Friday, October 21, 2016

This Week in Bank Failures

Cuts: Deutsche Bank is preparing more U.S. cuts but will maintain its Wall Street presence. HSBC will close its private bank in Monaco. The Wall Street Journal is offering a buyout package to all news employees worldwide and hopes to reduce staffing levels by about one sixth by next month.

Wells Fargo has lost its Better Business Bureau accreditation, the result of the bank’s $5 million ghost-account fraud against consumers and a surge in complaints in recent years. Meanwhile, the California attorney general is looking into allegations that the bank forged customer signatures.

Thursday, October 20, 2016

Shorter Seasonal Jobs

Christmas-season jobs may last for a shorter time this year. For a few years there was a trend for large companies to try to employ seasonal workers for nearly the entire fourth quarter. It rarely worked out that way, with work slowing in December and layoffs starting two weeks before Christmas. This time the largest seasonal employers plan to hire slightly more temporary workers, but for a shorter time. Many workers will have their jobs for only one month, from mid November to mid December. One reason for the shortened season is the worry that shoppers distracted by the presidential election may not start their Christmas shopping until November 11, the Friday after the election. The smaller number of jobs that last for a quarter will mostly be out of reach for walk-ons. Those positions will be reserved for workers returning from previous years.

Wednesday, October 19, 2016

Like a $1,000 Pay Cut

Three months ago, Starbucks drew up a plan to pay its employees more while giving them more health care choices. The benefit changes went into effect this month, and Starbucks employees are now seeing the raises reflected in their paychecks.

I talked to several Starbucks workers, and not one is taking home more money. Everyone is getting less. Those who opt for traditional health coverage, now called “gold,” are paying around $5,000 a year, or about $200 out of each paycheck, to cover their share of the insurance premiums. It is a high price when you consider the size of a retail paycheck. Most employees, to save money, selected high-deductible plans. The premiums are similar to last year’s, but a plan year deductible around $2,000 means that, in a good year, insurance won’t cover anything. Employees are paying for all health care out of pocket. That’s hard to do, of course, so many have signed up for health savings accounts to cover the gap. That’s the main reason the paychecks are smaller. Setting aside just $1,000 per year of before-tax income means your take-home pay is $28 less. Recognizing the impact, Starbucks provided across-the-board raises — its first in seven years, apparently. The raises are large enough to take much of the sting out of the situation, but with actual paychecks smaller than before, workers did not come out feeling like they’d gotten a raise.
Starbucks said its youngest, healthiest workers — those whose annual medical costs are zero — might do better with the change, but no one I talked to knew of a worker who fit that pattern. Many Starbucks workers are relatively healthy and in their 20s, but nearly all, it seems, have a continuing medical condition that requires monitoring and a prescription drug. The picture of the young worker who never sees a doctor has become a myth, it seems.
Baristas may not have quit Starbucks all at once this month, but they’re not happy. These are the gist of the reactions I heard: “I just have to take better care of my health because I can’t afford to see a doctor anymore.” “I’ll have to get another job.” “I don’t see why we can’t form a union.”
This is unfamiliar territory for Starbucks, which a decade ago had possibly the most loyal work force in the retail space. A seven-year wage freeze followed by a drastic cut in benefits has changed that, and now Starbucks is lagging a sector where many employers are making plans for a $15 minimum wage. The company knows it has more adjustments ahead and is looking at more ways to automate its store operations so it can get by with fewer workers. It is also considering a plan to close many of its locations. One thing is clear: as the labor market tightens, Starbucks can’t continue to operate the way it has.
The problems Starbucks faces are an inevitable result of the public policy decisions to tie health coverage to employment. The unfortunate result is that health care has become the largest wage tax ever, while many of the supposedly covered employees are shut out of the system again. Starbucks and its workers might be the ones affected this month, but in time, every employer will face some version of the problem. I don’t believe there will be a solution without real health care reform, and that won’t be coming soon in the current political climate. Eventually, though, health coverage for medical conditions not resulting from workplace injuries will have to be separated from employment. The chronic troubles of the labor market and health coverage are hard enough to address separately. Keeping these two vexing problems chained together just makes matters worse. Every solution you can think of creates a new problem somewhere else.

Friday, October 14, 2016

This Week in Bank Failures

Wells Fargo fired its CEO, but the move came with a surprisingly generous severance package. An insider was appointed as the new CEO. There are no signs of the bank adjusting its strategy or business model. Consumers are abandoning the troubled bank, with checking accounts declining the fastest. Nevertheless, the bank’s profit fell just 9 percent from the year before.

For years RBS systematically undermined its U.K. business customers according to a new report. In an intentional strategy, the bank abruptly raised interest rates on some 16,000 potentially vulnerable businesses in order to force them into restructuring. The bank would cut off credit, delay collecting deposits, or impose surprise fees to hurt a business’s cash position. Bank employees were paid bonuses for finding creative ways to squeeze a business. The bank then gained billions of pounds from restructuring fees while its customers, in many cases, went bankrupt.

Cuts: Deutsche Bank formalized its hiring freeze. It is said to be preparing to cut an additional 10,000 jobs and is looking for ways to accelerate its restructuring plans. Germany says it has ruled out any possibility of investing in the bank as part of a rescue package. Lloyd’s outlined 1,200 layoffs of its own. There are rumors of cuts at multiple banks in London and Singapore.

Arrested: The Singapore operations manager of Swiss bank Falcon Private Bank. Singapore has also revoked the bank’s license and started proceedings against former managers at the bank. The case involves money laundering of around $4 billion in funds connected to 1MDB.

Indicted: Brazil’s former president Lula da Silva and ten others face money laundering and conspiracy charges related to bribes used to arrange financing for an engineering company project in Angola. Prosecutors believe Lula was paid speaking fees for speeches he never delivered.

Settled: Monte dei Paschi will forfeit €10 million and pay a fine of €600,000 for false reporting of transactions and related crimes. The executives and managers involved are no longer with the bank.

Wednesday, October 12, 2016

Between Hurricanes, Peace

When I looked at the world this morning, it seemed unexpectedly quiet after the turmoil and disaster of the preceding week. It was nice not to have a hurricane tearing the East Coast and not to discover a new political scandal or financial crisis that had popped up overnight. Peace must be in the gaps between the hurricanes.

But wait. Looking at the world from a slightly different angle, there was no gap between hurricanes. Hurricane Matthew had left so much rainfall in North Carolina that the rivers would not return to normal levels for a month. In some ways the flooding in eastern Canada, heavily influenced by the same hurricane, was worse. Cleanup in Haiti and Cuba had barely begun because of the difficulties of reaching the more remote areas. Some people might starve! At the same moment, Hurricane Nicole looked like it had a moderate chance of strengthening to the level of a major hurricane before a direct hit on Bermuda that would start tonight. Meanwhile the unraveling of one of the largest political parties in U.S. history seemed, if anything, to be accelerating, while new signs of financial trouble could be seen in Europe and the nearest parts of Asia. Where was the gap between disasters?

Yet I did feel peaceful in comparison to previous days. Peace is subjective, after all; it is where you are or where you can find it. And peace is a blessing even when the circumstances of the larger world don’t seem to substantiate the feeling. Any moment in which anyone finds peace is valid. In that moment and at that place it is not a fake or delusional peace, but the kind of peace that matters, the kind of peace that has the potential to expand and extend, to spread to other people and places. Perhaps I could say that peace occurs in the imaginary gaps between the hurricanes. That is not quite right either, because while the gaps might not be explainable in the larger view of the material world, peace is real wherever anyone finds it. When you are there, there is no need to justify the feeling of peace and certainly no need to debunk it. Rather, notice it and make use of it while it lasts — because that might not be very long.