Who’s Getting a Raise?

September 29, 2009

“Not me,” you say. Well, guess who is? It might surprise you to learn the folks who head non-profits didn’t feel the economic pinch quite as much as the rest of us.  Go figure. Even non-profits gave their CEO’s a raise. The Chronicle of Philanthropy reports the median compensation for chief executives at the country’s biggest non-profit organizations rose 7% to $361,538 in 2008. All at a time when charitable giving has declined for the first time in more than 20 years.

Here are some of the more striking numbers: $2.1 million for the director of the Museum of Modern Art in New York; $2.7 million for the head of a health care group in Boston; $1.3 million for the president of New York University.   The survey found that many nonprofit CEOs earned half a million dollars or more last year.

Click here to read more on CNNMoney.com or listen to a report from NPR.

Woman Declares War on Bank and Wins!

September 29, 2009

YouTube is the consumer’s friend when it comes to airing your grievances against big companies. A California woman recently posted a video to protest what she called an unfair interest rate hike on her Bank of America credit card. The video went viral and she got results. Click here to watch and learn more.

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Chase Bank: Bringing Hypocrisy To A City Near You

September 17, 2009

Chase Bank BillboardBy Terry Smiljanich:

“Let’s Start Banking Better, Tampa” says Chase Bank in its newest ad campaign. Your city probably has similar signs. “Let’s?”  You mean Chase wants “us” to do a better job of banking? Give us a break, Chase. That takes a lot of nerve coming from you, of all banks!

You remember JP Morgan/Chase. It’s the mega-bank (second largest in the country) that took over Bear Stearns as a favor to the Treasury Department last year, and then received $25 billion in TARP taxpayer dollars to help it out of its crisis.

Then, as part of the “Making Home Affordable” program it was supposed to help homeowners renegotiate their troubled mortgages and keep them out of bankruptcy. Taxpayers helped Chase out, and it would help us out in return. Well, it didn’t exactly turn out that way.

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Time to Cash in On Your Gold

September 15, 2009

gold in hand

By Nicole Andriso:

With no shortage of “Cash for Gold” commercials on TV and online, it seems like everyone is jumping on the gold cash cow, hoping their old boyfriend’s high school ring and Mom’s antique necklace will be worth something. I was one of those people.

I had a few gold remnants that were taking up space in my jewelry box: a gold toe ring my friend bought me that never fit; a single gold earring missing its mate; random pairs of small gold hoops I never wore; and multiple sterling silver rings that had seen better days. I gathered them into a plastic bag and headed out for the nearest jewelry store to share my wares. I had pretty high hopes, as one of my friends actually made around $300 on her trade-ins.

I read the papers and saw the commercials, so I thought I knew what cash for gold was all about, it was just a matter of finding the right place to trade. I took them to a local jeweler who had a solid reputation and was a staple in the community for over 50 years.

When I entered the store, I saw nearly 20 people lining the glass counters with sandwich bags of gold and silver similar to mine. Clearly, the word is getting out and people are ready to trade in their gold for quick cash. Driving down a main highway in my city, I saw at least three different signs, stores or billboards promoting cash for gold events. It proves there are a number of different places people can take their jewelry – local jeweler, pawn shop, online, mail-in, jewelry event and, of course, the classifieds.

How it Works

According to the gold resource website www.kitco.com , gold prices are set each day and that standard is what a majority of jewelers and outlets use for pricing. Gold is paid by the gram, which isn’t very much, so a small bracelet or earrings probably won’t go for very much money.  Gold is also weighed in troy ounces, which translates to 31.1034768 grams per one troy ounce. Some jewelers charge by the penny weight, and there are 20 penny weights in one ounce. What they charge beyond that is up to the individual jeweler.

Throughout the store, people were leaned over the counter tops talking to salespeople who were looking at jewelry through small magnifying glasses. I walked up to a counter and a woman greeted me carrying three plastic containers. She took my jewelry and divided it up into containers. She took each silver piece and ran a magnet over them to ensure they were sterling silver. Then, she took a small magnifying glass to the gold pieces to determine whether they were 10, 14 or 24 carat. Each piece has a certain stamp that signifies its weight in carats, and each is priced according to the carat’s value.

As my gold and silver were divided among the containers, I kept seeing dollar signs. It’s like a garage sale for jewelry without having to get up at 6am, and knowing each piece will make me a profit! The saleswoman took my jewelry to the back to weigh it and get me a price. She returned and offered me a total of $62.80.

She broke down the actual amounts they could offer me; more money for the 14 carat gold and less for the 10 carat and sterling silver, which didn’t amount to much considering the light weight of the items. $62.80 was slightly more than I had expected. Not bad, I thought, for a few scraps of light gold and cheap sterling silver taking up space in my jewelry box.

Don’t Forget to Negotiate

As I waited for the saleswoman to return with my money, I watched two women next to me talk about their items with another salesperson. They had some serious, heavy-looking gold necklaces and old brooches, definitely much bigger and heavier than mine. I overheard the salesperson offer them $249 for their jewelry. One of the women said, “The place down the street offered us $279.”

The salesperson left to talk to the manager, and returned with a $279 match on their jewelry.  I caught the eye of one of the women and just smiled and said, “Good job.” They both smiled at me and shrugged.

It Pays to Shop Around

Much like it is when you buy anything at all – it pays to shop around. At that moment, I wanted to kick myself for not doing the research and getting quotes from other places around town or on the internet. If I had taken them to a few different venues, I might have bargained for a higher price and left with a $100 or more!

I chalk this one up to experience. And while I pride myself on researching almost everything I buy, I admit I got a little caught up in the quick cash-for-gold phenomenon. I was blinded by the dollar signs.

Next time I want to turn my cash into gold, I’ll follow the lead of my new friends who bargained for more money at the jeweler. Here are a couple of things I’ll do differently:

  • visit a few different places for quotes
  • don’t be afraid to speak up about the pricing

And, with that, I’ll hope my gold and silver scraps turn into a little more cash.

Foreclosure Judge Helps Homeowners

September 14, 2009

By Angie Moreschi:

In a world where big business and big banks always seem to win, a Brooklyn, New York Judge is giving hope to homeowners who face foreclosure, by banging his gavel for the little guy. Click here to read more and watch this CBS News story about the judge Consumer Warning Network has dubbed “The Foreclosure Judge Who Gets It.”

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Madoff Victims Have Tough Fight in Suing SEC

September 11, 2009

Victims of convicted swindler Bernie Madofff will likely have a tough time getting any relief by suing government employees. A scathing report by the SEC’s Inspector General admits the agency botched the investigation of Madoff, who confessed to a $65 billion Ponzi scheme.  Nevertheless, an old legal doctrine called “sovereign immunity” provides significant protection to people who work for the government, when acting within their official duties.

Reuters reporter Rachelle Younglai recently interviewed Consumer Warning Network Senior Editor John Newcomer about the victim’s chances of suing the SEC.  John,an attorney with extensive experience in securities cases, explained why he thinks the victims will have an uphill fight in suing the SEC.   See his quotes in the story below under the section titled “TRYING AGAIN.”

Madoff’s victims face uphill fight against SEC

Wed Sep 9, 2009 2:38pm EDT

By Rachelle Younglai and Jonathan Stempel – Analysis

WASHINGTON/NEW YORK (Reuters) – Victims of Bernard Madoff must surmount laws that shield federal workers and agencies from liability if they want to sue regulators and their staffers for not stopping Madoff years before he confessed to a $65 billion Ponzi scheme.

A report by U.S. Securities and Exchange Commission Inspector General David Kotz said the SEC allowed inexperience, indifference and memory lapses by some staffers to thwart five probes of Madoff.

The report, released last week, provides fodder for investors hoping to recover some of their money, either from the government or liquidation of Madoff’s assets.

But to get anything from the government, they would have to prove that the SEC and some of its staff were negligent and that could be extremely difficult, lawyers said.

“Although a claim against the government itself is at least plausible here, it would be very difficult to overcome the hurdles of sovereign immunity,” said Russell Ryan, a former assistant enforcement director at the SEC and now a partner at the law firm King & Spalding in Washington, D.C.

The doctrine of sovereign immunity has roots in English common law and is sometimes summarized as the idea that the king or queen can “do no wrong”. It helps protect a government from interference with official functions, including from lawsuits.

At Herrick Feinstein LLP, a mid-size New York firm, lawyers are closely examining the 457-page report, which quotes dozens of current and former SEC staffers, many of whom claimed not to have recalled or pursued evidence that in retrospect could have led them to uncover Madoff’s fraud.

“It confirms what we have been alleging, that the SEC was negligent in its duty to protect the public interest,” said Howard Elisofon, a partner who represents nine of Madoff victims.

Madoff pleaded guilty in March to fraud and is serving a 150-year prison term. A court-appointed trustee, Irving Picard, is trying to recover what he can to cover victims’ losses.

On Thursday, the Senate Banking Committee is due to hold the first of what may be several Congressional hearings to examine what went wrong and how the SEC can avoid a repeat.

Kotz is among the witnesses expected at the hearing, along with new enforcement director Robert Khuzami, acting director of examinations John Walsh, and Harry Markopolos, a whistle-blower who repeatedly warned the SEC that Madoff’s business was a sham.

NO FOLLOW-UP

Kotz’s report paints a picture of an agency plagued by inexperience and indifference as it botched five Madoff probes.

In one case, an SEC branch chief said he might have decided in early 2004 not to request a large amount of Madoff trade data, known as audit trail data, because “it can be tremendously voluminous and difficult to deal with and is a huge resource issue for us. It takes us a ton of time.”

His boss Eric Swanson, whose romantic relationship with Madoff’s niece, Shana, did not influence the probes according to Kotz, told investigators he could not explain why the data request had been scuttled. “It would have been, frankly, asinine for us to not get the audit trail,” he said.

In another example, Kotz said SEC examiners caught Madoff in “contradictions and inconsistencies” that were “seemingly implausible,” yet “accepted them at face value.” And, he said, staffers ignored a 2005 complaint about Madoff because it came from a competitor rather than a Madoff employee or investor.

Still, former federal prosectors and other experts said carelessness may not be enough to overcome the shield protecting government employees from lawsuits.

And although the Federal Tort Claims Act provides a limited waiver of sovereign immunity, it makes it difficult to sue individuals for acts performed in the course of their duties.

TRYING AGAIN

“You have to be more than just incompetent, you have to be negligent,” said John Newcomer, a partner at James, Hoyer, Newcomer, Smiljanich and Yanchunis PA in Tampa, Florida, which represents consumers in class-action lawsuits against mortgage companies.

“It is not enough to say, ‘We lost money and this agency was supposed to protect investors,'” he said.

Kevin O’Connor, a former associate attorney general and SEC enforcement counsel and now a partner at Bracewell & Giuliani LLP, added: “Nothing in the (Kotz) report would strike me as a basis to overcome sovereign immunity.”

Elisofon, the Herrick lawyer, has filed nine administrative claims accusing the SEC of negligence regarding Madoff.

In June, the SEC rejected his attempt to get the agency to pay $1.7 million to his client, Phyllis Molchatsky of New City, New York.

Yet since the Kotz report came out, Elisofon said, “My phone has been ringing off the hook.” He said the report could aid future litigation, and is “putting a lot of meat on the bones.”

(Reporting by Rachelle Younglai and Jonathan Stempel; Editing by Toni Reinhold)

5 Ways Drug Companies Put Profits Before Patients

September 10, 2009

By Terry Smiljanich:

When it comes right down to it, drug companies don’t look at us as patients, they look at us as consumers. Their primary goal is not to discover new drugs to make us healthier, but rather to make their shareholders happy by keeping short term profits up.

Unfair, you say? But unfortunately, quite true. Let’s look at some big ways the major drug companies put profits ahead of patients.  Here are five drug industry tactics that serve to put their bottom lines above the country’s welfare:

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Why Are Your Bank Fees Going Up?

September 10, 2009

money from pocketBy: John Newcomer

Bank customers are getting a double whammy thanks to all the bank failures.  Not only did we shoulder the costs of the bank bailout as taxpayers, but now as bank customers we get to pick up the tab for the failed banks with higher fees.

Here’s how.

The federal agency that insures bank deposits is the Federal Deposit Insurance Corp. or as it is commonly called the FDIC.   The FDIC receives NO taxpayer money.  It is funded by premiums paid by participating banks and all banks must participate. Those premiums are now going up to help cover the enormous cost of all the recent bank failures.  And, if you guessed that increase will be passed along to consumers, well, you guessed right. Banks fees for customers are on the rise, too.

Far and away, the most profitable fee for most banks is the “overdraft fee” charged for debit card and checking account overdrafts.  In fact, 45% of the nation’s banks make more from overdrafts than they make in profits from all other areas.  Yes, as unfair as it sounds,  bank customers living from paycheck to paycheck who sometimes overdraw their accounts are shouldering most  of the bank bail-outs.

How Did We Get Here?

The simple rules of spreading risk and building up a rainy day fund were botched by Congress.

Congress requires the FDIC to have reserves that are between 1.15 percent and 1.5 percent of total insured deposits.  To do this, the FDIC collects premiums based on a bank’s total deposits and certain risk factors.

Until 13 years ago, all banks paid in to fund the reserves. Beginning in 1996, Congress changed the law to require the FDIC only to collect insurance premiums from banks considered at risk, because of weak capital or dangerous lending practices.  As a result, the fund ended up with no savings for a rainy day.

Everything was all sunny when there were no bank failures in 2005 and 2006.  Even 2007 was a pretty good year, with only 3 bank failures. But the perfect storm was brewing, and the FDIC would soon be caught in a tsunami without a rain coat.

In 2008, twenty-six banks failed and nearly depleted all of the FDIC’s reserves.  Then, the banking collapse of 2009 hit.  By September fourth,  88 banks had failed, and it is predicted that by the end of the year there could be more than a hundred bank closures.

What To Do?

To replenish needed reserves, in 2007, all banks were once again required to pay premiums to the FDIC.  That was still not enough, so Congress recently approved an increase in the premiums.

The dramatic increase in premiums  is best illustrated by premiums paid by a moderately sized bank in Michigan — the Bank of Ann Arbor. In 2007, the Arbor Bank paid $137,000 in FDIC premiums.  In 2008, the premium increased to $413,000, and the bank estimates it will pay more than one-million dollars in FDIC premiums in 2009.

There are two ways for the banks to pay for the newly started and increased FDIC premiums.  One is to lower dividends to shareholders. The other is to increase fees to its customers.  Guess which one the banks chose? Not surprisingly, the answer is customer fees.

A survey conducted by Moebs Services, an independent and nationally recognized economic research firm, was just released. It found that that overdraft (OD) charges increased by 4 percent last year.  They rose from $25 per OD in 2008 to $26 per OD in 2009.

Mike Moebs, CEO of Moebs Services said, “This is the first time in our 22-year history of collecting this data that we have seen OD fees increase during a recession.” Four-percent may not seem like much, but based upon 2008 OD charges, this amounts to more than a billion dollars in additional income to the banks to help pay those pesky FDIC premiums.

Yes, that’s right. The same institutions that received billions of dollars in government bailout money and inflicted untold financial pain on workers, have found a new way to get blood from a stone .  Increase bank fees on those least able to afford it.  Somehow it makes sense to banks to squeeze the very customers who are having a difficult time making their house payments and putting food on their family’s table.

Editor: Angie Moreschi

Student Loans – The Next Mortgage Meltdown

September 4, 2009

An entire generation of our country’s young people face a financial Armageddon of sorts. The promise of a better future through education has turned into a means by which student lenders trap kids in oppressive debt, often with outrageous interest rates.  These young people, just beginning life on their own, are unable to get out of the debt cycle, often for the rest of their lives.  It sounds ominous, but it’s happening.

Students are beginning to fight back against lenders like Sallie Mae.  Consumer Warning Contributor Attorney Nicole Mayer is helping them.  She was interviewed for the article below by The American Association for Justice’s Trial Magazine.

Student Loan Lenders Face Scrutiny–and Lawsuits

September 2009 Issue

By Carmel Sileo -Trial Magazine , Associate Editor

Take easy credit terms, anxious and unsophisticated borrowers, and a commodity pitched as the ticket to wealth and security. Result: financial meltdown.

If that sounds like the housing market, it’s because the student loan industry has similar characteristics. Like mortgages during the housing boom, student loans are easily available and eagerly embraced by borrowers, lenders, and society. Like homeownership, a college education is promoted as the key to middle-class prosperity, a solid investment worth borrowing to the hilt for. Like mortgages, some private education loans were securitized and sold in bundled packages that mixed high-risk and low-risk borrowers.

And like homeowners facing foreclosure, students face loan burdens so onerous that default seems inevitable.

“As a nation, we have $700 billion in student loan debt,” said Alan Collinge, author of the new book The Student Loan Scam: The Most Oppressive Debt in U.S. History and How We Can Fight Back and founder of the Seattle-based group Student Loan Justice. “Student loans have a higher default rate than any other loan, including credit cards, car loans, home loans, and almost anything else.”

Many borrowers allege that the len­ders they trusted used predatory lending and collection practices. Because student loans are exempt from many rules governing consumer loans, the potential for abuse is high, critics say. The growing number of complaints has led to scrutiny by government investigators and private lawsuits against the lenders.

In 2007, a nationwide investigation headed by New York Attorney General Andrew Cuomo found that three major student lenders-SLM Corp., better known as Sallie Mae; Citibank; and Education Finance Partners-had given universities kickbacks in exchange for being designated their “preferred lenders.” The investigation led to a settlement of $6.5 million.

In June, Deanne Loonin, director of the Student Loan Assistance Program of the National Consumer Law Center, testified before the Department of Education about lending and collection practices in the student loan industry, especially at for-profit schools.

“The current messy patchwork of federal law is inadequate to protect students and taxpayers,” Loonin testified, and “using private collection agencies not only to collect but also to resolve disputes with borrowers has been a disaster for borrowers.”

“With the government guaranteeing many loans and without consumer protections, you get predatory lending on the front end and abusive collection tactics on the back end,” said Nicole Mayer, a lawyer with the Tampa-based James Hoyer law firm. “It’s a double whammy of the worst kind.”

There are three types of student loans: federally guaranteed loans backed by the Federal Family Education Loan Program (FFELP), including Stafford and PLUS loans, administered by private lenders like Sallie Mae; federally guaranteed loans by the Department of Education issued directly to students; and private education loans (PELs) that are not federally guaranteed, often those issued by for-profit schools, such as trade and technical schools.

Most students use a mix of loan types. The average student’s debt is nearly $20,000 by graduation-double the amount owed a decade ago. Recent media reports have highlighted the problem of borrowers defaulting on these loans: In July, for example, the newsmagazine program Now on PBS profiled a social worker in Baltimore who was evicted when, after losing her job, she was unable to afford both her rent and her student loan payments despite repeated attempts to renegotiate her terms.

“The Department of Education will tell you that it’s not a big problem, that the system works well and defaults are low,” said Collinge. “It’s a lie.” Collinge pointed to a 2003 audit by the department’s Office of the Inspector General, which found that the lifetime default rate for students at four-year colleges was between 19 percent and 31 percent, depending on the type of loan. For students at two-year colleges, the rate was as high as 42 percent, and students at for-profit schools had a high-end default rate of 51 percent.

Unique legal status

Student loans enjoy a unique legal status unlike most other consumer loans. “You can’t discharge them in bankruptcy. They don’t have to comply with federal truth-in-lending laws, state usury laws, statutes of limitations on debt collection, or much of anything else,” said Collinge. “If it’s a federally guaranteed loan, the lenders can garnish your paychecks, your Social Security and disability checks, and your tax refunds.”

Michael Zahara, a former default prevention specialist at the Las Vegas office of the Student Assistance Corp. (SAC), a debt collection agency owned by Sallie Mae, said, “What we want is to get back what was lost: The protection of the district courts. Let a judge rewrite the terms of a loan, or even discharge it. Give people back the access to the courts.”

Students can only discharge their loans, including PELs, in bankruptcy by proving that paying them poses an “undue hardship.” As a result, hard-pressed graduates have little recourse but to ask for a forbearance.

Granted by the lender when a borrower finds it impossible to meet monthly payments, forbearance halts the collection process. But during forbearance, interest and penalties continue to accumulate, resulting in loan amounts that can double or triple once the borrower begins paying again.

Robert Applebaum, a lawyer in New York who founded the Facebook group Cancel Student Loan Debt to Stimulate the Economy, which claims almost 200,000 members, wrote on the New York Times “Room for Debate” blog in June that he used a forbearance after law school to work in public service law. Then he “watched as the amount I owed ballooned by nearly $20,000 during the time I served the community.”

On his Facebook site, Applebaum writes that the student loan industry has created a generation of “educated poor, with student loan debt making ever more college graduates and young professionals unable to buy a house or start a family or a small business.”

Mayer of the James Hoyer law firm filed suit last year against Sallie Mae, the country’s largest distributor of student loans. The suit alleges violation of the federal Truth in Lending Act (TILA) and the Equal Credit Opportunity Act (ECOA). In March, a district court in Connecticut granted Sallie Mae’s motion to dismiss the TILA charge but did not dismiss the ECOA charge. (Rodriguez v. SLM Corp., 2009 WL 598252 (D. Conn. Mar. 6, 2009).)

Suing Sallie

Many critics of the student loan industry say lenders like Sallie Mae are pressing borrowers to go into forbearance, sometimes even against the students’ will.

Zahara said SAC loan administrators routinely pushed borrowers into forbearance to hide the number of bad loans on their books. “I would estimate that in my facility alone we had about $350 million in bad loans,” he said.

In 2005, Zahara filed a qui tam lawsuit against his former employer, alleging violations of the federal False Claims Act and charging that Sallie Mae and SAC “allowed their employees and agents to falsify loan records pertaining to delinquent FFELP loans held by Sallie Mae.” His suit claims that “fabricating forbearances benefited defendants and defrauded the federal treasury.” In March, the lawsuit was dismissed without prejudice so that Zahara could find a new lawyer. (Zahara v. SLM Corp., No. 1:06-cv-088-SEB-JMS (S.D. Ind. Mar. 12, 2009).)

Last year, Sallie Mae shareholders also sued the company, saying it engaged in risky behaviors by granting loans to high-risk borrowers (primarily students attending for-profit schools). The plaintiffs claim that Sallie Mae “used for­bearance as a means to reduce delinquencies and avoid charge-offs on the increasing number of loans that were past due with no documented basis for future repayment and to avoid charging off those loans.” (In re SLM Corp. Secs. Litig., No. 08-CV-1029 (WHP) (D.N.Y. filed Dec. 8, 2008).)

According to the complaint, “If these were private credit loans where the lender bears the risk of loss, Sallie Mae would have forced the loan into default long ago and cut its losses; but because FFELP loans are essentially risk-free to Sallie Mae, it keeps extending the loans knowing that the government is ultimately responsible for paying the loan balance when the borrower defaults.”

The lawsuit also claims that “based on information provided by former employees of SLM that worked in collection centers . . . [the] policy was consistent in encouraging PEL collection employees to move past-due loans into forbearance whenever it appeared that payment was not forthcoming. SLM did anything it could to avoid charging-off a loan.”

Signs of relief

There are signs that the government is trying to head off the problem before the numbers get too dire. Student advocates praised the Obama administration’s decision to remove “middleman” lenders like Sallie Mae and make all student loans direct government loans.

In July, the Department of Education instituted the Income-Based Repayment (IBR) plan, which caps student loan repayments to levels based on income, state of residence, and family size. Also, any debt and interest remaining after 25 years will be forgiven. Students who opt to work in specific nonprofit or public-service jobs could be forgiven after 10 years of IBR payments.

Mayer said she was taking a “wait and see” approach to the IBR, pointing out that it did not affect PELs, which cause most of the hardship. Collinge said the government was taking some good first steps but that these tended to sweep aside the real issue, which is to return bankruptcy and other consumer protections to people who have student loans.

“We’re not fighting to let people skate on their debts,” he said. “We just want people to have the same protection that applies to every other kind of debt.”

Carmel Sileo, Associate Editor

CEO’s Make 300 Times Average Workers Salary

September 3, 2009

By Angie Moreschi:

So much for the troubled banks.  Taking charity from taxpayers hasn’t seemed to make a difference to our top financial institutions.  They are still paying their CEO’s hefty salaries, despite the fact that these fearless leaders lead us into the black abyss of a near financial meltdown. All in a days work, apparently, and a very well compensated one at that.  Click here to watch the video above and learn more about the latest study on excessive CEO compensation.

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