Denver, San Diego top cities with highest ATM fees

ATM fees have climbed ever higher.

Banks now charge an average of $2.40, up 3% from a year ago, for people who aren't customers but want to withdraw cash from their ATM machines, according to Bankrate.com's annual checking account study.

That doesn't include the average $1.41 fee your own bank slaps on top for going so-called "out-of-network," the study noted, meaning it could cost you nearly $4 to take out bucks from another bank's ATM.

Fees can also vary depending on where you travel. Denver tops the list as the city with the most hefty average ATM charge, at $2.75, followed closely by San Diego ($2.70), Houston ($2.69), Seattle ($2.63) and New York City ($2.60).

The differences can be explained by smaller, regional banks, which can vary in their fees, Greg McBride, senior financial analyst at Bankrate.com, wrote in an email. Big companies such as Bank of America and Citibank typically charge the same ATM fee no matter where you go, he wrote.

That can sometimes work out in your favor, especially for those who live and travel to Cleveland, which has the lowest average ATM surcharge at $2.06. Other cities with cheaper machines include Minneapolis ($2.15), Tampa ($2.19), Chicago ($2.20) and Cincinnati ($2.22).

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--Shan Li

Photo: A Bank of America branch in New York. Credit: Peter Foley / European Pressphoto Agency

German media mock U.S. advice on debt crisis

The Obama administration’s unsolicited advice to Europe on its government-debt debacle isn’t playing well in Germany, which will end up bankrolling any solution to the crisis.

The popular response, in a nutshell: Mind your own business, Amerika.

President Obama scolded Europe on Monday, saying its inability to contain the crisis was “scaring the world.” He continued to hold European policymakers’ feet to the fire on Wednesday, saying “we haven’t seen them deal with their banking system and their financial system as effectively as they needed to.”

Over the weekend, Treasury Secretary Timothy Geither called on policymakers to “create a firewall against further contagion,” and supposedly has urged the European Union to commit trillions more euros to its bailout fund for member states and their banks -- a move that German Finance Minister Wolfgang Schaeuble called “stupid.”

Spiegel Online on Wednesday published a collection of German media commentaries firing back at the  U.S.  Most biting was this one from the financial daily Handelsblatt:

Barack Obama governs a country where, despite billions in state aid, the economy is stagnating, companies refuse to invest despite calls for patriotism, and which gets embroiled in one political trench war after another … Now this country is dispensing advice, suggestions and finger-pointing.

These are suggestions that have already failed to work in the U.S..: Money is supposed to save Europe -- quickly and in the largest quantities possible. U.S. Secretary of Treasury Timothy Geithner has been trying for more than two-and-a-half years to suffocate his crisis with money. But aside from the lack of success, the collateral damage is immense. It manifests itself in a loss of government credibility, a loss of trust in the currency and the paralysis of any sort of dynamism -- because the crushing debt mountain is robbing the famously optimistic Americans of their confidence.

The fact that Barack Obama, who is a brilliant thinker, knows full well that things are much more complicated in reality does not help. Indeed, it does the opposite. In the desperate battle for his re-election he'd rather construct myths, such as claiming that the Europeans alone are responsible for the American mess. Not only is this fundamentally wrong, but -- coming as it does from a friend -- it's downright pitiful and sad.

-- Tom Petruno

Photo: German Finance Minister Wolfgang Schaeuble. Credit: Joshua Roberts / Bloomberg  News

Reports of boom-era mortgage fraud on rise

Mortgage fraud reports to the Treasury Department jumped 88% in the second quarter as banks, under pressure from investors to buy back defaulted loans, dug deeper into files from the easy-money era of the housing boom.

And California led the way in this dubious trend, Treasury's Financial Crimes Enforcement Network division said.

In a report Wednesday, the agency said mortgage servicers filed 29,558 suspicious activity reports involving loan fraud, compared with 15,727 in the same quarter of 2010.

Most of the fraudulent mortgages closed during the height of the real estate bubble, the financial crimes division said: 81% of the reports involved suspicious activities before 2008 and 63% described what appeared to be fraud occurring four or more years ago.

Charts from the Financial Crimes Enforcement Network show that California had more reports of mortgage fraud on a per-capita basis than any other state, followed by Florida and Nevada. Six of the top 10 metropolitan-area hotbeds of mortgage fraud were in the Golden State.

Banks are required to report suspicious activities to their regulators. The Treasury unit attributed the spike of mortgage fraud reports in large part to loan repurchase demands from investors who contend that mortgages backing securities were riskier than represented when the bonds were sold.

"Financial institutions are uncovering fraud as they sift through defaulted mortgages," Financial Crimes Enforcement Network Director James H. Freis Jr. said in a statement.

Fraud continues in new loans, albeit at a lower level, he added, with misrepresentations of income, occupancy, or debts and assets the most common violations.

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-- E. Scott Reckard

Photo: Financial Crimes Enforcement Network Director James H. Fries Jr. Source: Financial Crimes Enforcement Network 

The online gambling battle is slowly being won in America – just not by the Department of Justice

US authorities’ pursuit of online gambling companies over the past five years might have been made for TV.

There’s been the midnight detention of a FTSE chairman at New York’s JF Kennedy airport as well as the seizure of domain names and closure of websites by the FBI. And this month, Preet Bharara, Manhattan’s top government prosecutor and a man with an eye for headlines, provided the script for a whole episode by accusing Full Tilt Poker, an online poker company with operations on the outskirts of Dublin, of being a Ponzi scheme – something Full Tilt’s lawyers reject.

But even before memories of Bernie Madoff were dredged up, 2011 was proving the most significant year for online gambling in the US since Congress passed the Unlawful Internet Gaming Enforcement Act in 2006. The Act made it illegal for banks and credit card companies to process payments from online gambling companies. Cue a rapid exodus of foreign operators, including PartyGaming and SportingBet, both of which had thriving businesses here.

Then, on April 15 this year, Bharara moved in to hoover up the three biggest companies still offering online poker in the US. Full Tilt, Costa Rica-based Absolute Poker and PokerStars, headquartered in the Isle of Man, were charged with money laundering, bank fraud and illegal gambling.

The history of US gambling has just a handful of turning points – moral and religious objections rooted in American history ensured that. Nevada’s decision to legalise casinos in 1931; the opening of the first state lottery in New Hampshire in 1964; and New Jersey’s move, 12 years later, to allow casinos in Atlantic City.

April 15 was christened “Black Friday” by some in the industry, and may yet prove an addition to these defining moments. But as lawyers were readying charges last April, officials in a different corner of the US capital were preparing an announcement that may yet challenge the claim that April 15 has and signal a very different future for the multi-billion dollar industry.

On April 13, the District of Columbia became the first jurisdiction in the US to legalise online poker. Experts say that under a loophole in the 2006 law, states or jurisdictions can offer online gambling as long as it’s within their own borders.  Why would DC do it? It needs the money. Those who object to DC’s move and its possible spread now face two formidable foes: the internet and the holes drilled in states’ coffers by the financial crisis.

“There’s a tremendous push within various state governments to create revenue,” says Stuart Slotnick, a lawyer who helped SportingBet negotiate a settlement with US authorities. That’s not to say that online poker players or potential operators should uncork the champagne. Even if momentum for change is building, some remain sceptical that Congress will act. The last two years have seen at least three bills stumble. “This is not about forcing people to strengthen the windscreen wipers on their cars or something like that,” says one industry executive. “This is about trying to spread gambling.”

Indeed, most observers agree that if internet gambling is going to be legalised, it will be on a state by state basis and start with poker. For its defenders, poker has always been exempt from the 2006 law, which defines gambling as an activity predominantly determined by luck. Poker’s key ingredient is skill, they claim.

As is often the case, looking at what companies are doing may offer the most reliable guide of what’s next. In March, casino magnate Steve Wynn struck an alliance with PokerStars to push for the regulation of online gambling. While Wynn pulled the tie-up when PokerStars was charged, it indicated that US casino operators may see online gambling as less of a threat to their established casino businesses and more of an opportunity.

It’s less clear what legalising it would mean for foreign companies. Mr Slotnick says they’ll have an advantage because they have the technology and the experience of running such businesses. But it feels hard to believe the US casino companies won’t be favourites to carve up the market.

Either way, in an industry with few key points in its history, the next couple of years look poised to provide another.

Consumer Confidential: Milk lawsuit, sneaker settlement, toy recall

Here's your kitten-with-a-whip Wednesday roundup of consumer news from around the Web:

--A Los Angeles law firm has filed a class-action lawsuit alleging that various dairy companies and trade groups slaughtered more than half a million cows to inflate the price of milk. The suit filed by Hagens Berman alleges that the National Milk Producers Federation, Dairy Farmers of America, Land O'Lakes and Agri-Mark combined to form Cooperatives Working Together in order to fix the price of milk in the United States. CWT is a trade group representing dairy producers throughout the country who produce nearly 70% of the milk consumed in the United States. The lawsuit alleges that between 2003 and 2010, more than 500,000 cows were slaughtered under CWT's dairy herd retirement program in a concerted effort to reduce the supply of milk and inflate its price nationally. According to the complaint, the increased price allowed CWT members to earn more than $9 billion in additional revenue.

--You don't see this every day: A sneaker company will pay for people wearing its shoes. Well, sort of. Reebok will pay $25 million to customers to settle charges by the Federal Trade Commission that it made deceptive claims in ads that its toning shoes would strengthen and tone the legs and butts of those who wear them. The company is also barred from making any claims of the strengthening effects of the shoes unless it is backed by scientific evidence. Consumers will be paid either directly from the FTC or through a court-approved class-action lawsuit.

--Heads up: More than 1.7 million toy workshop and tool sets from toymaker Little Tikes are being recalled because of choking concerns. The Consumer Product Safety Commission says the play tool sets have oversized plastic toy nails that might get stuck in the throats of young kids. The recall is an expansion of a 2009 recall of about 1.6 million workshop sets and trucks with the same toy nails. The new recall involves an additional 11 models. Little Tikes has reported two additional incidents in which children choked when the toy nail became lodged in their throat. Both children made a full recovery. The incidents occurred before the 2009 recall.

-- David Lazarus

Photo: A lawsuit alleges that thousands of cows were killed to boost milk prices. Credit:  Lillian Chou

Does the European Commission want Germany to leave the euro?

A euro without Germany will be no euro at all

Almost every scheme anyone seems to devise for "saving" the euro appears calculated to make it more likely that Germany will leave, destroying the euro and the European Union in the process and inducing a recession unprecedented in modern Western democracies.  The latest silliness has emanated from the European Commission – until recently, throughout this crisis, one of the few bastions of near-sanity in a world gone mad.  Once one looks in detail at the Commission's proposals, they are not as crazy as the headlines, but why create headlines about Eurobonds and a €2 trillion leveraged EFSF anyway?  At best these are wacky blue-sky long-term concepts, chucked around for the intellectual delight of their creators.  At worst they can only invite the speculation that the European Commission actually wants the Germans to leave!

How much clearer do the Germans have to be that there isn't going to be debt pooling, that that would not be available as a "solution" to the euro crisis even were it in fact a solution (which it wouldn't be)?  How many times has Merkel now said she won't agree to debt pooling?  The great and the good of the German financial establishment have condemned it as an idea.  The German president has condemned it.  The German constitutional court has declared that debt pooling would violate the constitution.  ARE YOU GETTING THE HINT YET?

Many people seem to imagine that, in the end, the Germans will indeed agree to debt pooling, as if, when they say "we won't", they actually mean "we will"!  One of the greatest television programmes of all time was Jon Ronson's amazing 2001 Channel 4 documentary, "The Secret Rulers of the World: David Icke, The Lizards and The Jews".  The show follows conspiracy theorist (and former notable sports journalist and one-time favourite for the Green Party leadership) David Icke.  Icke is well-known for spicing up the classic Illuminati-type grand conspiracy worldview with the idea that the world's leading elite (the "Babylonian Brotherhood") are, in fact, reptilians from the constellation Draco.  In one of many wonderfully colourful scenes in the show, David Icke clarifies that when he is talking about lizards, he is not using some metaphor to refer to the Jews.  He turns to the camera and states "This is not a Jewish plot."  The journalist then says to David Icke: "“When you say ‘This is not a Jewish plot,’ some people think that’s a metaphor for you saying ‘It is a Jewish plot.’”"

Listen: when the Germans say "We are not going to agree to debt pooling", that is not a metaphorical way of saying "We are going to agree to debt pooling."

Given that the German position couldn't be clearer, any proposal to save the euro via debt pooling can only be a proposal for a euro that doesn't include Germany.  And a euro that doesn't include Germany is no euro at all.  If that is what the world's authorities are hoping to achieve, then they are going about it in precisely the right way.

Fed to monitor Facebook, Twitter to snoop on critics?

The Federal Reserve Bank of New York wants you to friend it -- or at least it wants to understand why you won't friend it.

In a move that illustrates its sensitivity to public perception, the Fed bank reportedly is seeking bids for software to monitor what's being said about it on social media such as Facebook and Twitter. In business vernacular, the Fed has issued a request for proposal. Here's a link to the RFP.

Word of the move has exploded in the blogosphere -- and if the Fed were monitoring social media currently it would find, not surprisingly, that the commentary has been less than flattering. Much of it, in fact, is of the Big Brother variety.

"What they really want to do is to gather information on everyone that views the Federal Reserve negatively," wrote the Economic Collapse blog. "It is unclear how they plan to use this information once they have it, but considering how many alternative media sources have been shut down lately, this is obviously a very troubling sign."

In a report to clients, Nicolas Colas, chief market strategist at ConvergEx Group in New York, attempted to put the firestorm in some (humorous) context.

"When leading presidential candidates threaten the head of the nation's central bank with charges of treason, it is safe to say that criticizing the Fed is the status quo position," Colas wrote. "Throw a bucket of deep-friend Oreos at any number of state fairs this fall and the majority of people you'll hit will likely have an unkind word or two about the U.S. central bank and its handling of the banking system over the last decade."

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Photo: The Federal Reserve in Washington. Credit: J. Scott Applewhite / Associated Press

 

Chinese subway crash renews doubts about infrastructure frenzy

China's flashy new airports, rail lines and highways are often cited as symbols of the country's inexorable rise. Meanwhile, it's the reverse in the U.S., where images of Amtrak or Los Angeles International Airport are supposed to evoke American decline.

But a pair of violent rail incidents, one in Shanghai on Tuesday and another in the southeastern city of Wenzhou in July, are changing that narrative as more Chinese are questioning the value of economic development that comes at the expense of safety.

Dubbed "blood-stained GDP" by some, the race to ramp up infrastructure at all costs is now exposing vulnerabilities in China's economic might.

"China should be more cautious and concentrated in avoiding risks," read an editorial Wednesday in the Global Times, a Communist Party mouthpiece. "Although this is hard to do, the tragedies in Wenzhou and Shanghai keep reminding people that China cannot afford failure."

About 270 people were injured Tuesday when two subway trains collided in Shanghai, paralyzing parts of the country's financial capital.

The accident came just two months after 40 people were killed when two high-speed trains collided on a viaduct in a rural section of Wenzhou.

That disaster sparked widespread outrage at the ineptitude of rail officials who appeared to bungle the rescue effort and then rushed to reopen the rail line. At least one train passenger famously chose to wear a helmet after the accident to show his disgust.

The incident in Shanghai, which boasts the world's longest subway system, has again prompted anger toward officials.

A blogger named Qi Jie on Sina Weibo, a popular Twitter-like service, suggested tying officials to the first car of every subway train to ensure that safety standards improved.

China's central government responded to the Wenzhou collision by slowing down trains, sacking officials and scaling back investment in high-speed rail.

What will happen to China's ambitious subway plans remains to be seen. The country will soon have underground networks in about three dozen cities, a boon to foreign suppliers such as IBM, Siemens and Alstom, a French conglomerate whose Chinese joint venture has been linked to both the Shanghai and Wenzhou incidents.

Between 2010 and 2015, China will have invested $180 billion in subway lines, tripling the network's reach to 1,864 miles.

It's an investment the country needs to get right, as China is now the world's biggest purchaser of automobiles and congestion has started to take an economic toll. An IBM survey released last year determined that Beijing and Mexico City have the worst commutes in the world.

The World Resources Institute has emphasized the need for sound transportation policy given the effect rising car ownership has on pollution and China's oil security.

But expanding the country's transportation network will now continue under a cloud of public skepticism.

"Careful planning is a must before a city begins to construct its subway system. Otherwise, it'll be a regret that can last over 100 years," Shi Zhongheng of the Urban Rail Transit Research Center at Beijing Jiaotong University told the China Youth Daily.

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-- David Pierson   
Twitter.com/dhpierson

Photo: Rescue workers carry an injured passenger outside the entrance to a subway station where two trains crashed in Shanghai on Tuesday. Credit: Associated Press

The dangerous subversion of Germany democracy

The Bundestag and the German people are being undermined (Photo: Alamy)

Optimism over Europe’s "grand plan" to shore up EMU was widely said to be the cause of yesterday’s torrid rally on global markets, lifting the CAC, DAX, Dow, crude and copper altogether.

This is interesting, since Germany’s finance minister Wolfgang Schäuble has given an iron-clad assurance to the Bundestag that no such plan exists and that Germany will not support any attempt to "leverage" the EU’s €440bn bail-out plan to €2 trillion, or any other sum.

"I don’t understand how anyone in the European Commission can have such a stupid idea. The result would be to endanger the AAA sovereign debt ratings of other member states. It makes no sense."

All of this was out in the open and widely reported. Markets appear to be acting on the firm belief that he is lying to lawmakers, that there is indeed a secret plan, that it will be implemented once the inconvenience of the Bundestag’s vote on the EFSF tomorrow is safely out of the way, and that German democracy is being cynically subverted.

The markets may or may not right about this. Mr Schäuble has a habit of promising one thing in Brussels and stating another in Berlin.

But it is surely an unhealthy state of affairs. One of the happiest achievements of the post-War era is the emergence of a free, flourishing, and democratic Germany under the rule of law.

Carsten Schneider, finance spokesman for the Social Democrats, spoke for many last week, denouncing the shabby back-room dealings as a scandal. "A new multi-trillion programme is being cooked up in Washington and Brussels, while the wool is being pulled over the eyes of Bundestag and German public. This is unacceptable."

Indeed it is.

Mr Schäuble has now been forced to give a categorical assurance that the EFSF will not be expanded. He cannot break his word without very serious consequences, or before the financial crisis turns deadly.

We have reached the point where the unseemly scramble to find ever more inventive and extreme ways to save monetary union – yet without coming clean, and invariably by trying to deceive German citizens about the real implications of each deal – is clashing directly with the integrity of German democracy.

Andreas Vosskuhle, head of the constitutional court or Verfassungsgericht, specifically warned this week that Germany is entering treacherous waters.

He said that the improvisation of far-reaching policies to shore up EMU had become "dangerous", and warned against schemes to circumvent the rule of law with backroom deals. "Germany has a great affinity for the rule of law. People expect the political class to obey the rules."

"There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit – which might be politically legitimate and desirable – then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people," he told the Frankfurter Allgemeine.

Dr Vosskuhle reminded politicians that they do not have the legal authority to sign away German constitutional prerogatives.

"The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution)," he said.

He repeated that the Court had set clear boundaries to EU bail-outs in a ruling earlier this month. "Our judgment makes clear that the Bundestag cannot abdicate its fiscal responsibilities to other actors. And no permanent mechanism may be created that entails taking over the liabilities of other states," he said.

Otmar Issing, the ECB’s founding guru, has gone even further in recent weeks, warning that the current course must ultimately provoke the "resistance of the people" and perhaps civil wars.

Dr Issing is not a German nationalist. He is open to the idea of an authentic union with a "European government controlled by a European Parliament" on democratic principles.

What he opposes is the deformed halfway house that is now Europe, where supra-national bodies – accountable to no elected body and taking decisions behind closed doors – are usurping legislative primacy over tax and spending. As he reminds us, it was monarchical assault on the power of the purse that led to England’s Civil War, and America’s Revolution.

Large matters.

As for the assurances of Mr Schauble, either he really is lying, in which case there will be all Hell to pay in the Bundestag, and most likely a massive political backlash that will change German politics profoundly.

Or he is not lying, in which case there is no plan to save the eurozone, and we therefore face the mounting risk of a spiral into a banking crash, serial sovereign defaults, and a disorderly break-up of EMU.

Not pretty.

Safety Nets and Their Cost

Casey B. Mulligan is an economics professor at the University of Chicago.

The United States Coast Guard’s search-and-rescue division is considering some of the same trade-offs that are found in better-known safety-net programs related to unemployment and health care.

Today’s Economist

Perspectives from expert contributors.

Among other duties, the Coast Guard rescues people in, on and near United States waters. In addition to having highly trained life-saving personnel, the Coast Guard has ships, helicopters, planes and some of the world’s most modern life-saving equipment.

Perspectives from expert contributors.

Taxpayer financed, the Coast Guard every day offers its services free of charge to the people it rescues. In that regard, the search-and-rescue part of the Coast Guard is a kind of safety net –- taxpayers pay so that people can have help on the rare occasions when they need it.

In fact, these search-and-rescue activities predate Medicaid and unemployment insurance; the Coast Guard can be traced back more than 200 years to a private search-and-rescue organization in Massachusetts called the Humane Society.

Safety-net programs have what economists call “moral hazard” as an unfortunate byproduct: recognizing that the government is standing by to help, some people do too little to take care of themselves. For example, a significant fraction of unemployed people delay finding a new job until their benefits run out. This may not be a choice we condone, but because unemployment insurance makes unemployment a little less painful, some people will respond by doing less to exit unemployment.

In their marine rescue efforts, the Coast Guard has noticed that many boaters do not wear life jackets that can prevent or delay drowning, and a number of boats venture miles offshore without a radio beacon that can help rescuers find troubled boaters.

Unfortunately, some boaters’ imprudent actions may actually be the result of the Coast Guard’s life-saving proficiency. Boaters know that they can call the Coast Guard when their boat takes on water, catches fire or otherwise becomes disabled, and many times help will arrive before the boaters have to leave their vessel and jump in the water. The Coast Guard even has ways of locating people who do not have radio beacons.

President Obama signed a health care law that will require Americans to get health insurance. Although less known, President Obama also authorized the Coast Guard to consider mandating radio beacons for boats venturing offshore and mandating that boaters wear life jacket in many situations (the Coast Guard has long required boaters to have life jackets on board, even if they are not worn).

Although it is sometimes asserted that the federal government has limited legal power to mandate citizens’ purchases, there can be a good economic case for mandates. While economists are often not inclined to interfere when a person knowingly risks his life for thrills or any other reason, the fact is that our government is in the safety net business, so individuals may take risks without recognizing the costs they create for rescuers.

A boat owner may save himself a few dollars by forgoing the purchase of a radio beacon, and that can ultimately cost the Coast Guard –- and thereby American taxpayers –- a great deal of money in search-and-rescue resources. Over all, it might be cheaper if the owner were force to make the purchase.

On the other hand, it is possible (although not logically necessary) that mandating marine safety equipment may encourage dangerous activities on the water, because the safety equipment reduces the costs of dangerous activities. Years ago, Prof. Sam Peltzman of the University of Chicago found that mandating the wearing of seat belts in automobiles resulted in more dangerous driving and more accidents, because, thanks to the seat belts, the average accident was less deadly.

As always, helping people has its side effects, and some rescues are necessary because the safety net exists.