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The State and Fate of Community Banking

February 26, 2015 Comments off

The State and Fate of Community Banking
Source: Harvard Kennedy School, Mossavar-Rahmani Center for Business & Government

This working paper focuses on the plight of community banks in the United States. It begins by examining different definitions of what constitutes a community bank, and goes on to review what makes these institutions unique and distinguishes them from larger regional or national peers. Our assessment of Federal Deposit Insurance Corporation data finds that community banks service a disproportionately large amount of key segments of the U.S. commercial bank lending market – specifically, agricultural, residential mortgage, and small business loans. However, community banks’ share of U.S. banking assets and lending markets has fallen from over 40 percent in 1994 to around 20 percent today. Interestingly, we find that community banks emerged from the financial crisis with a market share 6 percent lower, but since the second quarter of 2010 – around the time of the passage of the Dodd-Frank Act – their share of U.S. commercial banking assets has declined at a rate almost double that between the second quarters of 2006 and 2010. Particularly troubling is community banks’ declining market share in several key lending markets, their decline in small business lending volume, and the disproportionate losses being realized by particularly small community banks. We review studies on the impact of regulation, consumer trends and other factors on community banks, and examine the consequences of consolidation on U.S. lending markets. We conclude with a discussion of policies that could promote a more competitive and robust banking sector.

Patient Responses to Incentives in Consumer-directed Health Plans: Evidence from Pharmaceuticals

February 26, 2015 Comments off

Patient Responses to Incentives in Consumer-directed Health Plans: Evidence from Pharmaceuticals
Source: National Bureau of Economic Research

Prior studies suggest that consumer-directed health plans (CDHPs) -characterized by high deductibles and health care accounts- reduce health costs, but there is concern that enrollees indiscriminately reduce use of low-value services (e.g., unnecessary emergency department use) and high-value services (e.g., preventive care). We investigate how CDHP enrollees change use of pharmaceuticals for chronic diseases. We compare two large firms where nearly all employees were switched to CDHPs to firms with conventional health insurance plans. In the first firm’s CDHP, pharmaceuticals were subject to the deductible, while in the second firm pharmaceuticals were exempt. Employees in the first firm shifted the timing of drug purchases to periods with lower cost sharing and were more likely to use lower-cost drugs, but the largest effect of the CDHP was to reduce utilization. Employees in the second firm also reduced utilization, but did not shift the timing or use of low cost drugs.

FCC Adopts Strong, Sustainable Rules to Protect the Open Internet

February 26, 2015 Comments off

FCC Adopts Strong, Sustainable Rules to Protect the Open Internet
Source: Federal Communications Commission

Ending lingering uncertainty about the future of the Open Internet, the Federal Communications Commission today set sustainable rules of the roads that will protect free expression and innovation on the Internet and promote investment in the nation’s broadband networks. The FCC has long been committed to protecting and promoting an Internet that nurtures freedom of speech and expression, supports innovation and commerce, and incentivizes expansion and investment by America’s broadband providers. But the agency’s attempts to implement enforceable, sustainable rules to protect the Open Internet have been twice struck down by the courts.

Today, the Commission—once and for all—enacts strong, sustainable rules, grounded in multiple sources of legal authority, to ensure that Americans reap the economic, social, and civic benefits of an Open Internet today and into the future. These new rules are guided by three principles: America’s broadband networks must be fast, fair and open—principles shared by the overwhelming majority of the nearly 4 million commenters who participated in the FCC’s Open Internet proceeding.

Absent action by the FCC, Internet openness is at risk, as recognized by the very court that struck down the FCC’s 2010 Open Internet rules last year in Verizon v. FCC.

See also: FCC Preempts Laws Restricting Community Broadband in NC/TN

A New College Compact: Addressing the Cost & Quality Crisis in Higher Ed

February 24, 2015 Comments off

A New College Compact: Addressing the Cost & Quality Crisis in Higher Ed
Source: Third Way

For decades, Washington has focused almost exclusively on defraying the cost of college for families as tuition sticker prices have increased. But the time has come for a new national conversation to address the far more serious and fundamental problem: how to significantly increase the quality of college education while lowering the actual cost.

Take the 1.2 million students who will begin a four-year college in 2015. Based on current statistics, only 39% will graduate with a bachelor’s degree in four years, with 41% failing to graduate in six. Forty-four percent will not find work that requires a four-year degree, 25% will graduate with over $30,000 in debt, and a shocking 36% will demonstrate no meaningful gains in critical thinking.

Enmeshed in these dismal outcomes is the federal government, which, as one of the principal payers of college tuition, could have immense and unique leverage over postsecondary education. It controls access to valuable data and oversees the accreditation process, funds significant university research, and administers a massive loan and grant infrastructure. In fact, the federal government spends around $126 billion per year on undergraduate student aid, contributing 69% of total state, local, federal, and private aid.*4 But Washington has neglected to use that leverage.

2014 Fifth Annual Study on Medical Identity Theft

February 24, 2015 Comments off

2014 Fifth Annual Study on Medical Identity Theft
Source: Medical Identity Fraud Alliance

The 2014 Fifth Annual Study on Medical Identity Theft measures the prevalence, extent and impact of medical identity theft to consumers and the healthcare industry in the United States. The study was sponsored by the Medical Identity Fraud Alliance (MIFA) with support from MIFA Founding Member companies Kaiser Permanente, ID Experts Corporation, Experian Data Breach Resolution and Identity Finder, LLC, and conducted by the Ponemon Institute.

The incidence of medical identity theft continues to rise. This most recent report shows that it has nearly doubled since the first study five years ago. In 2014, there were almost 500,000 more victims than in 2013.

The out-of-pockets costs to victims has also grown, with twice as many victims experiencing financial costs to correct their medical identities and deal with the resulting problems.

And victims continue to experience serious risks related to their healthcare as a result of being victimized, such as misdiagnosis, mistreatment and delayed healthcare.

free registration required2

USPS OIG — What Postal Services Do People Value the Most? A Quantitative Survey of the Postal Universal Service Obligation

February 24, 2015 Comments off

What Postal Services Do People Value the Most? A Quantitative Survey of the Postal Universal Service Obligation
Source: U.S. Postal Service, Office of Inspector General

The OIG has conducted a nationally representative quantitative survey on the relative value of some key services provided as part of the universal service obligation (USO). This study is the first of its kind in the United States and was done in conjunction with the market research firm Gallup and Professor Michael Bradley of George Washington University’s Department of Economics. The study, What Postal Services Do People Value the Most?, focused on four attributes of the USO: mode of delivery, access to postal services, frequency of delivery, and price. This study is a follow-up to our white paper Guiding Principles for a New Universal Service Obligation in which we discuss the need for such a study.

The survey found that both consumers and businesses still value postal services, especially door and/or curb delivery instead of delivery to a cluster box or parcel locker. Respondents also value the ability to access postal services through post offices, rather than using other alternatives such as postal counters in non-postal retail stores and self-service kiosks. In addition, while consumers and businesses are indifferent when it comes to the Saturday delivery of letters, consumers still place value on the Saturday delivery of parcels. Furthermore, consumers and businesses also value lower prices and may be willing to accept lower levels of service to keep prices from rising sharply.

The Effects of Conflicted Investment Advice on Retirement Savings

February 24, 2015 Comments off

The Effects of Conflicted Investment Advice on Retirement Savings (PDF)
Source: Council of Economic Advisors
From blog post (Whitehouse.gov):

Americans’ retirement income is derived from many sources, including Social Security, traditional pensions, employer-based retirement savings plans such as 401(k)s, and Individual Retirement Accounts (IRAs). While this landscape is familiar today, it reflects a dramatic change from the landscape 40 years ago. The share of working Americans covered by traditional pension plans—which offer a guaranteed income stream in retirement—has fallen sharply. Today, most workers participating in a retirement plan at work are covered by a defined contribution plan, such as a 401(k). Importantly, the income available in retirement from a defined contribution plan depends on both the amount initially saved and the return on those savings. The shift from traditional pensions to defined contribution plans raises important policy issues about investment responsibilities and the roles of individual households, employers, and investment advisers in ensuring the retirement security of Americans.

Defined contribution plans and IRAs are intricately linked, as the overwhelming majority of money flowing into IRAs comes from rollovers from an employer-based retirement plan, not direct IRA contributions. Collectively, more than 40 million American families have savings of more than $7 trillion in IRAs. More than 75 million families have an employer-based retirement plan, own an IRA, or both. Rollovers to IRAs exceeded $300 billion in 2012 and are expected to increase steadily in the coming years. The decision whether to roll over one’s assets into an IRA can be confusing and the set of financial products that can be held in an IRA is vast, including savings accounts, money market accounts, mutual funds, exchange-traded funds, individual stocks and bonds, and annuities. Selecting and managing IRA investments can be a challenging and time-consuming task, frequently one of the most complex financial decisions in a person’s life, and many Americans turn to professional advisers for assistance. However, financial advisers are often compensated through fees and commissions that depend on their clients’ actions. Such fee structures generate acute conflicts of interest: the best recommendation for the saver may not be the best recommendation for the adviser’s bottom line.

CEA’s new report The Effects of Conflicted Investment Advice on Retirement Savings examines the evidence on the cost of conflicted investment advice and its effects on Americans’ retirement savings, focusing on IRAs. Investment losses due to conflicted advice result from the incentives conflicted payments generate for financial advisers to steer savers into products or investment strategies that provide larger payments to the adviser but are not necessarily the best choice for the saver.

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