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Sunday, December 6, 2015

Short break in NFL coverage for Obama address

If President Obama wants his address to the nation about terrorism to reach the broadest possible audience, he picked the right date and time.









What to Do About Disloyal Corporations

Just like that, Pfizer has decided it's no longer American. It plans to link up with Ireland's Allergan and move its corporate headquarters from New York to Ireland.

That way it will pay less tax. Ireland's tax rate is less than half that of United States. Ian Read, Pfizer's chief executive, told the Wall Street Journal the higher tax rate in the United States caused Pfizer to compete "with one hand tied behind our back."

Read said he'd tried to lobby Congress to reduce the corporate tax rate (now 35 percent) but failed, so Pfizer is leaving.

Such corporate desertions from the United States (technically called "tax inversions") will cost the rest of us taxpayers some $19.5 billion over the next decade, estimates Congress' joint committee on taxation.

Which is fueling demands from Republicans to lower the corporate tax rate.

Donald Trump wants it to be 15 percent.

Mike Huckabee and Ted Cruz want to eliminate the corporate tax altogether. (Why this would save the Treasury more money than further corporate tax inversions is unclear.)

Rather than lower corporate tax rates, an easier fix would be to take away the benefits of corporate citizenship from any company that deserts America.

One big benefit is the U.S. patent system that grants companies like Pfizer longer patent protection and easier ways to extend it than most other advanced economies.

In 2013, Pfizer raked in nearly $4 billion on sales of the Prevnar 13 vaccine, which prevents diseases caused by pneumococcal bacteria, from ear infections to pneumonia -- for which Pfizer is the only manufacturer.

Other countries wouldn't allow their patent systems to justify such huge charges.

Neither should we -- especially when Pfizer stops being an American company.

The U.S. government also protects the assets of American corporations all over the world.

In the early 2000s, after a Chinese company replicated Pfizer's formula for Viagra, the U.S. Trade Representative put China on a "priority watch list" and charged China with "inadequate enforcement" against such piracy.

Soon thereafter the Chinese backed down. Now China is one of Pfizer's major sources of revenue.

But when Pfizer is no longer American, the United States should stop protecting its foreign assets.

Nor should Pfizer reap the benefits when the United States goes to bat for American corporations in trade deals.

In the Pacific Partnership and the upcoming deal with the European Union, the interests of American pharmaceutical companies like Pfizer -- gaining more patent protection abroad, limiting foreign release of drug data, and preventing other governments controlling drug prices -- have been central points of contention.

And Pfizer has been one of the biggest beneficiaries. From now on, it shouldn't be.

U.S. pharmaceutical companies rake in about $12 billion a year because Medicare isn't allowed to use its huge bargaining power to get lower drug prices.

But a non-American company like Pfizer shouldn't get any of this windfall. From now on, Medicare should squeeze every penny it can out of Pfizer.

American drug companies also get a free ride off of basic research done by the National Institutes of Health.

Last year the NIH began a collaboration with Pfizer's Centers for Therapeutic Innovation -- subsidizing Pfizer's appropriation of early scientific discoveries for new medications.

In the future, Pfizer shouldn't qualify for this subsidy, either.

Finally, non-American corporations face restrictions on what they can donate to U.S. candidates for public office, and how they can lobby the U.S. government.

Yet Pfizer has been among America's biggest campaign donors and lobbyists.

In 2014, it ponied up $2,217,066 to candidates (by contrast, its major competitor Johnson & Johnson spent $755,000). And Pfizer spent $9,493,000 on lobbyists.

So far in the 2016 election cycle, it's been one of the top ten corporate donors.

Pfizer's political generosity has paid off - preventing Congress from attaching a prescription drug benefit to Medicare, or from making it easier for generics to enter the market, or from using Medicare's bargaining power to reduce drug prices.

And the company has donated hundreds of thousands of dollars to the candidacies of state attorneys general in order to get favorable settlements in cases brought against it.

But by deserting America, Pfizer relinquishes its right to influence American politics.

If Pfizer or any other American corporation wants to leave America to avoid U.S. taxes, that's their business.

But they should no longer get any of the benefits of American citizenship -- because they've stopped paying for them.

ROBERT B. REICH's new book, "Saving Capitalism: For the Many, Not the Few," will be out September 29. His film "Inequality for All" is now available on DVD and blu-ray, and on Netflix. Watch the trailer below:

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My hack stole your credit card

Read full story for latest details.









Borrowers Pay the Piper for Lender Misdeeds

I have been turned down by 2 different lenders because my last years' tax return didn't show enough income from my business to qualify, despite a credit score of 800 and a down payment of 50%. Does this make sense?

No, it doesn't make sense. You and thousands of other potential home buyers are being rationed out of the market because of the misdeeds of lenders during the go-go years leading to the financial crisis. How we got to this state of affairs is the subject of this article.

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Underwriting rules focus on three borrower features that affect the probability that a mortgage loan will be repaid as promised. These are:

  • Payment obligations relative to income, which measures an applicant's capacity to make mortgage payments.

  • Equity in the property relative to property value, which measures the applicant's incentive to make mortgage payments.

  • Credit score, which measures the applicant's past reliability in meeting financial commitments.


Because most loans are sold by those who originate them, acceptable values of underwriting rules, and acceptable tradeoffs between them, are formulated primarily by the agencies who buy them or insure them: Fannie Mae, Freddie Mac and FHA. Loan originators can be more restrictive than the agencies in setting rules, but they cannot be less restrictive unless they are prepared to own the loans themselves.

In addition to the underwriting prongs described above, loan originators are concerned with the degree of rigor with which the agencies monitor underwriting decisions. An affirmative decision by the originator that turns out to be unacceptable to the agency results in a required buy-back or a mortgage insurance rejection, which carries significant cost to the originator.

Underwriting Becomes Flexible in the Years Before the Housing Bubble

In the years before the housing bubble, underwriting systems became increasingly flexible, driven in part by the development of automated systems at Fannie and Freddie, and by the development and increasing use of credit scores. Under these evolving rules, applicants could be weak in one underwriting dimension so long as they were strong in the other two. Flexibility was further increased by the development of alternative documentation requirements falling between the extremes of "full doc" and "no doc". Compliance with underwriting rules was subject to periodic spot checks by the agencies.

Underwriting Deteriorates During the Bubble

A bubble is a period of unsustainable price increases. The bubble period that preceded the financial crisis ran from September 1998 to June 2005, during which the Case/Shiller house price index rose by 10.5% a year. Over the preceding period from February 1975 when the index begins to September 1998, the average annual increase had been 5.5%.

When house prices are rising by 10% a year or more, borrowers' equity rises by the same amount, which makes it very difficult to originate a bad loan - one that results in loss to the lender/investor. Borrowers could be qualified on the basis of reduced payments that lasted only a few years because the loans could be refinanced when the initial payment period ended. Those that can't make the higher payments can sell the house at a profit. In the worst case where the lender had to foreclose, their costs are fully covered by the sale proceeds.

The bubble led to a liberalization of underwriting rules, and widespread violations of the rules that remained as scrutiny by the agencies largely disappeared.

Underwriting Becomes Rigid After the Financial Crisis

House prices stopped rising and began to fall after June 2005, causing enormous losses to mortgage-related firms, the insolvency of many, and a crisis of confidence during 2007-8. Underwriting rules did a 180 during these years, swinging from being excessively liberal to excessively restrictive and rigid. That is where they remain today, although house prices began to rise again starting in 2012.

Perhaps the most important of the underwriting rule rigidities involve income documentation. The abuses that arose during the bubble years and the losses that occurred when the bubble burst had such a major impact on the mindsets of lawmakers, regulators and Fannie/Freddie that an affordability requirement has become the law of the land; borrowers must be able to document that their income is adequate, regardless of how good their credit is and how much equity they have in the property.

The affordability requirement imposes an especially heavy burden on self-employed borrowers, who face the greatest difficulty in proving that they have enough income to qualify. Prior to the crisis, a variety of alternatives to full documentation of income were available, including "stated income," where the lender accepted the borrower's statement subject to a reasonableness test and verification of employment.

Stated income documentation was designed originally for self-employed borrowers, and it worked very well for years. Then, during the bubble period, the option was abused and stated income loans became "liars loans". After the crisis, instead of curbing the abuses, the option was eliminated.

My mailbox is crammed with letters from self-employed loan applicants with high credit scores and ample equity whose applications were refused because of an inability to document their income adequately.

The problem is heightened by the much strengthened surveillance over compliance, which increases risk to the originators. Assessing the income documentation provided by a self-employed applicant is a judgment call that carries a high cost to originators if they get it wrong. The loss on a required loan buyback can wipe out the profit on multiple good loans. The prudent path is not to invest any time in such loans, which is the policy taken by the lenders consulted by the frustrated applicant whose letter to me is cited at the beginning of this article.

For more information on qualifying for a mortgage or to shop for a mortgage in an unbiased environment, please my website The Mortgage Professor

-- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.











Borrowers Pay the Piper For Lender Misdeeds

"I have been turned down by 2 different lenders because my last years' tax return didn't show enough income from my business to qualify, despite a credit score of 800 and a down payment of 50%. Does this make sense?"

No, it doesn't make sense. You and thousands of other potential home buyers are being rationed out of the market because of the misdeeds of lenders during the go-go years leading to the financial crisis. How we got to this state of affairs is the subject of this article.

The Three Prongs of Loan Underwriting

Underwriting rules focus on three borrower features that affect the probability that a mortgage loan will be repaid as promised. These are:

  • Payment obligations relative to income, which measures an applicant's capacity to make mortgage payments.

  • Equity in the property relative to property value, which measures the applicant's incentive to make mortgage payments.

  • Credit score, which measures the applicant's past reliability in meeting financial commitments.


Because most loans are sold by those who originate them, acceptable values of underwriting rules, and acceptable tradeoffs between them, are formulated primarily by the agencies who buy them or insure them: Fannie Mae, Freddie Mac and FHA. Loan originators can be more restrictive than the agencies in setting rules, but they cannot be less restrictive unless they are prepared to own the loans themselves.

In addition to the underwriting prongs described above, loan originators are concerned with the degree of rigor with which the agencies monitor underwriting decisions. An affirmative decision by the originator that turns out to be unacceptable to the agency results in a required buy-back or a mortgage insurance rejection, which carries significant cost to the originator.

Underwriting Becomes Flexible in the Years Before the Housing Bubble

In the years before the housing bubble, underwriting systems became increasingly flexible, driven in part by the development of automated systems at Fannie and Freddie, and by the development and increasing use of credit scores. Under these evolving rules, applicants could be weak in one underwriting dimension so long as they were strong in the other two. Flexibility was further increased by the development of alternative documentation requirements falling between the extremes of "full doc" and "no doc". Compliance with underwriting rules was subject to periodic spot checks by the agencies.

Underwriting Deteriorates During the Bubble

A bubble is a period of unsustainable price increases. The bubble period that preceded the financial crisis ran from September 1998 to June 2005, during which the Case/Shiller house price index rose by 10.5% a year. Over the preceding period from February 1975 when the index begins to September 1998, the average annual increase had been 5.5%.

When house prices are rising by 10% a year or more, borrowers' equity rises by the same amount, which makes it very difficult to originate a bad loan - one that results in loss to the lender/investor. Borrowers could be qualified on the basis of reduced payments that lasted only a few years because the loans could be refinanced when the initial payment period ended. Those that can't make the higher payments can sell the house at a profit. In the worst case where the lender had to foreclose, their costs are fully covered by the sale proceeds.

The bubble led to a liberalization of underwriting rules, and widespread violations of the rules that remained as scrutiny by the agencies largely disappeared.

Underwriting Becomes Rigid After the Financial Crisis

House prices stopped rising and began to fall after June 2005, causing enormous losses to mortgage-related firms, the insolvency of many, and a crisis of confidence during 2007-8. Underwriting rules did a 180 during these years, swinging from being excessively liberal to excessively restrictive and rigid. That is where they remain today, although house prices began to rise again starting in 2012.

Perhaps the most important of the underwriting rule rigidities involve income documentation. The abuses that arose during the bubble years and the losses that occurred when the bubble burst had such a major impact on the mindsets of lawmakers, regulators and Fannie/Freddie that an affordability requirement has become the law of the land; borrowers must be able to document that their income is adequate, regardless of how good their credit is and how much equity they have in the property.

The affordability requirement imposes an especially heavy burden on self-employed borrowers, who face the greatest difficulty in proving that they have enough income to qualify. Prior to the crisis, a variety of alternatives to full documentation of income were available, including "stated income," where the lender accepted the borrower's statement subject to a reasonableness test and verification of employment.

Stated income documentation was designed originally for self-employed borrowers, and it worked very well for years. Then, during the bubble period, the option was abused and stated income loans became "liars loans". After the crisis, instead of curbing the abuses, the option was eliminated.

My mailbox is crammed with letters from self-employed loan applicants with high credit scores and ample equity whose applications were refused because of an inability to document their income adequately.

The problem is heightened by the much strengthened surveillance over compliance, which increases risk to the originators. Assessing the income documentation provided by a self-employed applicant is a judgment call that carries a high cost to originators if they get it wrong. The loss on a required loan buyback can wipe out the profit on multiple good loans. The prudent path is not to invest any time in such loans, which is the policy taken by the lenders consulted by the frustrated applicant whose letter to me is cited at the beginning of this article.

For more information on qualifying for a mortgage or to shop for a mortgage in an unbiased environment, please my website The Mortgage Professor

-- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.











The CEO Paying Everyone $70,000 Salaries Has Something To Hide


But there’s a problem with all those scenarios: The lawsuit predates the raise.

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The Fundamental Difference Between Leading And Managing: Influence Versus Direction

Leaders influence. Managers direct. While it may not be that black and white, leaders generally do focus on what matters and why as managers focus on how. Both use different forms of influence and direction at different times. But leaders have a bias to influencing by inspiring and enabling through advice and counsel while managers have a bias to command and control.

Coca-Cola's Doug Ivester was crystal clear on the difference. Sometimes he'd come to us and say,

"This is your decision to make. I'd like to give you my thoughts as input."


Since he was the CEO, we always considered his thoughts. Most of the time we did things the way he suggested. Sometimes we disagreed. We quickly learned that going back to the CEO and telling him that we decided he didn't know what he was talking about did not make for pleasant meetings. But it did work when we went back to him and said,

"Wanted to follow up on the decision we made on this subject. After we talked to you, we did some more digging and uncovered five things that you could not have known about. Given those new findings, we decided to go a different direction than what you had suggested."


He was fine with that.

Other times he'd say,

"See these stripes. I am the CEO of this company. I'm going to give you some direction which you will follow."


It was extraordinarily helpful to know when he was giving us input for us to consider in our decision and when he was giving us no choice but to follow his direction.

Decision versus input

The more companies I help with their executive onboarding and team onboarding, the more I'm becoming convinced that clarifying decisions versus input solves a whole host of other problems.

The most important thing for any two people to understand as they are working together is which of them is going to make which decisions so they know when they should be deciding and when they should be providing input into the others' decision.

Decision versus input for CEOs and Boards

CEOs and boards are a case in point. It's important for all the players to be clear on when the board is deciding versus advising and when the CEO is deciding and informing versus recommending.

At the risk of being overly simplistic, in general, for issues of:
  • Governance: the board should decide and the CEO should recommend and implement.

  • Strategy and long-term and annual plans including P&L, cash flows and balance sheets: the board should decide and the CEO should recommend and implement.

  • Operations: the CEO should decide and lead and the board should advise and be kept informed.

  • Organization: the CEO should decide and lead and the board should advise and be kept informed.


Decision versus input for partners

In any organization, there are natural (and unnatural) partners. It's helpful for these partners to be clear on which of them is deciding and which of them is influencing which decisions.

Take the case of a magazine publisher and editor-in-chief. They must work together as partners and communicate all the time. In general, it seems to work best if the editor-in-chief advises on marketing and pricing while the publisher makes those decisions. Conversely, the publisher should advise on content while the editor-in-chief makes those decisions.

RACI

Many have found the RACI framework helpful:
  • Accountable: Answerable for correct and thorough completion of deliverable or task.

  • Responsible: Does work defined and delegated by accountable person.

  • Consulted: Provides input and advice (Two-way communication)

  • Informed: Kept up-to-date (One-way communication)


Note the accountable person may answer to a higher approving or commissioning authority that delegates the task or project to that accountable person. RACI applies within the task or project.

Implications for you

Think input versus decide. For each important decision, clarify who makes the decision and who is providing input to the person making the decision.

This article originally appeared on Forbes.com

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