October 20, 2017

Wealth Matters: That Bland Annuity Notice May Be Anything but Routine

That’s because several insurance companies that sold variable annuities with generous income or death benefits before the financial crisis are having sellers’ remorse. Meeting those obligations — often guaranteed returns or payouts of 6 or 7 percent — has become tougher with interest rates low and the costs to hedge these guarantees high.

Now these companies are trying to persuade annuity owners to take buyouts or, in one case, are insisting that clients move into investments with lower returns — with the penalty of losing their guaranteed payment if they do not. Many of these notices arrive as bland-looking letters with little indication that they may be urgent.

“It caught the distributors off guard that the carriers would make these kind of changes, particularly to existing clients,” said Bernie Gacona, director of annuities at Wells Fargo, a large distributor of annuities. “We don’t have issues when carriers are making changes to the products with new clients — they don’t have to buy it. With existing clients, you’re pretty stuck.”

AXA Financial, which made an offer to buy out death benefits last fall, has filed with the Securities and Exchange Commission to expand the program to include riders that guarantee the rate of accumulation in an annuity. AXA would pay the annuity holder a lump sum to give up the rider.

“There were a lot of benefits sold by us and others prefinancial crisis that have become much more expensive than anticipated,” said Todd Solash, managing director of product development at AXA. “It’s fully voluntary. We’ll put money in, in exchange for canceling the riders.”

The Hartford, which is getting out of the annuity business, has gone further: it has sent letters to clients and advisers saying that they have until October to change the asset allocation in certain variable annuities. The goal is to lower the client’s balance and therefore the amount the company will have to pay out. If they do not do this, they will lose the rider that guaranteed a payment regardless of the cash value of the annuity. Instead of getting a 5 percent guaranteed payout for life, the owner would get a lower payout based on a lower account value.

“It’s important to note that the investment changes are not applicable to all contract owners, but to those where the investment changes are permitted under the existing contracts,” said Shannon Lapierre, a spokeswoman for The Hartford.

The Hartford’s original letter to advisers in May, given to The New York Times, was vague about what was happening. It put changes to the investments people were allowed to make toward the end and made no mention of the severe penalties. Instead, it referred advisers to a Web site for more information.

A letter sent to clients in June highlighted that “the withdrawal feature of your optional benefit rider will be revoked” with the last three words in capital letters. Ms. Lapierre said additional letters would be sent from now till the Oct. 4 deadline.

While the changes these two companies are making are at different ends of a spectrum, they are part of a trend with variable annuities sold in better times. Last fall I wrote about Prudential Annuities’ canceling provisions in 14 annuities with guaranteed payouts that allowed owners to continue to add money to them. Earlier this year, AXA also eliminated two dozen investment options and moved clients’ money into different funds.

These changes are also emblematic of how complicated these types of annuities have become. Still, in a time of low returns and few guaranteed sources of income, there is often a desire for the perceived security of annuities, which come in many forms.

So, how should some people consider what they already own? How should others consider a sales pitch to buy a new annuity?

It’s worth noting that all of these changes are legal, and the company’s right to do what it is doing is detailed in contracts that stretch to hundreds of pages. That is part of the problem, of course, since people often do not read those contracts closely.

This article has been revised to reflect the following correction:

Correction: July 12, 2013

An earlier version of this column misidentified the developer of the annuity intelligence report. It was developed by Morningstar, not the Macro Consulting Group, which uses it to analyze annuity contracts.

Article source: http://www.nytimes.com/2013/07/13/your-money/annuities/that-bland-annuity-notice-may-be-anything-but-routine.html?partner=rss&emc=rss

In Embattled Detroit, No Talk of Sharing Pain

Now another large city, Detroit, appears to be on the brink of filing for bankruptcy, but there is little talk of sharing the pain. Instead, the fiscal crisis in Michigan is setting up as a gigantic clash between bondholders and city retirees.

The city’s proposals, which could give some bondholders as little as 10 cents on the dollar, are making some creditors think they would be better off in bankruptcy. They see the specter of a federal judge imposing involuntary losses as less ominous than it was for New York.

“The haircut is so severe,” said Matt Fabian, a managing director of Municipal Market Advisors, “I think it’s scaring them into bankruptcy, rather than away from bankruptcy.”

But city retirees, facing the prospect of sharply reduced benefits whether in bankruptcy or under Detroit’s restructuring proposal, think they stand squarely on the moral high ground because despite the poverty of many current and retired members, they have already offered big concessions.

“It’s not the employees that are costing the city money,” said Edward L. McNeil, an official with the American Federation of State, County and Municipal Employees who is leading a coalition of 33 unions that will be affected by any restructuring of Detroit’s debts, which total roughly $17 billion. Just last year, he said, those unions offered concessions that could have saved the city hundreds of millions of dollars a year. But Detroit “botched the implementation,” he said.

And Michael VanOverbeke, interim general counsel for the general workers’ retirement plan, said bondholders were investors hoping for returns, who should expect “a certain amount of risk.”

“Planning for retirement and working for employers was not an investment into the market,” he added. “These are people who are on a fixed income at this point in their life. They can’t go back to work and start all over again.” He said it was unthinkable to cut retirees’ pensions outside of bankruptcy.

A bankruptcy in Detroit would have no precedent, despite an unusual flurry of municipal bankruptcies after the financial crisis. Rhode Island hurriedly passed a law giving municipal bondhholders priority over other creditors, including retirees, just before the small city of Central Falls filed for bankruptcy. That helped Central Falls resolve its bankruptcy quickly, but no one thinks Michigan could pass such a law. In Jefferson County, Ala., a large majority of the financial trouble grew out of debt issued to rebuild a sewer system, not pensions or other employee benefits. The rights of public workers and bondholders are in conflict in the bankruptcy of Stockton, Calif., but that case is not yet far enough along to be of any guidance to Detroit.

With talks on labor issues scheduled for Thursday, municipal bond market participants say one of their main concerns is that the city’s proposal would flatten the traditional hierarchy of creditors, putting say, a retired librarian on par with an investor holding a general obligation bond. That does not square with the laws and conventions of the municipal bond market, where for decades small investors have been told that such bonds are among the safest investments and that for “general obligation” bonds cities could even be compelled to raise taxes, if that’s what it took to make good. The “full faith and credit” pledge was supposed to make such bonds stronger than the other main type of muni — revenue bonds, which promised to pay investors out of project revenue.

Public finance experts have warned that broad societal problems could follow a loss of faith in municipalities’ commitments to honor their pledges. In a major report on the state of the muni market last year, the Securities and Exchange Commission warned that communities would find it increasingly costly to raise money, throwing into question the time-honored practices of building and financing public works at the local level.

Article source: http://www.nytimes.com/2013/06/18/business/in-embattled-detroit-no-talk-of-sharing-pain.html?partner=rss&emc=rss

Wealth Matters: Reasons to Avoid Buying Stocks, and Why You Should Ignore Them

The list, adding up to 78 for each of the years from 1934 to 2012, was compiled by Bel Air Investment Advisors.

But the punch line to this list was that stocks went up by an annual compounded rate of 10.59 percent over those 78 years, with occasional plateaus, and that $1 million invested in 1934 was worth $2.4 billion in 2012.

As for the last three years, the list singled out the European financial crisis in 2010, the downgrade of United States’ credit rating in 2011 and the political polarization of 2012. Investors were, in fact, generally reluctant to buy stocks. Yet in each of those years, stocks either rose in value or, at worst, were flat.

The reason for such hesitancy is obvious. Investors are still scarred from the 2008 crash and they perceive stocks as risky, a feeling reinforced by a good bit of volatility in the markets in recent years. Yet as stocks rallied earlier this year, money from individual investors began to trickle back into equity funds. This could be good for an intrepid few.

“The stock market is the same place it was in 2000 with double the earnings,” said Todd M. Morgan, senior managing director at Bel Air Investment Advisors. “Stocks are set to outperform bonds over the next three to five years.”

This may very well be true, but most people still think fearfully about stocks. What would it take to get more people to buy stocks? And by this, I don’t mean going all in as investors did in the late 1990s, but creating some semblance of a balanced portfolio.

Mr. Morgan and other advisers said that investors are being misled by talk about near-record levels for the Dow Jones and Standard Poor’s 500-stock index today. When adjusted for inflation, the levels approached earlier this year are not true highs. A new high for the Dow, for example, would be around 15,600.

What is more telling are the earnings and dividends of companies. Niall J. Gannon, executive director of wealth management at the Gannon Group at Morgan Stanley, calculated that the dividends on S. P. 500 stocks were $15.97 in 2000 and $31.25 in 2012. Earnings per share were $56 in 2000 and $101 in 2012. In other words, two major measures of a stock’s attractiveness have doubled in the last 12 years, but the index has not kept pace.

“A big mirage is going on in investors’ minds,” Mr. Gannon said. “They think stocks are expensive because they’ve used index levels as the measure.”

And investors aren’t confident that stocks will continue to rise, given the volatility in recent years. They may well fall in the short term, but over the next few years they are more likely to give investors a better return than bonds. Mr. Gannon pointed to an earnings yield on the S. P. 500 of around 7 percent.

But these are rational arguments for individual companies. They do not account for concerns that the actions of the Federal Reserve have skewed stock prices, another rational fear.

Michael Sonnenfeldt, the founder of Tiger 21, an investment club whose members each have at least $10 million to invest, said the feeling from the group’s annual conference was that the 14,000 level on the Dow was worrisome because it could be the result of all the money the Federal Reserve has put into the system and not based on company fundamentals.

The group, he said, was also worried that the Federal Reserve, having kept interest rates artificially low for so long, could have created a situation where investors suddenly demand higher interest rates at a government bond auction. A crisis like that could lead to deflation, and not inflation — where stocks are considered a hedge.

What’s telling is that Tiger 21 members reported increasing their allocation to equities by 3 percentage points in the last six months. “It’s not a stampede,” he said. “The focus has been on dividend-paying stocks, not growth stocks or tech stocks.”

For people with far less than $10 million to invest, the catalyst to buy stocks will probably be losing money in the bonds they own. “Over the last three years, you’ve lost out not being in stocks,” said Bernie Williams, vice president of discretionary money management at USAA Investments. “But you still made money in bonds. From that perspective, investors are not really feeling the pain.”

Article source: http://www.nytimes.com/2013/02/23/your-money/reasons-to-avoid-buying-stocks-and-why-you-should-ignore-them.html?partner=rss&emc=rss

I.M.F. Director Says Global Recovery Is Not Yet Secure

Christine Lagarde, the I.M.F.’s managing director, said the euro zone debt crisis and the budget dispute in the United States could have brought growth to a halt, an outcome only avoided by decisions often made at the last minute.

In particular, she urged the United States to raise its borrowing limit and pressed Europe to follow through with commitments to tackle its debt crisis.

“Clearly, the collapse has been avoided in many corners of the world,” Ms. Lagarde told reporters, even as she expressed concern that policy makers’ resolve could weaken just because there is a “bit” of recovery in sight and financial stresses have eased.

“It’s important to follow through on policies to put uncertainty to rest,” she said. “There is still a lot of work to be done.”

In her first news conference of 2013, Ms. Lagarde focused on political battles over the budget in the United States and the risks the euro zone’s debt crisis still presents. That focus is not new, but Ms. Lagarde made clear she worried that complacency could set in.

Ms. Lagarde warned that a fight in the United States over raising the nation’s $16.4 trillion borrowing limit could be “catastrophic” for the global economy if it is not raised in time.

“I very, very strongly hope that all parties, all views will converge in the national interest of the U.S. economy and in the international interest of the global economy,” she said. “To imagine that the U.S. economy would be in default, would not honor the payments that it owes, is just unthinkable.”

In Europe, she said, progress was made last year to tackle the debt crisis. Unfinished business included the need to press forward with plans for a banking union.

She also said that while a financial firewall against the debt crisis had been erected, it had not yet been made “operational,” a reference to a European Central Bank program to buy bonds from debt-laden euro zone countries that seek a rescue.

Further, she said, the central bank needed to keep monetary policy loose and perhaps try to lower borrowing costs further to help struggling member states.

“We recognize there has been progress, but the process has been very time consuming and continues to contribute to uncertainty,” Ms. Lagarde said. “We sense a sign of waning commitment. There is still momentum, but it is probably not as crucial as it was, and we regret it.”

Article source: http://www.nytimes.com/2013/01/18/business/global/imf-director-says-global-recovery-is-not-yet-secure.html?partner=rss&emc=rss

Your Money: An Invitation to High School Seniors to Write About Cash

At Pitzer College, a student used the example of the Ponzi schemer Bernard Madoff to take a philosophical look at how much money people truly need to be happy.

As the economy has suffered in recent years and college costs have risen, high school seniors have grappled with the fallout in their own families and channeled their feelings into an increasing number of memorable college application essays about sacrifice, social policy and affluence or its opposite. “Students never used to write about this stuff,” said Angel Pérez, vice president and dean of admission and financial aid at Pitzer. “I think there is this new consciousness. It’s unlike anything I’ve ever seen.”

Given the Your Money team’s long-standing endorsement of raising the financial consciousness of the younger set, we wanted to see these writings for ourselves. So we’re asking high school seniors who are applying for college this year to send us application essays that have anything at all to do with money, working, class, the economy and affluence (or lack thereof). We’ll read them all and publish the best on our Bucks personal finance blog.

There is more on our editorial criteria and the logistics down below, but if you’re trying to figure out what counts as a money essay, think broadly, as many applicants have in recent years. “An essay ought to try to fill in the gaps, to tell us things that we don’t know about you,” said Erica Sanders, managing director of the office of undergraduate admissions at the University of Michigan.

Your guidance counselor and teachers who are writing letters of support for your application may not know about or think to write about your family’s financial status, good or bad. “Maybe a parent had to move out of town for work, and the student writes about taking on more responsibility, that it allowed them to take on more leadership and to contribute to their family in a way that they didn’t even know was possible,” she added, echoing essays she’s read in recent years.

Even if your family has not struggled or become fabulously wealthy, an essay about your part-time job certainly qualifies. “Many of our engineering students will talk about building something and the costs of putting it together,” Ms. Sanders said.

Aside from the Madoff essay, Mr. Perez has read other Pitzer applicant essays and had other conversations with applicants about money and the economy in recent years that have stuck with him. “One student last year was very affected by the whole conversation about the 1 percent,” he said. “He sent us his proposal for the tax code. The committee thought that this is someone who is clearly thinking about this in a critical way, is informed about what is going on the world and has done some dissecting of the information, and that’s the kind of student we’re looking for.”

The college essay is always a bit of a high-wire act. Harry Bauld, the author of “On Writing the College Application Essay,” which I credit with helping me get into college, paints a visceral, frightening picture of haggard admissions officers reading dozens of essays each day. Then, he asks readers to imagine that their application is 38th in the pile. How are you going to excite that person?

Writing about money can offer a bit of voyeuristic thrill in this regard, but it also poses its own particular challenges. “Most of my students are absolutely brilliant,” said Mr. Bauld, a high school English teacher at Horace Mann in New York and a former admissions officer at Columbia and Brown. “But they cannot see their own relationship to economic culture. It’s not comprehensible.”

The more affluent ones, if they do understand it, struggle further when trying to put it into words. “When it becomes visible, it comes accompanied with a U-Haul full of guilt that they’re towing behind them,” he said. “Then, it forces them into various clichés.”

Twitter: @ronlieber

Article source: http://www.nytimes.com/2013/01/05/your-money/an-invitation-to-high-school-seniors-to-write-about-cash.html?partner=rss&emc=rss

Olympus Chairman Resigns Over Scandal

TOKYO (Reuters) – Japan’s scandal-hit Olympus Corp said its chairman and president Tsuyoshi Kikukawa has stepped down due to a series of media reports on the company’s problems and a plunge in its share price.

Shuichi Takayama, a managing director of the company, was appointed to replace him as president.

Kikukawa had taken over as Olympus’s chief executive after the company abruptly fired its British CEO, Michael Woodford, on Oct 14.

Shares of the camera and endoscope maker fell 7.6 percent on Wednesday and have lost more than half their value since Woodford was sacked.

The company is scheduled to hold a news conference at 1730 JST (09:30 BST).

(Reporting by Chikafumi Hodo; Editing by Edmund Klamann)

Article source: http://feeds.nytimes.com/click.phdo?i=cc96f8a4a1286593ae2e5f3fc22fe82c

DealBook: A Walk Down Money Lane

Manhattan’s financial district offers a wealth of history for the real estate-inclined tourist. Richard M. Warshauer, a senior managing director at Colliers International, has been leading the annual tours for 24 years. Earlier this year, DealBook’s Ben Protess took a walk with Mr. Warshauer to see what he could learn.

Article source: http://feeds.nytimes.com/click.phdo?i=0ba5ad8d3f25ebb9a5600d610a3a608a

Vote of Confidence Is Only the First Step for Greece

But in many ways, that will be the easy part.

The payment of 12 billion euros will help Greece pay its debts coming due only until September. After that, Greece still faces obstacles to winning tens of billions more in a much bigger bailout package that is essential to its survival through next year.

It has to persuade private banks and other companies that hold its government debt to take part in the bailout by agreeing to lend the country the same amount of money again after their bonds are redeemed. Only then will other European countries and the International Monetary Fund agree to put up their share of the new bailout.

The I.M.F.’s acting managing director, John Lipsky, warned that the European Union must be prepared to underwrite the finances of the Greek state for the next year — a much tougher position than European officials expected — in order for the I.M.F. to release its portion of the aid.

“That needs to be done before we can move forward and we are hopeful that those conditions will be met with alacrity,” Mr. Lipsky said.

If Greece’s economic emergency is not dealt with quickly, the I.M.F. said in a report, there is a risk of contagion to other countries, starting with Ireland and Portugal, but possibly spreading to Spain, Italy and even Belgium.

“With deeply intertwined fiscal and financial problems, failure to undertake decisive action could rapidly spread the tensions to the core of the euro areas and result in large global spillovers,” the I.M.F. said.

Greece needed a 110 billion euro bailout last year from European governments and the I.M.F. The hope was that the country’s economy would be growing by now and that it could start selling bonds in the markets to raise money. But still in the grip of its economic crisis, it is short on cash to pay interest to private investors that have lent it money through the years in the form of government bonds.

As a result, Greece is seeking a second bailout from the rest of Europe and the I.M.F., possibly as much as 100 billion euros.

At stake in the negotiations is the degree to which Greece’s bondholders would agree to take a hit on their investments.

One aggressive option, proposed by Germany, was for banks to be forced to exchange all of their Greek debt for bonds of a longer maturity.

But such forced restructuring would have constituted a default and appears to have been ruled out, at least for now, after Germany backed down last week.

The other option is a voluntary rollover of maturing debt. Investors agree to buy their bonds again when they come due.

“The real question is what their incentive will be for all of the banks to roll over their short term bonds,” said William Rhodes, a former senior vice chairman of Citigroup who has been involved with several emerging market debt crises. “How do you do a voluntary deal and get everyone on board that does not trigger a default?”

If there is a delay in payment, even if voluntary, that could be considered a technical default. Analysts say that would spook markets, potentially leading to downgrades of the banks that own much of the debt, initiating payment clauses in insurance contracts written on Greek debt, and leading to questions being raised about the creditworthiness of other highly indebted European nations.

Stocks slipped on Monday in Europe, with the Dax in Germany down 0.2 percent, and the CAC 40 in France down 0.6 percent.

According to Moody’s, the credit rating agency, a delay in bond payments would not necessarily be considered a default if investors did not feel pressured into taking part in a plan to delay bond payments owed them.

But according to Nicolas Véron, a senior fellow at Bruegel, a research institute in Brussels, the definition of what is a default is deeply uncertain, and even a voluntary debt exchange could be challenged by holders of credit-default swaps, in a court of law.

“Part of the problem is there are different judges,” he said. “There are the rating agencies. There is the E.C.B., and what debt it will accept, and the International Swaps and Derivatives Association and its views on credit-default swaps. You may have three different opinions.”

Already, concerns are mounting about Greek banks, which are among the biggest holders of Greek government debt. There are worries about their ability to lend if they are swept up in a general default, crushing the Greek economy even further.

There are also worries about the exposure of American money market funds, which have large holdings of debt issued by European banks. Another uncertainty is the exposure banks have in insurance written on the debt of Greece, Ireland and Portugal.

To get buy-in from the banks and other private debtholders, Greece must find someone who can go out to persuade the private investors to get on board.

The spotlight is falling on Jean-Claude Trichet, president of the European Central Bank, who appears to be one of the few people who could credibly make the argument that private sector banks should join in the sacrifice.

But Mr. Trichet is in an increasingly uncomfortable position, having already led the central bank deep into uncertain territory at the center of efforts to bail out the euro zone’s troubled economies. Without him making the arguments, it is unclear how Greece’s bondholders are going to be won over.

“There is every possibility that at the end of this Greece is going to default anyway,” said Kenneth S. Rogoff, a former chief economist at the I.M.F. who is now a Harvard professor.

The European ministers plan to revisit the aid to Greece on July 3 following the Greek Parliament’s vote of confidence in the reshuffled government led by Prime Minister George Papandreou. The ministers also insist that Athens make a firm commitment to raise cash by selling assets and cutting spending. Mr. Papandreou faces a trial of strength both with opposition deputies in Parliament and with protesters on the streets.

Stephen Castle contributed reporting.

Article source: http://www.nytimes.com/2011/06/21/business/21-greek-austerity.html?partner=rss&emc=rss

Wealth Matters: Assessing the Value of Owning Dividend-Paying Stocks

So when I heard recently that some advisers were using dividend-paying stocks to coax people who still hold their money in cash or low-yielding bonds back into the equity markets, my ears perked up.

After all, dividend-paying stocks were largely ignored in the high-growth years for much of the past two decades. Companies that pay dividends, like Coca-Cola, McDonald’s, Caterpillar and Johnson Johnson, are established corporations with none of the go-go appeal of a technology start-up.

On the other hand, the people running those start-ups often had (and still do have) a good portion of their compensation tied up in stock options. And those options become more attractive the higher the stock price goes, making growth much more important than returning any capital to investors through dividends.

And until President George W. Bush’s tax changes in 2003, dividends were taxed at ordinary income tax rates, not the lower capital gains rate.

“The way the tax code was written, it made companies go for capital gains over dividends,” said Jason Trennert, managing director at Strategas Research Partners. “It made people make imprudent decisions. Dividends remind executives four times a year that it’s not their company.”

Mr. Trennert said that many clients of Strategas, which has headquarters in New York, are reporting increased interest in dividend-paying stocks. That could produce a chicken and egg situation of companies increasing or initiating dividends if investors are asking for them. The advisers and analysts I spoke to who favored dividend-paying stocks as a crucial part of anyone’s portfolio were divided into two camps.

The first offered more sentimental reasons. Kenneth Kamen, president of Mercadien Asset Management in Hamilton, N.J., said he had a relative in his 80s who has held a handful of dividend-paying stocks since the 1970s. Until recently, he reinvested the dividends to buy more shares. But with the stocks now worth more than $1 million and with the average dividend yield of 4.5 percent, the relative stopped reinvesting the dividends and now receives $61,000 a year in income.

Mr. Kamen said his relative’s rationale back in the 1970s is still sound: if the company paid a dividend, it was probably sound. “He said, ‘We didn’t have access to all this information,’ ” Mr. Kamen said. “Dividend-paying stocks represented an interesting form of research for him. You can’t fake cash.”

The second group considers these stocks to be a counterweight to portfolios excessively weighted toward supersafe investments, since the performance of those investments is going to lag over time.

Catherine Avery, who runs an investment advisory company under her name in New Canaan, Conn., said she is telling her clients that 54 percent of the returns in stocks since 1928 have come from dividends. Ms. Avery also notes that companies like Johnson Johnson and Emerson Electric have maintained unbroken streaks of increasing their dividends — 49 years in the case of Johnson Johnson and 53 years for Emerson.

She said she has been making these points to encourage clients who have resisted investing in equities since the recession to buy stocks again. “They missed two big years in the markets,” she said. “Now we’re reaching out to people and telling them this is your dead last chance to get back into the market at attractive valuations.”

The reality, though, is most people own dividend-paying stocks even if they don’t think of them in those terms. At the end of 2010, 373 companies in the Standard Poor’s 500-stock index paid dividends. That is nearly 75 percent of the companies in the index that most investors track.

What follows is a more detailed assessment of the pros and cons of owning dividend-paying stocks.

THE UPSIDES All things being equal, dividend-paying stocks have several advantages.

Article source: http://feeds.nytimes.com/click.phdo?i=b4569ed1fead942c24196ce4cae30a7c

Bucks: Report Your Bribes Via a Smartphone App

Jessica Rinaldi/Reuters

Can a smartphone app help fight corruption?

That’s the idea behind Bribespot, a nascent Web site and smartphone app designed to let people shed light on, well, bribes. (A hat-tip to Urbandaddy for bringing this intriguing idea to our attention).

The Web site Bribespot uses the same sort of mobile “check in” technology that services like Foursquare use.Bribespot.com

The Web site says the app employs the same sort of mobile “check in” technology that services like Foursquare use. But instead of letting everyone know that you’re enjoying a fabulous latte at Starbucks, you let them know that you just were forced to pay a bribe to the subway inspector because you were caught riding (in Hungary) without a ticket. “The more check-ins are made at a certain location, the more visible are corruption hotspots on the map,” the site says, and the more likely those in charge of a particular institution are to take heed. “That is where the real change starts,” the site adds, hopefully.

The site, which just went live, was hammered into existence at a recent Garage48 gathering in Estonia, where tech geeks gather with the goal of putting their ideas into action in just 48 hours. The app is available for Android phones; the developers are working on an iPhone version. The site says it guards against malicious or fraudulent campaigns in various ways, like limiting the number of check-ins daily from the same phone.

The Web site Bribespot uses the same sort of mobile “check in” technology that services like Foursquare use.Bribespot.comThe Web site Bribespot uses the same sort of mobile “check in” technology that services like Foursquare use.

The posts are anonymous, which is a good thing. But is reporting corruption using a location-based device a smart idea? In an e-mail, Artas Bartas, Bribespot’s managing director, said it’s theoretically possible to link a specific report to a specific phone, but that doing so would “require some considerable resources,” like access to a mobile phone company’s user database. “The question is, who would be ready to invest such resources for the sake of going after the person reporting the petty act of bribery?” he said.

That said, Bribespot is going to “great lengths” not to collect any directly identifiable information about users of its app; user identifiers saved in its database, he said, are “random generated strings which — even if somebody gets a hold of them — will not tell you much about whose phone it was.”

A quick perusal of posts on Bribespot reveals many items from Romania (bribing exam officials seems popular) and other European countries. But there are a smattering from the United States, like someone paying $100 to get their fake I.D. back from a bouncer at a Miami restaurant or paying almost $50 to cut the line to get into a popular bar in lower Manhattan.

We at Bucks certainly aren’t suggesting that readers do anything illegal. But does, say, slipping a few tens to the hostess to secure a reservation at a swank new restaurant qualify? I once lived in a city where, I was told by a long-time resident, you couldn’t officially put large bulky items out on trash day, but you could maybe get that old couch to disappear if you slipped a few bills to the sanitation crew.

Have you ever paid extra for a service? When does that sort of behavior cross the line?

Article source: http://feeds.nytimes.com/click.phdo?i=89cbda09e1b7aeb21684bc0f1fa15f0e