Category: Economic Trends

Morehouse Graduates’ Student Loans to Be Paid Off by Billionaire

Not even Morehouse College administrators knew the announcement was coming.

Addressing the college’s class of 2019, Robert F. Smith, a man who is richer than Oprah Winfrey, made a grand gesture straight out of the television mogul’s playbook.

“My family is going to create a grant to eliminate your student loans,” he said on Sunday morning, bringing the approximately 400 students in caps and gowns to their feet.

“This is my class,” he said.

In January, Mr. Smith, a billionaire, donated $1.5 million to the college to fund student scholarships and a new park on campus. He received an honorary degree at the graduation on Sunday.

[Who is Robert F. Smith? Read more.]

The value of the new gift is unclear because of the varying amounts the students owe, but the money will be disbursed through Morehouse College and will apply to “loans students directly have for their college education,” a representative for Mr. Smith said.

Because Morehouse was not informed of Mr. Smith’s plans before the ceremony, details about how the money would be distributed were not immediately available.

A private equity titan, Mr. Smith founded Vista Equity Partners in 2000.

After making a fortune in software, he was named the nation’s richest African-American by Forbes. According to that financial magazine, Mr. Smith’s estimated net worth is $5 billion, making him richer than Ms. Winfrey, who previously held the title of the wealthiest black person.

Mr. Smith studied chemical engineering at Cornell University and finance and marketing at Columbia Business School. Although he shunned the spotlight for many years, Mr. Smith has recently embraced a more public role, speaking at the World Economic Forum in Davos, Switzerland, and making major charitable contributions. Cornell named its chemical and biomolecular engineering school for him after he announced a $50 million gift, and he has made major donations to the National Museum of African American History and Culture. He started the Fund II Foundation, which is focused in part on preserving African-American history and culture, and signed the Giving Pledge, a campaign through which wealthy individuals and families commit more than half their wealth to charitable causes, either during their lifetimes or in their wills.

Anand Giridharadas, the author of “Winners Take All” and a frequent critic of big philanthropy, said Mr. Smith’s offer was “generous.” But, he added, “a gift like this can make people believe that billionaires are taking care of our problems, and distract us from the ways in which others in finance are working to cause problems like student debt or the subprime crisis on an epically greater scale.”

Sunday’s announcement came amid growing calls to address the crushing burden of student loan debt in the United States, which has more than doubled in the past decade.

Over the past 20 years, average tuition and fees at private four-year colleges rose 58 percent, after accounting for inflation, while tuition at four-year public colleges increased even more, by over 100 percent, according to research from the College Board.

According to federal data, the average federal student loan debt is $32,000. The standard repayment plan for federal student loans is up to 10 years, but most students, according to research, take far longer than that to pay off their balances.

For the students at Morehouse, an all-male, historically black college in Atlanta that costs about $48,500 per year to attend, the gift could be transformative, especially in the unsettled years after graduation.

In an interview with the The Atlanta Journal-Constitution, Elijah Dormeus, a 22-year-old business administration major carrying $90,000 in student debt, said: “If I could do a backflip, I would. I am deeply ecstatic.”

Mr. Smith’s prepared speech did not include his plan to pay off the students’ debts.

“Now, I know my class, who will make sure they pay this forward,” Mr. Smith said on Sunday morning. “And I want my class to look at these alumni, these beautiful Morehouse brothers — and let’s make sure every class has the same opportunity moving forward — because we are enough to take care of our own community.”

Lyft’s I.P.O. Was a Huge Success, Just Not for Investors Who Bought on Friday

Lyft’s stock market debut has set up its founders, employees, early backers and even those who scored shares in the initial public offering Thursday night for quite a windfall.

But not everyone who invested in the company is reaping the spoils.

Shares of the ride-hailing company rose nearly 9 percent on Friday. At over $26 billion, Lyft’s market value is almost double what private investors valued it at less than a year ago.

But Lyft’s first-day gain is measured off the I.P.O. price (which was set on Thursday, when shares were divided up mostly among large funds). Ordinary investors who wanted in had to wait to buy the stock until it was available on public markets on Friday, and at a much higher price than the big funds paid.

And those who bought as soon as trading began are already sitting on losses of a little more than 11 percent.

It serves as an important reminder that amid all the hoopla around trading debuts, small investors wind up taking a lot of the risk. Most of the gains on the first day of trading for a stock are realized with the first trade.

Over the past decade, companies listing shares on American stock exchanges have increased 14 percent from their I.P.O. price, according to Dealogic. But nearly all of the rise has come at the opening trade.

That dynamic has played out in many of the prominent I.P.O.s in recent years. Facebook shares opened 10 percent higher on their first day of trading and then proceeded to give back almost all those gains to finish essentially unchanged for the day.

Etsy was an extreme example of this. Its stock soared 94 percent on its first day of trading, but investors who bought at the open actually lost 3 percent by the close of trading.

And it’s not just tech companies. Levi Strauss recently made its return to the public markets, selling shares to investors at $17 a piece on March 20. The stock opened the next day at $22.22, a 31 percent jump. For the rest of trading that day, though, it climbed less than 1 percent.

Of course, if Lyft keeps growing as fast as Wall Street hopes it will, or works out how to turn a profit, then even the latecomers could wind up with respectable returns. Facebook shares are up more than 300 percent since their first day of trading, and after Etsy struggled for its first three years as a public company, its shares have more than doubled since they started trading.

Still, not being able to buy at the I.P.O. price also greatly affects returns over the next year. Investors who bought shares at the offering price have averaged a 22 percent increase over the past decade. Returns for those that bought at the open? Sixty percent less.

“She Lied to My Face”: Inside the Hectic Last Days of Gymboree’s Retail Bankruptcy

Mera Chung had known for weeks that her 30-year career in retail was coming to an end. But Chung, a vice president of design for Crazy 8, a division of Gymboree Group Inc., wasn’t prepared for what CEO Shaz Kahng and human resources chief Bridget Schickedanz would tell her late on a Wednesday afternoon in mid-January.

They had called Chung in to inform her of an imminent bankruptcy filing, Gymboree’s second in two years, which would accompany the liquidation of two of the company’s three brands, including Crazy 8, which caters to lower-income parents. Chung was ready for that; the closure of Crazy 8 was announced in December, and the bankruptcy was long rumored. But then Schickedanz dropped the bomb.

“She said, ‘We had to make some other decisions and you’ve been impacted,’” Chung explains. “‘We had to terminate the severance plan.’”

The severance plan, according to Chung and two of her close friends, was a key reason why she decided to move to Gymboree from Old Navy five years earlier. The retail sector’s volatility has boiled over recently, with rapid-fire bankruptcies and store closures emptying malls across the country, much of it driven by private-equity firms busting out otherwise profitable companies. But Chung, a single parent caring for an elderly father, came to Gymboree because she knew she’d be due a year’s worth of salary if the company ever went belly-up.

Instead, on the same day as the bankruptcy filing, Gymboree’s board triggered Article VII of the severance plan, a self-destruct button that enabled the company to terminate the plan “at any time in any respect” via a majority vote from the board of directors. As a result, none of the roughly 400 staff members at Gymboree headquarters in San Francisco would receive severance, to say nothing of the nearly 10,000 clerks at 800 Gymboree and Crazy 8 locations, who would now be managing going-out-of-business sales without the promise of assistance in the aftermath.

Kahng told Chung that there just wasn’t enough cash available to pay severance. But Chung said she had information, which she would later share with the U.S. bankruptcy trustee overseeing the case, that at least a few executives would leave Gymboree with golden parachutes.

A few weeks earlier, she had learned about a confidential deal between the board and eight members of Gymboree’s executive leadership team. According to Chung, those executives received paper checks with a “retention bonus” equal in value to their severance payouts. The board, which includes representatives from hedge funds and private equity firms, told the executives to deposit the checks immediately. Bankruptcy experts often call this type of payment a “disguised severance.”

Chung heard this firsthand from one of the bonus recipients. Chung had an equivalent title to most of the members who she was told received the bonuses, but she was left out. She would later tell the bankruptcy trustee in a letter that she watched as four of those bonus recipients jetted off to the Sundance Film Festival, just days after Gymboree declared bankruptcy.

In the meeting, Chung had asked, “What about the retention bonuses the others have, including you?” referring to Schickedanz, a member of the executive leadership team. Kahng would only reply, “That is not an appropriate question and I will not comment on it.”

Chung said she had replied, “The answer is what’s not appropriate.”

Gymboree, founded in 1976, is on its way to history. Children’s Place, a rival retailer, paid $76 million for the rights to the Gymboree and Crazy 8 brands, and the Gap is purchasing Gymboree’s 139-store luxury chain, Janie and Jack. But the disguised severance maneuver Chung has alleged reveals how in corporate America, the winners at the top can win even in failure. And nobody else is safe — certainly not the line-level workers, but not even vice presidents like Mera Chung.

The Intercept has reviewed documents confirming the termination of the severance plan on the day of the bankruptcy. Chung made her allegations about the disguised severance to friends, attorneys, and bankruptcy officials in the weeks after Gymboree’s filing, according to interviews and documents. And Julie Thompson, a vice president of product integrity and compliance for Gymboree, also said in a separate interview that bonus payouts were made to the executive leadership team.

Moreover, Chung alleged to the trustee that Gymboree underreported the extent of the retention bonus payments in a filing with the bankruptcy court. In that filing, Gymboree acknowledges “discretionary bonus payments of $270,000 to two employees,” but Chung asserts that eight executives received bonuses totaling an estimated $2.1 million.

Gymboree, its executives, and board members have failed to respond to numerous requests for comment through email, phone, and LinkedIn. Calls to the company’s media relations department have gone directly to voicemail. Three calls to personal cellphones of members of Gymboree’s executive leadership team were answered, but the individuals refused to comment.

The situation at Gymboree echoes other recent retail bankruptcies in which executives got a king’s ransom while everyone else got a firm handshake. Toys “R” Us and Sears were approved for millions in executive bonuses, a fact that has enraged advocates for line-level workers. “These are the same handful of people who couldn’t run our company successfully, and they’re being rewarded while everyone’s severance is taken away?” asked Lily Wang, deputy director for Organization United for Respect’s Rise Up Retail campaign.

You can make a case for retention bonuses for top executives in some bankruptcies. They are usually justified as a way to keep the leadership from decamping to other jobs as soon as the bankruptcy is filed. “The rationale is by giving good people retention bonuses so they will stay, the company will have much greater likelihood of reorganizing and getting back on its feet,” said Brett Weiss, a bankruptcy attorney in Maryland.

But in this case, Gymboree was knowingly liquidating most of its business before the bankruptcy was ever filed, making retention bonuses less urgent. “This was a liquidation chapter 11, the executives are not going to be in these positions a year from now,” Weiss said. “Maybe they said, ‘How can we get more money out without having the trustee claw it back? What’s the greatest number of people we can do this for without raising red flags? How about the executive leadership team?’” Gymboree’s lawyers in the bankruptcy case did not respond to a request for comment.

Moreover, while some executives do need to be in place to wind down operations, the alleged bonuses were not uniformly given to executives who had that role. For example, the VP of marketing allegedly got a bonus, even though marketing operations effectively ceased. Meanwhile, Thompson’s job involved regulatory compliance, which any retailer still selling products (even in a going-out-of-business sale) needs to maintain. Yet she was denied a bonus and fired without severance.

The situation has left Chung devastated. “Me and this other woman were the altar sacrifices for the others to get paid,” she says. “People have to understand how vulnerable they are.”

Chung was recruited to Gymboree five years ago by her former boss at Old Navy, where she was the vice president of kids and baby clothing design. She was told that she would have the run of an entire brand, the low-price Crazy 8. “It was their only brand that was relevant,” Chung says. She took the job.

At the time, Gymboree was under the control of Bain Capital, Mitt Romney’s old private-equity firm. The private-equity business model involves engaging in buyouts with borrowed money and putting that mountain of debt on the company it purchases, all the while extracting profits from the company through management fees. Few companies, particularly in the high-risk retail sector, can deal with such a debt burden — it makes it difficult to invest in stores, personnel, or better products.

Chung says this showed in how Gymboree ran the business. “Instead of investing in creative talent, they promoted design and merchandising from within,” she says. “Merchandisers became complacent with wanting product they knew would sell from the year before. There were years upon years of awful clothes with poodles and trucks on them.” She also complains that Crazy 8 had no marketing budget, and her work to break with standard fare was practically hidden.

By 2017, Gymboree couldn’t hold out any longer and went into bankruptcy. The business was put in control of its largest creditors, who were private equity and investment firms. The seven-member board included then-CEO of Gymboree, Daniel Griesemer; Ron Beegle, CEO of investment consultant Carriage House Capital Advisers; Matt Perkal, a partner at hedge fund Brigade Capital Management; Brian Hickey from mutual fund firm OppenheimerFunds; and Eric Sondag, a partner at private-equity firm Searchlight Capital, who was made board chair. Other members of the board were not disclosed, and since Gymboree is not a public company, they have no requirement to do so. Apollo Global Management, Marblegate, Nomura Securities, and Tricadia Capital Management also had a share of the company.

Though Gymboree emerged from bankruptcy in decent financial shape, Thompson described the new board as uninterested. “There was zero involvement in what was going on day to day,” she says. “They just let the CEO do whatever he wanted.”

Griesemer decided to invest in a complete redesign of Gymboree’s clothing line. It was a high-cost gamble off the bankruptcy, and it failed; when the new clothes hit stores last summer, parents called them “complete garbage.” Says Thompson: “I started paying attention to sales, and I was like, ‘Oh my god, this is so bad.’ It was negative 20 to 30 percent [compared to the previous year] every single day.”

By November, Griesemer was fired, and Kahng, the new CEO, came in. She had started her career as a food scientist at Kraft and was an independent member of the board prior to being named CEO, according to her LinkedIn page.

“She thought they were going to try to rehab the brand, that this was her career-defining moment,” Chung says. She described one meeting in which Kahng pronounced that Gymboree needed to be a “disruptor” like Apple. “She said, ‘What does every parent experience?’” Chung recalls. “‘Every parent in the world feeds their child strained carrots. When my children were babies, there were carrot stains on everything. We could do something so simple, an orange bib.’ She was 100 percent serious. I barely got through the meeting.”

The disruption didn’t take. By early December, the company announced that it would shutter all Crazy 8 stores after the holidays and significantly reduce the Gymboree footprint. Chung says that in the month after the announcement, Kahng never formally addressed Crazy 8 employees, leaving them confused about their roles. If the brand was closing, there was no need to design or purchase product for the next season. “My team of 20 said, what do we do?” Chung recalls. “They said keep showing up until further notice. They didn’t want to let us go because then they would have to pay severance.”

The Gymboree management severance plan was not a package negotiated individually. It was an employee benefits plan, established under the auspices of the Employee Retirement Income Security Act. This has become popular, particularly with large companies, says Jim Keenley, an ERISA attorney in Berkeley, California. The statute provides protections to workers if they aren’t given what’s promised in the severance plan. It offers no protection, however, if the plan is terminated.

“It’s an illusory contract,” says Keenley. “It’s very common for severance plans to have language in them that say, here’s your severance but we can take it away at any time for any reason.” No advance warning is needed for termination, under current law. While retirement benefits under ERISA are better protected, severance plans are considered a welfare benefit, and the funds do not vest.

So employees have no recourse if a termination occurs. And most of them don’t read the fine print allowing companies like Gymboree to pull that trigger. “I didn’t have anyone look at it,” says Thompson. “I was naïve.”

Both Thompson and Chung were told after the 2017 bankruptcy that the severance plan remained active. And both sought further assurances after it was clear that Gymboree would slide into bankruptcy again. Chung says she had asked three colleagues — the general counsel, the VP of human resources, and the general manager of her brand, Crazy 8 — whether her severance would be honored. None gave a straight answer. But Thompson said that when she approached the general counsel, Kimberly MacMillan, in early January, MacMillan reassured her, “Don’t worry, we will file it as a first-day motion.”

In bankruptcy-speak, MacMillan was saying that the severance plan would be one of the payouts that Gymboree would seek to get approved when it filed. Pending court approval, all employees eligible for the severance plan would be compensated. The severance plan was approved in the 2017 bankruptcy, so Thompson trusted MacMillan that the same would happen the second time around. “I had good working relationship with [MacMillan],” Thompson says. “She fucking lied to my face.”

MacMillan, in a short phone call with The Intercept, said that “we [Gymboree employees] follow a strict no-comment policy” with the media, and hung up.

Around the same time, Chris Lu, general manager of Crazy 8, was commuting home with Chung. “She would always disclose things to me, she would blab them to me,” Chung says. In her letter to the trustee, Chung writes that Lu told her that members of the executive leadership team were “paid their severance,” after demanding assurances from the board of directors. The board arranged for a “retention bonus contract” in the amount of the severance pay. “She said I couldn’t tell anyone about it,” Chung recalls. “I said, ‘Why did you tell me that if I cannot say anything?’”

In a brief phone conversation with The Intercept, Lu would only say, “I can’t talk to you. … I’m going to hang up now.”

According to Chung’s trustee letter, members of the executive leadership team who may have received retention bonuses included Lu, MacMillan, Schickedanz, Chief Financial Officer Jon Kimmons, VP of Information Technology David Sondergeld, VP of Logistics Dana Todorovic, VP of Sourcing Patricia Lesser, and VP of Marketing Parnell Eagle. Those in the “next level down” like Chung were left out, even though she had the same VP title as several of the recipients. Chung and Thompson were not formally part of the executive leadership team.

Thompson had also heard about the not-so-secret retention bonuses. “Nobody officially told me, but I heard rumors,” she says. She talked it over with Chung just before the bankruptcy. But when Thompson asked MacMillan about the executive leadership team meeting with the board, MacMillan told her that she couldn’t comment on it.

Both Thompson and Chung were told about the severance termination on the same evening. That day, everyone in the office figured out who was being let go, because human resources had cleared out the layoff victims’ time-off balance from the payroll processing system. “Everyone compared notes, mine’s not cleared out, mine is,” Thompson says. “Everyone zeroed out is going to get let go. Mine was zeroed out at end of Wednesday.”

Thompson was told by phone that she would be terminated without severance. Kahng, who as CEO was also a member of the board, told her that “it wasn’t our decision. Goldman Sachs is running the show now, we couldn’t do anything about it.”

Goldman Sachs was the lead creditor on Gymboree’s remaining loans, which it used for cash flow. The investment bank was the first in line to get paid from the bankruptcy. “It’s like when you get on an airplane — Goldman was group 1,” says Chung.

The next day, staff was packed into a tiny conference room. Chung decided to wear a vintage Sex Pistols T-shirt to the meeting with the words “No Future” scrawled on the front. Schickedanz, the human resources chief, read a prepared statement through tears. Everyone had to turn in their ID badges, laptops, and corporate credit cards, and vacate the building by the end of the day. Employees would get their last paycheck and paid time off, and that was it.

Schickedanz, in a phone call with The Intercept, said, “Oh, I thought you were someone else calling. … I’m going to jump off [the phone],” and hung up.

One employee, Katherine Pocrass, filed a class-action lawsuit against Gymboree, alleging that the company did not provide 60 days’ advance notice of the mass firing, as required under the Worker Adjustment and Retraining Notification Act. Attorneys for that case did not respond to a request for comment.

The WARN Act case is ongoing, and Chung would be eligible to be a member in the class-action, which could yield up to 60 days of back pay. But her severance was for a year.

Chung says she met with 17 different attorneys seeking legal recourse for her full severance. Each of them said that while Gymboree’s actions were unconscionable, they were technically legal; the severance plan entitled the company to terminate at any time. Eugene Pak, a business litigator in the Bay Area, said that the situation struck him as “unethical.” Added Keenley, the ERISA attorney: “I think Mera felt that it was unfair. … I’ve been looking for ways to find that it was not lawful, but I have not found them.”

Ron Tyler, a friend of Chung’s and a law professor at Stanford, provided her with several legal contacts. “I think her devastation comes from the fact that she, after very carefully and persistently creating this extremely successful career, to have it end so dramatically and intentionally by her company,” Tyler says. “And she saw the writing on the wall. Had it not been for that [severance] agreement, she would have left before.” Shortly after the bankruptcy, Chung felt an even deeper sting. One of the lawyers she consulted asked how many employees worked at Gymboree headquarters, and so Chung put the question to Lu. “She was laughing and said, ‘I’ll call you when I land, I’m going to Sundance,’” Chung says. Chung wrote to the trustee that Lu and three other members of the executive leadership team — Tricia Lesser, Shelly Walsh, and Parnell Eagle — had decamped to the Sundance Film Festival, weeks after being given a retention bonus to stay on at Gymboree. Thompson corroborated that Gymboree executives were at Sundance, though she didn’t name names. READ MORE: https://theintercept.com/2019/03/25/gymboree-bankruptcy-severance-scam/

WeWork’s Rise: How a Sublet Start-Up Is Taking Over

Screen Shot 2018-11-13 at 4.30.28 AMCritics have derided WeWork as overvalued and vulnerable to the next downturn. But the company holds so many leases in so many cities, it might hold more power than its landlords.

Real estate titans have long scoffed at WeWork, which in eight short years has managed to attain a $20 billion valuation by selling short-term leases for shared office space with a mixture of stylish design and free-flowing alcohol.

Derided by some as a real estate company masquerading as a technology company, it has been called everything from a “$20 billion house of cards” to a “Ponzi scheme.”

The naysayers argue that WeWork’s business model looks brilliant only in a rising economy that has allowed it to lock in long-term leases and then re-rent that space to other businesses at a premium. The enormous valuation it has obtained is higher than that of Boston Properties and Vornado, two of the country’s biggest office-space landlords — companies that actually own the kind of space that WeWork usually rents.

Now, with interest rates creeping higher, residential real estate prices flattening and fears of an economic slowdown coming, real estate insiders are gleeful at the notion that a downturn could be an existential threat for the company.

But a funny thing happened as WeWork has scaled up all over the globe: It may have become too big to fail.

WeWork has gobbled up leases for so much space in so many cities, there’s a compelling case to be made that its landlords wouldn’t be able to afford for it to go under.

Because of WeWork’s size, “they have more power in a down market,” said Thomas J. Barrack Jr., the longtime real estate investor and founder of Colony Capital.

The company is scheduled to release third-quarter financial results on Tuesday. A WeWork spokesman, citing the coming report, declined to comment.

The conventional wisdom is that when the economy turns south, WeWork’s customers — many of which are start-ups and may be the most vulnerable — will simply walk away. The flexibility of WeWork’s short-term leases is part of its appeal, after all.

READ MORE: https://www.nytimes.com/2018/11/13/business/dealbook/wework-office-space-real-estate.html?action=click&module=Editors%20Picks&pgtype=Homepage

Freezing Credit Will Now Be Free. Here’s Why You Should Go for It.

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Consumers will soon be able to freeze their credit files without charge. So if you have not yet frozen your files — a recommended step to foil identity theft — now is a good time to take action, consumer advocates say.

Security freezes, often called credit freezes, are “absolutely” the best way to prevent criminals from using your personal information to open new accounts in your name, said Paul Stephens, director of policy and advocacy with Privacy Rights Clearinghouse, a consumer advocacy nonprofit group.

Free freezes, which will be available next Friday, were required as part of broader financial legislation signed in May by President Trump.

Free security freezes were already available in some states and in certain situations, but the federal law requires that they be made available nationally. Two of the three major credit reporting bureaus, Equifax and TransUnion, have already abandoned the fees. The third, Experian, said it would begin offering free credit freezes next Friday. To be effective, freezes must be placed at all three bureaus.

The Federal Trade Commission says that when the law takes effect, its identity theft website will provide links to each bureau’s freeze website.

A security freeze makes it harder for criminals to use stolen information to open fraudulent new accounts, or borrow money, in your name. Credit bureaus house records of your accounts and payment history, which card companies and lenders use to decide whether you are likely to pay your bills. If you freeze your file, the bureaus will not provide information to lenders unless you “thaw” the freeze first, using a special personal identification number.

Free security freezes are becoming available more than a year after a huge data breach was discovered at Equifax. The breach compromised the personal information, including Social Security numbers, birth dates and other sensitive details, of more than 145 million people — nearly half the population of the United States.

Despite the scale of that breach, and a steady stream of other incidents, security freezes have not really caught on. An AARP survey of about 2,000 adults found that just 14 percent had frozen their credit files. (The survey, conducted in July by GfK Group using a probability-based online panel, has a margin of sampling error of plus or minus two percentage points.)

In-depth interviews with 24 consumers by researchers at the University of Michigan School of Information found that many people knew about the Equifax breach, but few had taken the step of freezing their credit files as a result.

Consumers suffer from “optimism bias,” the researchers found. They realized that the breach created risk, but did not think anything would happen to them personally. “People tend to underestimate their own risk,” said Florian Schaub, an assistant professor at the school and one of the study’s authors.

Others incorrectly assumed that because they had poor credit or little wealth, they would be unattractive targets for identity thieves. “They think: ‘I don’t have much money. I have nothing to lose,’” Mr. Schaub said. “But that’s not how identity thieves operate.”

People interviewed also cited the cost of freezes as a barrier. It can cost as much as $10 per bureau to place a freeze, and a similar fee is charged to thaw it temporarily when you want to apply for credit.

Consumer advocates hope that making freezes free will spur more consumers to use them. (The new law requires that a thaw must also be free.)

But the freeze process is not as easy as it could be, said Mike Litt, consumer campaign director for U.S. PIRG, the consumer advocacy group. He would prefer credit files to be “frozen” by default, and thawed on request. As it stands, consumers must place freezes separately at all three bureaus, and keep track of three PINs.

And because it’s not always possible to know in advance what credit bureau a lender will use, consumers typically must lift the freezes at all three bureaus when they want to apply for new credit.

Brett Merfish, a lawyer in Austin, Tex., said she froze her credit at all three bureaus several years ago, after her personal information was used to open “a steady flow” of fraudulent credit card accounts. The freeze process was “tedious,” she recalled, but ultimately effective because she no longer has problems with fake accounts. “It’s worth it to do it,” she said.

One credit bureau, TransUnion, introduced a smartphone app, myTransUnion, this month that consumers can use to more easily freeze and thaw their credit. The app is available for both Apple and Android phones. Mr. Stephens, of the Privacy Rights Clearinghouse, said he had not seen the app, but cautioned consumers to tread carefully, in case it is used to market other, fee-based products and services.

The credit bureaus also offer something called a credit “lock,” which they promote as a more convenient way to protect your information. But some offerings carry fees, and consumer advocates prefer freezes because the rules are set by law, rather than by the credit bureaus.

One other less-protective option is a fraud alert, which requires credit bureaus to contact you to verify your identity when a company requests your credit file. Under the new law, initial fraud alerts must last for one year once established. Fraud alerts are free, and, unlike the freezes, an alert placed at one bureau is automatically placed at all three.

U.S. PIRG also recommends freezing your file at a lesser-known reporting agency known as the National Consumer Telecom and Utilities Exchange. The exchange provides credit information to some cellphone, pay television and utility companies. (Some consumers have reported having cellular accounts opened in their names, even though they had placed freezes on their credit reports at the main bureaus.)

The website for the utilities exchange says its database is “housed and managed” by Equifax. But the exchange is a “distinct” entity that requires its own freeze, said Craig Caesar, outside counsel to the exchange. “A separate request to N.C.T.U.E. is required because it is a separate database,” Mr. Caesar said in an email. There is no cost for a freeze, he said.

The new law also requires credit bureaus to allow parents to create and freeze credit files for their children under 16, to prevent their identities from being misused. The Federal Trade Commission offers information on what to do.

Freezes will not protect you from other types of fraud, like someone using the number of a credit card you already have, or impersonating you online to claim your Social Security benefits. To help prevent those types of theft, Mr. Litt recommends checking your credit card statements regularly for suspicious charges, and setting up and monitoring an online Social Security account, to prevent criminals from opening one first and diverting your benefit checks. A PIRG report suggests other helpful steps as well.

Checking your credit report periodically is also wise. You are entitled to one free copy each year from the big three bureaus at annualcreditreport.com. (A security freeze will not prevent you from getting your free annual report, the F.T.C. says.)

Here are the websites to visit to set up security freezes:

TransUnion: transunion.com/credit-freeze

Experian: experian.com/freeze/center.html

Equifax: www.freeze.equifax.com/Freeze/jsp/SFF_PersonalIDInfo.jsp

National Consumer Telecom and Utilities Exchange: www.nctue.com/Consumers

Why Is College in America So Expensive?

The outrageous price of a U.S. degree is unique in the world.

college ripoffBefore the automobile, before the Statue of Liberty, before the vast majority of contemporary colleges existed, the rising cost of higher education was shocking the American conscience: “Gentlemen have to pay for their sons in one year more than they spent themselves in the whole four years of their course,” The New York Times lamented in 1875.

Decadence was to blame, the writer argued: fancy student apartments, expensive meals, and “the mania for athletic sports.”

Today, the U.S. spends more on college than almost any other country, according to the 2018 Education at a Glance report, released this week by the Organization for Economic Cooperation and Development (OECD).

All told, including the contributions of individual families and the government (in the form of student loans, grants, and other assistance), Americans spend about $30,000 per student a year—nearly twice as much as the average developed country. “The U.S. is in a class of its own,” says Andreas Schleicher, the director for education and skills at the OECD, and he does not mean this as a compliment. “Spending per student is exorbitant, and it has virtually no relationship to the value that students could possibly get in exchange.”

Only one country spends more per student, and that country is Luxembourg—where tuition is nevertheless free for students, thanks to government outlays. In fact, a third of developed countries offer college free of charge to their citizens. (And another third keep tuition very cheap—less than $2,400 a year.) The farther away you get from the United States, the more baffling it looks.

This back-to-school season, The Atlantic is investigating a classic American mystery: Why does college cost so much? And is it worth it?

At first, like the 19th-century writer of yore, I wanted to blame the curdled indulgences of campus life: fancy dormitories, climbing walls, lazy rivers, dining halls with open-fire-pit grills. And most of all—college sports. Certainly sports deserved blame.

On first glance, the new international data provide some support for this narrative. The U.S. ranks No. 1 in the world for spending on student-welfare services such as housing, meals, health care, and transportation, a category of spending that the OECD lumps together under “ancillary services.” All in all, American taxpayers and families spend about $3,370 on these services per student—more than three times the average for the developed world. One reason for this difference is that American college students are far more likely to live away from home. And living away from home is expensive, with or without a lazy river. Experts say that campuses in Canada and Europe tend to have fewer dormitories and dining halls than campuses in the U.S. “The bundle of services that an American university provides and what a French university provides are very different,” says David Feldman, an economist focused on education at William & Mary in Williamsburg, Virginia. “Reasonable people can argue about whether American universities should have these kind of services, but the fact that we do does not mark American universities as inherently inefficient. It marks them as different.” READ MORE:https://www.theatlantic.com/education/archive/2018/09/why-is-college-so-expensive-in-america/569884/

How Trump Betrays ‘Forgotten’ Americans

Screen Shot 2018-09-03 at 7.45.29 AMFrom the Supreme Court to labor organizing rules, the president undermines workers’ greatest champions.

Donald Trump promotes himself as a friend of “forgotten” workers, but in ways large and small his administration has undermined what has traditionally been the biggest champion of workers: labor unions.

Most recently, he used his authority as president to deliver a harsh Labor Day message to the 2.1 million people who work for him, canceling pay raises for the civilian employees of the federal government. In May, he issued three executive orders to weaken federal employees’ unions by, among other things, limiting the subjects they can bargain over. (On Aug. 25, a judge ruled that this move violated federal law.) In March 2017, Mr. Trump signed a law repealing an executive order signed by President Obama that sought to keep the federal government from awarding contracts to companies that violate laws protecting workers’ right to unionize, as well as wage and job safety laws.

Since taking office, Mr. Trump has installed a conservative majority on the National Labor Relations Board that has moved quickly to make it harder for unions to organize. Last December, the board overturned a rule, beloved by unions, that made it easier to organize smaller units of workers in big factories and stores. In another board decision, his appointees made it tougher for workers at fast-food restaurants and other franchised operations to unionize, although that “joint employer” ruling was vacated when a labor board member later recused himself because of a conflict of interest. The board is also looking to slow down unionization elections, a move that unions oppose because it would give corporations more time to pressure workers to vote against unionizing.

Mr. Trump’s first nominee to the Supreme Court, Neil Gorsuch, was the deciding vote in a case that delivered this year’s biggest blow to workers. In Janus v. AFSCME, the court’s conservative majority, in a 5-to-4 vote, ruled in June that government employees can’t be required to pay any fees to the unions that bargain for them. By allowing many government workers to become “free riders,” that ruling is expected to chop revenues to many public employee unions by one-tenth to one-third.

READ MORE: https://www.nytimes.com/2018/09/03/opinion/trump-labor-unions-greenhouse.html