It’s been long, too long, since we’ve taken time here at the Quicken Loans Zing Blog to discuss the week’s financial embarrassments from across the globe. Don’t take this as a sign that financial blunders have stopped, far from it. Financial blunders are around us at all times, like atoms, air or buy-one-get-one specials at shoe stores. Out of the many surrounding us, here are two of the biggest financial blunders of the week.
Detroit has been under lots of scrutiny for their financial troubles for the past few years, culminating with the city filing for bankruptcy a few weeks ago. There’s no word yet on if Detroit will receive any financial aid, or how much, but the outcome is bleak so far. Bloomberg reported earlier this week that there is a proposed amount of $323 million in foreign aid set for Columbia to relieve drug trafficking and related violence, while Detroit is set to receive $108.2 million in aid. Detroit’s situation has already been dire, with most city and municipal services getting hit hard from the economic stress. Detroit’s homicide rate is 81% higher than Columbia’s; Detroit’s homicide rate last year was 58 victims per 100,000 residents while Columbia’s was 32 per, and Detroit’s police will only receive $2 million in aid for the 2014 fiscal budget. Despite the poor outlook for the city, the people of Detroit are remaining upbeat and optimistic.
JP Morgan Chase is on the hot seat again, and has agreed to cough up $410 million in fines after taking advantage of a poorly arranged energy market. Many states adopted deregulation, an energy sales system that allows energy to be bought and sold in a (despite the name) regulated market. Sales can be made in real time, the day before, or sold “make whole” for power that was produced but with no one to sell it to. JP Morgan discovered that by doing select bidding on “make whole” options, one could get a cheaper deal all the time and technically not exploit the market because, hey, that’s how it was set up. There is an implied moral obligation of course, but JP Morgan did their best to preserve their brand image by not admitting to any wrong doing with the settlement payment.
It’s been an odd week for electricity markets, and an odd year or three for Detroit in general. Don’t stop looking around you at all times for more blunders: there were plenty this week (fast food strikes, mega bank problems and potential Olympic bans) that are currently on simmer, ready to turn into full-blown financial blunders as the weeks go on. Stay tuned, reader.
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