But a bank failure is a scary thing - especially if it’s your bank. However, here are a few things that should give you comfort.

• The vast majority of US banks are going to be fine. According to the FDIC website (Failed Bank List) only about 44 banks have failed since October 2000. That’s approximately 0.61% of the nations 7,200 banks. Those are pretty good odds.
• When banks do fail, most are insured. The FDIC insures deposits in several “ownership categories,” which means you may actually be insured beyond the $100,000 limit you hear about. For example, single accounts in your name are covered up to $100,000 per bank. Joint accounts are a separate category and also get their own $100,000 of coverage per person per bank. This means that a joint account held by you and your spouse is insured up to $200,000. Retirement accounts (IRS, SEP, etc.) are covered up to $250,000. Check out the FDIC’s tool to help you determine if your account is fully insured.
• Even if your bank fails, your account isn’t going to disappear. For example, in the case of Washington Mutual, the bank was sold to JPMorgan Chase. JPMorgan has already informed Washington Mutual customers to continue banking as usual. Within a few weeks customers will get new debit or credit cards, checks, etc. In the meantime however, your account number stays the same, your checks will still be honored and you will hardly know your bank failed at all.
• Although mutual funds are not covered by FDIC insurance does not mean you would lose the money you have in mutual funds that you bought through the bank if that bank failed. Mutual fund assets are not part of the bank’s assets - they’re held in separate accounts - so they don’t even come into play when calculating the bank’s assets and liabilities.
• Money-market accounts are considered bank deposits and are therefore insured by the FDIC. However, money-market funds are not considered deposits and are therefore not insured. Money-market funds fall in the mutual fund category and would be treated as such.

So although the recent news of bank collapses has occupied our thoughts lately, the chances of your own bank failing is actually very small. If it happens though, hopefully you’ll now be a little more prepared for what’s to come and can avoid panicking.

The news of the insane profits instantly fueled the hate towards the public face of high gas prices - the oil companies.

Obama said in a statement, “Perhaps the only thing more outrageous than Exxon Mobil making record profits while Americans are paying record prices at the pump is the fact that Senator McCain has proposed giving them an additional $1.2bn tax break.”

And on Obama’s heels, four senior Democrats in Congress called a press conference critisize the largest US oil companies for spending more on stock buy-backs to enrich shareholders than on energy exploration.

Some argue that Exxons profit margin of 8.5% is significantly lower than other blue-chip stocks and that the company is actually not making that much money. But its hard to hear the words “record profits” at a time when there are “record prices.” It doesn’t take much to convince Americans that the two are related.

But the real question is, are the two related? Is a profit margin (defined as the net income divided by revenues) of 8.5% too high for a company that sells a commodity? After all, it is publicly held and must do its best to earn a healthy return for its investors. Aren’t they just doing their job.

After a little research, and a pass through their most recent press release… I’m convinced its a little bit of both. Is Exxon taking advantage of the high gas prices? Probably. Are they the root of all evil and the cause for the $4.95 gas in San Francisco? Probably not.

I spent a few minutes pulling up the most recent financial statements for a few other commodity companies to see if a 8.5% margin was fair. I was surprised to learn it was:

Exxon: 8.5%
Coal: 9.2%
Sugar: 4.6%
Aluminum: 8.3%

Of course this back-of-the-napkin approach has its flaws. An in-depth look into the financial statements of these industries is needed to get a clearer picture. However, it does shed a little light (or at least a little perspective) on the subject of high gas prices.

As much as I would like to blame big oil for the dent in my wallet, I’m not sure it’s entirely their fault.

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Now just a few weeks ago, at the Macworld Expo in San Francisco Apple announced software upgrades to the iPhone, the AppleTV, and the iPod Touch. As expected, the iPhone and AppleTV owners weren’t charged a dime because that type of upgraded was included in the original purchase price.

However, the software update to the iPod Touch was more significant that the others with the addition of five new mobile apps—Mail, Maps, Stocks, Weather, and Notes. So Apple decided that such a significant software upgrade would require $19.99 to activate. Now I have no problem with Apple charging for the new apps. In fact, I think it adds to the perceived value that the iPod Touch has and adds even more value to the software running the iPod Touch as well as the iPhone. What I do have a problem with is everyone and their dog explaining that Apple was forced to charge for the upgrade, citing GAAP accounting principles or even worse, Sarbanes-Oxley.

Doesn’t anybody remember the $1.99 charged for the 802.11n wireless adapter last year? Everyone blamed the extra fee on accounting rules then, just as they are now. But the more stories I read, the more that this argument appears asinine. Why would any company be forced to charge for a product? Hasn’t anyone heard of Google?

The simple fact is that Apple charged $19.99 because they thought the upgrade was worth it. Whether or not you agree is up to you, but it had nothing to do with accounting principles. In fact, I went back and dug up this quote from Lynn Turner, former chief accountant of the Securities and Exchange Commission, which I thought explained the situation perfectly:

“[generally accepted accounting principles] doesn’t require you to charge squat. You charge whatever you want. GAAP doesn’t even remotely address whether or not you charge for a significant functionality change. GAAP establishes what the proper accounting is, based on what you did or didn’t charge for it.”

In this light, the revenue recognition treatment of the iPhone and AppleTV appears reasonable because the accounting rules apply to how the company dealt with the $500 it had already charged customers. In fact, it is probably in Apple’s best interest to “smooth” the earnings of the iPhone over 24 months instead of recognizing it all up front and then explaining subsequent drops in earnings. In that case, the accounting treatment used is a privilege for Apple, not a requirement.

So what happens when a company is doing so bad that the market begins believing it might have to file bankruptcy? They get acquired of course! Bank of America announced today that it would but Countrywide Financial for $4 billion (with a ‘b’). But the fact that Countrywide was willing to take a deal that valued it shares 8.3% below trading levels reveals just how desperate the firm was.

Can you tell when the announcement was made?

Of the deal, Stifel Nicolaus analyst Christopher Brendler said:

“This deal comes together because no one wanted to see Countrywide fail; it is a win-win for everyone involved, but doesn’t indicate that the mortgage problems are behind us.”

But it does mean that BofA will likely become the nation’s largest mortgage lender. Brendler also said Countrywide is no sure bet for BofA. The company still has a dicey portfolio, with $80 billion in high-risk mortgage loans. Several months ago, many of these loans were not considered high risk, but the deterioration of the markets now makes them so

So let’s all give BofA a round of applause for helping to stabilize the lending market (and pick up a a major lending company at WalMart prices) and wish them luck with their new prize!

But today’s press announcements and market reactions brings up a few interesting observations about investing:

1. Sometimes market activity has nothing to do with performance. Countrywide could be just fine, but at the very hint of bankruptcy, investors take their money and run. It’s a knee-jerk reaction that has more to do with emotions and fear than actual performance. This is one aspect of investing that you just can’t plan for.

2. Sometimes investors know more than the company. I throw this one out there with a cautionary warning. At times, a few savvy investors can spot the warning signs early enough to bail right before a stock tumbles. The key is to watch those investors Perhaps Countrywide isn’t going to file for bankruptcy, but chances are that the investors believe the story is not only possible, but plausible.

3. Sometimes companies lie. I know, it’s hard to believe but Countrywide could be lying through their teeth. I’m not saying they are, but they could be. This is when you break out the spreadsheets and financial statements, pour over the figures, and crunch some numbers in the form of ratio analysis. You need to try and determine on your own if Countrywide could file for bankruptcy soon. What is the debt to equity ratio? Does it have enough cash on hand to pay interest this year? These are the types of questions you should be asking yourself before you jump ship yourself. Who knows, if you’ve done your homework Countrywide could be the perfect stock to BUY right now!

As you know, I am adamantly opposed to any Company who markets products (especially financial products) that harm or take advantage of consumers who don’t know any better. For example, Pay Day Loan brothels (yes, I said brothels) take advantage of people in need of short-term loans by charging interest rates as high as 1,600% (no, that’s not a typo).

Another product that has become increasingly popular is the Tax Refund Anticipation Loan. This loan, offered by companies such as H&R Block and Jackson Hewitt, allows you to walk out with cash in the amount of your anticipated tax return - for a fee. In fact, you don’t even have to complete your return! You can walk in, hand over your last pay stub, and walk out with a loan in the amount of your estimated tax return.

Well, the IRS has finally stepped in to put a stop to this ridiculous business practice. Citing tax fraud as its reason, the IRS has proposed restrictions on tax data used in refund anticipation loans. Basically, the IRS is stating that the tax information you hand over as part of your loan application is not allowed to be used for the purposes of getting a loan. And apparently from the reports coming out today, it seems that many people (and companies) didn’t exactly tell the whole truth on their applications, leaving banks with a huge difference between the amount loaned, and the amount of refund received from the IRS.

I for one am glad this revenue stream has dried up for tax preparers who have used this as a way to create more business. Your tax preparer should not be advertising loans using money you have not yet received. Your bank and tax preparer should be independent so that you can get fair and unbiased information from both. If the tax preparers are too focused on getting you a large refund only so that you can get a bigger loan - and they can get a bigger fee - then fraud is bound to occur.

In an effort to appear legitimate, the bogus e-mails include text from an actual speech about the wildfires by a member of the California Assembly.

The scam e-mail urges recipients to click on a link, which then opens what appears to be the IRS Web site but which is, in fact, a fake. An item on the phony Web site urges donations and includes a link that opens a donation form which requests the recipient’s personal and financial information.

“People should exercise caution when they receive unsolicited e-mail or e-mail from senders they don’t know,” said Richard Spires, IRS Deputy Commissioner for Operations Support. “They should avoid opening any attachments or clicking on any links until they can verify the e-mail’s legitimacy.”

The bogus e-mails appear to be a “phishing” scheme, in which recipients are tricked into providing personal and financial information that can be used to gain access to and steal the e-mail recipient’s assets.

The IRS also believes that clicking on the link downloads malware, or malicious software, onto the recipient’s computer. The malware will steal passwords and other account information it finds on the victim’s computer system and send them to the scamster.

Generally, scamsters use the data they fraudulently obtain to empty the recipient’s bank accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name or even file fraudulent tax returns to obtain refunds rightfully belonging to the victim.

As a rule, the IRS does not send e-mails soliciting charitable donations, nor does not send unsolicited e-mails or ask for personal and financial information via e-mail. The IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.

Recipients of the scam e-mail can help the IRS shut down this scheme by forwarding the e-mail to an electronic mail box, phishing@irs.gov. This mail box was established to receive copies of possibly fraudulent e-mails involving misuse of the IRS name, logo or Web site for investigation. The IRS and the Treasury Inspector General for Tax Administration (TIGTA) work with the U.S. Computer Emergency Readiness Team (US-CERT) and various Internet service providers and international CERT teams to have the phishing sites taken offline as soon as they are reported.

If you’d like to contribute to one of the many charities accepting donations for victims of the California wildfires, please go to the respective charity’s website directly. NEVER click on a donation link from an email.

The surtax would be a percentage of your tax bill, and if you don’t like the cost, then shut down the war. It’s a backhanded way of cutting off funding to the war, but it does put more power into the hands of the people. Right now, Congress does not necessarily want to cut off funding to the war because that would signify a lack of support for the troops. And as taxpayers… we don’t seem to care. We don’t seem to care about the ridiculous cost and strain on our resources - because we obviously haven’t been vocal enough to spark change.

But you know what would prompt change? Feeling the cost of war in your very own pocket.

The measure - sponsored by Obey, Rep. Jack Murtha, D-Pennsylvania, and Jim McGovern, D-Massachusetts - would require low- and middle-income taxpayers to add 2 percent to their tax bill, while higher-income taxpayers would add 12 to 15 percent.

“This is the first time in American history that when a president has taken a country to war and said ‘by the way folks, we’re going to have to sacrifice and the way to sacrifice is by cutting your taxes.’” Obey said. “It makes no sense.”

So regardless of your political views, what do you think about a war surtax - for the current war in Iraq or any other future conflicts? Is the best way to sacrifice for our country include paying additional tax?

The new guidance is designed to clear up confusion about the tax reporting rules that apply to poker tournaments. In recent years, some casinos and players have been confused over whether poker tournament sponsors who hold the money for participants in a poker tournament are required to report the winnings to the IRS and withhold tax on the winnings.

For tournaments completed during 2007 and before March 4, 2008, casinos and other sponsors of poker tournaments will not be required to report the winnings to the IRS or withhold tax on the winnings. But beginning March 4, 2008, the IRS will require all tournament sponsors to report tournament winnings of more than $5,000.

Tournament sponsors who comply with this reporting requirement will not need to withhold federal income tax at the end of a tournament. If any tournament sponsor does not report the tournament winnings, the IRS will enforce the reporting requirement and also require the sponsor to pay any tax that should have been withheld from the winner if the withholding requirement had been asserted. The withholding amount is normally 25 percent of any amounts that should have been reported.

So that tournament sponsors can comply with this requirement, tournament winners must provide their taxpayer identification number, usually a social security number, to the tournament sponsor. If a winner fails to provide this identification number, the tournament sponsor must withhold federal income tax at the rate of 28 percent.

This woman, Kathleen Casey-Kirschling, filed for early retirement Monday, becoming the first baby boomer to start collecting Social Security. Born one second after midnight in January 1946, the retired teacher leads the way for as many as 80 million individuals who will qualify for the retirement payout. And thus begins the end of social security…

What? Do you think I’m being a little too over-dramatic? Well, David Walker agrees with me! He’s the comptroller general of the Government Accountability Office, Congress’ legislative arm, who warned the Social Security system will soon have more recipients coming than it can afford to pay out.

“We face a tsunami of spending due primarily to the retirement of the baby boom generation and rising health care costs,” Walker said. “So what’s happened is we’ve gone from 16 workers paying into Social Security for every person drawing benefits in 1950 to 3.3 to one today, and we’re going down to two to one by the time the boomers retire in big numbers and that’s about where it will stay over the long run.”

Democratic Representative Tim Penny is also worried.

“We’re going to have tens of thousands of baby boomers retiring every week over the next decade or so and that means that by time we get to 2017, just 10 years away, we will no longer be collecting enough payroll taxes to pay Social Security benefits.”

Under current law, Social Security won’t have enough money to pay promised benefits in 2041, but there is another crunch much, much sooner, the result of the the federal government relying on Social Security to pay for its annual spending.

When Social Security gets payroll taxes it pays out most of the money in benefits. The rest is supposed to go into a trust fund. Instead the government, in it’s infinite wisdom, has been spending the money on other government programs, and putting IOUs into the trust. When Social Security needs the money it’ll turn to the government waiting for the payback. But the government won’t likely have any. It’s estimated that over the next 75 years between Social Security, Medicaid and other entitlements, the federal government will be in a $50 trillion hole.

So by the time I hit retirement age… I’ll be pulling in a nice $3/month from the government, after paying thousands and thousands of dollars into it during my lifetime.

That’s why I’m a little worried…