Relief loans to replace loss of earnings

First posted on 18 Nov 2008

PM Lee said that our finances are sound. The Government will implement measures to stimulate the ecoomy.

The recent methods to stimulate the economy are:
a) Spend on infrastructure works (i.e. Singapore and China approach)
b) Give money to the people to spend (i.e the US stimulus package)

These methods are good. I wish to suggest a third method:
c) Allow each person to apply for a relief loan for the loss or reduction of earnings

Here is how the relief loan works:
1. The borrower can apply for a relief loan to replace the loss or reduction of earnings.
2. This loan will carry interest at 2.5% p.a.
3. The total borrowing can be subject to a cap of say $50,000
4. The loan can be repaid at any time, when the borrower has excess earnings.
5. It will be a first charge on the sale or your property or CPF savings
6. The CPF savings cannot be withdrawn for investments, while there is an outstanding relief loan

The relief loan will help the affected person to pay the mortgage and carry on the daily life with dignity. This facility will provide the assurance for the employed people to carry out their daily life without cutting back on their expenditure drastically, although they are expected to be more careful and frugal. They will follow SM Goh's advice to continue to spend and keep the economy moving.

If mortgages continue to be paid, the property values will be somewhat protected. The fall will be modest. The lower price will encourage other people to buy properties.

How does the Government manage the task of assessing and approving these relief loans? I suggest that they outsource it to the banks and the financial adviser firms, who will carry out the assessment to the expected standard in return for an agreed fee. They have many representatives who can be retrained to process these relief loans. It will create useful jobs for these representatives.

This concept is especially relevant to Singapore, as we do not have any unemployment benefit. A relief loan can be a good alternative to help the affected people.

TOC: Social Justice and Fairness

First posted on 7 Dec 2008 - rally organised by The Online Citizen

The theme for this rally is “Social Justice and Fairness”. I like to talk on two points:

1) Our society should be more egalitarian.
2) The elected leaders should represent the people.

Wages
What is being egalitarian? It is being more equal. It means that the gap between the rich and poor should be narrower. In the past 10 to 20 years, the gap has widened.

We know how much the high income earners earn each year. Salaries of $1 million, $2 million, $5 million or $10 million are quite common in Singapore, in the business sector. Even our government leaders earn more than $1 million in salaries, as they are benchmark against the top earners.

I do not mind people earning higher salaries, if they are able to build the economic pie. But, the economic pie must be fairly shared with the other members of society.

I am worried that the low income earners are not earning enough to make a decent living. Many people have to work hard on two jobs, and they hardly earn enough to survive, to meet their monthly expenses. It is important that the salaries of the low income earners should be raised.

In many countries, there is a minimum wage that is tied to the cost of living. Everybody working a decent day’s work should receive a wage that is sufficient to pay for their living expenses, at a frugal level. They are not well off, but they should not starve.

Apart from an adequate wage, we must also give people some security against unemployment, especially if they fall victim without any fault of their own.

In some countries, there is unemployment insurance to give them some benefit for 12 to 24 months. It allows them to adjust a period to adjust. This type of payment ensures that they can continue to pay their mortgage and meet their living expenses for a period of time. They do not have to borrow on credit cards or from loan sharks and pay a high rate of interest, which adds to their burden.

Even America, which is the champion of the free market system, has a minimum wage for their workers. It also has an unemployment insurance scheme that makes payment for 12 months or slightly longer.

Singapore has schemes such as the workfare and assistance given by the community development council. We need to review the effectiveness of these schemes to make sure that they are able to address the real problems. I suspect that these schemes take a lot of work to administer and do not provide adequate assistance to the people in need.

Represent the people
Our elected leaders can represent the people and be the voice of the people. This requires the leaders to be freely elected at the general and by-elections. We should move back to the old days when most elections are contested and the candidates have to go out to win over the votes of the people.

The trend in recent years, where many elections at the group representation constituencies (or GRCs) are won through walkovers is not satisfactory. Some members of parliament have never been directly elected for several rounds, as they continue to win through walkovers.

We should move towards smaller GRCs and eventually to move back to the single member constituencies, which was the case in the 1970s and early 1980s. A free election will bond the leaders to the people. It will lead to a more united country. It will go back to the old days when the people are proud to be Singaporeans.

In recent months, more than 10,000 people have lost their hard earned savings by being misled into investing in the mini-bonds and other credit linked notes. They have signed a petition for the authority to carry out an independent investigation into the possible wrong doings by the financial institutions that created and/or marketed the products.

I hope that the authority will act on this petition, which has been signed by nearly 1,000 people. The signatories need to know if their appeals have been heard and have been fairly considered. They also like to know the progress and outcome of the investigation. As the goes, “justice has to be done, and seen to be done”.

Let me wish the very best for the future of our people and nation, and for Singapore.

Tan Kin Lian

Bonus restructure badly affected by the global crisis

Dear Mr, Tan Kin Lian,

I have two concerns about NTUC Income's bonus restructure enforced on policy holders effective last year, 2008.

First Concern
I have been paying about 11 years for an Income endowment policy. If I am not mistaken, my payout from NTUC Income at maturity date, 2011, will probably be badly affected by the recession. Had the bonus not been restructured in 2008, I would have a larger amount locked-in last year because the economy was bouyant in 2007 and the bonus for 2007 is distributed in 2008.

Second Concern
I think policyholders like me should have been allowed an opt out option last year when Income decided to restructure the bonus. This is because when I signed for my policy it was based on a different understanding of the bonus distribution. I have only two years more to pay my premiums so if I understood how my policy is affected by the bonus restructure, I should be allowed to opt out with no penalty. I find I cannot opt out now because of the financial penalty incurred, I have to continue my premium payments for this year and the next.

In conclusion, I expect my worst fears will be realised when I receive notification of downward revision on Income endowment policy after the end of Income's financial year.

I would like to hear from you. Thank you very much, your insights into these concerns I'm sure will be absolutely helpful.

REPLY
I agree with your views. I believe that NTUC Income should have allowed policyholders to make a choice to stay with the old bonus structure.

But the management and board was adament about their right to change the bonus structure and not to give this option. The chairman made a promise at last year's Annual General Meeting about the future bonuses. At that time, the promise was quite reasonable.

Subsequently, the global financial crisis came, and made the situation worse for policyholders - especially with the restructured bonus.

I suggest that you write to the chairman of the board of NTUC Income to express your views. You can also write to MAS.

Advice on lodging complaint on FIDREC

Mr Wang Says So http://mrwangsaysso.blogspot.com/is writing a series of articles on possible lines of arguments that investors could use when they use the FIDREC adjudication process. I urge you to read the articles.

 

The first two articles.

 http://mrwangsaysso.blogspot.com/2009/02/saga-of-structured-notes-what-next-for.html

 http://mrwangsaysso.blogspot.com/2009/02/saga-of-structured-notes-what-next-for_03.html

 

He may be writing other articles.

SCMP:Minibond settlement may start new troubles

Source

3 Feb 2009
Enoch Yiu

The city’s corporate police seem to be getting smarter and faster – at least when it comes to such high-profile cases as the minibond issue.

While in the past insider dealing cases needed seven or eight years to reach a final verdict, the Securities and Futures Commission has made history by taking only four months to reach settlement with Sun Hung Kai Investment Services on the minibond refund.

The brokerage has agreed to voluntarily pay back all HK$85 million to 310 investors in minibonds issued or guaranteed by collapsed Lehman Brothers Holdings. The landmark settlement shows the commission can move mountains when it wants to.

It also appears to be a smart choice. While the broker insisted it had done nothing wrong, it agreed to give a full refund to investors. Had the SFC opted to take the case to the Market Misconduct Tribunal, it might have waited many years for a ruling and investors might not have got their money back in the end.

Our regulatory friends have assured White Collar that Sun Hung Kai is not the only one in the SFC’s sights. It is checking other minibond distributors – understood to include two brokers and 21banks – and will demand a full refund to clients if it is confirmed they had misled investors into buying the products without explaining the risks.

Once the SFC reached an agreement with an institution, all of the firm’s clients would receive the compensation.

White Collar is concerned investors may now ignore the moral hazard of investing in such dubious products. The 310 Sun Hung Kai investors who bought the Lehman minibonds did not need to bear any investment losses at all.

The SFC considered they should be fully repaid as they would never have been lured into buying the products if brokers and banks had clearly explained the risks involved.

But Sun Hung Kai has been a broker in Hong Kong for 40 years and has many sophisticated clients. Were all these clients so naive as to be misled by the brokerage staff? If some investors bought the products with their eyes open, they should bear at least some responsibility.

Has a precedent been set where investors use high-profile complaints and street protests to pressure the SFC to force intermediaries to accept liability for the investors’ own wrong investment decisions?

The other problem created by the Sun Hung Kai settlement is the expectation gap. Other minibond investors may not accept lower compensation levels from their banks or brokerages. It will certainly add pressure to other banks and brokers to follow suit, but neither the SFC nor the Hong Kong Monetary Authority can force them to offer the same settlement.

It is easy to understand why Sun Hung Kai was willing to pay up – the money involved was not large, at less than 1per cent of all minibonds sold. Also, if it said no to the SFC, it would have risked losing its licence.

For the banks, some of which have sold several billion dollars worth of minibonds, a full settlement may be less attractive. Although the SFC can mete out disciplinary action, it is the HKMA that supervises their daily operations and issues their licences.

As this column has mentioned before, the government should seriously consider a single financial regulator for banks and brokers.

SCMP:Lawmakers want brokerage's role in Lehman products saga revealed

Source

3 Feb 2009
Paggie Leung

Legislators have urged the Securities and Futures Commission to publish in full the details of its investigation into Sun Hung Kai Investment Services’ sales of Lehman Brothers investment products.

“Why don’t you release the investigation report to let us decide whether your penalty is a fair one?” financial affairs panel legislator Albert Ho Chun-yan asked SFC chief executive Martin Wheatley yesterday at a meeting to discuss reports on the minibond saga prepared by the commission and the Hong Kong Monetary Authority.

The question came 11 days after the SFC reprimanded the company over its sales of minibonds.

The firm immediately announced it would repay about 300 investors HK$85 million and review its internal systems. It did not acknowledge any liability or wrongdoing.

“No one knows what Sun Hung Kai did … we are all in the dark,” Mr Ho said. He said he would have preferred it if the SFC had just fined the firm and used that to repay the investors. “The message would be clearer and fairer,” he said.

Civic Party legislator Ronny Tong Ka-wah said disclosure would let firms know the “things [the SFC] is going to do to the institutions to make them realise that in future, they have to adhere to regulations faithfully”.

However, the commission said it had achieved the best outcome in the case, given that it did not have the power to order the company to pay compensation.

“Getting compensation back to its investors is the most important part of this investigation process and imposing a fine would not achieve that,” Mr Wheatley told lawmakers.

“I think you have to realise that it would make any negotiation we have with any of the banks concerned more difficult if we couldn’t achieve any agreement [with Sun Hung Kai].”

Hong Kong investors lost billions of dollars on minibonds guaranteed by Lehman Brothers when the US investment bank went bankrupt in September 2008. Minibonds are not corporate bonds, but consist of highrisk credit-linked derivatives. They are marketed as a proxy investment in well-known companies.

Ten of the worst ... scams to avoid

Dear Mr Tan
Please find an updated list of top ten scams from the UK Guardian Feb 2 2009 . Land Banking is listed at number 4 and continues to be a problem. Is there any chance some action will be taken on this in Singapore
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Ten of the worst ... scams to avoid
More than 3 million consumers fall victim to scams each year, but you don't have to be one of them. Tony Levene picks the main ones to avoid
Tony Levene
Monday February 2 2009
guardian.co.uk

Scams cost UK consumers at least GBP3.5bn last year, according to the Office of Fair Trading (OFT). And the older you are, the more likely you are to lose money: older folk tend to have cash as well as being more trusting.

The OFT estimates 3 million UK consumers a year fall victim to scams sent by post, email, text or over the phone. But the real figure could be much higher. Many victims fail to report losses, often due to embarrassment.

Today is the first day of the OFT's scams awareness month designed to raise awareness of mass marketed scams. The consumer watchdog is setting up a nationwide "Scamnesty" scheme, which calls on consumers to drop scam mailings into scamnesty bins or boxes at local libraries and public areas across the country. The OFT says the information collected will help identify and develop strategies to combat the worst criminals.

So what are the scams most likely to catch people out? Here is our top 10.

1. Homeworking scams
Credit-crunched people turning to part-time work to help balance budgets need to watch out. Homeworking scamsters advertise "easy earnings" in return for cash. But all they send out is a leaflet telling people to advertise "easy earnings" schemes. Others promise big rewards for packing goods ? they take the money upfront and victims never see any earnings, even if they are conned into packing goods.

2. Racing tipsters
Many tipsters try to find winners, but some offer "guaranteed" tips which turn into a regular income in return for a fee. Except they don't. Others ask you to put money on horses for them in return for a 50% share of winnings, while promising to recompense losing bets. The only safe bet is that you won't see your money again.

3. Bogus foreign lotteries
You receive a letter from Spain saying you have won a million euros in a lottery you have never heard of, let alone entered. The fraudsters demand you send some money to "unlock the cash". And then some more. There is no prize ? victims can lose tens of thousands of pounds.

4. Landbanking
Fraudsters buy a field, divide it into tiny slices and sell each one for big money ? usually ?10,000 ? by convincing victims the land will soon get planning permission. The land never gets planning consent and the landbankers disappear with your money, leaving you with valueless land.

5. Pyramid schemes
A classic pyramid scheme involves getting lots of people to invest small amounts of money and offering them a reward for every new recruit they sign up. For example, you might be invited to invest ?3,000 of your own money and asked to recruit seven other investors who will pay you ?3,000 each. You now have ?21,000. The incentive for your friends is that they are "allowed" to go out and each recruit seven other investors so they get ?21,000 as well. It is illegal and people soon run out of friends to con.

6. Business opportunity scams
Here you are offered a "franchise" or other business idea in return for thousands of pounds in fees. The attraction is along the lines of "thousands of pounds a month without leaving the comfort of your armchair." The idea is usually rubbish and the originator runs off with your money.

7. Phoney jobs
Another credit crunch special. Websites promise jobs with high pay for an hour's work a day for those with no experience or skills. The first snag is you have to send substantial cash sums for the application form upfront. The second snag is that the job does not exist.

8. Bouncing cheques
Advertise your car or motorbike in a legitimate website or publication and you could get someone offering you more than you ask for. They will back this up by sending you a "certified cheque" or "banker's draft" for the cash. By the time you discover the cheque is a forgery your vehicle is halfway across Europe. Many insurers will not pay out for "theft by deception".

9. Boiler room investment frauds
Very persuasive salespeople call you up ? usually from abroad ? to offer you sure-fire share investments. The shares, if they exist at all, are overpriced by up to 100 times. And it is impossible to sell them. It is easy to lose ?20,000 or more.

10. Phishing
This is nothing to do with angling! Fraudsters send emails purporting to come from your bank's security department, asking you for your log-in, password and other personal details. Once they have these they loot your account. No legitimate bank ever asks for these details. And banks are getting tougher with victims, telling some they will not be recompensed for their losses because, by now, everyone should know about this racket.

Tony Levene is the author of How to avoid scams (Age Concern ?9.99)
Copyright Guardian Newspapers Limited 2009