radio last weekend here.

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Loan modifications: Round-the-clock help returns to South Florida

The immensely popular round-the-clock mortgage modification event, which drew thousands of borrowers recently to West Palm Beach, is happening again. This time, in Miami Beach.

The Miami Herald's story on it is here.

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April 13, 2010

Tax Day: One third of Florida returns to go

As tax day approaches, about two-thirds of all Florida tax returns have been filed.

It's actually a slow season. The 5,624,000 Florida returns filed so far -- out of 8.7 million expected - is actually down 1.2 percent from a year ago.

Nationwide, the figure for filed returns, 89.97 million, is down 2.5 percent from this time last year.

Why? Maybe it's just that we've all faced the music when it comes to money in this past year and we just couldn't face one more bill. IRS South Florida Spokesman Michael Dobzinski says he doesn't know why taxpayers are slower to file.

But there is money out there. The average refund of $2,960 is larger than last year. And most taxpayers do get refunds.

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Tax Day: Food!

Want to know where all the free food and reduced priced deals are April 15?

My friend and wonderful colleague John Tanasychuk has the list in his blog. You can read it here.

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Taxes: South Florida Post Offices open late

To those late-filers who just have to mail their tax returns on April 15, here are all the South Florida Post Offices that will be open beyond 5 p.m. Thursday.

And remember: Unless there are employees collecting envelopes in the parking lot, if you put your letter in the box after the Post Office closes, it will not be postmarked April 15.


Atlantic, 8801 W Atlantic Blvd, Coral Springs 33071 7:00 pm
Coral Springs, 3255 NW 94 Ave, Coral Springs 33065 7:00 pm
Davie, 3850 University Dr, Davie 33314 7:00 pm
Ft Lauderdale Main, 1900 W Oakland Park Blvd, Ft Lauderdale 33310 7:00 pm
(Retail operations close at 7:00 pm, drive-through collection open until midnight)
Golden Isle, 1800 E Hallandale Beach Blvd, Hallandale 33009 6:00 pm
Hillcrest, 4429 Hollywood Blvd, Hollywood 33081 6:00 pm
Hollywood Main, 1801 Polk St, Hollywood 33020 6:00 pm
Inverrary, 6240 W Oakland Park Blvd, Ft Lauderdale 33319 6:00 pm
Miramar, 14900 SW 30 St, Miramar 33027 6:00 pm
Plantation, 7580 NW 5 St, Plantation 33317 7:00 pm
Sawgrass, 12801 W Sunrise Blvd,#967, Sunrise 33323 7:00 pm
South Florida Retail Unit, 16000 Pines Blvd, Pembroke Pines 33082 7:00 pm
Southside, 2801 S Federal Hwy, Ft Lauderdale 33316 7:00 pm
Sunrise, 3225 N Hiatus Rd, Sunrise 33345 7:00 pm
Tamarac, 7875 NW 57 St, Tamarac 33351 7:00 pm
University, 7972 Pines Blvd, Pembroke Pines 33083 8:00 pm
Weston, 1870 N Corporate Lakes Blvd, Weston 33326 7:00 pm
Westside, 11600 W State Rd 84, Ft Lauderdale 33355 6:00 pm

Avenue of the Americas, 1455 NW 107 Ave, Miami 33172 9:00 pm
Coral Gables, 251 Valencia Ave, Coral Gables 33134 6:00 pm
Country Lakes, 13520 SW 152 St, Miami 33177 6:00 pm
El Mercado, 2440 W 60 St, Hialeah 33016 6:00 pm
Father Felix Varela, 14310 SW 8 St, Miami 33184 5:30 pm
Kendall, 13101 S Dixie Hwy, Miami 33156 6:30 pm
Ludlam, 7900 SW 40 St, Miami 33155 7:00 pm
Miami Gardens, 6193 NW 183 St, Miami Gardens 33015 6:00 pm
Miami GMF, 2200 NW 72 Ave, Miami 33152 9:00 pm
(Retail operations close at 9:00 pm, drive-through collection open until midnight)
North Miami, 14311 Biscayne Blvd, Miami 33161 7:00 pm
North Miami Beach, 16400 W Dixie Hwy, Miami 33160 6:00 pm
Pinecrest, 11301 S Dixie Hwy, Miami 33156 8:00 pm
Snapper Creek, 11000 SW 104 St, Miami 33116 7:00 pm
South Miami, 5927 SW 70 St, Miami 33143 6:30 pm
Sunset, 7501 SW 117 Ave, Miami 33173 6:00 pm
Surfside, 250 95 St, Miami Beach 33154 6:00 pm
Tamiami, 8880 SW 8 St, Miami 33144 5:30 pm
Town & Country, 8266 Mills Dr, Miami 33283 7:30 pm
West Dade, 14790 N Kendall Dr, Miami 33296 5:30 pm

Boca Woodlands, 604 Banyan Trail, Boca Raton 33431 6:30 pm
Boca Rio, 8185 Via Ancho Rd, Boca Raton 33433 6:30 pm
Boynton Main, 1530 W Boynton Beach Blvd, Boynton Beach 33436 6:30 pm
Boynton Jog Rd, 6400 W Boynton Beach Blvd, Boynton Beach 33437 6:00 pm
Deerfield Beach Main, 212 E Hillsboro Blvd, Deerfield Beach 33441 5:30 pm
Jupiter Main, 1095 Military Trail, Jupiter 33458 5:30 pm
Lake Worth Green Acres, 4300 Jog Rd, Lake Worth 33467 5:00 pm
Loxahatchee, 14611 Southern Blvd, Loxahatchee 33470 5:00 pm
Palm Beach Worth Ave, 401 S County Rd, Palm Beach 33480 5:30 pm
Palm Beach Gardens, 3330 Fairchild Gardens Ave, WPB 33410 7:00 pm
Palms West, 10299 Southern Blvd, West Palm Beach 33411 6:00 pm
West Palm Beach Main 3200 Summit Blvd, West Palm Beach 33416 9:00 pm
(Retail operations close at 9:00 pm, drive-through collection open until midnight)

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April 12, 2010

Wachovia: We're online again

Wachovia’s online banking is working again, after a five-hour disruption last Friday.

Florida’s second largest bank – after Bank of America – experienced a “systems glitch of some sort, but we assured customers that there was no problem with the safety and security of their accounts,” spokeswoman Kathy Harrison said.

Adding to the confusion: Customers were also unable to access their Wachovia credit card accounts online over the weekend, as their cards were converted to Wells Fargo, which acquired Wachovia in a 2008 merger. Wachovia customers had been notified about the change ahead of time.

The systems problem and the credit card conversion were not related.

And despite the outage, which affected mobile and online banking from around 8 a.m. until 2 p.m., customer service was not disrupted in bank locations, at ATMs and at the Wachovia call centers.

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Dow 11,000 and then some

Watching the Dow.

If you’ve been reading me a long time, you know that I don’t think much of these big milestone numbers or the stories that report about them. I’ve written my share of them.

It’s not so much the big numbers are meaningless. It’s that the Dow is 30 stocks. Not the market. And not the directional sign for what investors should be doing. In fact, it may be the thing you need most to ignore.

But I do keep an eye on the market’s surge.

I’m an investor, too. Just one of those didn’t follow the “Dow sign” when the market plummeted through last March 9 and who didn’t sell and who has been in for the whole ride up. The Dow, through last Friday, was up about 60 percent.

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April 9, 2010

Marketplace Money: Listen on Saturday

Snooze alert: She's talking taxes again.

Oh give me a break. It's not so bad. Actually, the producer at Marketplace Money gave me a challenge: Do something funny about taxes. x16021019.jpg

Ha! No sweat. You live, you breathe, you struggle with taxes, what's not to be amused about?

My commentary will air on National Public Radio on Saturday.

The show from American Public Media airs on these stations
WLRN, Miami-Fort Lauderdale, FM 91.3, 2 p.m.
WQCS, Stuart- Fort Pierce, 11 a.m.

Elsewhere, if you want to find out when the program airs and on what station, click here.

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April 8, 2010

Troubles grow for Morgan Keegan

Morgan Keegan faces a slew of new legal troubles, including a regulators' charge that it mislead investors, including many in South Florida, into seven bond funds that cost them more than $1 billion.

The Securities and Exchange Commission Wednesday filed fraud charges.
The Financial Industry Regulatory Authority also Wednesday asked for full restitution for what it charges were misleading marketing and sales materials.

It was two years ago when I first wrote about Morgan Keegan, which is a unit of Regions Financial.

Morgan Keegan said in a statement that it intends to vigorously contest the charges, which it linked to the public's anger at the near collapse of the nation's financial system.

"During the time of the most challenging market turmoil, Morgan Keegan invested over $100 million of the firm's capital into shares of two of the hardest-hit funds in order to provide liquidity for shareholders who wished to sell their Fund shares," the satement said.

Fort Lauderdale attorney Jeffrey Erez had around 25 cases brewing against the firm when all this started in 2008. Now, he says, he has pursued 50 arbitrations.

"A lot of local people were lead to believe these were safe investments," Erez said this morning.

He says about 30 cases are now over, either settled or the investors prevailed at arbitration. One case he lost. His biggest win came last month, when arbitrators awarded more than $1 million to a retired Alabama veteran.

If you're interested in the documents, here's a link to the SEC charges.

And here's the FINRA news release.

And below is my column on the case, from two years ago this month:

Auction-rate securities taking victims

Date: Sunday, April 27, 2008

As good as cash. As safe as a bond fund.
A growing number of investors have learned those statements when uttered by someone on Wall Street had no meaning. The credit crisis made those promises unreliable. Now, individual investors whose money is frozen or whose assets have been sharply devalued are part of an angry backlash.
I'm hearing a lot these days about problems with auction-rate securities, which were marketed as a good alternative to money market funds with a higher yield. I'm also hearing about a certain high-yield bond fund, which was heavily invested in securities backed by risky subprime mortgages.
One Delray Beach woman told me her tale with a mixture of fury and indignation. She had taken her divorce settlement money to a broker at UBS AG. She thought she was putting it into a fund much like a money market.
She deposited $370,000 in what turned out to be an auction-rate securities fund. A short time later, her broker told her that UBS had written down the value of her account. She's lost $97,000. "And I didn't even touch the principal," she said. She asked me to withhold her name.
Attorney Jeffrey Kaplan of Dimond Kaplan & Rothstein, which has offices in Miami and West Palm Beach, has filed dozens of arbitration claims on behalf of investors over auction-rate securities. He's been retained by the Delray Beach woman. Kaplan says he's representing everyone from individuals to corporations that put $100 million into funds that now can't be accessed.
"She didn't understand. The brokers did not understand," he said. "This is not a unique circumstance."
Auction-rate securities are a special breed of long-term investments typically bought and sold regularly, so investors can cash out before the securities mature. They offer higher yields than the safe investments money market funds own.
Auction-rate securities, which are estimated to be a $330 billion market, turned out to be neither safe nor as liquid as cash, when the credit market seized up in February.
Now, some brokerages, including UBS, have reacted by writing down the value of the accounts to what UBS supposes the securities could be sold for today. "UBS is committed to addressing our clients' concerns about the market events that caused the breakdown of liquidity for auction-rate securities," the company said in a statement, in response to my request for a comment. UBS said it is working with individuals and offering loans up to the full value of the accounts.
Kaplan says some of his clients have taken action on their own. They found buyers, but they can't get the full value. They're selling at a 25 percent discount.
Others are trying to restructure their funds. Nuveen Investments of Chicago has announced plans to try to work 100 of its mutual funds out of this problem, starting with redeeming large portions of the funds' auction-rate securities.
State regulators are demanding action, too. Nine states, including Florida, have formed a task force to investigate the collapse of the auction-rate securities market.
"If the product was represented to be a cash-equivalent going in, it must be treated as a cash equivalent coming out," Karen Tyler, North Dakota's securities commissioner and president of the North American Securities Administrators Association, said in a statement.
It's not only the "good-as-cash" promise that has investors infuriated.
John Klecha is an accountant and he regularly manages his own investments. He needs to be conservative in his choices. How then did Klecha and his companion Betsy Blum end up in a bond fund that doesn't seem to know any direction but down?
It was sold to them by brokers at Morgan Keegan, a unit of Regions Financial Corp., say Klecha and his attorney, Jeffrey Erez, of Sonn & Erez in Fort Lauderdale. The fund, they said, was investing in risky mortgage-backed securities but that wasn't disclosed to investors. .
"The problem is I had no understanding that this particular fund was not a safe fund," Klecha said from his home in Lighthouse Point. "It was very risky."
Klecha knows bond funds can fluctuate. When interest rates go up, the value of bonds goes down. But not like this. In 2007, Klecha's fund, which is RMK Multi-Sector High Income, dropped 61 percent. This year, it's down 29 percent.
He doesn't feel like he can get out. And so, he, too, is filing an arbitration claim.
Erez says he's filed nine arbitrations about Morgan Keegan bond funds and he's been retained by 25 other clients to look into the issues.
Morgan Keegan spokesman Eric Bran said the company doesn't comment on matters in litigation or arbitration.
So what can you learn from these investors' experiences?
If the yield is good, ask why. The auction-rate securities funds offered investors better rates than money market funds. But higher returns are always associated with risk. The same goes for bond funds. Delve into what the fund owns.
If you can't take the loss of the money you have put at risk, don't take it. About the only options available to these investors at the moment is to sell at a discount or to liquidate some other investments if they need cash.
If you're not sure that you're getting the full story from your broker, read the prospectus. They're boring and full of legalese, but the prospectus is the closest thing to a commitment that you'll get from a fund.

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April 1, 2010

Interest rates rising will hurt bonds

But how much?

This chart, from T. Rowe Price, gives you a look at what would happen if rates rise (or fall) one percentage point, on various categories of bonds.

Bond investors or those thinking about going into bond mutual funds should be aware of what's ahead. Interest rates won't stay this low forever and the Fed has signaled its willingness to let rates begin to rise.

So many investors have rushed into bonds. Last year, more than $375 billion flowed into bond mutual funds, according to the Investment Company Institute. In January this year, another $26.9 billion went in, almost as much as the $27.6 billion that went into bond mutual funds in all of 2008.

Hope those investors are ready.


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You've got the job of managing your money. No one in school taught you how. But you and I, we can teach each other, how to handle it, how to save for retirement, how to make money last, how to educate the kids, how to make a budget work. The conversations I have with my readers are fun. Money's important, but discussing it does not have to be boring.

Harriet Johnson Brackey Harriet Johnson Brackey, the personal finance columnist for the Sun Sentinel, is an award-winning business reporter. Her columns for 2008 were named "The Best in the Business," a national award chosen by her colleagues at the Society of American Business Editors and Writers.

Brackey has worked at Business Week magazine and at USA TODAY, where she was a founder and part of the original staff of the Money section at the country's first national newspaper. After nearly 11 years there - spent covering the 1980s bull market, the insider trading scandals, the 1987 crash - Brackey left Washington, D.C., and came to The Miami Herald. She spent the next decade writing a column about personal finance that chronicled the stock market's Internet boom and bust, as well as the popular Money Makeover features.

Brackey also has done commentaries for Marketplace Money, which airs on National Public Radio and The Nightly Business Report which is broadcast on more than 250 PBS television stations nationwide. She also has been a radio guest on WLRN’s Miami Herald News.
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