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Cypen & Cypen
OCTOBER 23, 2008

Stephen H. Cypen, Esq., Editor


On October 3, 2008, Congressional Research Service updated its “Income and Poverty Among Older Americans in 2007.” Older Americans are an economically diverse group. In 2007, the median income of individuals aged 65 and older was $17,382 but incomes varied widely around this average. One-fourth of Americans 65 or older had incomes of less than $10,722 in 2007 while another one-fourth had incomes of $32,160 or more. As Congress considers reforms of Social Security and the laws governing pensions and retirement savings plans, it may be helpful to examine how changes to one income source would affect each of the others, and thus the total income of older Americans. Older persons receive income from a variety of sources, including earnings, pensions, personal savings and public programs such as Social Security and Supplemental Security Income. The report describes the number of elderly individuals and households receiving income from each of these sources and the distribution of income across individuals and households. (We are sure that this report was completed prior to the recent upheaval in the financial markets.)


The American Academy of Actuaries’ Board of Directors has asked the Actuarial Standards Board to develop standards for consistently measuring the economic value of pension plan assets and liabilities. The Board has also determined that it will not issue a public advocacy statement on the issue at this time. The Board received a report by its Public Interest Committee. The committee determined that disclosure of consistent measures is in the public interest. The committee’s report was accepted by the Board and sent to the Actuarial Standards Board. The Public Interest Committee’s report was developed partly from information obtained through a public forum. The committee also collected and reviewed written comments as part of its information-gathering process. Separately, the Academy will appoint a Public Plan Practices Task Force to explore public pension plan issues. The task force will identify important issues to refer to the Public Interest Committee or other appropriate bodies. The eight-member Public Interest Committee’s report was unanimous.


Weiss Research, Inc. has published its “”X” List Report, covering the strongest and weakest banks and thrifts in the United States. The data come from FDIC’s Call Reports and OTS’s Thrift Financial Reports. All U.S. commercial banks, savings banks, S&Ls and other thrifts with total assets of $500 Million and more are covered. (The final page lists select U.S. brokers with their capital multiples: total net capital divided by minimum capital requirement. You will be real surprised.) The “X” List Report is available at


The United States Government Accountability Office has issued a report on Veterans’ Disability Benefits: “Better Accountability and Access Would Improve the Benefits Delivery at Discharge Program.” Recent military conflicts have increased interest in federal efforts to support servicemembers preparing to leave military service. Through the Benefits Delivery at Discharge Program, the Department of Veterans Affairs, in collaboration with the Department of Defense, has made efforts to streamline access to veterans’ disability benefits by allowing some servicemembers to file a claim and obtain a single comprehensive exam prior to discharge. The report examines VA’s efforts to manage the BDD program and how VA and DOD are addressing challenges servicemembers face in accessing BDD. To address these objectives, GAO analyzed relevant documents and data, interviewed officials and conducted site visits/interviews at selected military bases. GAO recommends that VA improve timeliness and accuracy measures for BDD and predischarge claims data, collect additional data to monitor these claims, evaluate the BDD paperless process initiative and improve its reviews of BDD operations. GAO recommends that DOD improve how it measures its goal for participation of VA benefits briefings. GAO also recommends that VA and DOD disseminate promising practices for the cooperative exam process. DOD concurred with GAO’s recommendations; VA generally agreed, but did not agree to track timeliness of BDD and predischarge claims development. GAO-08-901 (September, 2008).

5. ARBITRABILITY OF USERRA CLAIMS: contains an interesting piece on arbitrability of claims under the Uniformed Services Employment and Reemployment Rights Act of 1994. With continuation of major troop deployments overseas, increasing numbers of employers and employees are finding themselves affected by protections of USERRA, which provides comprehensive reemployment and anti-discrimination rights to employees who serve in America’s military. Employees who seek to vindicate their rights under USERRA, however, are finding themselves at the center of a conflict among federal courts concerning whether USERRA claims may be subject to their employers’ mandatory arbitration clauses. While most civil rights and employment discrimination claims have been found to be subject to the Federal Arbitration Act’s policy of enforcing contractual agreements to arbitrate, courts disagree as to whether USERRA claims are exempt from this policy. The majority of federal courts have concluded that contracts to arbitrate USERRA claims are enforceable, but a pair of courts have held to the contrary, drawing support from USERRA’s unusual statutory text and legislative history. The article addresses current division on the issue, and concludes that, until such time as the ambiguity in the statute is resolved by the Supreme Court or Congress, employers will do well to rely on the balance of existing precedent and draw comparisons to other civil rights statutes, while employees should focus on the peculiar language of USERRA’s preemption provision and stress its role in military recruitment.


It’s been many years since we did a piece on Dow Jones industrial average. So, with the turmoil we are experiencing, we thought it might be a good idea to look at some Dow history and how the Dow works. Begun in 1896, the Dow is the oldest continuing U.S. market index. It started out with twelve components, the only original one still around being General Electric. The average when the index was launched was 40.94, a quaint little number compared to the Dow’s record high of 14,165.43 on October 9, 2007. The Dow has a mathematical formula to account for things like stock splits or new companies being added or removed. The Dow uses a “divisor” -- a number that is divided into the total of all the stock prices. The current divisor is 0.122820114. The index is price-weighted, because it is based purely on the dollar value of stocks. Thus, expensive stocks have more influence over the number than lower-priced ones. Some downplay importance of the average because it is not as broad as, say, the Standard & Poor’s 500 Index. Still, as the granddaddy of U.S. market indices, the Dow does offer a relatively easy-to-understand snapshot of how the market is fairing. Here are the current elite thirty:

3M, Alcoa, American Express, AT&T, Bank of America, Boeing, Caterpillar, Chevron, Citigroup, Coca-Cola, DuPont, Exxon-Mobil, General Electric, General Motors, Hewlett-Packard, Home Depot, Intel, IBM, Johnson & Johnson, JPMorgan Chase, Kraft Foods, McDonald’s, Merck, Microsoft, Pfizer, Procter & Gamble, United Technologies, Verizon Communications, Wal-Mart and Walt Disney


Milliman, Inc. has released the first of what will be a monthly update of the Milliman 100 Pension Funding Index. During the financially volatile month of September, assets of the Milliman 100, which includes the 100 largest corporate defined benefit pension plans, dropped by more than $78 Billion in value. The losses were offset by interest rate gains, resulting in a net loss of $9 Billion for the month (increasing the net loss for the year to $79 Billion) and overall funded ratio of 98.4% on September 30, down from 104.9% at the beginning of 2008. While the September results are among the most dramatic of the year, they mirror the year-to-date trend. The Milliman 100 pensions opened the year with a healthy funding position of 104.9%, only to see the funding surplus erode during the first quarter. The cumulative asset return for the past 12 months stands at -12.11%, a loss of $102 Billion. Looking forward, the combination of a 0% return for the rest of the year and steady discount rates (7.63%) would result in a $22 Billion funding loss and a funded ratio of 96.4% on December 31. Considering everything, not all that bad.


“The Snark” reports that credit crunches and gas shortages don’t just hit Wall Street and Main Street; they also steamroll big law firms. Here are the top five ways to know your firm is feeling effects of the economic crisis:

1. People start doing strange things, such as taking vacations or long weekends. Even without gas to get anywhere, “vacation” is a much better excuse for not billing hours than having no work. And since no one takes a vacation when they have work, days off can be a sign of a slowdown.

2. Holiday party gets downsized. You know your firm is hurting when you get this e-mail announcement: “This year our firm has decided to go green for the annual holiday party. In the spirit of sustainability and eco-awareness, we are moving the party from the un-energy-efficient Grand Ballroom at the Five Star Hotel to a quaint, family owned country farm that grows organic cotton and raises grain-fed, free-range, opera-loving chickens.”

3. Basic services and perks start to evaporate. The firm may also cut some costs in tight times by eliminating nonbillable staff positions or perks. But they will make these changes sound like something done for your benefit and totally unconnected with the bottom line.

4. Billable hours dry up. Lawyers know their function in life is to bill hours. When partners stop calling you and asking you to research mundane areas of the law for hours on end, you need to worry. A lack of billable hours can sneak up on you.

5. Partners start doing their own work. The final and most telling sign that times are tough at a big law firm is when you find your boss has done his own legal research and written his own memos and briefs in longhand.

You just better hope that reduction in perks and nonbillable staff is enough to keep you on the payroll -- even if its only as a mail carrier for partners too out of shape to make it up the stairs.


That headline is from the New York Times, not recently but September 30, 1999! The article says that Fannie Mae’s action will encourage banks to extend home mortgagers to individuals whose credit is generally not good enough to qualify for conventional loans (read: “can’t make the payments”). Fannie Mae has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people, and felt pressure from shareholders to maintain its phenomenal growth in profits. In addition, the financial institutions have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers, whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates. In moving into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times, but the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's. By expanding the type of loans it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings. In July (1999), the Department of Housing and Urban Development proposed that by the year 2001, 50% of Fannie Mae’s and Freddie Mac’s portfolio be made of up loans to low and moderate-income borrowers. In 1998, 44% of the loans Fannie Mae purchased were from these groups. Thanks to reader G.F. in Jefferson City, Missouri, for pointing us to the old article.


Money can't buy happiness -- but somehow it's more comfortable to cry in a Mercedes than in a Kia.


“Nearly all men can stand adversity, but if you want to test a man's character, give him power.” Abraham Lincoln

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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.

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