Congress voted down the Troubled Assets Relief Program (“TARP”) legislation, much to the chagrin of the financial markets. At the moment, the markets continue to be in distress, despite a “dead cat bounce” in stocks today. What should you be doing in terms of your household finances? Read the full article

In June I wrote about Bank of New York Mellon's reported loss of computer tapes containing four million people's personal information. This month, BNY Mellon got around to informing me: I was one of the four million. Read the full article

Unless you live in Lake Wobegon, it hasn't been a quiet month:

• Fannie Mae and Freddie Mac are in federal conservatorship
• Merrill Lynch is now part of Bank of America
• Lehman Brothers Holdings filed for Chapter 11; its assets have been purchased by Barclay's PLC
• The two investment banking giants left standing, Goldman Sachs and Morgan Stanley, have been converted to bank holding companies
• AIG has received an infusion $85 of billion from the Federal Reserve in return for a 79.9% ownership position
• Washington Mutual became the 13th bank failure of the year (and the largest bank failure in U.S. history); the bank's assets have been sold to J.P. Morgan Chase

I've added Credit Slips to my list of great blog links.

The Credit Slips blog is run by seven academics who specialize in debt issues; the blog also fields quite an array of guest authors. Credit Slips has been particularly interesting lately as its writers have weighed in on the bank bailout plan currently under debate. The blog covers all things credit-related, include legislation under consideration, bankruptcy, credit reporting, medical debt, student loans, etc. I’m finding it very interesting reading. Read the full article

I don’t write many blog-centric posts, but I’ve noticed something interesting in the past week. Last Monday, as the wizards of Wall Street blinked and the markets went crazy, traffic to the FFS Blog jumped by 4 or 5x. I assumed it was a one-day event, but as you can see from the attached Quantcast graph, traffic on the site has remained higher than normal.



A number of people got here by Googling phrases like, “are mutual funds insured,” “are brokerage firms insured,” and the like. The traffic hasn’t dropped back to where it was, suggesting that there are still a lot of folks anxious about the safety of the financial markets. I hope the information here is helpful to you.

If any of my readers have questions that you’d like me to tackle in the blog, please drop a note to FFSBlog “at” FFSCambridge.com (I’ve avoided using the “at” sign to thwart spammers, but you know to substitute an @ for that). I can’t promise to post on every idea I get – this isn’t my day job, after all – but I’ll seriously consider anything that comes in. Be patient, though.

A final note: readers who would like to get a once-a-week summary of my posts may do so using the new FeedBlitz widget on the upper left-hand side of the blog. Read the full article

In my first post on emergency funds, I discussed why having an emergency fund is a wise idea. The next question is, how big does an emergency fund need to be? Read the full article

The Subprime mortgage mess and its aftermath were partly the result of risks not being priced appropriately. Interest rates for risky mortgages and bonds should have been much higher given the level of risk involved. As financial markets still recover from the aftermath of risk being underestimated, there is a good chance that there are now areas where risk is being overestimated. This week’s issue of Barron’s has two interesting suggestions in this regard. Read the full article

The financial markets seem to be taking a breather after last week’s roller-coaster rides. We’re all digesting the latest news of short-selling restrictions and a $700 Billion stabilization plan for mortgage-related debt. But now is also a good time to step back and think more broadly. Read the full article

Web-based e-mail accounts like Yahoo and GMail provide a lot of convenience, but apparently with convenience comes risk. Prior to the news of the hacking of Sarah Palin’s Yahoo account, I had assumed that this kind of thing required a phishing attack, but now I know better. Tech sites have been speculating about how her account was accessed and it’s been noted that the “lost password” protocols for Yahoo are not hard to beat. A hacker might be able to guess well enough to gain access to your account. Read the full article

This Monday, something very unusual happened: a money market fund began trading its shares at 97 cents, instead of a dollar.

Reserve Primary Money Fund (RPFXX) was forced to write down three quarters of a billion dollars of Lehman Brothers debt as a consequence of the Lehman bankruptcy. Even though the debt may eventually be partially paid through the bankruptcy process, as a current obligation the debt has no value. Thus the fund’s share value had to drop, forcing the fund to “break the buck.” On Monday and Tuesday, investors in the fund pulled out $27 billion in response.

FT Alphaville reports that one of Putnam Investments’ institutional money market funds has decided to close and liquidate itself, not because it needs to “break the buck” now, but because of concern that a future run on the fund might force a fire sale of its assets.

Money market funds are normally thought of as stable places to put cash, but even money market funds are not guaranteed not to lose money. How can you judge how safe your money market funds are? Read the full article

American International Group, one of the largest insurance companies in the world, has been struggling to stay afloat this week. Moody's Investors Service and Standard & Poor's lowered their ratings on AIG; these downgrades, in turn, trigger clauses in AIG’s contracts with its trading partners that could require the company to raise billions for collateral or penalty payments. It looks as though the federal government has decided to keep AIG from going under.
Still, today insurance policyholders may have been wondering: what happens to my insurance policy if the insurer goes bankrupt? Read the full article

As residents of Houston and Galveston grapple with the aftermath of Hurricane Ike, it strikes me that every year, some part of the US must deal with a natural disaster. Hurricanes in the Gulf and southeastern states, wildfires and earthquakes in California, and flooding in the Midwest often leave lasting consequences for those living in the affected areas.
Although such events happen relatively infrequently in New England, the region is hardly immune from the possibility of a serious natural disaster. Being prepared for a disaster should be an important part of every household’s risk management strategy. Read the full article

Douglas Adams’ Hitchhiker’s Guide to the Galaxy described a fictional intergalactic travel manual of the same name. The guide had the words “DON’T PANIC” written “in large friendly letters” on its cover. Investors could use a copy of the Hitchhiker’s Guide right about now…. Read the full article

The Federal Reserve Bank of Boston recently issued an interesting analysis of the nature of the subprime mortgage crisis in Massachusetts. Using data on mortgages, home equity loans, and deeds recorded between January 1987 and March 2008, the researchers were able to examine in detail the nature of the loans that ended in foreclosure. Some of their conclusions are surprising, while most fall in line with what one might have guessed. Read the full article

As the graph below from BlogPulse.com shows, the announcement of the Fannie-Freddie takeover generated a burst of activity in the blogosphere.



In perusing some of the posts on the topic, it looks as though a lot of people are upset at what appears to them to be a bailout. In fact, it is a bailout, but at this point in the game, I think the U.S. Treasury really had very little choice. Read the full article

I’m happy, but tardy, to announce that I have been accepted as a member of the National Association of Professional Financial Advisors, a.k.a. NAPFA. I put so much effort into applying that after I was admitted, I forgot to announce it. Read the full article

Finally, I've gotten around to establishing a blog roll for web logs related to things I write about here. I'm inaugurating it with three selections and I thought I’d let my readers know a bit about each one. Read the full article

Last Friday’s Boston Business Journal reported that banks in Massachusetts have cut back significantly in making both commercial and consumer loans. Also, according to a Federal Reserve Bank of Boston survey, since the beginning of the year, banks have been tightening their approval standards for all kinds of loans. Read the full article

The Treasury Department's much-anticipated plan to prop up Fannie Mae and Freddie Mac has finally been (mostly) revealed. The move should help a bit to keep mortgage markets afloat, but if you're not sure what all the fuss is about, this short primer should help. Read the full article

Predators keep an eye out for weakness in their prey. Now that many lenders have left the educational loan market, students and parents will have a harder time finding loans. It’s likely that con artists will take advantage of the situation by cranking up the level of phony financial aid and loan solicitations. SmartMoney.com has a helpful article that decribes college funding flim-flam schemes. The article also points out some useful resources for families seeking scholarships and other sources of college funding. Read the full article

Most financial planners advise their clients to have money set aside in an emergency fund. Occasionally my clients ask me why they need to keep money on hand for emergencies.

If you’re like most Americans, once you’ve paid your credit card bills, mortgage, and your other bills, there’s not much left of your paycheck. If you’re someone who lives far below his or her means (by this, I mean that you have two or three thousand dollars a month or more left unspent from your income every month) you have the capacity to cover many typical unexpected expenses, like the sudden failure of your heating system in the middle of winter. If that's your situation, you’re in a position to cover emergency expenses from your cash flow – unless the emergency happened to be the loss of your job, in which case you’d still be in trouble.

The fact is, though, that few households have large amounts of cash flow that go unused from month to month. Read the full article

Master Limited Partnerships are complicated investments in which you share in the profits from an income-generating business. Most often these partnerships make their money in energy-related businesses. They’re publicly traded and offer certain income tax benefits. They aren’t for everyone, however. Read the full article

As a result of a class-action suit against the Transunion credit bureau, consumers can obtain six to nine months of free credit report and credit score access if they qualify for inclusion in the class. Read the full article

In Part 1 of this series, I explained why people need life insurance; in Part 2, I explained the basics of “how insurance works.” A question that people always have is, “how much life insurance should I buy?” There are various guidelines for estimating how much life insurance one should buy. Alas, they usually lead to the wrong answer. Read the full article

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