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    Why Finance Gurus Switched Their Bait From Millions to Thousands of Dollars

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    Their YouTube videos went from promising proprietary secrets for achieving wealth to any little update on the stimulus. And the viewers came rolling in.“Mark your calendar, there’s a big day coming!” On Jan. 9, with the dream of $2,000 stimulus checks not yet deflated, the Southern California real estate broker Kevin Paffrath uploaded a video to his “Meet Kevin” YouTube channel, updating viewers on the status of the stimulus. Sitting before an array of glowing LED screens and pop-culture paraphernalia (a star from the Super Mario games, Thor’s hammer from the Marvel movies), Paffrath, a wiry white man in his late 20s with a close-cropped beard, leaned into the lights and greeted his viewers. Using the earnest eye contact of a veteran YouTuber, he ran through a summary of the situation: the interests at play in Congress, the details of proposed bills, the tangled qualifications for relief. Out of focus, over his shoulder, the monitors reminded us to visit his “Meet Kevin School” and sign up for courses to “Master Stocks”; at the end of the video, we are invited to “#BecomeMore” through investing, to subscribe to his channel and, of course, to smash that “like” button.This video would be just one of dozens about potential stimulus packages posted that day, even that evening — many of them from finance influencers like Paffrath, whose pitches normally involve real estate, stocks or airline points. A year ago, they were promising to share their proprietary secrets for achieving wealth, staging monologues in the drivers’ seats of luxury cars and poolside on cruise ships. Brian Kim, a Chicago accountant, had previously been explaining tax preparation, including how high-earners could reduce their obligations; Ramy Wahby once raised a complimentary glass of Champagne from a first-class airplane seat and offered to explain how he used airline rewards to get there. Now all that had changed. The thumbnails on their channels may have kept their usual style — buffoonish facial expressions, glaring yellow text — but it was videos about stimulus checks that came to dominate their feeds. They vied for the role of soothsayer before a rapt audience with a seemingly insatiable demand for information about when the government would offer financial relief.Personal-finance influencers turned out to be naturals for this part. They were already performing as the shamans of a core American mythology: that though the world may be divided into haves and have-nots, the only thing standing between you and life among the haves was some arcane savvy. The influencers were exactly like you, they promised; it’s just that they had cracked the code and would, in their magnanimity, break a taboo to share its secrets with you. (Simply sign up for their classes, buy their books and use the appropriate coupon codes at checkout.) Their shift to stimulus content was sudden and significant, but it was merely a change to the type of knowledge in which their enlightened-everyman personas were trained: Instead of decoding real estate or cryptocurrencies, they opined on means-testing and party politics.In Paffrath’s case, stimulus-check updates began doubling his other videos in view counts; one update became the most popular video on his channel, with 1.1 million views. For other finance gurus, these updates took over their output entirely. Their audiences grew dramatically, but the shift required a tacit admission: that the people they had been teasing with paths to affluence had ended up sitting around with everyone else, hoping for a check.Viewer demand didn’t come from upward-bound entrepreneurs after all, it seemed, but rather from those enduring the kind of precarity where the precise timing of a $2,000 deposit could mean keeping the lights on or the difference between housing and eviction. These audiences didn’t want yesterday’s news, or even this morning’s; the slightest budge toward progress was meaningful and welcome. So the output of YouTube updates was relentless: Every hour, a glut of new videos provided the latest on whether relief was coming and how many dollars of it were likely to arrive.The audiences they had been teasing with paths to affluence had ended up sitting around with everyone else, hoping for a check. Paffrath typically uploaded two videos each day. Some content makers uploaded three or more. There was, often, simply not much to say. The key to collecting views was simply to serve as foil to what the audience saw as an infuriating lack of urgency from Congress and the president. The YouTubers tended to mimic the calm, authoritative style of cable-news anchors, but other than reading other peoples’ reporting off printer paper, there was little to do beyond trying to match their viewers’ exasperation. The visuals, comically, featured the same techniques used to press investment schemes: stock images of fanned-out $100 bills and tantalizing click bait like “$4,200 STIMULUS!”Paffrath has a charisma that cuts through all this. He’s exceptionally talented at talking to a camera, a natural salesman. But when he turns to a flowchart breaking down the Biden stimulus proposal, what might even be sincerity leaks out. Judging by the ad hoc community formed in his comments sections, his viewers appreciate it.Then you remember the neon advertisements behind him and the exhortations to go “from $0 to millionaire and beyond.” That Paffrath, a multimillionaire landlord who once extolled the virtues of misleading tenants and vigorously refusing to rent to people with suboptimal credit scores, has come to be an exasperated avatar for emergency economic relief for the neediest — most of whom would be spending it on rent — feels deeply, typically American. A CNBC profile reported that Paffrath actually makes most of his money not from the industry he built his status on, not from investing or even from buying rental properties, but via his audience itself, from his YouTube channel’s advertising revenue and affiliate programs..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.This confluence of the sincere and the cynical recurs constantly in stimulus-check YouTube. It serves a uniquely American need: Even at the height of desperation, nothing can ever dispel the mirage that riches are available to anyone with the work ethic and (if you insist) a little savvy. In the days leading up to the relief bill becoming law, Paffrath’s stimulus content remained his most popular product; soon he was posting videos calming those members of his audience for whom the $1,400 deposit had not yet arrived. Can the path forward for someone like Paffrath really lead back to making videos from the driver’s seat of a Tesla, promising to make viewers rich? Or will what he has seen during this stint — months of tending to a public desperate for news of a couple thousand dollars — open his eyes to the possibility of being just another rich person hustling the poor?Adlan Jackson is a writer from Kingston, Jamaica, who writes about music in New York. This is his first article for the magazine. Source photographs: Screen grabs from YouTube More

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    On the Post-Pandemic Horizon, Could That Be … a Boom?

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    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesVaccine RolloutSee Your Local RiskNew Variants TrackerCredit…Maxime MouyssetSkip to contentSkip to site indexOn the Post-Pandemic Horizon, Could That Be … a Boom?Signs of economic life are picking up, and mounds of cash are waiting to be spent as the virus loosens its grip.Credit…Maxime MouyssetSupported byContinue reading the main storyFeb. 21, 2021, 3:00 p.m. ETThe U.S. economy remains mired in a pandemic winter of shuttered storefronts, high unemployment and sluggish job growth. But on Wall Street and in Washington, attention is shifting to an intriguing if indistinct prospect: a post-Covid boom.Forecasters have always expected the pandemic to be followed by a period of strong growth as businesses reopen and Americans resume their normal activities. But in recent weeks, economists have begun to talk of something stronger: a supercharged rebound that brings down unemployment, drives up wages and may foster years of stronger growth.There are hints that the economy has turned a corner: Retail sales jumped last month as the latest round of government aid began showing up in consumers’ bank accounts. New unemployment claims have declined from early January, though they remain high. Measures of business investment have picked up, a sign of confidence from corporate leaders.Economists surveyed by the Federal Reserve Bank of Philadelphia this month predicted that U.S. output will increase 4.5 percent this year, which would make it the best year since 1999. Some expect an even stronger bounce: Economists at Goldman Sachs forecast that the economy will grow 6.8 percent this year and that the unemployment rate will drop to 4.1 percent by December, a level that took eight years to achieve after the last recession.“We’re extremely likely to get a very high growth rate,” said Jan Hatzius, Goldman’s chief economist. “Whether it’s a boom or not, I do think it’s a V-shaped recovery,” he added, referring to a steep drop followed by a sharp rebound.The growing optimism stems from the confluence of several factors. Coronavirus cases are falling in the United States. The vaccine rollout, though slower than hoped, is gaining steam. And largely because of trillions of dollars in federal help, the economy appears to have made it through last year with less structural damage — in the form of business failures, home foreclosures and personal bankruptcies — than many people feared last spring.Lastly, consumers are sitting on a trillion-dollar mountain of cash, a result of months of lockdown-induced saving and successive rounds of stimulus payments. That mountain could grow if Congress approves the aid to households that President Biden has proposed.When the pandemic ends, cash could be unleashed like melting snow in the Rockies: Consumers, released from their cabin fever, compete for hotel rooms and restaurant tables. Businesses compete for employees and supplies to meet the demand. Workers who were sidelined by child care responsibilities or virus fears are drawn back to the labor force by suddenly abundant opportunities.“There will be this big boom as pent-up demand comes through and the economy is opening,” said Ellen Zentner, chief U.S. economist for Morgan Stanley. “There is an awful lot of buying power that we’ve transferred to households to fuel that pent-up demand.”That vision is far from a certainty. Delays in the vaccine rollout could stall the recovery. So could new strains of the virus that render vaccines less effective. A political standoff in Washington could hold up aid for unemployed workers and struggling businesses. And even if the economy avoids all of those traps, there is unlikely to be a single moment when public health officials give an “all clear”; it could be years before people pack into bars and sports stadiums the way they did before the pandemic.A boom also carries risks. In recent weeks, prominent economists including Lawrence H. Summers, a Treasury secretary under President Bill Clinton, have warned that Mr. Biden’s relief proposal is too large and could lead the economy to overheat, pushing up prices and forcing the Federal Reserve to bring the party to a premature end. Fed officials have largely dismissed those concerns, noting that the consistent problem in recent decades has been too little inflation rather than too much.Other economists fear that the rebound will primarily benefit those at the top, compounding inequities that the pandemic has widened.“We may see a boom in the future, but that may just leave some people even further behind, or may give them a trickle when they need a waterfall,” said Tara Sinclair, a George Washington University economist.But for many businesses and households that have struggled to stay afloat during the pandemic, those concerns pale in comparison with the opportunities that a boom could provide.The Coronavirus Outbreak More

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    How to Win at the Stock Market by Being Lazy

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    #masthead-section-label, #masthead-bar-one { display: none }GameStop vs. Wall StreetRobinhood’s C.E.O. Under the GunGameStop Investors Are TestedYour TaxesReader’s GuideAdvertisementContinue reading the main storyUpshotSupported byContinue reading the main storyHow to Win at the Stock Market by Being LazyThe drama of GameStop is misleading; the surer path to wealth is extremely boring.Feb. 4, 2021, 5:00 a.m. ETMany parts of the GameStop story — the wild swings over the last couple of weeks in shares of the video-game retailer and a few dozen other out-of-favor stocks — are not exactly new.Long before Reddit, the Yahoo message boards of the late 1990s democratized the expression of strong opinions about stocks (they didn’t call them “stonks” in those days).Short squeezes and market-cornering were maneuvers well before Randolph and Mortimer Duke — the fictional securities-fraud-committing villains of the 1983 comedy “Trading Places” — were greedy little boys.What has been weird to watch, if you’ve spent your life plodding away at building a retirement fund, reading books about personal finance, weighing fee structures and tax implications of various investment vehicles, is the mix of righteous anger and gleeful anarchism driving it all. Many of the traders driving the GameStop mania in recent days want to strike it rich and bring down what they view as a corrupt, rigged system along the way.Yes, there is abundant greed and venality on Wall Street. But the reality is that the stock market has also offered a path for ordinary people to build wealth — and more so in the last generation than ever before. You haven’t needed to burn down the system. All you’ve had to do is take the laziest, simplest approach to stock investing imaginable, and have a little patience.Ever since Vanguard introduced its S&P 500 index fund 45 years ago, ordinary investors have been able to invest in broad stock indexes in a tax-efficient manner, with extremely low fees. Any schlub on the street can put money to work harvesting a small share of the earnings of hundreds of leading companies, led by some of the sharpest corporate executives on earth and their millions of employees. You haven’t had to do much of anything![embedded content]Your returns would have been strong even if you had terrible timing. Suppose you had received a $10,000 windfall in March 2000, the peak of the dot-com bubble and a moment at which we can all agree stocks were overpriced. Yet even with such unfortunate timing, if you invested that money in a low-fee S&P 500 index fund and reinvested dividends for the last 20 years, your $10,000 would have turned into nearly $28,000 by the end of this past month — a 5 percent annual return when adjusted for inflation.And that was the single worst month in decades to begin investing. On average, if you were to select a month between 1990 and 2019 to begin investing, your annualized return through January 2021 would have been 9.8 percent after inflation. Simply for having the patience to sit on your hands.(Those returns would have been reduced by a few hundredths of a percentage point by mutual fund fees, and more by taxes if the money was not in a tax-advantaged account.)It gets better. Most people don’t receive and invest a single windfall, but rather chip in savings gradually.So suppose you had begun saving $100 a month at the start of the year 2000 — again, near the peak of a bubble — and had continued doing so ever since, increasing your savings along with inflation, putting the money into an S&P 500 index fund and reinvesting dividends. Over the last 21 years, you would have contributed about $32,500, yet your portfolio at the end of January would be worth more than $103,000.You achieved a 10.5 percent annualized rate of return, because while some of your savings was invested at market peaks, your slow-but-steady approach ensured you were also buying shares during periods when the market was depressed, as in 2002 and 2009.As recently as the 1970s, this strategy would have been hard to carry out. Modern index funds didn’t exist until John C. Bogle invented the concept for Vanguard in 1976. Mutual funds in the past had much higher fees than they do today. Buying lots of different individual stocks would have required high brokerage fees as well, making it all but impossible for people with modest savings.Moreover, the advantages of a “buy the index” approach were not as well understood until recent decades. Academic finance research in the second half of the 20th century had a series of findings about the efficiency of markets that, taken together, imply that the best long-term investing strategy for most people is simply to put money into the market as a whole and minimize fees and taxes. Personal finance advisers and commentators widely embraced this finding, with adjustments that depend on the investor’s risk preferences, particularly investing some slice of the portfolio in safer bonds.The result: In recent decades, following the most obvious conventional wisdom of how to invest has been possible even for small investors.If the market is rigged, it is rigged in a way that allows people to achieve a substantial return on their money by watching television or playing golf or taking a nap, rather than by spending their hours scouring message boards or developing elaborate theories of how to enact revenge on perfidious hedge funds or learning what the gamma of an option is.Think of Corporate America — the hundreds of large companies in which you are investing if you put your money into index funds — as a sports franchise.There are people who try to make money by betting for or against the franchise. They may put in lots of effort calculating proper odds, and once in a while may win big, turning a small wager into a big score. The very best at this — the sharps, in sports betting terminology — will even win more than they lose and be able to make a living out of it.But over all, the system is a zero-sum game, and most people who play are going to lose money once the sports books’ cut is accounted for. If you decide to try to make a fortune by betting on professional sports, you might even conclude that the system is rigged against you, because in a sense it is. The consistent winners are going to be highly skilled sports bettors who have been doing this a long time; and the casino, which takes a share of every pot.In this analogy, those fortune-hunting newcomers are the people who have taken to trading options on GameStop and other stocks in recent months.Then there are people who work hard to make that franchise operate: the team executives, the coaches, the players. They put in long hours to make the franchise a success, and while part of their pay is linked to the franchise’s success, the bulk of their compensation is cash in exchange for their labor. They can be well compensated, but theirs are rare talents and they have to work really hard.They are the equivalent of the executives and employees of the companies whose stock shares trade on public exchanges.Then there are the passive owners of the sports franchise. For instance, the owner of a minority share who doesn’t even have to help hire and fire team presidents. Other people do all the work of running the team. These owners just enjoy the benefits of earnings, year after year.It is not without risk: The franchise might sign an overpriced free agent, or ticket sales might collapse because of a pandemic. But if they are patient, they can expect that their investment will eventually pay off. And that is true even though they spend their time doing something other than examining point spreads and drawing up plays.There are no guarantees in life. Some people who are aggressively trading meme stocks will presumably walk away with significant profits. Index funds won’t generate the kind of overnight payoffs that buyers of GameStop options are evidently looking for. And the decades ahead may offer lower returns to stock investors than the decades just past.But the extraordinary payoffs of being a passive stock market investor are not something to overlook. When you are offered a free lunch — a reasonable expectation of good returns with zero effort and only moderate risk — it makes sense to eat it.Successful investing is not nearly as exciting and potentially painful as trading options on GameStop or sliding down the steps of Federal Hall on Wall Street. But then, it isn’t trying to be.Credit…Kena Betancur/Agence France-Presse — Getty ImagesAdvertisementContinue reading the main story More

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    Will an Overdraft Balance Impact Your Stimulus Check?

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    AdvertisementContinue reading the main storySupported byContinue reading the main storyTheir Finances Ravaged, Customers Fear Banks Will Withhold Stimulus ChecksBanks have the power to decide whether to let overdrawn customers gain access to the stimulus money being deposited into their accounts, but they have taken different approaches.Morgan Banke was hoping her bank would waive her overdraft fees so she could tap her stimulus funds, but the bank’s officials said they would not.Credit…Narayan Mahon for The New York TimesDec. 31, 2020Updated 5:52 p.m. ETSince August, Morgan Banke has had just enough money in her bank account every month to pay either her rent or her car insurance. The unemployed mother of two has relied on her bank, the Dupaco Community Credit Union in Dubuque, Iowa, to cover the difference. But each time she makes that choice, the bank charges her $28 in overdraft fees. Her account is $780 in the red.When she heard that the federal government was working on a fresh stimulus package, Ms. Banke called Dupaco to ask whether it would waive the outstanding fees. If it did so, she hoped, she could tap the stimulus funds. Bank officials said no.Ms. Banke, who has been selling her possessions on Facebook to make ends meet, doesn’t know if she will get any of the money. “When we were told we were getting another stimulus, I was excited,” she said. Now, she is dejected.As 2020 comes to an end, the $600 promised by the federal government — poised to begin appearing in bank accounts this week — is welcome news to millions of needy Americans whose finances have been devastated after nine months of economic crisis wrought by the coronavirus pandemic.But for people whose bank accounts are overdrawn, whether they get their hands on the money depends on what the country’s banks — which, as in Ms. Banke’s case, also are the creditors on overdrawn accounts — decide to do. Banks hold this power because, for a vast majority of people, the stimulus money will be deposited in the same bank accounts in which they also receive tax refunds.In the past week, the largest United States banks have pledged to temporarily zero out their customers’ negative balances so they can get access to their stimulus money and put it toward whatever expense seems the most pressing. Negative balances typically include the various fees that banks tack on to customers’ accounts for letting the customers withdraw more money than they have.Representatives of Bank of America, Citigroup, JPMorgan Chase and Wells Fargo said the banks would be crediting customers’ accounts for roughly a month after the money arrived. After that, the banks will revert the accounts to their previous overdrawn status. It was a reprise of the relief they offered their customers when the first round of stimulus money was distributed in April.Large regional banks, including Fifth Third Bancorp, Truist (the institution formed by the combination of SunTrust and BB&T), PNC Financial Services and US Bank, are following suit.However, some regional and community banks — which often serve areas where there is little competition, including poor neighborhoods and rural communities — are pursuing different approaches. Some smaller banks say they are considering customers’ requests on a case-by-case basis.Citizens Bank, a regional bank catering to customers mostly in the Northeast, said it would temporarily zero out all customers’ accounts, but only if the customers called and specifically requested it. A Citizens spokesman said the bank would email customers a reminder that the option was available to them.Some banks, including Chase, have pledged to temporarily zero out their customers’ negative balances, so they can get access to their stimulus money.Credit…John Taggart for The New York TimesThe disparate approaches of smaller banks often put the onus on customers to figure out what options they have — when many are already stressed out by the enormous financial challenges they face. Consumer income fell in November; layoffs continue, particularly in hard-hit industries like restaurants; and the unemployment rate remains high.Dupaco, the credit union where Ms. Banke, 25, has had an account for six years, ever since she started working as a bartender in Dubuque, doesn’t have a blanket policy for customers. “We work with members on an individual basis to address whatever situation they might have,” Dave Klavitter, a Dupaco spokesman, said. He declined to address Ms. Banke’s case.Having waived Ms. Banke’s overdraft fees on three earlier occasions, bank officials were unwilling to grant her a waiver yet again when she called them recently to ask for one, Ms. Banke said. Although the bank hasn’t said she won’t get the $600 in stimulus funds, Ms. Banke, who lives in Madison, Wis., remains worried. She can’t work because her 5-month-old son has a respiratory illness. She plans to ask Dupaco if it can zero out her balance temporarily.Temporary forgiveness from banks might not be enough, especially for those in the worst financial straits. Since the coronavirus outbreak hit, one in four people in the United States has struggled to pay monthly bills, according to a study released in late September by the Pew Research Center. One in three has dipped into savings or retirement accounts. One in six has borrowed from family or friends to cover bills.Bank fees are adding extra pain to some Americans’ pandemic-induced woes. In 2019, according to the Center for Responsible Lending, big banks collected more than $11 billion in overdraft fees from their customers, with 9 percent of customers paying more than 80 percent of the fees. For the first nine months of 2020, customers of big banks paid $6 billion in overdraft fees, according to Rebecca Borné, a researcher at the nonprofit, which advocates better treatment of consumers by financial institutions.The total amount of penalty fees that bank customers paid in 2020 could end up being lower than last year, but because such a large amount of the penalties are paid by such a small subset of customers, the impact of those fees on their finances will most likely be far worse this year.Aside from the temporary truces some banks have made with their customers around the stimulus checks, banks have not modified their overdraft policies during the pandemic, Ms. Borné said. “Charging unreasonably high fees, multiple fees per day, extended fees and other practices that manipulate the charges to maximize the fees — those practices hurt those struggling the most,” she said.On Christmas Eve, Andrew Shorts, an artist living in Ogden, Utah, was scrambling to pay his electricity bill so that he would not lose power and heat. Mr. Shorts, who makes murals and graphic design projects for local businesses, has been locked out of his account at Zions Bank, a Salt Lake City-based lender, since a rapid fire of automatic deductions for household bills this fall pushed his balance $150 into negative territory.When he called Zions two days before Christmas, a representative told him that he would probably have to pay the bank what he owed it and settle for the remainder. The bank changed its policy after President Trump signed the stimulus bill on Tuesday. A spokesman said Zions would zero out all negative balances of up to $2,000 for 30 days to let customers get their stimulus money.Mr. Shorts described the $600 stimulus payment as “the equivalent of a pool noodle while my wife, child, myself and my now crippled business are drowning in the open sea.” But he still wants the money. In the meantime, he scraped together just enough to pay his electricity bill.On the day Congress passed the latest stimulus legislation last week, Misha Roberts, a 26-year-old student at Ohio State University, could not bring herself to sign into her PNC online account and look up the balance. She knew it was somewhere between $1,200 and $1,700 in the negative, thanks to a combination of bills for basic expenses she could not afford, which were automatically deducted from her account, and overdraft fees.Some banks have closed accounts that have overdrawn balances. A PNC spokeswoman said in cases where accounts had recently been closed, either the I.R.S. would mail the customer a check or PNC would let the customer use a different existing account to receive the money.Ms. Roberts, who wants to be a nurse, is working to pay for college and has already had to drop out several times after running out of money. For two years, she worked overnight shifts as a home health aide, earning $10.50 an hour. But when the pandemic hit, the company sending her out to care for elderly people started to lose clients.“Less hours to go around means less money to go around, and it made my work environment really tense at times,” Ms. Roberts said.She recently quit and now spends weekends cleaning the common spaces, including the gym, communal kitchens, stairwells and lobby, in the apartment building where she lives, making $15 per hour. In an email on Monday, she said of the $600 stimulus: “I really need it or I might be forced to leave school again.”Late on Tuesday, after learning PNC would temporarily zero out customers’ overdrafts, Ms. Roberts finally worked up the courage to look at her balance. But when she tried to sign in, she said, she was blocked. PNC had closed her account.AdvertisementContinue reading the main story More

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    For Millions of Jobless, Christmas Is a Season to Endure, Not Celebrate

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    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesThe Stimulus DealThe Latest Vaccine InformationF.A.Q.AdvertisementContinue reading the main storySupported byContinue reading the main storyFor Millions of Jobless, Christmas Is a Season to Endure, Not CelebrateEven with new federal aid on the way, many Americans face a holiday of tough choices, trying to celebrate while dealing with pressing needs.Tresa Watson, right, with her grandson Khalil and his mother, Rachel Rucinski, at their home in Milwaukee. Ms. Watson was laid off in March.Credit…Sebastian Hidalgo for The New York TimesNelson D. Schwartz and Dec. 23, 2020, 5:00 a.m. ETNicole Craig, an unemployed mother of two from Pittsburgh, will have no Christmas gifts for her two children, and the ham she bought with food stamps will be far less than their usual holiday dinner. Months behind on her rent and utility bills, she has been struggling to afford formula and diapers. But there is one thing she couldn’t give up: a small Christmas tree and the trimmings to go with it.Ms. Craig spent the last $7 in her bank account on tinsel, a symbol of light in the darkness of 2020. “It’s my baby’s first Christmas,” she said. “I wanted him to be able to see a Christmas tree.”Although Ms. Craig, 42, lost her job as a counselor for at-risk youth through no fault of her own, she can’t help blaming herself when she sees Christmas decorations and other reminders of a holiday she can barely celebrate. “I don’t even want to think about it because I feel so bad for my kids,” she said. “It makes me feel like such a failure.”For Ms. Craig, and millions of other Americans who lost their jobs because of the coronavirus pandemic, this is a holiday season more to weather than to relish. With unemployment benefits running out and an unforgiving job market offering few berths, this Christmas will be remembered by many for painful sacrifices, not the joy of exchanging gifts and partaking of festive meals with family.The arrival of vaccines and the approval of a new federal relief package offer hope, but they come too late to salvage this year’s celebration — particularly with the prospect that this winter could bring the pandemic’s darkest days.“I’m really afraid of what’s going to happen,” Ms. Craig said.The long delay in achieving a congressional accord on an aid bill has meant fewer gifts under the tree even as the pandemic has separated families and moved what holiday cheer there is this year to video-chat gatherings.And for many families, the $600-a-person stimulus payments approved by Congress are already earmarked for rent and other necessities.In the meantime, unemployed Americans like Monica Scott of Lakeland, Fla., are looking to the past for comfort.“This year the only thing I can do is talk about memories,” said Ms. Scott, who is five months pregnant and had to leave her job at an Amazon warehouse because of the risk of miscarriage from loading and unloading heavy packages. “Last year was awesome — so many toys, clothes and shoes.”Ms. Scott, 34, wants to make a Christmas dinner with her three boys — 14, 10 and 8 years old — but food will be limited because she will be relying on food stamps and lacks a kitchen. Ms. Scott is living in a motel after being evicted last spring from her apartment, but hopes to find a permanent home soon.“It’s just a room with a bathroom,” she said. “The rent is due, and I don’t know where it will come from. I could move in with my sister, but she has her kids, and it’s just not comfortable.”Jessica Hudson, with her children, Emerson and Marleigh, spent the last few weeks scouting beautifully decorated houses for a family drive on Christmas Day.Credit…Sarahbeth Maney for The New York TimesMs. Scott and others will also be turning to food banks to pull together Christmas dinner.“We usually do rib roast, Martinelli’s apple cider, a couple of desserts,” said Jessica Hudson, a full-time student and mother of two from Millbrae, Calif. “We won’t be able to do any of that this year.”Ms. Hudson and her partner, who is unemployed, are doing their best to make Christmas as cheery as they can: They bought stockings and candy from the dollar store, and they have spent the last few weeks scouting local streets for the most beautifully decorated houses, so that they can take their children on a drive to see them on Christmas Day.The Coronavirus Outbreak More

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    What Happens to the Unemployed When the Checks Run Out

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    AdvertisementContinue reading the main storySupported byContinue reading the main storyWhat Happens to the Unemployed When the Checks Run OutMillions face a steep and immediate drop in spending power when federal jobless benefits end this month, with a sharp rise in the poverty rate.Volunteers distributed food donations last week in Newton Centre, Mass. Poverty declined in the first months of the pandemic, reflecting CARES Act relief, but has since surged.Credit…Cody O’Loughlin for The New York TimesDec. 14, 2020When jobless workers get their last unemployment check, the effect on spending is sharp and swift.Unemployed workers’ spending on food, clothes and other so-called nondurable goods immediately drops 12 percent, about twice as much as when they lost their job and went on unemployment insurance, University of Chicago researchers have found. Spending at drugstores falls 15 percent. Co-payments for visits to the doctor fall 14 percent. Spending on groceries falls 16 percent, or $46.30 a month, on average.Millions of Americans are less than two weeks from cutbacks like those. The last two federal emergency unemployment programs in the CARES Act, passed as the pandemic’s first wave surged in March, expire on Dec. 26.An analysis by the Century Foundation concluded that 12 million workers who rely on one or the other of these programs will lose them on that day. This will add to 4.4 million who will have already exhausted their federal unemployment benefits.It projected that fewer than three million of these workers will be eligible for what are known as extended benefits, which kick in when the unemployment rate in a state is exceptionally high and can last six to 20 weeks, depending on the state.If Congress and the administration are unable to hammer out a deal to provide additional relief, the others will be left with nothing.“It was obvious this would be totally inadequate,” said Stephen A. Wandner, an expert on unemployment insurance at the Upjohn Institute for Employment Research, who has argued for extending unemployment benefits for a longer period, especially at a time when jobs are so hard to come by.Mr. Wandner noted that unemployment benefits lasted up to 99 weeks — almost two years — as part of the recovery effort in the last recession. In 2003, when the nation was also recovering from recession, maximum benefits were extended as long as 72 weeks, or almost a year and a half.Joblessness will not only affect consumer spending. Nearly 12 million households fear they may not being able to meet their mortgage payments, according to a survey in October by Moody’s Analytics and Morning Consult. Millions of others can no longer afford their rent. And 37 percent of the unemployed said the coronavirus pandemic prevented them from looking for a job. “You are really putting coal in people’s stockings,” Mr. Wandner said.At the end of November, 16 million people reported they had not worked in the last seven days and were relying on unemployment insurance payments to make ends meet, according to a Census Bureau survey of Americans’ financial condition. Losing those checks will translate into immediate hardship. “Come Jan. 1, a lot of people are going to be on Defcon 1,” said Mark Zandi, chief economist at Moody’s Analytics.The expiring programs are Pandemic Unemployment Assistance, created for gig workers and others not covered by regular unemployment insurance, and Pandemic Emergency Unemployment Compensation, which extended benefits up to 13 weeks beyond their regular duration (from 12 to 30 weeks, depending on the state).The November Census survey found that about one in four people out of work was relying on savings or selling assets to meet spending needs. One-fifth said they were still using some of the so-called economic impact payment of $1,200 that most Americans got under the CARES Act in the spring. But that is running out fast. More than one in six said they were borrowing from friends and family.Pascal Noel, an economist at the University of Chicago, analyzed the consequences of expiring unemployment benefits with his colleague, Peter Ganong, in a study published last year. Mr. Noel noted that spending “falls substantially exactly in the month in which benefits expire, and it falls across the board.”And that kind of shock has consequences. Mark Aguiar of Princeton and Erik Hurst of the University of Chicago have estimated that the drop in grocery spending that Professors Ganong and Noel associate with the end of unemployment benefits leads to a deterioration in diet quality: a significant decline in household consumption of fresh fruit and a jump in the consumption of hot dogs and processed lunch meat.Business & EconomyLatest UpdatesUpdated Dec. 15, 2020, 7:19 a.m. ETSolar energy had one of its best years in the U.S. despite the pandemic.U.S. stocks set to open higher as vaccine rollout outweighs virus restrictions.Millions are about to lose jobless benefits. Expect a sharp drop in spending.Jesse Rothstein of the University of California, Berkeley, and Robert Valletta of the Federal Reserve Bank of San Francisco studied what happened when unemployment insurance ended for workers who lost their jobs during the recessions of 2001 or 2007-9. Household income declines $522 a month on average, they found.When unemployment checks run out, the poverty rate among families who received them rises from 20 percent to about one-third in the next six months, the researchers found. Other government programs, like food stamps, did not raise their income by much.The current crop of unemployed is already in bad shape. According to the Census Bureau, for instance, by the end of November, more than one person in 10 who had not worked in the past week was relying on federal nutrition assistance, also known as food stamps, to meet needs. That is up from one in 40 in mid-July, just before the expiration of another component of the CARES Act — a $600 weekly supplement to other unemployment benefits.Poverty, which actually declined in the first months of the pandemic — reflecting the extraordinary relief offered by the CARES Act through the spring and early summer — has snapped back with a vengeance. According to estimates by Bruce D. Meyer of the University of Chicago, James X. Sullivan of the University of Notre Dame and Jeehoon Han of Zhejiang University, 11.4 percent of Americans subsisted with incomes below the official poverty line by October, up from 9.3 percent in June.The checking accounts of the unemployed also reflect this reversal of fortunes since the early phases of CARES Act relief, according to an analysis by researchers at the JPMorgan Chase Institute and the University of Chicago. Their account balances more than doubled from January to July, helped by the supplemental unemployment payments and the economic impact check. In percentage terms, their gain was vastly greater even than for workers who kept their jobs. Their spending also surged, peaking in July.By the end of August, however, the last month in which the researchers tracked the finances of the unemployed, their median bank balances had shrunk by about a third since July, losing most of the cushion built up since March.“The typical family does still have somewhat of a cash buffer,” said Fiona Greig, co-president of the JPMorgan Chase Institute, “but it is declining precipitously.”Regular unemployment insurance in the United States remains among the least generous in the Organization for Economic Cooperation and Development, typically falling to zero after six months, barring extraordinary legislation. In Denmark or Portugal, by contrast, unemployment benefits replace around 80 percent of the lost wages of workers even two years after they lose their jobs.In the United States, jobless benefits add up to about 20 percent of the median income for a family with two children, according to data from the O.E.C.D. In Germany and Ireland, they amount to over 50 percent.Emergency legislation like the CARES Act has provided an intermittent boost to unemployed American workers during crises. But barring new action by Congress in the coming days, the safety net will revert to its previous state. Millions will fall through the cracks.AdvertisementContinue reading the main story More

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    States Overpaid Unemployment Benefits and Want Money Back

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    AdvertisementContinue reading the main storySupported byContinue reading the main storyJobless Benefits Saved Them, Until States Wanted the Money BackA pandemic relief program allows no forgiveness of overpayments, even when recipients are not at fault and the funds are already spent.William and Diana Villafana were told they had received more than $7,000 in excess unemployment benefits. To collect the debt, Nevada is taking all of his benefits and paying her $73 a week.Credit…Bridget Bennett for The New York TimesDec. 11, 2020, 5:00 a.m. ETUnemployment payments that looked like a lifeline may now, for many, become their ruin.Pandemic Unemployment Assistance, a federal program that covers gig workers, part-time hires, seasonal workers and others who do not qualify for traditional unemployment benefits, has kept millions afloat. The program, established by Congress in March as part of the CARES Act, has provided over $70 billion in relief.But in carrying out the hastily conceived program, states have overpaid hundreds of thousands of workers — often because of administrative errors. Now states are asking for that money back.The notices come out of the blue, with instructions to repay thousands or even tens of thousands of dollars. Those being billed, already living on the edge, are told that their benefits will be reduced to compensate for the errors — or that the state may even put a lien on their home, come after future wages or withhold tax refunds.Many who collected payments are still out of a job, and may have little prospect of getting one. Most had no idea that they were being overpaid.“When somebody gets a bill like this, it completely terrifies them,” said Michele Evermore, a senior policy analyst for the National Employment Law Project, a nonprofit workers’ rights group. Sometimes the letters themselves are in error — citing overpayments when benefits were correctly paid — but either way, she said, the stress “is going to cost people’s lives.”The hastily conceived Pandemic Unemployment Assistance program has presented other troubles, including widespread fraud schemes and challenges with processing. As a result, states only recently had enough resources to start sending out overpayment notices. In the meantime, people have been collecting — and spending — sometimes thousands of dollars in what they understood to be legitimate benefits.Olive Stewart, a 56-year-old immigrant from Jamaica, worked part time as a sous-chef at a cafeteria at a Jewish school in Philadelphia, earning $16 an hour for roughly 25 hours a week. But when the pandemic hit and schools shut down, she was laid off.Ms. Stewart applied for Pandemic Unemployment Assistance and began receiving $234 a week. It was not quite enough to cover the $650 in rent, $200 electric bill and $200 internet bill for the house she shares with her 12-year-old daughter, her retired mother and her sister, who has a disability that prevents her from working. To make ends meet, Ms. Stewart started dipping into her savings.Then, on Oct. 6, she got a notice saying that Pennsylvania’s unemployment insurance vendor, Geographic Solutions, had overpaid her by accident. The overpayment included funds from Pandemic Unemployment Assistance and from a $600 federal supplement to unemployment insurance. In total, she was told, she would have to pay back nearly $8,000.To collect the debt, the state began to withhold more than half of her unemployment payments, leaving her just $105 a week. In early November, the state began taking all of her unemployment benefits, leaving her with no income. She has yet to pay her December rent.“The state should be paying attention to what they are sending out,” Ms. Stewart said. “It was their mistake, and I’ve already spent all the money on food and rent. How am I going to pay it back?”Geographic Solutions made duplicate payments for 30,000 Pennsylvania claims because of a system problem, a $280 million mistake, the State Department of Labor and Industry said. (The company says the problem arose from a one-day error that was immediately reported.) Overpayments can also occur if an applicant makes a mistake on a form, as ProPublica reported, or if a state determines that a recipient should not have been eligible.As of Sept. 30, about 27 percent of those approved for Pandemic Unemployment Assistance in Ohio had been overpaid, about 162,000 claims. In mid-November, the figure in Colorado was about 29,000; in Texas, it was over 41,000.Many states waive overpayments on regular unemployment insurance when no fraud is involved, or when paying the money back would cause someone significant hardship. But the federal rules for Pandemic Unemployment Assistance prohibit forgiveness. Even if the state is at fault, the recipient is on the hook.States often start collecting the overpayment automatically, by withholding a portion — from 30 to 100 percent — of future unemployment benefit payments.Many overpayments arose because state unemployment systems are designed to calculate benefits using W-2 forms, employer records, pay stubs and other documents associated with traditional jobs. But because gig workers and part-timers had different sorts of documentation, states had to adapt quickly to a new method of processing and approving claims.Mistakes in the rollout were inevitable, said Behnaz Mansouri, a senior attorney for the Unemployment Law Project, a nonprofit legal aid organization in Seattle.Business & EconomyLatest UpdatesUpdated Dec. 10, 2020, 4:09 p.m. ETWalmart is preparing to administer a coronavirus vaccine once it is available.Mastercard and Visa stop allowing their cards to be used on Pornhub.The U.S. budget deficit hit $207 billion in November.“For a new system to have such a punitive response when the system itself fails seems overly harsh and draconian,” Ms. Mansouri said.“I don’t think they understand that unemployment benefits are for survival,” Mr. Villafana said. “Or if they do understand it, they don’t care.”Credit…Bridget Bennett for The New York TimesGina Jones, 29, was furloughed in March from her part-time job at a breakfast bar at a Quality Inn in Spokane, Wash., and began receiving $750 a week from the pandemic program, which allowed her to pay for rent, food and necessities for her two daughters, ages 1 and 5. She was called back to work in July, and now works about 28 hours a week at $13.50 an hour.Then, in mid-November, she checked her unemployment portal online and saw a message that she had been overpaid by nearly $12,500. She fears that the state will start garnishing her wages to collect the debt.“I already used that money to support my family,” Ms. Jones said. “It’s all gone, and I can’t afford to pay it back.”Asking people to pay back unemployment funds can undermine the unemployment system’s goal of stabilizing the economy, said Philip Spesshardt, branch manager for benefits services at the Colorado Division of Unemployment Insurance.If a person’s unemployment checks are reduced each week because of an overpayment, the recipient will have less cash to pay bills and patronize local businesses. “Ultimately that has a cascading effect on many of those small businesses, causing them to close permanently and further adding to the unemployment rate,” Mr. Spesshardt said.While overpayments under the federal program cannot be waived, applicants can appeal demands for reimbursement after the notice is issued. But the time allowed for appeal can be as little as seven days. After that, the process can be slow, confusing and cumbersome.Colorado has taken steps to address the hardships of reimbursement. In October, after the state noted the large number of overpayments, it determined that the application form was confusing because it did not specify whether the person filing was supposed to provide gross or net income. It decided to “write off” cases where the recipients had submitted earnings and tax documentation that would have allowed the correct benefit to be calculated.Asked how the policy squared with the federal prohibition against forgiveness, a spokeswoman for the Colorado Department of Labor and Employment cited “the administrative burden that it would create for us to collect on these overpayments given competing priorities.”House Democrats have called for renewed pandemic relief to include a provision allowing states to waive overpayments when workers cannot repay them without severe hardship. The provision would apply to previous and future cases. A separate House bill, with bipartisan sponsorship, provides for forgiveness if the overpayment was not the recipient’s fault and “such repayment would be contrary to equity and good conscience.”But the possibility of a remedy is not much consolation to those wondering how they will pay rent and put food on the table in the meantime.William and Diana Villafana, 55 and 34, who before the pandemic ran a car rental business in Henderson, Nev., were told in late October that between them, they had been overpaid by more than $7,000. To cover that debt, the state is taking all of Mr. Villafana’s benefits, and giving Ms. Villafana $73 a week. They are using credit cards for their $2,000 monthly rent, as well as utilities, food and other necessities.“I don’t think they understand that unemployment benefits are for survival,” Mr. Villafana said. “Or if they do understand it, they don’t care.”Mr. Villafana worries about how he will continue to provide for their son and daughter, ages 6 and 7. When his daughter recently asked for a paintbrush set and an easel, he didn’t know what to tell her.“It’s kind of hard to explain to them, ‘Look, you can’t do this’ or ‘I can’t buy you that,’” he said. “I have no idea what we’re going to do about Christmas.”Sheelagh McNeill contributed research.AdvertisementContinue reading the main story More