patrick.net

First off what is the connection between my employer and Wells Fargo?

It is quite common for companies to promo the same bankster that provides their financing to their employees. For example, Citi is a common financier for law firms, and law firm employees are often eligible for preferential rates for bankster services. I'm assuming it's something similar in this case. Sometimes the presentations are done by the bankster who runs the company's 401(k), although that might be less common.

Many of my co-workers have refinanced with other banks at much better rates than the "preferential rates" given by Wells Fargo....

There's a lot of truth to that though. From the book The Politics of Life by Craig Crawford:

Beware the boss who encourages you to buy a house or new car. Mortgages and car payments enslave you to the paycheck that your boss controls.

“Beware the boss who encourages you to buy a house or new car. Mortgages and car payments enslave you to the paycheck that your boss controls.”

The first thing the boss used to encourage me to do at my "First Real Job" as a Financial Adviser? Buy myself a nice car to impress clients. And of course, get myself so helplessly in debt I'd put everybody who walked in the door in a VUL policy with murderous surrender fees.

I had a brief stint in a sales job once. The boss used to throw barbecues for employees and their families. He made it a point to tell each wife that she deserved to go out and buy herself a new car.

VUL = "Variable Universal Life"?

I don't know how those work, but I get the idea. It trapped them, like your boss what trying to trap you.

VUL = “Variable Universal Life”?

Yep, generally the only group that benefits from a VUL would be a 70-year old Texas Oilman whose 20-something Playmate wife just had twins. And even he could do better in other products.

Many VULs resemble the Life Insurance version of a pick-a-pay loan. A couple of bad months in the market, and you're underwater. Most people in them don't realize how the combined insurance and subaccount (annuity/mutual fund-like) system works, and find themselves in deep water, fast.

corntrollio says

First off what is the connection between my employer and Wells Fargo?

nice, lavish kickbacks.

Inviting debt-vultures into your enterprise is NOT an employee benefit!!!!!

Who will attend on June 7? I will try to make it. I hope Patrick and
APOCALYPSEFUCK can make it, too!

In a similar vein, the Military PX's (or BX depending on the branch of service) promote heavilly the "Military Star Card" a charge card that can be used at the PX. It is very appealing to young military personnel away from home for the first time to use the card to buy lots of stuff they cannot afford on entry level military pay. My daughter got caught up in this and wound up with way more debt than she could ever hope to pay. Since financial difficulties can affect a military person's fitness reports, I bailed her out (sometimes ya swallow hard and just do it.)

I've been with her to the BX a few times and can say with certainty that there is significant subliminal impetus to charge big ticket items (by a young military person's standard) on the Star Card. This are an exceptionally vulnerable group of people and I feel very strongly that they are being taken advantage of by the AAFES.

I wrote my congressman and senators, but got only the "well look into it).

APOCALYPSEFUCK says

Everyone on PatrickNet should go to this thing and demand that Wells be dechartered and its executives indicted!

Maybe one of us should ask "Should I pay down my credit card debt before buying a house?" and see what that say.

Any other suggestions?

How about "I've heard of this thing called FHA loans where I can put down only 3%, but if market prices go down again, will that mean that I will go into foreclosure?"

How about "My friend is in foreclosure and has been living for free for two years now. How can I do what he's doing?"

Landru3000 says

I had a brief stint in a sales job once. The boss used to throw barbecues for employees and their families. He made it a point to tell each wife that she deserved to go out and buy herself a new car.

At some point during my sales work the last few years, I discovered a written management document that specifically said overleveraged people make for motivated sales staff. Seems to be a common belief/thought in the sales/business world.
It works! Go borrow half a million dollars, (or some large mutliple of your current income) to buy a house and see how important your job becomes. ; ) It's sad, actually.

FunTime says

At some point during my sales work the last few years, I discovered a written management document that specifically said overleveraged people make for motivated sales staff. Seems to be a common belief/thought in the sales/business world.
It works! Go borrow half a million dollars, (or some large mutliple of your current income) to buy a house and see how important your job becomes. ; ) It’s sad, actually.

Makes total sense. The more responsibilities you have, the more you need your job. That's why, similarly, unmarried childless workers in their 20s can bolt from a job and go backpacking in Europe. If you've got a mortgage, you're terrified of losing your job.

tenant in foreclosed house says

How about “My friend is in foreclosure and has been living for free for two years now. How can I do what he’s doing?”

My favorite comment so far.

I think we need to have a thread to get everyone from this website to one of the webinars (a day/time that works best for everyone). Would be hilarious.

zzyzzx says

tenant in foreclosed house says

How about “My friend is in foreclosure and has been living for free for two years now. How can I do what he’s doing?”

My favorite comment so far.

I'm using this one.

VUL = “Variable Universal Life”?

I don’t know how those work, but I get the idea. It trapped them, like your boss what trying to trap you.

Typically it works like this: You pay in money as investment, and while your downside is often capped, your upside is capped as well. This means that you don't lose money in bad years, but you lose a hell of a lot of money in good years. You pay a substantial fee in order to achieve this.

What they basically do in the aggregate is this:
Let's say you have $500,000. They tell you, we will guarantee that if the market goes down, you will not lose any principal. However, you will get market return up to 6% -- i.e. we are capping upside.

In order to maintain principal, they buy Treasury STRIPS. So for example, if you have a 20 year horizon, you can buy a STRIP in 2011, discounted by the time value of money, to return to you $500,000 in 2031. Let's say the average return is 3.25%/year, so you buy that STRIP for $263,736. That guarantees you will always get your $500K back in 2031 -- Treasurys are considered risk-free because the likelihood of default is considered non-existent.

With the remaining $236,264, the insurance company can invest this quite aggressively. Then, they say, okay, if the market returns 0-6%, we will give you that return. If the market returns 8%, we will cap you at 6%. So in the good years, the insurance companies could get a nice spread, since the market could go up 15%, and you still only get 6%.

You would be better off if you bought the STRIP yourself and invested the $236,264 yourself, but you pay a fee to have this managed for you.

The VULtures will tell you that, "oh there are tax benefits," and "oh, you can adjust your contributions lower when you have a down year as long as you hit the minimum," and "there's a secondary market for selling your policy if you really have trouble," and "look at my nice triangle diagram with tax on one side and insurance on the other, and retirement at the bottom" and other salesy things.

However, nothing stops you from replicating their methods on your own if you are disciplined and financially savvy, with more liquidity and lower fees. What they don't tell you is what their fee is, and that in good years, you lose a lot of upside, and that the secondary market for Treasurys is FAR better than the low liquidity secondary market for life insurance.

There’s a lot of truth to that though. From the book The Politics of Life by Craig Crawford:

Beware the boss who encourages you to buy a house or new car. Mortgages and car payments enslave you to the paycheck that your boss controls.

Yes, my friends at law firms call this The Golden Handcuffs. It's a very common attitude because most of the time people are earning more money than they've ever dealt with. However, the downside is you lose all kinds of career and life flexibility.

tenant in foreclosed house says

If you’ve got a mortgage, you’re terrified of losing your job.

Whether you have a mortgage or a lease, losing your job hurts the same.

tatupu70 says

Whether you have a mortgage or a lease, losing your job hurts the same.

No, it doesn't. You can move to cheaper housing or to another city for a new job more easily with a lease. Mortgages put you in a less liquid position with high transaction costs to get out.

SF ace says

That is not a “golden handcuff”. A golden handcuff are things like employee stock options. In a law firm, they handcuff you by giving you by giving things like 25K annual housing allowance in exchange for x amount of service time.

Which law firm does that?

Again, this is the sarcastic term that is in actual use by law firm associates, and I'm not talking about a technical definition. Stock options are only handcuffs if you are counting on them to have ends meet, and upside is speculative. The idea is more that you are wedded to the 6-figure salary and do not have the flexibility to find other jobs when you buy the fancy house or fancy car.

zzyzzx says

There must be a lot of stupid people in California.

I'm pretty sure it's not an exclusive.

SF ace says

You’re not going to be handcuffed by a mortgage, get real, there are at least 200 law firms in the bay area and 400 public companies/closely held large corporations with in house lawyers.

Looks like you edited your original comment to add a few more sentences.

You clearly don't know much about what has happened to the legal market over the last 2.5-3 years if that's your belief. Two of the handful of major law firms based in the Bay Area collapsed in 2008 and no longer exist.

In-house jobs don't pay as much, even if they have a decent salary.

SF ace says

Controllio says "Yes, my friends at law firms call this The Golden Handcuffs. It’s a very common attitude because most of the time people are earning more money than they’ve ever dealt with. However, the downside is you lose all kinds of career and life flexibility."

That is not a “golden handcuff”. A golden handcuff are things like employee stock options.

That's right buddy.

Nothing "golden" about being a company-facilitated debt slave. I guess in the old coal-mining company towns maybe debt was the "(*)black" handcuffs.

SFAce has shown his true "Colors" this week, advocating employers using stockholder resources (time, space, etc.) to advocate debt options for employees; and advocating "VUL's".

Now we know.

(*)Like that "AMEX black".

APOCALYPSEFUCK says

The lesson is clear. Have no debt. Own your own home. Own your own business.

Agreed. Debt is not wealth. Say it two more times.

corntrollio says

No, it doesn’t. You can move to cheaper housing or to another city for a new job more easily with a lease. Mortgages put you in a less liquid position with high transaction costs to get out.

You do have the break lease fee, but I agree you are somewhat more mobile as a renter. But the whole debt slave argument is crap. You have to live somewhere and you have to pay for that shelter.

SF ace says

Obviously, lockheed employees are target customers for their mortgage business.

This was at Lockheed? They've just announced layoffs a few days ago. I wonder if any one that took advantage of this will get the pink slip. Luckily for them, I heard there are quite a few near retirement age that are willing to take the bullet for everyone and get unemployment for the remaining year or so before they truly retire.