This email was sent to Money Box subscribers on 21 May 2010

Dear Listener

 

I took a detour round the volcanic ash cloud this week to visit New York to seek the truth about investment bank Goldman Sachs. More on that later. But it was a good excuse to take an hour off to visit the newly enlarged Morgan Library and Museum which showcases the collection built up in the early 20th century by investment banker John Pierpont Morgan. There is his study and original library full of perfect works of art dating from five thousand years ago to the renaissance together with his priceless collection of rare books and manuscripts. In the American way it was all given to the nation to enjoy after his death.

Back home our new Coalition Government has promised to “give regulators new powers to define and ban excessive interest rates on credit and store cards.” So here are three ideas taken from debates on the new and massive financial regulation laws passed by the US Congress this week.

 

Idea number 1: credit reports in the US are free. In the UK you are entitled to your credit report for a nominal sum of £2 – an amount that is small enough to be worthless to the agency but big enough to be annoying to the customer. Why not make them free here too?

 

Idea number 2: when a US credit reference agency sends you your credit report it will in future have to include your credit score. That number between 1 and 999 determines whether you will get credit or not and, if you do, at what price. In the US the score is sold to customers for $14.95, even more than the £6.95 charged here in the UK. The score will also have to be provided free to anyone who is refused credit or charged a premium rate of interest.

 

Idea number 3: Some states in the US impose a cap on interest rates. The Supreme Court ruled thirty two years ago that the state law applies to where the bank is based not where the customer lives. So banks base themselves in states that do not impose a cap and many states do not see the point of passing a cap if it won’t help their residents. The new law changes that and says the cap applies to where the customer lives not where the bank is based. Its proposer Senator Sheldon Whitehouse says that will encourage more states to impose a cap and people would “see a difference as soon as their states respond. They can be protected from these outrageous 30 per cent interest rates”.

 

Incidentally, the US is currently discussing as we are here the question of taxing investment gains as income. At the moment they can be taxed at 15%. The change would tax them at the highest rate imposed on income – soon to rise from 30% to 39.6%. Needless to say accountants are busy devising ways round the new levy even before it has become law.

 

In this week’s Money Box

 

*** The first interview with the new Pensions Minister the Liberal Democrat Steve Webb and a man who knows a great deal about pensions and has campaigned for radical changes in the past. Hear what he says as Minister in his first interview.

 

*** Germany bans naked short selling. Hold on, first what is short selling? Second, what is doing it naked? And third, does it get more exotic than that? We explain and look at whether that ban has caused the prices of shares to plummet.

 

*** This week the anti-Crufts of the shares world reveals not the best but the worst in show. The dogs of the investment world (using the word ‘dog’ in a pejorative sense, which will no doubt upset some of you, rather than in the sense of your best and most loyal companion) have done worse than their peers every year for three years and have lost their customers at least 10% of their cash. So are people who buy them barking? Woof woof.

 

*** And from today, Friday 21 May 2010, homes for sale (in England and Wales) will no longer need a Home Information Pack. Good news for the housing market? Perhaps. Bad news for the 3000 inspectors who prepare them? Definitely. And what alternatives are there to speed up this historically very slow process of buying and selling property?

 

The door is firmly shut on at least three other stories that begged for airtime but we said ‘no’ – or in some cases ‘perhaps next week’. And the day is not half over. So find out what made it and what didn’t by listening to Money Box at noon on Saturday, at nine pm on Sunday, or at any time on the website www.bbc.co.uk/moneybox. There you can also watch videos, follow up items, read web pieces, download transcripts, follow links, and send us stories or ideas you want us to look into. And of course Have Your Say on one of these topics. 

 

And make a note now of ‘The Truth About Goldman Sachs’ on Radio 4 on Monday at 8pm. Find out what I was really doing in New York.

 

Best wishes,

 

 

Paul

 

PS don’t forget the programme trail on Breakfast on BBC 1 between 0845 and 0900 on Saturday.

 

 

 


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