Monthly Archives: August 2014
“…since I first asked Congress to raise the minimum wage, 13 states have gone ahead and raised theirs – and those states have seen higher job growth than the states that haven’t raised their minimum wage.”, President Obama, July 9, 2014
“In short, there is no sound basis in this Labor Department report for rejecting the fundamental economic understanding that raising firms’ cost of employing low-skilled workers makes firms less willing to employ such workers. Until there’s a sound theory for why raising the price of low-skill labor doesn’t lessen employers demand for it, and until that theory is confirmed by serious, empirical analysis based on adequate data, the only legitimate minimum-wage stance is that it shrinks the employment options for the very workers it ostensibly intends to help: the poorest of the low-skilled.”, Liya Palagashvili and Rachel Mace, “Do Higher Minimum Wages Create More Jobs?”, Wall Street Journal
“As a former colleague liked to say to me: ‘In God we Trust. All Others Must Provide Data.’”, Mike Perry, former Chairman and CEO, IndyMac Bank
Do Higher Minimum Wages Create More Jobs?
President Obama points to evidence that they do, but he must have missed New York, New Jersey and Connecticut.
LIYA PALAGASHVILI And
Aug. 20, 2014 7:25 p.m. ET
Since the release of the May jobs report, President Obama and many in the media have been crowing about new evidence allegedly showing that minimum-wage hikes stimulate job growth. At a speech in Denver on July 9, Mr. Obama noted that “since I first asked Congress to raise the minimum wage, 13 states have gone ahead and raised theirs—and those states have seen higher job growth than the states that haven’t raised their minimum wage.”
Here’s where this story got started. In June, the Center for Economic and Policy Researchreleased a report claiming that compared with the 37 states that did not raise their minimum wage in January, the 13 states that did had on average higher employment growth from January to May 2014. The data came from the U.S. Bureau of Labor Statistics.
No one committed to evidence-based public policy would accept these skimpy facts as grounds for raising the minimum wage.
Why would firms hire more workers when government raises the cost of hiring workers? The progressive answer is that hiking the minimum wage raises the incomes of poor workers, causing them to spend more. This additional spending, in turn, is so great that firms hire even more workers. When you raise the minimum wage, as Mr. Obama said in Denver, “that money gets churned back into the economy. And the whole economy does better, including the businesses.”
This theory is dubious for many reasons, not least because minimum-wage workers make up about 2% of the workforce, a percentage much too small to have such an effect. Yet if this theory were valid—and if these data reveal useful information—then job growth should be greater the higher the minimum-wage boost.
Not so. Of the 13 states that raised the minimum wage, Connecticut, New Jersey and New York were the three that raised it most, with increases ranging from 5% to 14%. These three states also experienced the worst job growth between January and May, an average of 0.03% compared with an average 1.28% for the other 10 states. Indeed, job growth was worse in each of these three states than it was, on average, in the 37 states that did not raise their minimum wage at all. Moreover, in New Jersey, the state that hiked minimum wage the most—to $8.25 an hour from $7.25—employment actually fell by about 0.56%.
Washington experienced the largest job growth at 2.1%, but the state only raised its hourly minimum wage by 13 cents. A full-time minimum-wage employee in Seattle now earns, before taxes, a whopping $23.80 more a month. That’s barely enough to cover dinner for two at a chain restaurant. Consider also that between December and May the price of gasoline rose by more than 20 cents a gallon, according to Gasbuddy.com. Minimum-wage workers would need a big chunk of their higher pay to cover the increased cost of driving. There’s no way there was enough left over to spark extra job growth.
We conducted a statistical analysis of the Bureau of Labor Statistics’ data called a two-sample “t” test for comparing two means. We found, for this time period, no difference in the job-growth trend in the states that raised their minimum wages from states that did not. In other words, the correlation cited as debunking the economic case against the minimum wage is not statistically significant.
Minimum-wage supporters might say the data at least show that a higher minimum wage does not reduce job growth. That’s also not what we found. When looking—over the time-span December 2013 through June 2014—at only the 13 states that raised their minimum wage in January, those that raised it the most had, on average, lower job growth than did those that raised it the least. This particular finding is not by itself evidence that raising the minimum wage slows job growth; these data remain too meager. But it does run counter to the White House narrative.
In short, there is no sound basis in this Labor Department report for rejecting the fundamental economic understanding that raising firms’ cost of employing low-skilled workers makes firms less willing to employ such workers.
The data are simply no reason to reject this fundamental economic precept: When you raise the cost of hiring, companies will do less of it. Until there’s a sound theory for why raising the price of low-skill labor doesn’t lessen employers demand for it, and until that theory is confirmed by serious, empirical analysis based on adequate data, the only legitimate minimum-wage stance is that it shrinks the employment options for the very workers it ostensibly intends to help: the poorest of the low-skilled.
Ms. Palagashvili is a fellow of the Classical Liberal Institute at the NYU School of Law. Ms. Mace studies economics at George Mason University.
“Uber has the chance to be a once in a decade if not a once in a generation company. Of course, that poses a threat to some, and I’ve watched as the taxi industry cartel has tried to stand in the way of technology and big change. Ultimately, that approach is unwinnable.” David Plouffe, President Obama’s former Chief Political Strategist
Plouffe for Free Markets
Obama’s strategist discovers the virtues of capitalism.
Aug. 20, 2014 7:18 p.m. ET
Everyone has to make a living, so far be it from us to complain that David Plouffe, President Obama’s former chief political strategist, is joining a private business to fight government regulation. The uber-politico will join Uber, the four-year-old San Francisco company that uses smartphones to compete with taxi services to get passengers around big cities.
Uber CEO Travis Kalanick says Mr. Plouffe will oversee the company’s policy and communications strategy starting in September. Mr. Kalanick, whowe profiled in January 2013 when Uber was getting rolling, has been battling regulators and politicians across the world who want to maintain established interests in the taxi business.
“Uber has the chance to be a once in a decade if not a once in a generation company,” Mr. Plouffe said in a statement. “Of course, that poses a threat to some, and I’ve watched as the taxi industry cartel has tried to stand in the way of technology and big change. Ultimately, that approach is unwinnable.”
We couldn’t have said it better, and it’s nice to see the man who elected the most anti-free-market President since Richard Nixon extol the wonders of business competition. Uber’s fight is primarily in big cities, so Mr. Plouffe won’t have to lobby his former boss to change many of his policies. But having to fight city hall and the taxi cartel is suitable penance for his political sins.
The young policy wonk may also discover that Uber’s future will depend on the overall health of the economy. Uber is competing with ride-sharing upstart Lyft, as well as private cars, subways, buses and other conventional means of transportation.
The faster the economy grows the more money urban commuters and tourists will have to spend on Uber’s relatively high-priced services. Perhaps Mr. Plouffe can prevail on his former boss to be less hostile to every other American business?
Copyright 2014 Dow Jones & Company, Inc. All Rights Reserved
“But like in London, an equally potent driver of the property market in Germany is the good old “search for yield”…With 10-year Bund yields at 1 percent, free money will have to flow towards property at some point…
…Just as the BoE has sounded alarm over the overheating of the property market in London, Germany’s Bundesbank has recently voiced concern over the health of Germany’s property market, saying that “there is an increasing risk of a housing bubble in Germany”. It also warned certain cities showed prices that were overvalued by up to 25 percent.”, Carolin Roth, “Auf Wiedersehen German real estate? Not so fast”, CNBC
Auf Wiedersehen German real estate? Not so fast
Wednesday, 20 Aug 2014 | 1:08 AM ETCNBC.com
As soon as someone mutters the words London property, the word “bubble” is never far away.
London house prices displayed a jaw-dropping 20 percent growth year-on-year in July– even though last week’s RICS indicator showed that the housing market is pausing for breath. Bank of England (BoE) Governor Mark Carney has sounded a warning on tougher mortgage rates and the expectation of higher rates.
But London isn’t the only place which is seeing a dizzying increase in property prices. Look no further than across the channel – to the euro zone’s economic powerhouse – Germany.
Major cities like Frankfurt, the financial capital, Munich with its famous beer gardens and proximity to the Alps and Stuttgart, the home of Mercedes and Porsche, are becoming increasingly attractive as a place to live and work. Germans from rural settings and immigrants are flocking to the cities.
But like in London, an equally potent driver of the property market in Germany is the good old “search for yield”.
“Near zero interest rates in the euro zone make sense for the region but not for Germany. The economy has been relatively strong and the interest rate policy is disjointed from economic reality,” Patrick Armstrong from Plurimi Global Macro Fund told CNBC.
“With 10-year Bund yields at 1 percent, free money will have to flow towards property at some point. Rental yields of 4-5 percent are attractive with current interest rates, and German property is the least expensive per square meter in Western Europe.”
Rolf Buch, CEO of Deutsche Annington, Germany’s largest private-sector residential real estate company, echoed these comments when he told CNBC the German housing market is in a “sweet spot” because of stable incomes and the benefit from low interest rates.
Contrary to the U.K. though, it’s not Germany’s capital that is seeing the highest prices.
According to research from B+D, the most expensive properties in Germany are found in Munich (an average 4,800 euros ($6,427) per square meter). Berlin is relatively cheap, as a square meter there only costs 2,930 euros, while Frankfurt properties will set you back an average of 3,400 euros per square meter.
Compare that with an average square meter price of 8,900 pounds (around 11,120 euros) in London’s Westminster and you’ll think Germany is a bargain.
However, it is the capital that is showing the highest growth in values. Prices of apartments in the trendiest part of Berlin have seen a 40 percent increase since 2007, while they have grown by an equally impressive 25-30 percent in popular cities like Munich, Hamburg and Frankfurt.
Concerns of overheating
Just as the BoE has sounded alarm over the overheating of the property market in London, Germany’s Bundesbank has recently voiced concern over the health of Germany’s property market, saying that “there is an increasing risk of a housing bubble in Germany”. It also warned certain cities showed prices that were overvalued by up to 25 percent.
German property prices have recently shown signs of moderation, yet analysts agree the environment is still a very favorable one for continued increases in prices and rents.
How do you participate in the German property market if you’re not willing to say Guten Tag to your own home in the country?
One of Patrick Armstrong’s preferred stocks is Deutsche Annington. He also likes Grand City Properties which focuses on the acquisition and turning around of distressed portfolios with high vacancy. He estimates it generates a rental yield on capital expenditure of almost 15 percent.
Analysts at Goldman Sachs expect LEG, Germany’s second biggest property company, to continue to show “good like-for-like rental growth from an acceleration in rent per square meter growth over the next few quarters and vacancy continuing lower from an already low 3.0 percent”.
Yet, with all this money attracted into the German property market, are rental yields starting to decline, taking into account that prices and rental yields usually move inversely to each other?
Deutsche Annington’s Buch says he sees no signs of this yet, but “a decline in yield could be on the horizon.”
For now, the CEO says an improvement in capital value and residential yield is still possible for the next year, which is why the group raised its guidance for 2014.
“Former Obama senior adviser David Axelrod dismissed it as “pretty sketchy.” (The indictment of Texas Governor Rick Perry for “abuse of power.”) Harvard law professor Alan Dershowitz said this is “what happens in totalitarian societies.”…
…The remedies for those who don’t like a governor’s veto are clear: override, impeachment and the ballot box. They don’t include indictment.” Karl Rove, “A Texas-Size Abuse of Power”, Wall Street Journal
A Texas-Size Abuse of Power
A left-wing public interest group gets a special prosecutor to indict Gov. Rick Perry.
Aug. 20, 2014 7:13 p.m. ET
The indictment on Friday of Texas Gov. Rick Perry on charges that he abused his powers is an outrageous—but not unprecedented—abuse of prosecutorial power. And it may come back to haunt those responsible.
The indictment itself caused a storm of denunciation, including by liberals. Former Obama senior adviser David Axelrod dismissed it as “pretty sketchy.” Harvard law professor Alan Dershowitz said this is “what happens in totalitarian societies.” The Washington Post, Boston Globe and New York Times were critical.
The events that led to these condemnations can be traced to April 15, 2013, when Travis County (Austin) District Attorney Rosemary Lehmberg was arrested for drunk driving. There was an open vodka bottle in her car and her blood alcohol was nearly three times the legal limit. She abused her jailers, had to be restrained, and was fitted with a spit mask. It’s all on YouTube. Ms. Lehmberg pleaded guilty and served 45 days in jail.
Since 1982 the Travis County district attorney has supervised the state’s Public Integrity Unit. Mostly funded by the legislature, the office investigates public corruption in state government. Rightly believing Ms. Lehmberg had lost the public’s confidence, Mr. Perry and other state leaders demanded she resign. The governor apparently signaled that he would appoint her chief deputy, a Democrat, to replace her. Ms. Lehmberg ignored the calls. On June 10 the governor threatened to veto the Public Integrity Unit’s appropriation unless she stepped down. She refused, and he vetoed the funding.
Enter a left-wing public interest group, Texans for Public Justice, funded by personal injury lawyers, George Soros and liberal out-of-state foundations. Mr. Perry and the trial lawyers have a long, fractious relationship because of his strong support for legal reform. TPJ filed a complaint and found a judge willing to appoint a special prosecutor, Michael McCrum, who took the case to a grand jury. It indicted Mr. Perry on two counts. The first, “abuse of official capacity,” was for vetoing the funding. The second, “coercion of public servant,” was for demanding Ms. Lehmberg resign.
This is ludicrous. Mr. Perry was acting within his broad constitutional power under the Texas Constitution to veto legislation. Speaking out about the controversy hardly qualifies as “coercion.” According to Mr. McCrum’s logic, Mr. Perry’s veto is a criminal act because he announced what he was going to do. If he had simply vetoed the appropriation without comment apparently he would not have been charged. Since when is political free speech a felony?
If Mr. McCrum’s logic was applied to the U.S. Congress, any member who threatened to cut an agency’s funds over leadership issues could be charged with “abuse of official capacity.” And any member who browbeat agency heads over their actions and attached riders to appropriations bills prohibiting or requiring certain practices could be charged with “coercion of public servant.”
Texas courts have already considered the coercion issue in Texas v. Hanson , according to UCLA Law School Prof. Eugene Volokh. A county judge (the Texas term for county executive) threatened to end funding for salaries of two county employees unless the district court judge fired the county auditor and forced the county attorney to revoke a local misdemeanant’s probation. In 1990 the Texas Tenth Court of Appeals found these coercion charges were “unconstitutionally vague” and had “a chilling effect on the exercise of free expression.” It upheld a lower-court decision to dismiss them. The remedies for those who don’t like a governor’s veto are clear: override, impeachment and the ballot box. They don’t include indictment.
Travis County’s Public Integrity Unit has a long-standing reputation for partisan witch hunts. In 1993, then-Travis District Attorney Ronnie Earle indicted Republican U.S. Senator Kay Bailey Hutchinson on charges so flimsy he did not proceed with the case. His 2011 conviction of House Republican Leader Tom DeLay for election-law violations—also prompted by a TPJ complaint—was thrown out on appeal two years later for insufficient evidence.
Mr. Earle’s reputation was ruined by his abuse. The same will happen to Mr. McCrum, a fitting reward for a prosecutor who shamefully tried to criminalize political differences.
It is never ideal for a political figure to be indicted. But this indictment is so unfair that Mr. Perry has become a sympathetic figure. He’ll be even more so when he beats the rap.
Mr. Rove, a former deputy chief of staff to President George W. Bush, helped organize the political-action committee American Crossroads.Copyright 2014 Dow Jones & Company, Inc. All Rights Reserved
“It wasn’t entirely accidental that Theresa’s debts ended up in the hands of thieves. When the original creditor, Washington Mutual, sold her debt, it stopped caring about what Theresa owed, how she was treated or what happened to her personal information. This is true for many banks…
…when they sell their unpaid accounts, their contracts testify to this indifference. According to American Banker, in a series of transactions in 2009 and 2010, Bank of America sold millions of dollars of charged-off debt to a company in Denver called CACH. In the sales agreement, Bank of America said it would not make “any representations, warranties, promises, covenants, agreements or guarantees of any kind or character whatsoever” about the accuracy of the account information it was selling…Several years after the Package was stolen — in the summer of 2013 — Theresa received a phone call from a company called McKellar and Associates Group, trying to collect on this very same Washington Mutual debt. I spoke with the agency’s co-owner, Adam Owens, who is based out of Beverly Hills, Calif. I asked Owens how he obtained Theresa’s debt, given the fact that Siegel had permanently retired it. He told me he had purchased it from a debt broker in Florida. It was part of a much larger package of roughly $50 million worth of debt, which he bought for just 12 basis points — or one-twelfth of a penny on the dollar. It had been bad paper, Owens said, and he’d gotten burned on the deal. After the purchase, Owens discovered that another agency was collecting on the same paper and, what’s more, that some of the dates on the debts had been manipulated so that the paper appeared newer than it actually was. As Owens saw it, when buying from debt brokers, this was all part of the risk you faced. He concluded: “It is just data you are purchasing.”…Such sloppy record-keeping may seem surprising, but it is prevalent enough that in 2009, the F.T.C. said in a report: “When accounts are transferred to debt collectors, the accompanying information often is so deficient that the collectors seek payment from the wrong consumer or demand the wrong amount from the correct consumer.”…Just this month, the Office of the Comptroller of the Currency, which supervises all national banks, issued written guidance on how debts should be sold. Banks need to vet potential buyers and provide accurate and complete information, the office says. Reform may be on the horizon. And with it there may come a time when there is no need for Wilson’s strongman services or his tough-talking antics, but for the moment, at least, they continue to fill a need. Wilson is still hunting for “crap,” selling it to his clients and promising to keep the sharks at bay.”, Jake Halpern, “Inside the Dark, Lucrative World of Consumer Debt Collection”, New York Times Magazine, August 14, 2014
“Why do these big banks who have already financially charged-off these debts, sell them to “Tony Soprano” for pennies on the dollar (which means nothing to them financially)? It’s either top management doesn’t realize how dumb (and unkind) this is or I guess they believe that it is their responsibility to put these generally lower income Americans through a little bit of hell because they couldn’t pay their debts…because if they don’t they are worried that more debtors will not pay? I am not sure, but I think it’s wrong. To me, they should be “courageous” enough to collect their own unpaid debts, in a fair and responsible manner.”, Mike Perry, former Chairman and CEO, IndyMac Bank
Inside the Dark, Lucrative World of Consumer Debt Collection
By JAKE HALPERN AUG. 14, 2014
In the murky world of unpaid-bills, a banker and an ex-con can make a fortune — if they don’t run into too many crooks.
One afternoon in October 2009, a former banking executive named Aaron Siegel waited impatiently in the master bedroom of a house in Buffalo that served as his office. As he stared at the room’s old fireplace and then out the window to the quiet street beyond, he tried not to think about his investors and the $14 million they had entrusted to him. Siegel was no stranger to money. He grew up in one of the city’s wealthiest and most prominent families. His father, Herb Siegel, was a legendary playboy and the majority owner of a hugely profitable personal-injury law firm. During his late teenage years, Aaron lived essentially unchaperoned in a sprawling, 100-year-old mansion. His sister, Shana, recalls the parties she hosted — lavish affairs with plenty of Champagne — and how their private-school classmates would often spend the night, as if the place were a clubhouse for the young and privileged.
So how, Siegel wondered, had he gotten into his current predicament? His career started with such promise. He earned his M.B.A. from the highly regarded Simon Business School at the University of Rochester. He took a job at HSBC and completed the bank’s executive training course in London. By all indications, he was well on his way to a very respectable future in the financial world. Siegel was smart, hardworking and ambitious. All he had to do was keep moving up the corporate ladder.
Instead, he decided to take a gamble. Siegel struck out on his own, investing in distressed consumer debt — basically buying up the right to collect unpaid credit-card bills. When debtors stop paying those bills, the banks regard the balances as assets for 180 days. After that, they are of questionable worth. So banks “charge off” the accounts, taking a loss, and other creditors act similarly. These huge, routine sell-offs have created a vast market for unpaid debts — not just credit-card debts but also auto loans, medical loans, gym fees, payday loans, overdue cellphone tabs, old utility bills, delinquent book-club accounts. The scale is breathtaking. From 2006 to 2009, for example, the nation’s top nine debt buyers purchased almost 90 million consumer accounts with more than $140 billion in “face value.” And they bought at a steep discount. On average, they paid just 4.5 cents on the dollar. These debt buyers collect what they can and then sell the remaining accounts to other buyers, and so on. Those who trade in such debt call it “paper.” That was Aaron Siegel’s business.
It turned out to be a good one. Siegel quickly discovered that when he bought the right kind of paper, the profits were astronomical. He obtained one portfolio for $28,527, collected more than $90,000 on it in just six weeks and then sold the remaining uncollected accounts for $31,000. Siegel bought another portfolio of debt for $33,388, collected more than $147,000 on it in four months and sold the remaining accounts for $33,124. Even to a seasoned Wall Street man, the margins were jaw-dropping.
Aaron Siegel driving his Maserati in Buffalo. CreditJonno Rattman for The New York Times
Siegel soon realized that there was the potential to make a fortune. What he needed was capital to invest in portfolios on a grand scale. Using his connections from his school days and from the banking world, he courted eight investors to fund a private-equity firm that would deal exclusively in such paper. He opened the firm, which he named Franklin Asset Management, in an elegant old home at 448 Franklin Street in Buffalo. In the ensuing year and a half, he bought $1.5 billion worth of unpaid debts. This would be his trial run. If all went smoothly, he would soon start another fund with even more money in it.
But all did not go smoothly.
Some of the deals Siegel made were hugely profitable, while others proved more troublesome. As he soon discovered, after creditors sell off unpaid debts, those debts enter a financial netherworld where strange things can happen. A gamut of players — including debt buyers, collectors, brokers, street hustlers and criminals — all work together, and against one another, to recoup every penny on every dollar. In this often-lawless marketplace, large portfolios of debt — usually in the form of spreadsheets holding debtors’ names, contact information and balances — are bought, sold and sometimes simply stolen.
Stolen. This was the word that was foremost in Siegel’s mind on that October afternoon. He had strong reason to believe that a portfolio of paper — his paper — had been stolen and was now being “worked” by one of the many small collection agencies on the impoverished and crime-ridden East Side of Buffalo. Using his spreadsheets, this unknown agency was calling his debtors and collecting debt that was rightfully his. The debtors, of course, had no way of knowing who actually owned the debt. Nor did they have any reason to suspect that they might be paying thieves. They were simply being told they owed the money and had to pay.
This was not a problem Siegel was used to handling. There had been no classes at Simon Business School on how to apprehend crooks who appropriated your assets. He could, of course, call the police or the state attorney general, but by the time they intervened, the paper would be picked clean, worthless. His problem was more fundamental, more pressing. At this point, he didn’t know exactly how many files had been stolen, but he knew he needed immediate intervention.
Fortunately, Siegel had someone to call — a fixer who knew just what to do.
What got Siegel into this mess — and into the shadowy realm of debt collecting — was the simple desire to return home. In 2005, when he was 31, Siegel left Wall Street and decided to move back to Buffalo, where his parents and sister still lived. He took a job at a local division of Bank of America, specializing in private-wealth management. The only problem was that he had almost no work. “I spent my days spinning around in a chair and throwing pencils at the ceiling,” Siegel said. “There was nothing to do. There’s very little private wealth to manage here.”
In many ways, Buffalo never recovered from the loss of its steel mills in the 1980s. Yet at least one industry was booming: debt collection. Buffalo is among the nation’s debt-collection hubs. One of the largest collection agencies in the country, Great Lakes Collection Bureau, was once based there. When many of the company’s managers eventually struck out on their own, their companies prospered, multiplied and hired still more collectors.
Siegel at his office in Buffalo. CreditJonno Rattman for The New York Times
Siegel was intrigued by the fact that so many people in his midst were toiling to collect on debts that his employer — the bank — had given up on and had sold at huge discounts. He sensed an opportunity and in the fall of 2005, using $125,000 from his personal savings, he bought his first batch of paper and opened a collection agency. During the day, he worked at the bank; after hours, he ran his new company.
The most pressing order of business was hiring collectors. Those who applied to work for him were mainly a downtrodden lot, and their ranks included ex-convicts, drug addicts, 20-somethings without high-school diplomas and a variety of other hard-luck cases. “Oh, my God, they were like thugs,” Siegel recalled. He quickly concluded, however, that the more clean-cut types simply couldn’t get the job done. As he put it: “You realize that you’re sitting on an investment and you’ve hired a bunch of Boy Scouts who can’t turn any money.” What he needed were telephone hustlers. The problem with the hustlers, Siegel explained, was that they hustled not just the debtors, but him as well. Siegel said one of the first truly great collectors he hired — an overweight, womanizing aspiring bodybuilder — robbed him of several thousand dollars by counterfeiting the firm’s checks.
Still, he was making money. And that was largely because of a former armed-robber named Brandon Wilson, whom Siegel met in 2006. Wilson worked as Siegel’s most valued debt broker, buying portfolios on his behalf. He also served as Siegel’s emissary to the collection industry’s many unsavory precincts.
From the outset, they were a most unlikely duo. Siegel likes to wear $2,000 custom-made pinstripe suits, and he strikes a patrician demeanor from the moment he shakes your hand. His sister told me, “I always say that you can tell he hasn’t worked a manual-labor job in his life because his hands are like butter.”
Wilson, by contrast, favors loosefitting sports clothing — the style and the brand don’t matter, so long as they come with a Red Sox or Celtics logo. He spent much of his youth in the notorious housing projects along Mystic Avenue in Somerville, Mass. His mother recalled that “when he was growing up, I was chasing Brandon around the projects with a bat, and he was throwing stones at me, and I was hitting the stones back at him with the bat — but boy, could he run.” When Wilson pulls up his shirt, which he does with some regularity, his arms and upper body are covered with scars, the marks of various knife fights. This is a guy you’d cross the street to avoid.
By the time he was in his early 20s, Wilson had amassed an impressive criminal record. His many offenses included assault and battery, armed robbery (three counts), larceny, armed assault in a home (two counts) and knowingly receiving stolen property. And these, of course, represented only the times he was caught. He was never busted for robbing toy stores or night deposit boxes at banks, both of which he claimed to have done repeatedly.
Not long after getting out of prison, Wilson took a job as a debt collector. He proved quite good at it, and soon he bought some paper and opened his first agency. Later, he also became a debt broker or dealer, a type of role he knew quite well: “I used to buy pounds of weed, all right, and then break it down and sell ounces to the other guys, who were then breaking it down and selling dime bags on the corner, right? Well, that’s what [I’m] doing in debt.”
Initially, at least, Siegel knew very little about Wilson, except that he was in his mid-30s, shrewd, plain-spoken and very candid about the decade he spent in jail. What mattered to Siegel, however, was simply that Wilson delivered. From the moment they started doing business, Wilson was providing good paper, with “plenty of meat on the bone,” as they say in the business. “The paper that I bought from him performed wonderfully,” Siegel said.
The secret to Wilson’s success was that he knew how to find “crap,” as he called it. Instead of buying “fresh” paper directly from the banks — paper that just a few of the banks’ own collectors or subcontractors had tried to collect on — he looked for older paper that had been bought and sold many times over. He often bought credit-card debt, for example, that had been sold off by the banks 10 or even 15 years ago. Old paper was much cheaper, but the trick was figuring out which portfolios had not been collected on efficiently and thus wrung dry. If you called the debtors from these sorts of portfolios and simply reminded them what they owed, they would often send you a check. “I am a bottom feeder,” Wilson said. “I specialize in finding paper that everyone else thinks is worthless.”
A dizzying array of variables affects a portfolio of debt’s true potential — the age of the debt, how many agencies have tried to collect on it, the size of the balances, the type of credit card, where the debtors live and the current economic climate. What’s more, there is no single market or venue — like the Nasdaq or the New York Stock Exchange — where this kind of debt is sold. This creates a marketplace that is inherently inefficient, and Wilson seemed to have a genius for exploiting it. He was quick with numbers and was a tenacious haggler. Wilson talked to everyone, did his research and found opportunities that no one else could — like, for example, a portfolio of paper that no one had touched for five years, other than an incompetent call center based in Brazil. This was the bedrock of his reputation as a debt broker. “I buy old crap,” Wilson said. “I’m the King of Crap.”
Siegel felt confident that if he could enlist Wilson to help him buy an enormous quantity of paper — crap, but good crap — he could make a fortune. Instead of running his own collection agency, he would start a private-equity fund, buy large portfolios of debt and have them worked at other agencies. The fund would be set up as a one-time deal with a limited life span: Investors would make an initial investment and then, over the course of the next several years, receive returns until all of the money the fund earned was dispersed. Best of all, Siegel wouldn’t be responsible for the actual collecting. That meant no more headaches, no more bodybuilders making off with his checkbook. All he needed to do was persuade Wilson to join his operation.
Brandon Wilson. CreditJonno Rattman for The New York Times
Until then, Siegel simply bought paper from Wilson without knowing where he had purchased it or for how much. This worked out well for Wilson. In fact, as Wilson told me, he often bought paper for one penny on the dollar and then instantly sold it to Siegel for two pennies on the dollar, doubling his money. Now, Siegel wanted him to reveal all of his suppliers, help him analyze prospective deals and then step aside and let Siegel make the deals directly.
In theory, though, this new arrangement meant that Wilson stood to make a lot of money. Siegel had $14 million to spend, and he was also authorized to reinvest his profits for a limited time, which meant that he would most likely be purchasing closer to $20 million worth of paper. Siegel would offer Wilson a 5 percent commission on all of the purchases he made from Wilson’s sources. If Wilson brokered all of these deals, he could make $1 million. Still, Wilson was skeptical. This deal meant going against a way of doing business — dating back to his criminal days — in which you never, ever gave up your sources or suppliers. But eventually Wilson agreed, in the hopes of becoming a millionaire. As Wilson remembered: “At first, I was like, I am not giving you my sources or my prices — that is how I feed my family. But I did it to make a million bucks.”
Siegel’s gut feeling about Wilson was that he was honest and that he knew what he was doing, but it did give him a moment’s pause that he was entrusting his fate to a man who may have robbed the very banks for which Siegel himself once worked.
In Wilson’s view, his checkered past actually enhanced his pedigree. “Part of the package you get of being my business associate or my friend is that I’m going to protect you from the sharks,” he explained. By “sharks,” Wilson meant the industry’s many unscrupulous collectors, brokers and agency owners. “If you don’t give them a little bit of fear, right — if it’s just the law, if it’s just the attorney general, if it’s just a civil suit — they could care less. So they need someone to go put a stop to that right now. That might not be bashing someone over the head, it might be sitting them down and saying: ‘Look, man, you ever do 10 years in the can? I have. You ever sat there for 10 years waiting for your date? I have. You think you’re getting away with this? You’re not.’ ”
Not long after Siegel started his fund, Wilson became interested in a debt buyer based in Painesville, Ohio, known as Hudson & Keyse. Wilson suspected that the company was in financial trouble — and he was right. An insider at Hudson & Keyse later told me, “There was a desperation to sell paper to raise funds.” At Wilson’s urging, Siegel capitalized on this desperation. On Dec. 16, 2008, Siegel bought a parcel of debt from Hudson & Keyse containing 8,518 accounts with a face value of $47.5 million for precisely one penny on the dollar.
The portfolio of debt that Siegel purchased — which I will refer to simply as “the Package” — was the archetype of the kind of paper he hoped to buy. It was cheap paper that proved very collectible. The debtors in the Package hailed from a range of places across the country, including Ewa Beach, Hawaii; Dutch Harbor, Alaska; Prairie Village, Kan.; and Rock Springs, Wyo. Some of these debtors owed as much as $29,777, and others as little as $209; some were as young as 19, others were as old as 85; some had accounts that were charged off by the banks as long ago as 1989, others had accounts charged off as recently as 2008.
For Siegel and Wilson, the Package represented money — plain and simple — but, in truth, this Microsoft Excel spreadsheet represented much more than this. The various columns and rows told the stories of several thousand Americans whose financial lives had fallen into ruin and whose futures dangled precariously in the balance. Wilson understood this. At his collection agency in Bangor, Me., where he worked some of Siegel’s paper, he was often on the phones himself. He heard the excuses, the tirades, the lies, the desperation and the heartbreaking stories of loss.
For Wilson, none of it was personal. Instead, he saw the challenge of collecting in very professional, even empirical terms. He’d developed his own quasi-scientific taxonomy, grouping debtors into some 38 different species or types. For example, a D.H.U. (Debtor Hung Up) was a sorry specimen because he had hung up the phone and would probably do so again; a C.B. (Call Back) was a better prospect, because he had at least bothered to call back; a Promised to Pay had potential, because he acknowledged that the debt was his; a Broken Promise had failed to honor his guarantee, but that wasn’t entirely bad because you could now use that against him; and a Broken Payment simply needed a little nudging because he had started to pay and just needed to get back on track. Using a software system that Wilson developed himself, he could program the office’s auto-dialer to call only those debtors who fell into certain classifications. One day, I watched as the auto-dialer at his office called Broken Promises, Broken Payments and C.B.s.
One debtor was an elderly woman who was apparently too poor to pay her debts. Wilson strove for empathy, trying to “marry the debtor,” as he put it.
“I’d love to tell you to forget the whole thing,” Wilson said. “I have a mother, I have a grandmother. But I can’t do that. Unfortunately, it’s in your name, it’s under your Social and the balance is due. I could give you a settlement, I could work out some kind of hardship plan with you.”
“Sir,” the woman said, “I get Social Security, and that’s it.”
“Right,” Wilson said.
“I barely get enough to live on,” the woman added.
“Right, well, I understand times are hard, ma’am,” Wilson said, undeterred. “There are a lot of people in that situation.”
One imperative for Wilson and his collectors was conveying the calm, cool, unshakable understanding that they were, in fact, the rightful owners of these debts and that these debts needed to be paid promptly. It remained unsaid, of course, that this “paper” had often been purchased for as little as one penny on the dollar, and there was no mention of the fact that many of the debts that Wilson specialized in were too old to appear on a credit report or to be sued for in court. Most negative information disappears from credit reports after seven years and, depending on state law, debts may be unrecoverable through a lawsuit after as little as three years.
Yet Wilson’s pitch — you owe the money, and now you need to pay — was both simple and perfectly legal. In most states, you can still try to collect on a debt even after its statute of limitations has expired. As the Federal Trade Commission notes on its website: “Although the collector may not sue you to collect the debt, you still owe it. The collector can continue to contact you to try to collect.” Wilson knew the rules and used them to his advantage. As far as I could tell, that’s what Wilson loved about collections: It was a hustle, but a legitimate hustle.
In the fall of 2009, however, it appeared that Wilson and Siegel were the ones being hustled. Someone was pre-empting them, collecting the debts from the Package before they could. The first people to be affected, of course, were the debtors themselves; the danger they faced was that if they paid the wrong collectors, they would still be liable for their debts.
Debtor No. 3,159 from the Package, for instance, was a woman named Theresa from a small town in the Southwest. Theresa defies almost all the stereotypes of debtors. She joined the Marines in the early 1990s, at 18, and served for the next eight years. Theresa was so determined to live responsibly that throughout much of her teens, she worked more than 30 hours a week at a McDonald’s, earning $4.25 an hour.
After the Marines, Theresa married, bought a house and landed a job as the manager of a grocery store. Life was good. And that’s precisely when everything fell apart. “What happened was, I found out that my husband of 11 years had another family somewhere else,” she said matter-of-factly. Theresa filed for divorce in 2005, but this quickly created a new set of problems. “He left me with everything except the truck that he took, and that was fine, except that I now had to pay for everything,” she said. “I had the credit-card debt. I had the mortgage. I had everything.”
Theresa’s credit-card debt included a Washington Mutual account that had a balance of $4,184 as of July 2006. In August, September and October, she continued making steady payments even though she wasn’t using the card to make any purchases. Eventually, finances became so tight that she stopped paying altogether. Things came to a head in 2009 when she began receiving phone calls from people who claimed to work at a law firm. She was told that unless she paid off the balance in full, they would take her to court.
The script Wilson uses when calling consumers to recover debts.CreditJonno Rattman for The New York Times
At the time, Theresa had no way of knowing that the threat was a bluff, nor did she realize that such bluffs are increasingly common. According to annual reports filed by the F.T.C., the number of complaints about “false threats of lawsuits” from collectors more than doubled from roughly 12,000 in 2008 to more than 30,000 in 2012. And the combined number of complaints about threats of violence and “false threats of arrest or seizure of property” have jumped, more than tripling. David Torok, who oversees the F.T.C.’s complaint database, speculates that there were “more consumers truly on the edge” and that collectors were therefore simply “trying to squeeze even harder to get some money out of an extraordinarily dwindling pot.”
For Theresa, the possibility of being sued was deeply unsettling. She had recently landed a job with the Border Patrol and knew that a lawsuit could destroy her career as a federal law-enforcement officer. (As a matter of policy, the Border Patrol says that debts and “financial issues” may render candidates “unsuitable” for service.) The collectors explained that she now owed more than $6,000 with interest, but they offered her a deal in which she could settle the matter for just $2,700. Theresa said that she set up a payment plan and that over the course of the next six months the money was withdrawn directly from her checking account.
There was just one problem: The company never sent a letter confirming that she had paid the bill. Even worse, the payment never appeared on her credit report. She spent the next six months trying to understand where, exactly, her money had gone. “I didn’t want the money back,” she told me. “I just wanted somebody to say, ‘Hey, she tried to pay.’ ”
It wasn’t entirely accidental that Theresa’s debts ended up in the hands of thieves. When the original creditor, Washington Mutual, sold her debt, it stopped caring about what Theresa owed, how she was treated or what happened to her personal information. This is true for many banks; when they sell their unpaid accounts, their contracts testify to this indifference. According to American Banker, in a series of transactions in 2009 and 2010, Bank of America sold millions of dollars of charged-off debt to a company in Denver called CACH. In the sales agreement, Bank of America said it would not make “any representations, warranties, promises, covenants, agreements or guarantees of any kind or character whatsoever” about the accuracy of the account information it was selling. When Siegel bought the Package from Hudson & Keyse, the sale contract had similar wording. It stated, for example, that the seller was offering no “warranty of any kind” relating to the “validity, collectibility, accuracy or sufficiency of information” that was being sold. In other words, there might be problems with the debts, but they were being sold as is.
And there were problems, dating right back to the original creditor, Washington Mutual. Theresa’s bank records confirm that Washington Mutual issued her a significant credit — $702 — on the very same day it sold her debt. It’s unclear what the credit was for. An official at Chase Bank, which acquired Washington Mutual in 2008, told me that the credit might have been offered as relief — a gift, essentially. But he couldn’t be certain. On the monthly statement, the credit appeared as a payment alongside the words “Payment received — Thank you.” Whatever the explanation, one thing is certain: When Siegel bought the account in 2008, Theresa’s balance didn’t reflect this credit. Somewhere along the way, quite possibly at the bank itself, it was simply forgotten or ignored. Such sloppy record-keeping may seem surprising, but it is prevalent enough that in 2009, the F.T.C. said in a report: “When accounts are transferred to debt collectors, the accompanying information often is so deficient that the collectors seek payment from the wrong consumer or demand the wrong amount from the correct consumer.”
In truth, there was little that Theresa could do; she had paid off her debt to the wrong collectors and had fallen into the debt underworld. If anyone was going to help her, it wouldn’t be the state attorney general, or the Better Business Bureau, or the F.T.C., or even the police, but the former banker and the former armed-robber who bought her debt.
Around the same time that Theresa was getting phone calls from a mysterious law firm, Siegel received an email from the owner of an agency that he had hired to do his collecting. The collectors at this agency were getting the same message from many debtors: We just paid off these accounts — to someone else. Siegel was both flummoxed and concerned. Was this the work of a renegade collector at one of his agencies who was collecting on his own and pocketing the cash? Or had the paper simply been stolen from his offices?
The notion that a portfolio of debt could be stolen may seem improbable, but plenty of debt brokers are all too willing to sell “bad paper.” Such brokers sometimes “double sell” or “triple sell” the same file to multiple unsuspecting buyers. Other times, a broker may sell paper that he does not own and obtained by nefarious means. I spoke at length with one debt broker from Buffalo, who told me that he had hired a hacker from China to break into a former client’s email account and obtain his password. Once he had the client’s password, the broker had access to his paper. He then simply took a portfolio and, subsequently, sold it to another buyer — who didn’t know and didn’t ask where it came from.
Siegel playing pool recently with his wife, Stacey. CreditJonno Rattman for The New York Times
On several occasions, Siegel dealt with collection agencies or debt brokers who tried to cheat him in one fashion or another. Once, after being scammed by two local debt brokers, he hired a lawyer and sued the culprits. It took Siegel two years to get a judgment, and then it turned out that the companies were shells. I accompanied Siegel to his lawyer’s office when he got the bad news. “Just because you get a judgment,” his lawyer told him, “doesn’t mean you can collect it.”
Much of the responsibility for policing debt collections falls upon the nation’s various state attorneys general — and perhaps none have been more aggressive or successful than the one in New York. Still, the Buffalo bureau consists of only two people devoted to the collections industry. Karen Davis, who is the office’s senior consumer fraud representative, said she received thousands of written complaints about debt collectors each year. After sifting through these complaints and investigating many of them, she singles out companies whose behavior seems to be the most egregious. She puts those companies on a list of the worst offenders that she, personally, has to monitor. When we spoke in the spring of 2013, there were 324 companies on her list.
One of Davis’s recent coups was against an outfit known as International Arbitration Services. The agency’s collectors had been posing as law-enforcement officers and threatening debtors with arrest. (This particular tactic, which is not uncommon, was just a slightly more aggressive version of the one used against Theresa.) Rogue agencies like I.A.S. often use fake addresses, post-office boxes and rented phone numbers to mask their whereabouts. Davis believed that I.A.S. was located somewhere in Canada, but she couldn’t determine where exactly. “It went on for months, with us being frustrated, but we could get nowhere,” Davis said. “We just couldn’t figure out where they were.” Then one day an informer showed up at the Buffalo bureau and announced that he worked as a collector for I.A.S. He said he was unhappy because he had been cheated out of his pay — so unhappy that he walked over to complain in person. Walked.That single word left Davis flabbergasted. “What do you mean?” she said. “They’re not located in Canada?” No, the informer said, explaining that the I.A.S. office was just a few blocks away. Two days later, she served I.A.S. with a subpoena. Davis’s office ultimately forced I.A.S. to shut down and fined the owner a modest $10,000. And this is how a list of 325 companies dwindled to 324.
When Siegel realized that his paper had ended up in someone else’s hands, he knew there was only one thing to do: call Wilson. Wilson quickly started his detective work. First, he spoke with some of the debtors who recently paid the mysterious other agency. None of them could recall the name of the agency, but several combed through their credit-card statements and identified the company that processed the payments they made. So Wilson called the processing company. “I got them on the phone, told them that I was the debtor and said: ‘What is this? I am reversing the charge! What company charged me for this?’ ” And, like that, Wilson had the name and the phone number of the collection agency.
He called up the agency and introduced himself as the debtor. According to Wilson, the woman who answered the phone promptly told him that he was going to be arrested if he didn’t pay. Wilson asked for the address where the business was located, but the woman refused to tell him. Realizing that he was getting nowhere, Wilson hung up and glanced around his office, surveying the faces of his collectors. He called out the names of four of them. They all stood up. One was a young employee named Jeremy Mountain. As he recalls it, Wilson calmly explained to them what they were about to do: “We’re going to shut down this rogue agency or burn it down to the ground.” No one hesitated. They piled into Wilson’s small Mercedes sports car. “On average, the guys in the car weighed about 240 pounds,” Mountain said. “I was the only person who hadn’t gone to prison.”
Wilson decided to call one last time and got a man who claimed to be the owner. Wilson told him, “You guys are stealing money.” The owner, who asked to be identified only by his nickname, Bill, insisted that the accounts were his and that he would not stop collecting on them. Wilson’s last-ditch effort to negotiate had apparently failed.
Before “going to war,” as Wilson put it, he and his crew stopped by Siegel’s office in Buffalo. As it turns out, Wilson had some business to settle with Siegel as well. Under their arrangement, Siegel was supposed to notify Wilson every time he bought paper from one of Wilson’s sources and then send him a 5 percent commission. Wilson suspected that Siegel had either forgotten or simply neglected to pay him for some of these deals. In the car, Wilson apprised his posse of the situation: “I told my guys, ‘I know he has been holding out.’ ” Wilson figured that now was the perfect time to leverage his position and demand payment.
Wilson at home with his wife, Sharon, and their dog, Brady. CreditJonno Rattman for The New York Times
Siegel recalls Wilson’s arrival vividly: “They come down here in this small Mercedes, and they come storming out of it like clowns out of a clown car — only they’re ex-cons.” With some trepidation, Siegel invited them up to his office. Siegel’s assistant told me that she, too, was startled by the sight of Wilson: “He showed up in the office in a long black coat, drinking whiskey out of the bottle, with all these guys that I would not want to meet in a dark alley.” Siegel quickly resolved the matter of the unpaid commissions by writing Wilson a check for $50,000.
Before the posse left Siegel’s office, one final member arrived; he was the owner of another collection agency in Buffalo, which also worked Siegel’s paper. The man — who asked to be identified only by his middle name, Shafeeq — was a Muslim who said he tried to avoid charging interest whenever possible. Shafeeq had the advantage of being a local. He knew the collections scene in Buffalo — the good actors, the bad actors and everybody in between. Shafeeq knew, for example, that Bill owned and operated a corner store near Buffalo’s downtown. There was another benefit to having Shafeeq in the posse as well, namely that he ran his own security firm and was licensed to carry a firearm. Wilson recalls that when they all met up, Shafeeq had a 9-millimeter pistol with two clips. He also had a large knife. Wilson asked him what it was for. According to Wilson, Shafeeq’s reply was, “It’s for when I run out of bullets.”
Wilson and his crew eventually found Bill at his corner store in a run-down neighborhood. Wilson gestured for several of his guys to come with him, including Mountain and Shafeeq. When he walked into the store, he saw an enormous man, roughly 6-foot-6 and 280 pounds. Wilson asked the man his name. It was Bill.
The encounter was tense. Mountain recalled seeing a gun resting on a shelf behind the checkout counter. Bill confirmed that he had a gun at the ready and said that whether Wilson knew it or not, “he was the one in danger.” Wilson looked around and saw a door that appeared to lead to a back office. He gestured toward the door and said, “I don’t want an audience.” The two men walked through the back door, where Wilson hoped they might find some privacy. “Turns out it was a closet,” Wilson later told me. “So it’s the two of us, just standing there, in a storage closet.”
As he recalls it, Wilson told Bill to sit down and then drew close so that the two of them were eye to eye. “If you collect one more dollar on this paper,” he said, “I will come back down here, I will take your server, I will burn your agency to the ground, I will come to your house and burn it down, and then I will come back here and burn this store down. Understand?” Bill, indignant, proclaimed his innocence, insisting that he had bought the file legitimately from a fairly notorious debt broker based out of Buffalo.
This news gave Wilson pause. He knew this broker both personally and by reputation. “Saying that [this guy] sold you some bad paper and ripped you off is like saying: ‘Guess who robbed me in the forest? Robin Hood!’ Of course he did.” According to Wilson, the broker and his associates were notorious in the industry for selling stolen and double-sold accounts. Wilson himself had had “a couple of run-ins with these guys.” On one of these occasions, Wilson claimed that he was cheated out of money that he was owed and drove down to Buffalo to confront them. He never found them, but he remembered the incident bitterly and wondered for a second whether what Bill said might be true.
Siegel at his office window. CreditJonno Rattman for The New York Times
But at the corner store, Wilson was primarily concerned with impressing upon Bill just how serious and dangerous he was. Shafeeq, who overheard much of their encounter, described it as two “big kids” trying to prove who was meanest: “It was a tough-guy show.” Bill said that he refused to be strong-armed and that he told Wilson: “It’s not going to happen here — you’re talking to the wrong guy.” Wilson was not to be outdone. As Shafeeq recalled it, Wilson went into a tirade, lifting up his shirt and screaming at the top of his lungs: “I got stabbed right here! I got a bullet hole right here!” According to Shafeeq, Wilson’s tactic worked. “As soon as you see that kind of behavior,” Shafeeq said, “you’re like, O.K., this dude is absolutely crazy.”
In the end, Bill promised to stop collecting on Siegel’s accounts. Bill said he was happy to do this because he paid only $10,000 for the accounts and had already collected many times that. What’s more, Wilson didn’t demand that he return what he had made. “It was a win-win,” Bill said proudly. Siegel resolved to make the best of a bad situation. Whenever he could confirm that a debtor had paid Bill, he closed the account and permanently retired the debt; besides that, there wasn’t much more for him to do. He eventually sold many of the uncollected accounts in the Package for a tidy profit.
How, exactly, the Package got into Bill’s hands remains a mystery. The notorious debt broker did not return my calls. I did eventually manage to speak with one of his former partners — a man who asked to be identified only by his first name, Larry. Larry insisted that he himself hadn’t handled the Package, but said it was entirely possible that his partner had, because this was how business worked in their corner of the industry. Larry told me that he had often made deals in his car in which the buyer gave him cash, and he handed the buyer a thumb drive with a spreadsheet containing the names, addresses, Social Security numbers, credit-card balances or loan amounts of several thousand debtors. Where exactly, I inquired, did such files come from? “I’m not asking where the files are coming from,” he said. “I’m just dealing.”
This, of course, was the root of the problem. No one could ever be sure how Bill obtained the accounts from the Package. The possibilities were dizzying. Bill later suggested to me, for example, that he mentioned the notorious broker’s name only as a diversion and that he had in fact bought the paper from an employee in Siegel’s office, who was selling the paper covertly. Ultimately, there was no telling where the files came from, or who else had copies of them. And this was a problem not just for Siegel, but also for the debtors from the Package.
Several years after the Package was stolen — in the summer of 2013 — Theresa received a phone call from a company called McKellar and Associates Group, trying to collect on this very same Washington Mutual debt. I spoke with the agency’s co-owner, Adam Owens, who is based out of Beverly Hills, Calif. I asked Owens how he obtained Theresa’s debt, given the fact that Siegel had permanently retired it. He told me he had purchased it from a debt broker in Florida. It was part of a much larger package of roughly $50 million worth of debt, which he bought for just 12 basis points — or one-twelfth of a penny on the dollar. It had been bad paper, Owens said, and he’d gotten burned on the deal. After the purchase, Owens discovered that another agency was collecting on the same paper and, what’s more, that some of the dates on the debts had been manipulated so that the paper appeared newer than it actually was. As Owens saw it, when buying from debt brokers, this was all part of the risk you faced. He concluded: “It is just data you are purchasing.”
The federal government is, at long last, starting to make a serious effort to clean up the collections industry and protect consumers like Theresa. In 2012, the Consumer Financial Protection Bureau announced that it would start supervising some of the nation’s larger debt collectors to “help restore confidence that the federal government is standing beside the American consumer.” The bureau vowed to police the nation’s largest 175 agencies, but one recent projection on the industry estimates that there will be 8,501 debt-collection firms in 2015 in the United States. And the companies engaging in the most grievous behavior — like falsely threatening lawsuits or collecting on bad paper — tend to be the smaller operators. It inevitably falls upon the state attorneys general to go after them, which means depending on overburdened officials like Karen Davis.
A house on Delaware Avenue that is now home to Siegel’s private-equity firm. CreditJonno Rattman for The New York Times
And so far, regulators have concentrated on debt collecting, as opposed to the buying and selling of debt, which is the source of many of the industry’s problems. As long as paper continues to be stolen, double-sold or otherwise exchanged without accurate supporting information — like statements or copies of the original signed contracts — consumers will be exploited and collectors like Siegel and Wilson will have to fend for themselves.
A centralized loan registry might help, and there are some in development. Mark Parsells, the chief executive of a company called Global Debt Registry, has developed a database that tracks the ownership of consumer debts once they are sold off by banks or original creditors. Each debt is assigned a “universal loan identification number,” or ULIN, which functions like a vehicle identification number on a car. When a car changes hands, its license-plate number changes, but the VIN remains the same; likewise, when a debt is bought or sold, the account number and the creditor information might change, but the ULIN would remain the same. The registry also maintains electronic records of the original data and documents associated with each debt, like statements and loan applications. If a debtor like Theresa received an inquiry from a strange collection agency or law firm, she could access the registry’s secure website and quickly verify whether this agency actually owned the debt or was authorized to collect on it.
So why hasn’t the government helped establish such a registry? After all, the Department of Motor Vehicles keeps track of who owns what car, and the Register of Deeds records who owns a piece of property. When I visited the Federal Trade Commission in Washington, I posed this very question to an official who investigates and brings actions against debt collectors. The question wasn’t entirely fair, because it fell outside his purview, but I wondered if anyone at the F.T.C. was giving this any thought. “Yeah, I don’t know,” the official said. “The commission hasn’t weighed in on something like that. I think that the commission would have to have a lot more information.”
Just this month, the Office of the Comptroller of the Currency, which supervises all national banks, issued written guidance on how debts should be sold. Banks need to vet potential buyers and provide accurate and complete information, the office says. Reform may be on the horizon. And with it there may come a time when there is no need for Wilson’s strongman services or his tough-talking antics, but for the moment, at least, they continue to fill a need. Wilson is still hunting for “crap,” selling it to his clients and promising to keep the sharks at bay. Siegel is still paying back his investors, but his fund is almost at an end. Wilson, not surprisingly, is busy looking for new clients. He even had hopes that his former foe Bill might be a good candidate. In fact, as a thank you for Bill’s prompt and polite cooperation, Wilson said he sent him a small present, a trademark Brandon Wilson tiding of good will: a file containing 1,000 old accounts. Pure crap — but crap with potential to become gold.
This article is adapted from “Bad Paper: Chasing Debt From Wall Street to the Underworld” by Jake Halpern, to be published by Farrar Straus and Giroux in October.
Correction: August 19, 2014
An earlier version of this article misstated the value of a package of debt that McKellar and Associates Group purchased for 12 basis points. That comes out to about one-eighth of a penny on the dollar, not one-twelfth of a penny on the dollar.
“If I had been told to get out of the street as a teenager, there would have been a distinct possibility that I might have smarted off. But, I wouldn’t have expected to be shot…
….. How did this happen? Most police officers are good cops and good people. It is an unquestionably difficult job, especially in the current circumstances. There is a systemic problem with today’s law enforcement. Not surprisingly, big government has been at the heart of the problem. The Pentagon gives away millions of pieces of military equipment to police departments across the country—tanks included. When you couple this militarization of law enforcement with an erosion of civil liberties and due process that allows the police to become judge and jury—national security letters, no-knock searches, broad general warrants, pre-conviction forfeiture—we begin to have a very serious problem on our hands. Given these developments, it is almost impossible for many Americans not to feel like their government is targeting them. Given the racial disparities in our criminal justice system, it is impossible for African-Americans not to feel like their government is particularly targeting them. Anyone who thinks that race does not still, even if inadvertently, skew the application of criminal justice in this country is just not paying close enough attention. Our prisons are full of black and brown men and women who are serving inappropriately long and harsh sentences for non-violent mistakes in their youth. The militarization of our law enforcement is due to an unprecedented expansion of government power in this realm. It is one thing for federal officials to work in conjunction with local authorities to reduce or solve crime. It is quite another for them to subsidize it…..Americans must never sacrifice their liberty for an illusive and dangerous, or false, security. This has been a cause I have championed for years, and one that is at a near-crisis point in our country.”, U.S. Senator Rand Paul, Time Magazine, August 14, 2014
Rand Paul: We Must Demilitarize the Police
Aug. 14, 2014
Police in riot gear watch protesters in Ferguson, Mo. on Aug. 13, 2014.Jeff Roberson—AP
Anyone who thinks race does not skew the application of criminal justice in this country is just not paying close enough attention, Sen. Rand Paul writes for TIME, amid violence in Ferguson, Mo. over the police shooting death of Michael Brown
The shooting of 18-year-old Michael Brown is an awful tragedy that continues to send shockwaves through the community of Ferguson, Missouri and across the nation.
If I had been told to get out of the street as a teenager, there would have been a distinct possibility that I might have smarted off. But, I wouldn’t have expected to be shot.
The outrage in Ferguson is understandable—though there is never an excuse for rioting or looting. There is a legitimate role for the police to keep the peace, but there should be a difference between a police response and a military response.
The images and scenes we continue to see in Ferguson resemble war more than traditional police action.
Glenn Reynolds, in Popular Mechanics, recognized the increasing militarization of the police five years ago. In 2009 he wrote:
Soldiers and police are supposed to be different. … Police look inward. They’re supposed to protect their fellow citizens from criminals, and to maintain order with a minimum of force.
It’s the difference between Audie Murphy and Andy Griffith. But nowadays, police are looking, and acting, more like soldiers than cops, with bad consequences. And those who suffer the consequences are usually innocent civilians.
The Cato Institute’s Walter Olson observed this week how the rising militarization of law enforcement is currently playing out in Ferguson:
Why armored vehicles in a Midwestern inner suburb? Why would cops wear camouflage gear against a terrain patterned by convenience stores and beauty parlors? Why are the authorities in Ferguson, Mo. so given to quasi-martial crowd control methods (such as bans on walking on the street) and, per the reporting of Riverfront Times, the firing of tear gas at people in their own yards? (“‘This my property!’ he shouted, prompting police to fire a tear gas canister directly at his face.”) Why would someone identifying himself as an 82nd Airborne Army veteran, observing the Ferguson police scene, comment that “We rolled lighter than that in an actual warzone”?
Olson added, “the dominant visual aspect of the story, however, has been the sight of overpowering police forces confronting unarmed protesters who are seen waving signs or just their hands.”
How did this happen?
Most police officers are good cops and good people. It is an unquestionably difficult job, especially in the current circumstances.
There is a systemic problem with today’s law enforcement.
Not surprisingly, big government has been at the heart of the problem. Washington has incentivized the militarization of local police precincts by using federal dollars to help municipal governments build what are essentially small armies—where police departments compete to acquire military gear that goes far beyond what most of Americans think of as law enforcement.
This is usually done in the name of fighting the war on drugs or terrorism. The Heritage Foundation’s Evan Bernick wrote in 2013 that, “the Department of Homeland Security has handed out anti-terrorism grants to cities and towns across the country, enabling them to buy armored vehicles, guns, armor, aircraft, and other equipment.”
Bernick continued, “federal agencies of all stripes, as well as local police departments in towns with populations less than 14,000, come equipped with SWAT teams and heavy artillery.”
Bernick noted the cartoonish imbalance between the equipment some police departments possess and the constituents they serve, “today, Bossier Parish, Louisiana, has a .50 caliber gun mounted on an armored vehicle. The Pentagon gives away millions of pieces of military equipment to police departments across the country—tanks included.”
When you couple this militarization of law enforcement with an erosion of civil liberties and due process that allows the police to become judge and jury—national security letters, no-knock searches, broad general warrants, pre-conviction forfeiture—we begin to have a very serious problem on our hands.
Given these developments, it is almost impossible for many Americans not to feel like their government is targeting them. Given the racial disparities in our criminal justice system, it is impossible for African-Americans not to feel like their government is particularly targeting them.
This is part of the anguish we are seeing in the tragic events outside of St. Louis, Missouri. It is what the citizens of Ferguson feel when there is an unfortunate and heartbreaking shooting like the incident with Michael Brown.
Anyone who thinks that race does not still, even if inadvertently, skew the application of criminal justice in this country is just not paying close enough attention. Our prisons are full of black and brown men and women who are serving inappropriately long and harsh sentences for non-violent mistakes in their youth.
The militarization of our law enforcement is due to an unprecedented expansion of government power in this realm. It is one thing for federal officials to work in conjunction with local authorities to reduce or solve crime. It is quite another for them to subsidize it.
Americans must never sacrifice their liberty for an illusive and dangerous, or false, security. This has been a cause I have championed for years, and one that is at a near-crisis point in our country.
Let us continue to pray for Michael Brown’s family, the people of Ferguson, police, and citizens alike.
Paul is the junior U.S. Senator for Kentucky.
“…the Fed should also take into consideration the possibility of excesses brought on by low interest rates that could create financial crises. In making interest-rate decisions, the Fed should have a realistic view of the broad range of the existing systemic risks and of the limits of the government’s currently extant macroprudential tools…
…The stress in these interest-rate decisions is heightened by the political system’s failure to act on our nation’s broader policy challenges, increasing the pressure on monetary policy, despite the limits on what it can do and the risks its expanded use can pose.”, Martin Feldstein and Robert Rubin, Wall Street Journal
The Fed’s Systemic-Risk Balancing Act
Using ‘macroprudential’ tools means recognizing the breadth of the potential trouble in the financial system.By MARTIN FELDSTEIN And ROBERT RUBIN Aug. 11, 2014 7:31 p.m. ET
The Federal Reserve Board of Governors recently warned of the possibility of excesses in asset markets but concluded that, at least for now, if there is a need to act it will not be done by raising interest rates but by relying on “macroprudential” policy tools to reduce systemic risk.
We are not expressing a view on whether there are current financial excesses that are potentially destabilizing—that is always hard to judge—or whether the Fed should raise rates now to deal with such possible risks. But we do think it imperative that Fed policy makers have a realistic view of the breadth of the possible systemic risks and of the tools that are available to deal with such risks.
The macroprudential tools that the Fed has discussed relate primarily to making banks more resilient, and that is obviously very important. But the possible systemic risks extend to a vast number of other institutions and asset markets, and there the issues around macroprudential regulation become much more complicated.
The Financial Stability Oversight Council, established in 2010 by Dodd-Frank, can give the Fed authority over certain non-banks, and can recommend policy changes to regulators like the Securities and Exchange Commission and the Commodity Futures Trading Commission. But so far the FSOC has taken very limited actions. The Fed’s banking regulatory powers may also give the Fed the ability to indirectly affect some other areas of risk, such as hedge-fund positioning, but how much is unclear. Neither the Fed nor any other regulatory body has laid out a comprehensive description of the potential macroprudential tools.
Thus, we see three important issues with respect to relying on macroprudential tools. First, since a wide range of assets and asset holders are involved, current tools are not nearly as broad and comprehensive as the existing range of systemic risks. Second, the situations are complex, making the design of an appropriate regime complicated and time consuming. Third, it might take considerable time for the FSOC and the relevant agencies to reach a decision to act.
There is debate about how much the extremely low yield on 10-year U.S. Treasury bonds has been affected by the Fed’s “unconventional monetary policies,” including both the quantitative easing and the long-term guidance of short rates. In addition to Fed policy, the low yields on Treasury bonds reflect weak investment demand by businesses, the slow pace of the recovery, and the dollar’s role as a safe haven in a troubled world.
Whatever the reason, the low yields on Treasury bonds have led to reaching for yield in many ways and in very large magnitudes. Again this needn’t mean that the asset prices are excessive, but the combination of their dramatic increase in price, the low volatility and the reaching for yield by investors and lenders suggest that the risk of excesses and the consequent instability have increased substantially. And if there are excesses, they represent wide-ranging systemic risks that go beyond the banking system.
There are many potential examples of heightened risks. For one, if hedge funds hold excessively priced assets that at some point start to adjust, there could be contagion and a snowballing effect, especially given the crowded trades that are common among hedge funds. That could affect broader markets and the economy more generally.
The yield spreads on low-quality “junk” bonds have fallen dramatically. The volume of high-risk “leveraged loans” (i.e., loans that require interest rates of Libor, the London Interbank Offered Rate, plus 200 basis points or more) have increased from $200 billion in 2010 to $600 billion last year. Covenant-light loans have grown from $10 billion in 2010 to more than $250 billion last year. The S&P 500 is near record highs. Volatility across asset classes is very low and volatility instruments like the Vix index of equity volatility are trading at low prices to reflect this. European sovereign-debt yields have come way down, with the Spanish 10-year bond, for example, recently trading at the lowest rate since 1789. And the list goes on.
The buyers of these instruments and securities include insurance companies, endowments, money managers, hedge funds, individuals, pensions, special funds created for their acquisition, and others.
In the short run, markets tend to be psychological and in the longer run tend to reflect fundamentals. Whether and how much markets are mispriced relative to fundamentals is always uncertain. But when markets have moved across the board as much as they now have, that should be a warning of the possibility of excesses.
Our conclusion is not that the Fed should respond to those risks by raising interest rates now. Weak labor markets are and should be a deep concern and a pressing issue. But the Fed should also take into consideration the possibility of excesses brought on by low interest rates that could create financial crises. In making interest-rate decisions, the Fed should have a realistic view of the broad range of the existing systemic risks and of the limits of the government’s currently extant macroprudential tools.
The stress in these interest-rate decisions is heightened by the political system’s failure to act on our nation’s broader policy challenges, increasing the pressure on monetary policy, despite the limits on what it can do and the risks its expanded use can pose.
Mr. Feldstein, chairman of the Council of Economic Advisers under President Reagan, is a professor at Harvard and a member of the Journal’s board of contributors. Mr. Rubin, a former U.S. Treasury secretary, is co-chairman of the Council on Foreign Relations.
““The collapse of Lehman was not an isolated failure of a single broker-dealer, but rather one of a string of crises for multiple broker-dealers,” Mr. Rosengren (Boston Fed President) said in his speech. While repo borrowing has fallen from its peak before the financial crisis, it is still by far the largest source of borrowing for broker-dealers…
…In 2013, repos and similar types of borrowings accounted for 52 percent of broker-dealer obligations, according to figures in a chart that Mr. Rosengren cited in his speech, down from 59 percent in 2007.“The funding model, the core of the problem, hasn’t changed at all,” Mr. Rosengren said in an interview. “It is a model that is designed for government intervention.””, Peter Eavis, New York Times
“During the 1998 global liquidity crisis, IndyMac was a publicly-traded mortgage reit that was primarily funded by repo borrowings from Wall Street. We learned a tough lesson about the volatility and lack of reliability of capital markets funding (repo and commercial paper) and prudently sought shareholder approval to de-reit and become a thrift in mid-2000; so that we would have access to federally insured deposits, FHLB advances, and FRB funding. As a result, when the repo and commercial paper markets collapsed in 2007/2008, IndyMac had no repo or commercial paper outstanding and several billion in operating liquidity. Our bank run wasn’t caused by an imprudent funding model (as it was with broker-dealers and many others), it was caused by a United States Senator who in June 2008, inexplicably and inappropriately publicly released letters he had sent the banking regulators, expressing concerns about our financial health. At that time, if he or anyone of his stature had done the same to almost any other major financial institution in America, I doubt they would have survived either.”, Mike Perry, former Chairman and CEO, IndyMac Bank
Boston Fed Chief Warns of Dangers to Repo Market
By PETER EAVIS
Wall Street banks continue to rely for billions of dollars in borrowing on a market that dried up suddenly in 2008, sending shock waves through the financial system and the wider economy.
Since the crisis, some steps have been taken to shore up the potentially unstable debt market, known as the repo market. But on Wednesday, Eric S. Rosengren, president of the Federal Reserve Bank of Boston, became the latest prominent regulator to call for a more ambitious overhaul of the repo market. In particular, he suggested that financial institutions making large use of repo borrowing should maintain higher levels of capital.
“Broker-dealers can experience significant funding problems during times of financial stress,” he said on Wednesday in remarks for a conference at the Federal Reserve Bank of New York. “Unfortunately that potential for problems has not been fully addressed.”
The Dodd-Frank Act of 2010 and international regulatory agreements have introduced many new rules since the crisis that are aimed at making the financial system stronger. Still, some regulators, including Janet L. Yellen, the Fed chairwoman, and Daniel K. Tarullo, the Fed governor who oversees regulation, are still concerned about Wall Street’s heavy use of short-term debt markets to finance their operations.
Most of the concern centers on repurchase agreements, known in the banking world as repos. These allow broker-dealers to borrow at low rates for short periods against collateral, usually bonds. The market turned treacherous in 2008 as broker-dealers like Lehman Brothers encountered severe financial trouble, causing the repo market to seize and prompting the Fed to make billions of dollars of emergency loans across Wall Street to keep the market functioning and prevent a failure of the system.
“The collapse of Lehman was not an isolated failure of a single broker-dealer, but rather one of a string of crises for multiple broker-dealers,” Mr. Rosengren said in his speech.
While repo borrowing has fallen from its peak before the financial crisis, it is still by far the largest source of borrowing for broker-dealers. In 2013, repos and similar types of borrowings accounted for 52 percent of broker-dealer obligations, according to figures in a chart that Mr. Rosengren cited in his speech, down from 59 percent in 2007.
“The funding model, the core of the problem, hasn’t changed at all,” Mr. Rosengren said in an interview. “It is a model that is designed for government intervention.”
The authorities’ focus on the repo market comes at a time when Wall Street banks are holding smaller inventories of bonds on their balance sheets. The banks use repos to finance these stockpiles. But recent regulations, particularly a capital rule known as the leverage ratio, are making it less economical for banks to use repos for this purpose.
Some analysts are now concerned that as banks’ bond inventories decline in size, bond prices could fall more sharply during periods of heavy selling. When bond prices fell steeply last year, for instance, Wall Street firms were also reducing their holdings of bonds.
But a study last year by the New York Fed determined that the broker-dealers most likely cut back during the sell-off because they were reassessing risks in the market, not because of regulations.
Even so, the new rules are prompting broker-dealers to make significant changes to their trading operations, debt market experts say.
“It’s not creating particular strain or stress right now, but there are a lot of uncertainties about how the structure of the markets will evolve,” said Lou Crandall, chief economist at Wrightson ICAP.
Changes since the crisis have made the repo market less of a threat. Assets that back repo loans are, for instance, less risky than before the crisis. And banks also have bigger sources of cash on hand, for times when the repo market dries up.
Still, apparent weaknesses continue to exist, according to regulators. The repo market is potentially vulnerable, Mr. Rosengren asserted, because money market funds are one of the main lenders in the market. Investors typically see these funds as having very low risk. As a result, when investors thought they might suffer losses on money market funds in 2008, they withdrew their money in droves. In turn, this reduced the amount of money that the funds could lend to banks through repos, depriving the banks of their financial lifeblood.
The Securities and Exchange Commission last month approved new rules aimed at preventing runs on money market funds.
In his speech, Mr. Rosengren gave the overhaul two cheers. “While I would have preferred even more protection against financial runs on money market mutual funds, this element of the recent rule-making does represent a meaningful improvement,” he said.
The commission is the primary regulator of banks’ broker-dealer subsidiaries, where much repo borrowing takes place. Mr. Rosengren noted that the S.E.C. had not significantly changed capital and other regulations for broker-dealers since the crisis.
The Fed, however, may decide in the coming months to forge ahead with its own measures to address banks’ short-term borrowing. Mr. Rosengren, for instance, suggested that banks that make heavy use of short-term borrowings should be required to maintain higher levels of capital.
At Wall Street banks, capital amounts to a small fraction of their repo borrowings, so a slight increase in capital might not have much of an effect. But Mr. Rosengren responded that any rise would make capital “less tiny than it is.”
“When I finally realized that we were talking past each other, I felt kind of dumb. Because essentially this very realization – that people who favor expansion of government imagine a State different from the one possible in the physical world – has been a core part of the argument made by classical liberals for at least three hundred years.”, Michael Munger
Notable & Quotable: The Government Is not a Unicorn
Duke University economist Michael Munger writing in the Freeman, Aug. 11.
Economist Michael Munger writing in the Freeman, Aug. 11:
When I am discussing the state with my colleagues at Duke, it’s not long before I realize that, for them, almost without exception, the State is a unicorn. I come from the Public Choice tradition, which tends to emphasize consequentialist arguments more than natural rights, and so the distinction is particularly important for me. My friends generally dislike politicians, find democracy messy and distasteful, and object to the brutality and coercive excesses of foreign wars, the war on drugs, and the spying of the NSA.
But their solution is, without exception, to expand the power of “the State.” That seems literally insane to me—a non sequitur of such monstrous proportions that I had trouble taking it seriously.
Then I realized that they want a kind of unicorn, a State that has the properties, motivations, knowledge, and abilities that they can imagine for it. When I finally realized that we were talking past each other, I felt kind of dumb. Because essentially this very realization—that people who favor expansion of government imagine a State different from the one possible in the physical world—has been a core part of the argument made by classical liberals for at least three hundred years.
“We were told the science was settled. Yet new research suggests that salt is not nearly as dangerous as the government medical establishment has been proclaiming for many decades—and a low-salt diet may itself be risky.”, Wall Street Journal
The Salt Libel
Another example that scientific debates are rarely ‘settled.’
We were told the science was settled. Yet new research suggests that salt is not nearly as dangerous as the government medical establishment has been proclaiming for many decades—and a low-salt diet may itself be risky. Other than how to season tonight’s dinner, perhaps there’s a lesson here about politics and the scientific method.
The USDA, Food and Drug Administration and other regulators have long instructed eaters to consume no more sodium than 2,300 milligrams a day, or about a teaspoon, well below the U.S. average of 3,400 mgs. The limits are said to reduce the risks of high blood pressure, cardiovascular disease and stroke.
But several related papers in this week’s New England Journal of Medicine undermine these recommendations, and one even speculates that the official targets pose health hazards. In one of the most complete treatments of the subject to date, researchers followed more than 100,000 people world-wide for three and a half years. They found that those who consumed fewer than 3,000 mgs had a 27% higher risk of death or a serious medical event like a heart attack.
The findings are associations, not definitive clinical proof (to the extent there is such a thing). But they add to a growing literature arguing that the evidence that sodium is harmful is weak or nonexistent, including a report last year out of the Institute of Medicine.
If the war on salt was wrongly declared, that may be because diet is inevitably an elusive and ambiguous field given the complexity of human biology. What we know about the body evolves over time. Many theories of food and health are no more than superstition, so any nutrition advice that is more specific than moderation and more vegetables ought to be taken with a grain of—well, you know.
Yet the latest USDA food pyramid, which was updated as recently as 2011, clings to simplistic low-salt pseudo-science. The FDA is pressuring food manufacturers and restaurants to remove salt from their recipes and menus, while the public health lobby is still urging the agency to go further and regulate NaCl as if it were a poison.
The larger point is that no scientific enterprise is static, and political claims that some line of inquiry is over and “settled” are usually good indications that real debate and uncertainty are aboil. In medicine in particular, the illusion that science can provide some objective answer that applies to everyone—how much salt to eat, how and how often to screen for cancer, even whom to treat with cholesterol-lowering drugs, and so on—is a special danger.
Government regulation often can lock in bad advice and practices and never changes as quickly as the evidence evolves. So be glad the salt debate continues.