December 22, 2005

2005′s “Worst in Finance”

Terri Cullen of The Wall Street Journal (requires subscription) nominates the following four worthy contenders, and I agree that they all belong:

The New Medicare Prescription Drug Benefit
Although this won’t have an impact until next year, the negative fallout is already being felt. I’m sure I’ll be dealing with this more often than I’d like in 2006, so suffice it to say for now that this has all the marking of a PR, and potentially electoral, disaster for those who voted it in.

The Alternative Minimum Tax (AMT) that refuses to die
This tax (too complex to explain in detail here) was meant for the super-wealthy when it was enacted 30-plus years ago. But it is snaring more upper middle-income payers as time goes by, because the amounts involved in determining income and deductions were never indexed for inflation. So millions who weren’t intended targets are being affected. Congress is diddling around with piecemeal solutions when it should either jettison the thing entirely, or limit its impact to those with 7-figure incomes.

Credit-card company rates, fees, and universal default clauses
This has been covered frequently here. If there is to be a liberal comeback in politics, it will occur largely because the lending industry has basically turned Congress (including many Democrats) into lapdogs, and, with their over-30% penalty rates and $35-plus fees, have turned the capitalist system against anyone who makes just a couple of financial mistakes, or who is forced into financial hardship by events outside their control (medical bills, divorce, etc.). As Moderate Mainstream noted earlier this year (sorry, can’t find original link), universal default is like the electric company increasing your rates because you were late with your cable bill (shh–don’t give them any ideas).

Bankruptcy “Reform”
The only question here is how serious the repercussions from this public-policy mistake will be. My objections to it were many and are referenced here. The biggest is that the new bankruptcy regimen was put in place while the outrageous lending practices in the previous item were not reined in one bit.

One Other
The only other deserving candidate I would include would be the collection of conflicted practices found in the mutual fund and retirement-planning industry.

Any other suggestions? E-mail me or leave a comment.

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