ID Thieves Bag Bernanke: Is No One Safe?

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“You’ve got to be kidding,” I said to my wife. “Incredulous. The Chairman of the Federal Reserve is the victim of Identity Theft. According to the Associated Press story, thieves got Bernanke to the tune of $2.1 million and the fraud involved at least 10 financial institutions.”

“Guess he didn’t have Identity Theft Shield, huh?”

I knew she was going to say that. I wanted her to say just that. As an Independent Associate of Pre-Paid Legal myself, I tell people all the time about their risk. But, people are people and they say what they say, like “my bank takes care of that” and “my credit card company covers me.” If that is what they want to believe and it works for them, great.

However, my banker and I had a chat when I opened Tommy Mack Organization LLC and it turned out that she has Pre-Paid Legal coverage as an employee benefit through her employer, or Financial Institution as they prefer. She had declined to take the Identity Theft Shield protection at the time she enrolled.

She got a letter from the IRS that claimed my banker owned them income tax on unclaimed wages. It came to be discovered that her ID was stolen and used by someone else to get work. She said that the FBI told her it could take 2 to 3 years to straighten it out. And just about everyone knows someone who has been a victim.

Back to the Bernanke case, the AP story quotes Brian Lapidus, “an identity theft expert with Kroll Fraud Solutions said it's not unusual to hear of high-ranking officials caught up by identity theft. His firm has worked with celebrities, senators and others who have been victims.” That company provides the PPD Identity Theft Shield product I recommend to my clients and friends.

The story also reports in small details the fastest growing ID Theft scheme – the synthetic person. “The scheme involved using stolen IDs, bank records, personal checks and other items to impersonate victims at bank branches, according to an affidavit signed by Postal Inspector William J. Aiello,” the article said.

How could organized crime be anything if not thrilled by ID theft? Other than plastic cards, what inventory is there in sets of numbers? It is impersonally personal as crimes go and a growing menace by all accounts.

There are other pretenders to ID theft solution; but they do not do what Kroll and Pre-Paid Legal Services can do – like have professional, licensed investigators go after the perpetrators. Go to my PPD website and look. PPD has been in business since 1972 and is publically traded on the New York Stock Exchange.

It would be an easy target to blame the credit card industry for facilitating ID Theft. It would be easy to suggest that the industry is actually legalized crime, but I will address that later. In the mean time, the PBS series Frontline did a revealing story about credit cards you may be interested in seeing.

I am sorry that Mr. Bernanke got bagged in an ID theft. But, if he is not safe, who is?

Broke Banks

If ever there was an industry that needs some positive public relations, it is banking. Bank failures have become common place. In Georgia, for example, there have been five bank failures in the last five months and the hits just keep on coming. Another fifteen banks are expected to go under this year, more than twice the number that collapsed there during the savings and loan crisis twenty years ago. Until last year, California had seen only 3 bank failures during the previous decade – in 1999, 2000 and 2003. According to the FDIC, California suffered 5 bank failures in 2008 alone.

Banking is a highly regulated business. Despite news commentaries that bankers got greedy as banks were deregulated and became corrupt, bank consumers have protection. In the recent case of IndyMac Bank, the third-largest bank to fail in American history, a run on deposits and rising defaults made Federal regulators seize it.

The mortgage loan portion of the banking business earned derision for being lax and, in some cases, predatory in its lending practices. Federal Reserve Chairman Ben Bernanke says that a sustained economic recovery may require additional bailouts of financial institutions. However, the business loan portion of banking has become the collateral casualty that threatens the country’s economic recovery.

As a business management consultant experienced in dealing with bankers on behalf of my clients, it is clear to me that business loan criteria are in flux. Even clients with excellent credit, strong assets and positive history are being denied new loans and are incurring decreased credit lines. New financing does not seem to be happening. Does that mean banks are not lending money to small businesses? They say that they are but that assertion is inconsistent with my clients’ are experiences.

Banks make money by selling the use of money, right? “If the borrower provides the bank with both a belt and a pair of suspenders,” Joe Nocera wrote in the New York Times, “the loan is being granted.” However, “[i]n addition to not making new loans, the banks are systematically withdrawing commitments and capital from the economy.”

So what about the Economic Stimulus Package of 2008? It is about tax breaks for businesses that spent money on property and vehicles last year while their credit lines were getting trashed. According to the Package’s press release, “This new legislation will not only benefit small businesses in a variety of ways, but it will also provide an economic boost to the entire nation.” Bold words in that generalization do not change the fact that “there are exceptions and additional requirements.” Tax credits for small businesses that create jobs sound fine, but it takes money to make the payroll to pay for the jobs to qualify for the tax credits.

Bank accountability is about to change with the new administration. Specifically, the government might force banks to make loans they would otherwise avoid. It is certain that the Obama administration wants to avoid more stupidity, such as those of the Bush Treasury secretary, Henry Paulson “who sold Congress on an elaborate strategy for shoring up banks and then shifted to an entirely different approach before he even got started.”

Meanwhile, forces for the benefit of small business—the largest aggregate employer in the United States -- are seeking the administration’s ear. The National Development Council wants a $75 billion small business stimulus package and a Cabinet-level position to coordinate federal resources for small businesses. Additionally, the National Small Business Association is seeking congress’s ear, asking for 25 percent of TARP funds to be aimed at small business lending and a mandate that 23 percent of stimulus infrastructure funds be contracted out to small businesses. Both are debatable requests.

Small business needs direct financial help to grow our pillaged economy and to create the jobs promised by the new administration. Tax credits alone cannot make job growth happen. The new congress and administration need to hear from us. We will have to make prosperity happen. They will have to help us.