Finance

Trump Mortgage started business this April, with alleged seasoned pro E.J. Ridings appointed to head the organization. Ridings claimed that honesty was one of the differentiators for Trump Mortgage, but it turns out he’s misrepresented his experience. He claimed to be “a top executive at one of Wall Street’s most prestigious investment banks,” when in fact he was a retail stock broker for Morgan Stanley’s Dean Witter Reynolds subsidiary for less than three months, and was only a registered broker for six days of that period. Ridings said he was an “established leader” at a leading New York mortgage boutique, but was only “a relatively minor player” at GuardHill Financial from June 2003 to April 2005, working as an entry-level mortgage originator. Ridings also claimed 15 years of experience in the financial industry, but all that anyone can dig up besides his Dean Witter time (that began in 1998) and his GuardHill position are in documents from the NY State Banking Commission which say he was also a day trader for two years and worked for a year at subprime lender Equity Funding prior to GuardHill. That’s a total of less than six years of financial experience. Ridings claims he also had financial experience in his earlier jobs–running a company that sold nutritional supplements and health drinks, and a cleaning service. Trump Mortgage has lost six residential mortgage professionals in the last six months, and may not reach $1 billion in residential mortgage originations, despite Ridings predicting that they would hit $3 billion in 2006. The mortgage business is not a business I’d want to be in right now, as the U.S. housing bubble deflates.

Washington Post, Sunday, December 24, 2006; B06 The largest employer in the world announced on Dec. 15 that it lost about $450 billion in fiscal 2006. Its auditor found that its financial statements were unreliable and that its controls were inadequate for the 10th straight year. On top of that, the entity's total liabilities and unfunded commitments rose to about $50 trillion, up from $20 trillion in just six years. ...

I’ve submitted this review of The Millionaire Mind by Thomas J. Stanley, Ph.D. (2001, Andrews McMeel Publishing) to Amazon.com: This is a deeply flawed book. It purports to be a description of the characteristics and attitudes that make wealthy people wealthy, but it is based mostly on their self-assessments without comparison to a control group. I suspect that this heavily underplays the role of random chance in success, and attributes causation where there is only correlation. Further, the author display clear biases on a number of topics, which leads him to engage in ad hoc interpretation of his data, sometimes to argue for conclusions that are contrary to the clear implications of the data–such as his arguments for the importance of religion in the lives of millionaires. On pp. 33-35, the author looks at success factors, and compares to the role of luck on pp. 82-85, which he downplays in favor of discipline. While he touches on the importance of having the right connections (and the genetic contributions to intelligence), on p. 85 he asks “what does luck have to do with graduating from medical school? What does luck have to do with successfully running a medical practice? Very little, according to these physicians.” But what does luck have to do with being born into a family and in a country where one has a chance to reach adulthood, let alone be able to attend a medical school? Quite a bit. ...

Answers in Genesis had been an international organization, with the U.S. branch under Ken Ham based in Kentucky, and an Australian branch under Carl Wieland in Queensland (which was formerly known as the Creation Science Foundation). Now the Australian group (along with ministries in Canada, New Zealand, and South Africa) has changed its name to Creation Ministries International, explaining in a recent brochure that the U.S. group did not want to be “subject to an international representative system of checks/balances/peer review involving all the other offices bearing the same ‘brand name’." This explains why an article critical of bad creationist arguments (and specifically Kent Hovind) disappeared from the Answers in Genesis site, but is found on the new Creation Ministries International site. (UPDATE (March 6, 2006): This statement was not quite accurate, but the linked-to page gets it right. The article listing arguments not to use is still present on the Answers in Genesis site, but it no longer links to the separate “maintaining creationist integrity” page and response to Kent Hovind which is present on the Creation Ministries International site.) Wieland’s group has made a point of publishing material critical of bad creationist arguments, on its website and in its technical journal. Ken Ham, on the other hand, has made a point of publishing and presenting bad creationist arguments. The U.S. group, known for spending millions on a creationist museum, has interesting Form 990s filed with the IRS. Some highlights from 2003 and 2004: Revenue: $9,016,228 (2003), $10,423,222 (2004). Expenses: $6,894,456 (2003), $8,320,926 (2004). Assets: $10,778,086 (2003), $17,368,759 (2004). Liabilities: $1,693,035 (2003), $6,086,610 (2004). Officer/Director compensation: $313,960 (2003), $926,837 (2004). Other salaries/wages: $2,938,288 (2003), $2,852,351 (2004). Pension plan contributions: $87,819 (2003), $0 (2004). Other employee benefits: $317,802 (2003), $399,482 (2004). Payroll taxes: $223,636 (2003), $307,267 (2004). Employees with salaries over $50,000: Kevin Markesbery, Construction Manager, $87,000 plus $8,778 to benefit plans/deferred income and $1,375 expense account (2003). $88,678 plus $6,850 to benefit plans, $4,076 expense account (2004). John Pence, Dir. of Planned Giving/Legal Counsel, $87,539 plus $7,728 to benefit plans/deferred income (2003). (Became a director in 2004, see below). Patrick Marsh, Director, $73,713 plus $5,202 to benefit plans (2004). James Hatton, Controller, $70,763 plus $8,609 to benefit plans/deferred income. Kathy Ellis, Dir. Administration, $68,519 plus $7,078 to benefit plans/deferred income. Mark Looy, VP Ministry Relations, $68,417 plus $8,460 to benefit plans/deferred income and $2,232 expense account. (Became a director in 2004, see below.) Tony Ramsek, Systems Mgr., $62,720 plus $6,821 to benefit plans (2004). Dan Zordel, Director, $57,724 plus $6,816 to benefit plans and $839 expense account (2004). Charles Tilton, Director, $56,828 plus $3,109 to benefit plans and $112 expense account (2004). Directors: Carl Wieland, Board Member, $0 (2003). Ken Ham, President, $125,739 salary, $11,033 benefits, $44,478 expenses (2003). $121,764 salary, $6,887 benefits, $63,808 expenses (2004). Bill Wise, CFO, $121,418 salary, $8,845 benefits, $2,535 expenses (2003). John Pence, General Counsel, $93,115 salary, $3,148 benefits (2004). Kathy Ellis, Vice President, $86,068 salary, $5,261 benefits (2004). Mark Looy, Vice President, $85,615 salary, $6,820 benefits, $3,518 expenses (2004). James Hatton, CFO, $81,000 salary, $6,831 benefits (2004). Mike Zovath, VP, $74,798 salary, $8,707 benefits, $2,267 expenses (2003). $90,201 salary, $6,830 benefits, $1,115 expenses (2004). Brandon Vallorani, $74,432 salary, $8,313 benefits, $1,368 expenses (2003). COO, $90,344 salary, $6,223 benefits, $2,316 expenses (2004). Don Landis, Chairman, $0 (2003). $0 (2004). Dan Chin, Board Member, $0 (2003). $0 (2004). Mark Jackson, Board Member, $0 (2003). $0 (2004). Carl Kerby, Board Member, $6,538 salary (20hrs/week), $1,650 benefits, $22,462 expenses (2003). Vice President, $65,112 salary, $4,225 benefits, $27,240 expenses (2004). Dan Manthei, Board Member, $0 (2003). $0 (2004). Peter Strong, Board Member, $0 (2003). Greg Peacock, Board Member, $0 (2003). $0 (2004). Paul Salmon, Board Member, $0 (2003). David Denner, Board Member, $0 (2004). Dale Mason, Vice President, $115,621 salary, $4,828 benefits (2004). John Thallon, Board Member, $0 (2004). Tim Dudley, Board Member, $0 (2004). They paid their top building contractors in 2003: plumbing and HVAC: $829,979 concrete: $310,252 steel erection: $279,428 building electric: $249,450 concrete foundations: $195,872 In 2003 they sold or gave away several old computers, and gave a 2002 Toyota Camry to CFO Bill Wise (who also got a free Compaq laptop). The full AiG 2004 Form 990 may be found here (PDF). Ken Ham earns a pretty good salary for someone who spouts misrepresentations of and about evolution for a living and resides in a state where the median household income in 2002-2003 was $37,270. Answers in Genesis of Kentucky’s unwillingness to undergo even the peer review of fellow creationist organizations indicates to me a lack of ethics and integrity. UPDATE: I didn’t explicitly note above that this schism must have actually taken place back in 2005, since Carl Wieland and the other Australians (Greg Peacock and Paul Salmon) disappeared from the AiG Kentucky board in the 2004 Form 990 (signed on August 10, 2005, apparently an update since the original was due by May 15). Also of note is that John Thallon, an Australian who helped lose the Creation Science Foundation thousands of dollars in a bogus investment (he was also a victim, not a party to the fraud–see the “Loss of Funds” section of my article “How Not To Argue With Creationists”), has moved to Kentucky and is on the board as of 2004. One other thing worthy of note is that as Answers in Genesis of Kentucky has grown, it has pulled support away from the Institute for Creation Research (ICR), which Henry Morris’ son John Morris has never really had his heart in running. The ICR’s 2004 revenue was $4,341,000, with expenses of $4,231,885. They had assets of $5,628,352 and liabilities of $537,283–so they’re not exactly hurting, but they’re not doing AiG-sized business, either. (2004 Form 990 for the ICR is here (PDF).) It wouldn’t surprise me if AiG ultimately completely displaced (or perhaps acquired) the ICR. ...

This Wall Street Journal article describes the UAW Jobs Bank program, under which American auto manufacturers pay some 15,000 unneeded employees wages and benefits which can exceed $100,000 a year, with a total cost of over $1.4 billion per year. GM has the most workers in the program–between this and the pensions, it’s no wonder GM is not competitive. While many of the workers in the program do community service or participate in educational programs, some of the latter seem rather dubious (studying crossword puzzles?). Other employees spend their time in the “rubber room” engaging in creative loafing. (Via The Agitator.)

Bruce Schneier reports on how a house in Valparaiso, Indiana was incorrectly valued at $400 million due to a single-keystroke error by an “outside user” of Porter County’s appraisal records. This incorrect valuation led to an expectation of $8 million in property taxes due from that homeowner, which led to a erroneous increase of budgets and even distribution of funds. Now the Porter County Treasurer has had to ask 18 governmental units to return funds–the city of Valparaiso and Valparaiso Community School Corp. have been asked to return $2.7 million, which will leave the school system with a $200,000 budget shortfall. The number of errors here is huge–first of all, an external user shouldn’t have access to change budget data at all, let alone by a typo which caused the user to invoke “an assessment program written in 1995” which “is no longer in use, and technology officials did not know it could be accessed.” Second, there should have been checks on the data to identify anomalies like a house suddenly jumping in value to $400 million. Third, there should have been checks on the accuracy of budget numbers before the disbursement of funds. And I’m sure I’m only scratching the surface–it sounds like they’ve got some serious IT infrastructure issues.

My parents loaned me a set of 13 CDs by a Christian financial counselor named Dave Ramsey, which I listened to in my car over the last several weeks. The CDs are audio recordings of Ramsey’s course of lectures that he calls “Financial Peace University." I wasn’t quite sure what to expect, but I was pleasantly surprised–there were occasional references to God and Bible verses, but they were relatively few and tended to be ones that gave sensible advice. It was only the last CD, on charitable giving, which emphasized tithing to a church over other forms of charitable giving, that I found more objectionable than sound. (There were also two bonus CDs, one with samples from Ramsey’s radio show, in which I agreed with virtually all of the advice he gave to listeners, and another giving his personal testimony and a “come to Jesus” call that I gave up listening to after about the first 15 minutes.) The first 12 CDs I give pretty high marks to. Each CD covered a single topic: 1. “Super Savers”: how to save money, build an emergency fund, the value of cash purchases. 2. “Cash Flow Planning”: how to budget. 3. “Relating With Money”: how to communicate about money in a relationship and with your children. 4. “Buying Only Big, Big Bargains”: how to find good deals and negotiate on price. 5. “Dumping Debt Part 1”: facts about credit cards and how to get out of debt. 6. “Dumping Debt Part 2”: more on that subject. 7. “Understanding Investments”: some basic information about stocks, bonds, and mutual funds. 8. “Understanding Insurance”: some basic information about insurance offerings and which ones are a ripoff. 9. “Retirement & College Planning”: 401Ks, Roth 401Ks, IRAs, SEPs, Coverdell ESAs, etc. 10. “Buyer Beware”: understanding some marketing and sales tactics and how to avoid being pressured by them. 11. “Real Estate & Mortgages”: some basics about buying and selling a home, types of mortgages (apparently recorded before the recent popularity of some more creative mortgages), and refinancing. 12. “Careers & Extra Jobs”: how to find a job you love, when it makes sense to seek extra income to get out of a problem. 13. “Collection Practices & Credit Bureaus”: some basics on collections, how to clean up your credit report, how to get out of bad debt messes when you can’t afford to pay all your bills. Some of the basic messages of Ramsey’s plan are to start by building an emergency savings of $1,000, cut up all your credit cards and budget every dollar of income, get all non-mortgage debt paid off, build up savings of 3-6 months of expenses, and start investing 15% of annual gross income in mutual funds (maximizing tax-preferred options). He’s very anti-credit card and anti-debt. I agree with the latter (except for a mortgage); the former I don’t personally agree with for myself, but I think it’s good advice for anyone who doesn’t have the discipline to be a credit card “freeloader” (pay off all credit card balances monthly). He also advises never buying a house with anything but a 15-year fixed rate mortgage, and never with a monthly payment greater than 25% of your monthly take-home pay, never spending more than 20% of your annual income on cars (and always paying cash, never going into debt–and that means buying used). The average household has about $10,000 in credit card debt, lots of people have been buying their homes with interest-only adjustable rate mortgages where they can barely afford the interest-only payments (or even just the negative amortization option), and many people have been pulling equity out of their homes to pay for consumer goods, and buying homes with interest-only adjustable rate mortgages (some with negative amortization options), and these people are heading for disaster. Ramsey’s advice is pretty sound. UPDATE (January 23, 2007): The Simple Dollar has a good summary of Dave Ramsey’s program.

In 2003, the Bush administration said that the $200 billion estimate of the cost of the war in Iraq from Larry Lindsey, Bush’s economic advisor, was too high. Paul Wolfowitz suggested that the cost of reconstruction would be financed entirely by Iraq. Congress has so far appropriated $251 billion for military operations, and the Congressional Budget Office has indicated that we should expect another $230 billion in costs over the next ten years. Now a paper by Nobel prizewinning economist Joseph Stiglitz and Harvard budget expert Linda Bilmes argues that the CBO’s estimate leaves out some significant costs, like healthcare for injured soldiers–lifetime care for brain injuries alone may cost $35 billion. Their paper argues that $1 trillion is a conservative estimate of the total costs. (Story at The Guardian.) ...