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Customer Review

HALL OF FAMEon September 19, 2012
Investigative reporter and Pulitzer-winner Johnston reports how American consumers are gouged by practices that go on in plain sight. For example, 19 states let companies pocket the state income taxes withheld from employees for up to 25 years, sometimes simply for moving existing jobs from one state to another. State and local governments spend at least $70 billion/year to subsidize factories, office-buildings, etc., per research by Kenneth Thomas. Research papers suggest that the cost of handling bounced checks could be less than a penny - banks charge eg. $35 fees for each one.

BNSF is often the only rail line farmers can use, and routinely charges 2.5 - 4X variable costs. The Surface Transportation Board (STB) regulates some railroad prices, allows them up to 1.8X. Farmers bear the shipping costs, but grain companies contract for most shipping. The result - farmers can't sue for being 'railroaded.' The railroads also sometimes provide poor service to both their coal and grain customers - car shortages.

One of the largest electric utilities is MidAmerican Energy Holdings, a monopoly owned by Berkshire Hathaway. MidAmerican benefits from profit-now, pay tax-later corporate tax laws. In 2009 it paid less than 17% tax on profits, while being allowed to charge customers the full 35% corporate tax rate. Similarly with Buffett's PacifiCorp utility.

In 1996 the STB ruled that if any portion of a trip is on a monopoly rail line the monopoly rail can charge monopoly rates all the way. Railroads are also allowed to require that contract terms be kept confidential, supposedly to promote competition.

Sine 1995, average cable prices have been rising 2.6X the cost of living. Glasgow, Ky. has provided Internet service since 1987 at less than commercial rates. Chattanooga, Tn. began offering 1 GB Internet service in 2011. Scottsboro, Al. also provides its own Internet service for residents - at lower costs.

South Korea leads the world in average Internet speed, averaging 18 MB/second; the U.S. is 29th and falling (5 MB). The U.S. pays an average 60% more than South Koreans. French Internet service is 10X the downloading speed of that in the U.S, 20X for uploading, and costs only $40/month.

Tradable jobs accounted for only 2% of newly created positions between 1990 - 2008, per Michael Spence.

PG&E got a rate hike to fund replacing 46K poles/year (estimated 50-year life-span). Then, in 2002 and 2003, it replaced only 15K/year, dropping to 3.3K in 2004 (estimated pole life of 700 years). Johnston also documents instances where deferred utility maintenance is putting lives at risk - all while these same utilities earn up to 55 percent on their assets, eight times the average for all corporations. Gas line problems are the most dangerous.

An energy auditor in New Orleans has found utilities all over the U.S. billing for non-existent, under-watted, and non-functioning street lights, as well as using inaccurate meters and charging more than allowable per existing rates.

Sometimes increased taxes can save money. The Council Rock Refuse District in Brighton, N.Y. used the tax system to replace multiple trash collecting companies operating six days/week with a single company collecting only once/week. The authors costs fell from $575/year to$221. Nationally, trash collection has become an oligopoly, even a monopoly when a single firm controls the local landfill.

Moeles Research found nearly half of banks' overdraft fees in 2010 exceeded their net profits. About 10% of customers generate 90% of overdraft fees. Bank of America has moved dubious value Merrill Lynch CDS to its banking arm, using them as collateral for borrowing from the Federal Reserve, and also using them as the basis for FDIC coverage.

Most financial contracts now contain a clause requiring disputes to be resolved via arbitration, not in the courts. Costs can be large (even disproportionately falling upon the consumer), and require traveling to the arbitrator's locations. Also allows corporations (eg. Subway provided an example) to make promises they may or may not intend to keep. (Unless you can prove the company INTENDED to deceive, the consumer will not win.) Arbitrators have a financial interest in the outcomes - more business.

U.S. mortgage bonds totaled $15 trillion in 2008, while CDS were created against them with a face value of $67 trillion. Taxpayers paid Goldman's nonredeemable bets with AIG ($13 billion) for 100 cents on the dollar, despite Goldman earning $39 billion pretax during the years 2009 - '11, paying $44 billion in bonuses.
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