Greenwashing Alert: US Mega-Banks Rank Poorly on Sustainability Indicators

Talk is Cheap, but Coal Still Fetches a High Price
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Greenwashing is prevalent amongst large US banks. In “Ranking the Banks”, a recent report by the Interfaith Center on Corporate Responsibility and Sustainalytics, seven major US banks were rated on four different indicators relating to sustainability and corporate responsibility. The report ranks the financial institutions and their activities across select “social themes,” including their environmental consciousness, their tendencies to follow […]

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Progress in the Fight against Payday Loans

Across the country, countless Americans have trouble making payments on housing, auto loans, and healthcare, as well as affording food and other basic necessities. Many people throughout the country are strapped for cash, and the payday loan industry is devouring what little savings they have left. Although they’re advertised almost anywhere you go, most people don’t know how payday loans work. When someone needs cash to pay a bill or cover an unforeseen expense, a lender can give them the funds they need to meet their obligations. As with most loans, borrowers will pay back the amount they received plus interest. The caveat with payday loans, however, is that the interest rates applied are absurdly high; often as much as 200-300%. Very few borrowers seem to appreciate the gravity of an interest rate that high – and even those who do often feel they have no other recourse. By the time the payment on a loan is due, the added interest typically exceeds the balance of the borrower’s account; they now have no money in the bank, which is the reason the loan was taken out in the first place. By handing out more cash to cover the original debt plus late and overdraft fees, payday lenders continue to rope in long-term customers. These small, yet high-interest payday loans, or “deposit advances,” as big banks have come to call them, trap consumers in a perpetual cycle of debt that is […]

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An Unfinished Mission – Senator Warren Fights for Financial Reform

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An Unfinished Mission: On Tuesday, November 12, 2013, a group of financial experts gathered in the Russell Senate Office Building in Washington, DC to discuss the current state of financial industry regulatory reform, with a keynote speech by Senator Elizabeth Warren (D-MA). Speakers exhibited a sense of self-awareness that has been largely missing from the conversation on financial rulemaking; panelists […]

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What Do Your Credit Card Charges Support?

Cash or credit? In 2012, purchase volume in the United States from credit card companies Visa, MasterCard, American Express, and Discover totaled close to $2.1 trillion. Of these $2.1 trillion worth of transactions, cardholders’ issuing banks collect 1-3% in the form of an interchange fee. While 1-3% of the cost of a sandwich at Subway for lunch may seem negligible to you, consider all of the other people in the same restaurant using their credit cards, multiplied by the number of locations across the country, multiplied by the number of lunches each person purchases each year, and so on. If we crunch the numbers, we can deduce that credit-issuing megabanks collect between $20.5 billion and $61.4 billion each year on credit card transactions. The majority of that money goes to the 10 largest credit card issuing banks in the U.S. It’s difficult to believe that just a few institutions get to divvy up such large sums of money amongst themselves, especially when the individual charges to an everyday person’s credit card go largely unnoticed. As you might guess, those billions of dollars pay for high salaries and bonuses, and finance lending to fossil fuel polluters and other destructive industries around the globe. Let’s think for a minute about just how much money large banks amass from the collective totals of millions of miniscule charges, and how that money could be used to fund projects that could add real benefit to […]

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Newsflash: Regulating Banks is Good for Credit Card Customers

When Congress decided to reign in the abuses of the credit card industry four years ago through the Credit Card Accountability Responsibility and Disclosure Act (the Card Act), a lot of industry observers declared that increased regulation would lead to high costs for consumers overall.  Not so.  As reported in the New York Times, a recent study by Neal Mahoney, an economist at the University of Chicago found that federal regulation of credit card abuses has been unequivocally beneficial to consumers, to the tune of $20 billion per year. Before the Card Act, megabanks would regularly charge excessive fees and interest rates to cardholders, particularly low-income cardholders.  For example, banks would regularly jack up the interest rate on credit card holders for no reason – the cardholders were not delinquent in their payments – often to rates exceeding 25%.  Banks also played with the due dates for payments to engineer more late fees, and charged customers extra for paying by phone or over the internet.  These interest rates and fees boosted profits at megabanks, and acted as an enormous transfer of wealth from mostly working class and poor Americans to our wealthiest financial institutions, helping to drive record salaries for CEO and upper management. When the Card Act passed in 2009, the industry warned that consumers would be penalized overall with less access to credit and higher rates in general.  Overall, that has not happened.  While banks have pulled back […]

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JP Morgan Chase — Accountability Needed!

Banking giant JP Morgan Chase is in the midst of finalizing a settlement with the Justice Department, the Federal Housing Finance Agency, and the New York State District Attorney regarding its involvement in the 2008 financial crisis. While the exact number remains the subject of much debate, the bank could pay out as much as $13 billion for defrauding investors regarding securities it issued years ago. Based on its acquisition of Bear Stearns and Washington Mutual in 2008, JP Morgan is currently the subject of a massive investigation by the federal government into its mortgage lending practices. The two acquired companies were among the largest mortgage lenders in the nation, and they had reached that point largely by offering home loans to individuals with low income, bad or no credit history, or subprime borrowers.  To further complicate the matter, subprime mortgages were then “packaged” into securities and sold to investors at large scales. With hands off regulation from the government, paired with a highly competitive sales culture amongst the issuers of mortgage-backed securities, the subprime industry became too big and fast-paced to control. As we all learned, the bubble was unsustainable; when the bottom dropped out, financial institutions and insurers teetered toward collapse, and the US economy spiraled downward. If Bear Stearns or Washington Mutual had declared bankruptcy in 2008,the economy would have taken an even greater hit than it did. The federal government realized this, and asked JP Morgan […]

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Financial Fast: Leave the Credit Cards at Home

Last week, Tracy asked: One of the two rules of the Financial Fast is to pay for every necessity you buy with cash, not credit cards. How has this been going for you? Does counting out dollar bills when you go to the store make you more cognizant of the fact that your purchases are having an impact on your finances? I’ll make a confession right away: my financial fast has been messy, and we’ve broken some rules. I planned to walk side-by-side with Tracy as we both embarked on the 21-day financial fast, vowing to spend money only on essentials and forgo using credit cards. And  though I was excited to take on this challenge and use it as a jump-start to organize my financial life, the rest of my life has kind of gotten in the way. A series of events in my family has necessitated a certain amount of travel, and my financial fast went largely off track in exchange for ease during a rough few weeks. But even though I haven’t been hard and true with the fast, my best efforts have definitely taught me about my spending habits, helped me to develop some great alternatives to spending, and start important conversations in our house about budgets. And it’s also taught me about the importance of cash! I’ve been meaning for a while to tuck away my credit and debit cards and start using cash, and […]

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Financial Fast: Budgets and Journal Questions

“A budget is your roadmap to prosperity,” says Michelle Singletary in her book, The Power to Prosper: 21 Days to Financial Freedom. Why would that be the case? Budgets can keep us from spending more than we need, of course, since they set strict limits on unnecessary purchases. They can also help us save more, since the time we spend creating or revamping a budget is also a great time to deeply consider whether we can increase our savings and investments, and decrease the amount we allocate to unnecessary purchases. Here’s a “quick and dirty” rundown on how to create a budget, without purchasing a new computer program or app. Figure out your net worth (or the difference between your assets and liabilities): List all of your assets, including cash on hand; banking, retirement, and investment accounts; and the market value of your possessions, including your house, automobile, and furniture. List all of your liabilities, or what you owe on your mortgage, student loans, credit card debt, and any other outstanding debt. Subtract your liabilities from your assets, and you have your net worth! Is your net worth low or negative? Don’t despair—taking the Financial Fast is a great first step. It’s time to figure out how to pare down that debt and pick up your savings and investments. Now, let’s look at your cash flow, or the money flowing in and out of your wallet. Track your expenses for […]

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Financial Fast Monday: On Self-Improvement and Gratitude

One thing I’ve noticed as we’ve rolled out the idea of the 21-Day Financial Fast to our readers is that we have a lot of our more seasoned sustainability champions responding (often offline) with something like, “Well, I live my life like that every day.” On the surface, it’s a lovely pick-me-up to think about all of those committed Green Americans out there, taking action together for a robust green economy and world. When it comes to the Financial Fast, though, is that the healthiest response? Or do all of us have an area of our lives where we could do better? And shouldn’t we be acknowledging and encouraging those readers who aren’t as far along on their journeys to sustainability, by letting them know they’re not alone? That’s why I confessed my Bad Book Habit last week. I have a lot of good habits—you don’t work at a place like Green America without constantly picking up new green steps nearly every week to bring into your life. But the Fast is a time to figure out where you might not be so perfectly green. Maybe the little we do buy has too much packaging. Maybe we’re not saving enough for the future, if we have income coming in. Maybe we aren’t generous enough with our money. Maybe our savings is still sitting in a mega-bank, where it’s being used to fund endeavors that don’t support our values.  Maybe our investments aren’t socially […]

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The 21-Day Financial Fast Begins!

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Could you go 21 days without buying ANYTHING? (Other than food and other true necessities, of course.) Could you that long go without using your credit cards at all? That’s the question that Washington Post columnist Michelle Singletary posed in her book The Power to Prosper: 21 Days to Financial Freedom. As we noted in our interview with Singletary in […]

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