Economics

Despite the common concern that immigrants to the U.S. take jobs that would otherwise go to American citizens, immigrants actually create jobs and promote innovation. Two recent articles in The Economist look at this topic. In the March 7, 2009 issue, a study by Harvard economist William Kerr and University of Michigan economist William Lincoln looked at how patent production changes in response to changes in the number of H-1B visa holders, immigrants with technical skills. When the number of H-1B visas was increased by 10%, total patenting increased by 2%, caused mostly by patent activity by immigrants. However, rather than reducing the number of patents by the native population, those also increased. In the March 14, 2009 issue’s special report on entrepreneurship, it’s noted that H-1B visas are capped at 85,000/year, and a maximum of 10,000 from any one country, increasing the wait for large countries such as India and China, where the wait time is about six years. There are over one million people waiting. This issue also notes that about half of Silicon Valley’s startups are founded by immigrants, and about 25% of all U.S. science and technology startups have a CEO or CTO who is an immigrant, and these companies employ 450,000 people and generate $52 billion in annual revenue. A quarter of U.S. patent applications in 2006 name foreign nationals as inventors or co-inventors. ...

$10.1 billion in federal stimulus money has been released to the states by the Department of Housing and Urban Development, and Arizona is receiving more than $150 million of that. And what is that money to be used for, in a state where there are tens of thousands of homes for sale with few buyers (50,000+ in Maricopa county alone)? Building more housing. The Arizona Republic reports that Millions of dollars more will go to state and local programs. That includes $32 million to begin construction of affordable rental housing, $22 million to prevent homelessness and $12 million to build or repair public housing across the state.To the extent this money is used to build new homes, as opposed to repairing deteriorating ones, it’s just going to accelerate the decline of home prices, putting more homeowners underwater and providing them with more incentive to walk away from their mortgages. Now, I think that a further decline in home prices is inevitable, no matter what the stimulus money tries to do, but it’s ridiculous to throw additional money at accelerating that process. It makes about as much sense as using federal stimulus money to give grants to investment bankers to develop more complex collateralized debt obligations. Now, this isn’t actually quite that bad, since it does apparently focus on some particular communities–a third of the money is for Native American communities that didn’t get a housing bubble of speculative buying. Some of it is also for families that need short-term help with utility bills, rent, or other expenses (something that the Modest Needs Foundation has been doing for years with private donations). And Tucson is apparently using it to improve energy efficiency of existing public housing units. Those are all much more reasonable uses of the money than building more houses. ...

I recently wrote about how Chase Bank’s inflexible systems just cost it money by not allowing me to make a $100 payment to my mortgage account to make up an erroneous underpayment. Instead, I had to make an entire additional payment, depriving them of a significant amount of future interest. In January, I received an offer from Chase Bank to open a checking account with them, with a minimum deposit of $100. After I set up direct deposit, within ten business days of the first deposit they would deposit $125, which would be mine to keep so long as I left the account open and receiving direct deposits for at least six months. I asked an online banker whether there was any minimum amount that had to be direct deposited, and was told no. I decided to set up the account in person at a branch near my office, and again asked whether there was any minimum direct deposit. The banker told me no, there was no minimum–if I wanted to deposit only $1 per paycheck, that would be fine. As I have no interest in using Chase Bank as my primary bank–I’m quite happy with a regional bank that is one of the top-rated places to work in the country and has demonstrated reliability to me repeatedly over several decades–I decided to maximize my return on this otherwise non-interest-earning account by minimizing my deposits. My employer provides a convenient way for me to control my own direct deposits into up to three different banks, so I added a new direct deposit of $0.01 per paycheck into my new Chase Bank account. The first $0.01 went in on January 15. On January 30, no $125 had been deposited, so I sent an online email inquiry asking when I could expect to see it. A response a couple days later told me I needed to call in to get an answer to my question, so I dialed the toll-free number, waited on hold, and finally got to a person who told me I needed to wait four to six weeks after the first direct deposit. My second $0.01 went in on January 30. My third $0.01 went in on February 13. Still no $125. Today, I got another $125 offer from Chase Bank, which prompted me to dig up my application materials and see that they promised my $125 would be deposited within ten business days, not four to six weeks. So I called and left a message for the banker at my branch, I sent another online inquiry asking whether Chase Bank is going to remedy its failure to honor its offer, and called in to the toll-free number again. I described the issue to my “telephone banker,” and he asked for my account information. When he brought up my account, he asked if the $0.01 deposits were pre-authorizations for direct deposit, and I told him no, those are the deposits–I was told multiple times that there was no minimum deposit, and there is nothing in the written offer that mentions a minimum deposit. He was unable to solve the problem, and said he would have to send it to be researched, and I would hear back within a couple of days. If they didn’t want to honor the offer, they shouldn’t have made it in the first place. By failing to live up to it, they’re costing themselves even more money. It’s surprising to me that this is probably the strongest of the major banks in the U.S., and the least likely of the majors to end up costing the U.S. Treasury money in the long run from the TARP’s preferred investments ($25 billion put into Chase so far). UPDATE (February 18, 2009): I received a voice mail from Chase Bank stating that the promised $125 will be deposited into my account within the next two weeks. My real-life banker left me a voice mail saying that the issue was that their system doesn’t automatically count direct deposits for issuing an award if they are less than $1. So they do intend to honor their offer, it will just take longer since I used the system in a way they apparently didn’t anticipate (or did anticipate with the same reasoning companies use with rebates). UPDATE (February 25, 2009): My $125 was deposited yesterday. ...

My mortgage has been purchased by Chase Bank a couple of times (after the first time, I refinanced with another bank and then Chase bought my mortgage from them), and they’re my current lender. I pay extra principal with every payment, usually about 30% more. For my February payment, I decided to reduce the extra principal a bit, for various reasons including keeping a bit more cash on hand in current economic conditions. Unfortunately, I made a $100 error in my payment. Rather than paying an extra $40.37, I underpaid the monthly payment by $59.63. I learned my mistake when I received my mortgage statement, indicating that my entire payment was in “suspense funds received” and had not been applied to my mortgage at all. I immediately called Chase. Even though it was an hour before their call center closed, I was unable to get to a human being. Instead, after being told I was being transferred to customer service, I got an automated message saying that my call could not by completed. I looked for online options for payment, but the Chase website referred me instead to their phone-based “FastPay” system. The “FastPay” system by phone charges a $15 fee (which the phone system says can be avoided by using the online payment system) and only allows making a full payment. I tried again the next morning, and got through to Tonja, a customer service rep who told me that I could only make a full payment through the phone (not the $100 I wanted to pay), but said if I connected an external bank account online, I could make the payment that way, and as soon as the extra $100 was received, the payment would be applied as normal. I’m also well within the 15-day grace period for a payment, so I don’t have to worry about late fees. Online, I searched through some counter-intuitive menu options–within the mortgage account, payment options send you to the page about FastPay over the phone–I finally found that from the front page I could get to an option to connect an external account. I started the process, and learned that my bank could not be connected instantly by putting in my online banking authentication information, but had to use a method of verification where Chase puts two small deposits in my account and I come back later and input those amounts back to Chase to prove that it’s my account (or at least that I have access to it). It then allowed me to attempt the instant verification method, despite its previous claim that my bank didn’t accept it, but that failed (and I probably shouldn’t have tried–Chase shouldn’t have my authentication credentials to another bank). It then said it would take up to two business days for these deposits to go through. The next day, my bank showed me that there were two pending deposits from Chase (yet another cost Chase is incurring), so I went back to the verification page and entered those amounts. Chase’s website informed me that because those deposits had not been made yet, I was not allowed to verify the amounts yet. Dumb design. I tried again later in the evening, and my verification was accepted. Now I went to the page to make a payment, only to find that once again, the only option is to make an entire payment. Contrary to what Tonja told me, I cannot pay just an additional $100, because there is an outstanding payment that hasn’t been made, and my $1100 sitting in “suspense funds” doesn’t count and can’t be used. Well, I’ve got the money in savings, so I decided that if Chase is going to make things so difficult, I’m going to go ahead and make a full extra payment and deprive them of a little more interest over the life of my loan, in addition to the overhead costs they’ve incurred through this episode. The website told me it would take two business days to process, so it will be applied on February 11–still during the grace period. But now I still am not sure that the $1100 will be applied to principal reduction, so I called in again and spoke with Kim. I explained what has happened, and pointed out to her that Chase is losing money from its inflexibility, and she offered to move $100 from my January extra payment to February so that I could cancel the additional payment. I thanked her for the option (which I would have needed to take if I didn’t have the money to spare), but declined, since that would result in an increase in interest. I asked if she could verify that the $1100 would be applied correctly, and she suggested that I call in again after I see online that the new payment is applied–which will incur yet further costs to Chase. This is a nice demonstration of how an inflexible payment system doesn’t deal well with partial payments can cost a company money and customer goodwill. ...

In a recent paper, Jamie Napier and John Jost argue that the reason conservatives are happier than liberals is that they are, for ideological reasons, not pained by observing high levels of income inequality. They draw this conclusion on the basis of responses to a survey item about attitudes about meritocracy that ranges from a scale of “hard work generally doesn’t bring success–it’s more a matter of luck” to “hard work pays,” which Will Wilkinson shows cannot do the job of supporting their explanation: I strongly agree that success, understood as a significant upward move on a valued status dimension, is largely a matter of luck. But I also strongly agree that hard work (in a society with decent institutions) usually brings a better life. It’s possible to work hard and achieve a better life without ever winning anything you’d count as success. So I haven’t a clue how I’d answer this question. Do I believe in meritocracy or not?He observes that there’s also a much better explanation for the answers to that question than assuming a blindness or lack of care about inequality: If one wants to see a meritocratic bent as a common cause of conservative leanings and higher happiness, here’s a less tendentious explanation. (1) Those with a greater sense of the efficacy of their behavior — with a greater sense of being in control — will tend to (a) think hard work brings a better life, (b) be happier, (c) see policies that seem to penalize hard work as unjust. (2) People likely to see high taxes as an unjust penalty on hard work tend to identify as “conservative.”And a further problem about attributing a blindness to inequality to conservatives is that conservatives give more to charity than liberals, as Wilkinson’s commenter John Thacker points out (and I’ve previously observed at this blog). Thacker attributes the difference to religiosity; again, I’ve previously pointed out that he is apparently correct on this point (also see this post and the previous reference on conservatives vs. liberals), that the religious give far more to charity than the secular, even if you don’t count donations to churches. (But apparently Christians are well-known in the service industry as lousy tippers.) The same Napier and Jost paper is discussed at Marginal Revolution, where commenter DocMerlin points out that: ...

The creation of jobs in the economy is neither the president’s responsibility nor within his power to do anything other than influence through policy, but it’s still interesting to look at the record of job creation under the last eleven presidents (Truman to Bush Jr.), as presented at Barry Ritholtz’s blog (from the Wall Street Journal’s Real Time Economics): ...

“Anchoring” is the psychological effect that, when presented with a sample number prior to being asked to estimate some quantity, people tend to stick closer to that sample number than they would if no number were mentioned, even if the number is completely irrelevant to what’s being estimated. A study by Neil Stewart at Warwick University suggests that minimum payment amounts on credit card bills cause people to pay less on their credit cards per month than they otherwise would, since the minimum payment tends to be extremely low. While it has no effect on those who intend to pay off the full monthly amount (the only reasonable way to use credit cards, in my opinion), Stewart’s work suggests that those who pay less than the full amount pay 43% less on average than they would if no minimum payment were specified. While this might be interpreted as counter to the intent of a minimum payment, I suspect it’s exactly the intended effect from the credit card companies–to drag out payments over the longest possible time and accumulate the most interest. ...

In a fiendishly clever plan, Credit Suisse Group AG has found a way to reduce its exposure to toxic securities and transfer risk off its balance sheets–it’s paying senior executives’ bonuses with them. Managing directors and directors, the two highest ranks at the Zurich-based company, will be paid year-end bonuses in its most illiquid loans and debt. Those assets will be transferred to a “Partner Asset Facility,” and those directors will receive shares of ownership in the facility. Those assets will make semi-annual payments to the owners, with the full value only to be known as the assets mature or default.

The traditional bank lobby, filled with expensive marble and and furnishings, is designed to signal to the customer that the bank is stable and isn’t going anywhere. Some recent failed banks have used advertising slogans also designed to inspire confidence, such as IndyMac’s “you can count on us." Others, however, should perhaps have been recognized as clues of impending problems: Dexia: “The short term has no future." Fortis: “Here today, where tomorrow?" Countrywide: “[A] lender that actually finds ways to make loans." Fannie Mae: “As the American dream grows, so do we." Washington Mutual: “Whoo hoo!" (Via The Economist, October 2, 2008.)

(Via FailBlog.)