I received a telephone call from an associate in Austria this week. I hadn’t spoken with this individual for a few years, and the last time, Roman was in Houston. So it was a pleasant surprise to hear from him. He asked me if I had purchased the Senate seat, and I responded that I understood it was for sale on E-bay and I couldn’t afford the $99 million price tag. We both laughed, but for me it was a bitter one.
Here in Illinois, everything is for sale and the politicians have made betraying the public trust an art form. Chicago’s Mayor Daley is a great example. He sells everything he can to private interests, from airport parking concessions, entire airports and even toll bridges. He moves parks from the public domain to special groups. He commandeered a lakefront airport and bulldozed it. He has made Navy Pier the number one tourist attraction in the state but if you are trapped in Chicago with its decrepit public transportation system and high taxes, you pay and you pay. Routinely the city is the most expensive place in the US to purchase gasoline. It has one of the highest sales taxes. In the last 10 years the city collected $182 million in parking tickets and is currently owed about $40 million in tickes due over two years, according to Chigago's Revenue Department Director Bea Reyna-Hickey.
This is essentially another form of taxation of its citizens. Chicago is surrounded by tollways to trap the wayward traveler and fleece his pockets. We hardly go into the city anymore because there are so many automobiles and so few unrestricted driving areas, that it is difficult to find a place to park. My spouse drove in once to meet a friend for dinner; the tab for that soiree , including tolls, gasoline parking and dinner was over $100. She said she won’t do that again. So we now take the train and only on very special occasions.
We have a long line of crooks and cronies in Illinois, followed by the incompetent. Even our Senator Dick Durbin is attempting to get convicted felon former Governor George Ryan out of prison. Under Ryan, the state was for sale to anyone and everyone. Unqualified people got licenses to drive trucks and there were the deaths of innocents on the roads as a result. That’s the way business is done here. The politicians routinely betray the public trust. We the citizens, after all, are subservient to them.
These same politicians routinely float bonds (take out loans) to pay the retirement benefits for their municipal and state workers, because they have spent every nickel and haven't properly funded the pensions of transit workers, teachers, firemen, policemen, etc. So their way of dealing with this is to "pay forward" the debt to the next generation. And the citizens sit around and there is no outrage. We are sheep or perhaps simply stupid. Or both??
Meanwhile, the Illinois Lottery, which was passed by law to fund education in the state, is ups for sale, too! Even with the lottery, Illinois is ranked 49th out of 50 states in the amount of money provided by the state for education. So much for taking care of the children.
It is unfortunate that we have to live here. But that may change. There are limits and this area has reached mine. I am about ready to gag!
I have associates in Louisiana who have complained for years about graft, corruption and incompetence in that state. I have told them that they have nothing compared to Illinois. They now finally believe me.
At one time Illinois was considered a land of gangsters. Now it is simply a laughing stock, with incompetents in various political offices and many crooked politicians.
Illinois, R.I.P.
Sunday, December 14, 2008
Wednesday, November 19, 2008
A Quote from a Banker
Mr. Kenneth Lewis, CEO of the Bank of America, which only 3 weeks ago got $15 billion from the federal government as part of the massive bailout of the banks, was quoted yesterday commenting on the automotive industry's request for a bailout of their own. The "Big Three [automakers] is one too many.....[and] the American people aren’t interested in just giving more money and not helping them change.”
Interesting!
Interesting!
Monday, November 17, 2008
The Obama "deja vu" Team
I thought the Obama campaign was all about "change", to get us beyond the "Bush Years", and all of those "special interests" in Washington DC, etc. However, it seems we are moving back to the "Clinton Years" as President-elect Obama loads up his team with former Clinton administration insiders.
But that's OK, right, because these are Clinton's old cronies? Republican cronies are to be abhored, and Democratic cronies are to be revered! At this rate, I must wonder if Hillary Clinton will be Secretary of State?
Here are a few of the "Clinton Team" recently picked up by Obama:
Gregory B. Craig, a former State Department official who served as former President Bill Clinton's impeachment lawyer, will be White House counsel, serving as President-elect Obama's chief lawyer.
Mona Sutphen, a former special assistant to Mr. Clinton's national-security adviser, Sandy Berger, was named deputy chief of staff.
Jim Messina, a veteran Senate aide and Mr. Obama's campaign chief of staff, will also serve as White House deputy chief of staff.
Phil Schiliro, a veteran House aide, will be President-elect Obama's liaison to Congress.
Rahm Emanuel a former senior advisor to President Clinton will be President-elect Obama's White House chief of staff.
Ron Klain, who was also a top aide to Vice President Al Gore will be Vice President-elect Joe Biden's chief of staff.
But that's OK, right, because these are Clinton's old cronies? Republican cronies are to be abhored, and Democratic cronies are to be revered! At this rate, I must wonder if Hillary Clinton will be Secretary of State?
Here are a few of the "Clinton Team" recently picked up by Obama:
Gregory B. Craig, a former State Department official who served as former President Bill Clinton's impeachment lawyer, will be White House counsel, serving as President-elect Obama's chief lawyer.
Mona Sutphen, a former special assistant to Mr. Clinton's national-security adviser, Sandy Berger, was named deputy chief of staff.
Jim Messina, a veteran Senate aide and Mr. Obama's campaign chief of staff, will also serve as White House deputy chief of staff.
Phil Schiliro, a veteran House aide, will be President-elect Obama's liaison to Congress.
Rahm Emanuel a former senior advisor to President Clinton will be President-elect Obama's White House chief of staff.
Ron Klain, who was also a top aide to Vice President Al Gore will be Vice President-elect Joe Biden's chief of staff.
Monday, November 10, 2008
Some Observation on the Recent Presidential Election
Political historians and planners will be studying the recent election under a microscope. I have a few observations of my own.
1. The End of Campaign Reform
I think that if only one conclusion is drawn from the recent election, it is that adhering to the discipline of campaign reform, as Sen. McCain did, is political suicide. There is no way to compensate when the spending is about 10 to 1 against you. The Obama campaign directly spent about $650 million dollars on his election bid. However, that does not include the amounts raised by the Democratic National Committee or Political Action Committees (PACs). While it is true that PACs are regulated to the extent that they directly contribute to a candidate, there is no limit to how much PACs can spend on advertising in support of candidates or in promotion of their agendas or beliefs, or against competing candidates.
How much the various PACs raise is available at the Federal Election Commission website. PACs are required under law to register with the commission and file detailed financial reports of monies raised and spent. Link: Federal Election Commission Candidate PAC Finances
2. The Death of the Political Intellectuals
On November 9, the New York Times ran an Op-ed piece about the Obama win being a win for "intellectuals". I am not so confident of that assessment. True, Governor Sarah Palin was a surprise candidate for Vice President. Her credentials were questionable and her educational background includes "only" a Bachelor of Science degree in Journalism from the University of Idaho. Both Governor Palin and Sen. McCain's lack of educational "fiber" were widely reported in the populist press. However, her opposite, Vice-President Elect Joe Biden graduated 76th in a class of 85 from Syracuse University College of Law. He was nearly expelled for plagiarism while at that school. Link: New York Times: Biden Admits Plagiarism in School According to the 1987 article "Mr. Biden released a 65-page file, obtained by the Senator from the Syracuse University College of Law, that he said contained all the records of his years there. It disclosed relatively poor grades in college and law school, mixed evaluations from teachers and details of the plagiarism".
Sen. Barack Obama was also a surprise candidate who did attend Harvard Law School after attending Occidental College and Columbia University. He graduated from Columbia University without honors, which indicates a GPA of less than 3.3. However, he did later graduate from Harvard Law School magna cum laude which according to that school puts him in the top 10% of his class. As Pres. Elect Obama has not released his transcripts of any college, it is unknown what his true GPAs were.
3. The Triumph of Populism over Brains.
If the Obama campaign was a triumph of "intellectuals" as has been posed by certain "journalists" including the New York Times, that was not reflected in the economics or the math. Both the McCain-Palin and Obama-Biden campaigns were marked by overt populism. The Obama-Biden campaign made consistent promises to protect the "Middle Class", but with little substance to back that up. Sen. Biden was effectively muzzled toward the end of the campaign, in part by a willing press, which ignored his gaffes, most notably his October 28 statement that the tax breaks "should go to middle-class people, people who make $150,000 a year." This was in direct conflict with the official statements of the Obama-Biden Campaign.
The McCain-Palin campaign also waffled in and out of populism, but candidate Sen. McCain seemed to have difficulty in this area, as his message was inconsistent and he could not effectively articulate the details of his health plan. It is pure speculation on my part, but this may have been because Sen. McCain was well aware that the Federal Government will have great difficulty in funding and delivering the current Social Security and Medicare plans, much less the expansionism promoted by his and the Obama-Biden campaigns. In March 2007, the former Comptroller General of the US stated that the current plans "are mortgaging the future of our children and grandchildren at record rates, and that is not only an issue of fiscal irresponsibility, it's an issue of immorality." Link: Comptroller General Walker on the 60 Minutes Show
The campaign of Sen. Hillary Clinton was also marked by more and more populism as it ground on and on, and gradually imploded. It also suffered with an inconsistent message, as she attempted to extend her message, and made more and more promises in her bid to win the Democratic Party nomination.
I attribute much of the inability of all of the opponents to the Obama juggernaut to clearly and concisely deliver their message, to an difficulty to make outlandish, populist promises that the more seasoned candidates knew they cannot deliver. Obama, in his naivete or political populist bent, had no such problems, no history and no difficulty articulating something for everybody which would easily be accomplished by "spreading the wealth around."
The platforms of all of the candidates included "tax breaks" for the middle and lower classes. However, the Obama-Biden campaign went far beyond this to include the protection of Social Security and Medicare, the expansion of Prescription Drug benefits, additional health care subsidies, the elimination of income taxes on lower income ($50,000) seniors, tax cuts for working families, energy rebates for all Americans, increasing the military by 92,000 men, protection and enhanced programs for veterans, eliminating 2.5 million barrels of imported oil per day by 2018, additional tax cuts, etc., etc. and the simultaneous restoration of fiscal discipline in Washington. All this would be accomplished while the economy is melting down and some economists are articulating massive unemployment, substantially reduced tax revenues, terrible deficits and possibly a depression.
In his November 9 article in the NYT, author Nicolas D. Kristof while lauding Obama's Intellectual win, stated that "We can’t solve our educational challenges when, according to polls, Americans are approximately as likely to believe in flying saucers as in evolution, and when one-fifth of Americans believe that the sun orbits the Earth." However, those same Americans can vote, and vote they did! That was the triumph of the election. Link: Obama and the War on Brains
4. The Naked Bias of the Media
There is little doubt that the media chose to ignore certain controversial aspects of Barack Obama during the primary and election processes. This was not questioned.
It was reported that certain members of the Democratic congress and party went beyond this one-sidedness to call for restoration of "fairness" laws to gag opponents, most notably right leaning talk shows. I am referring to the FCC "Fairness Doctrine" a policy that required radio and TV stations to, in effect, provide equal time on matters of public importance. Not doing so would be the basis for repealing the broadcast license of the station. During the recent election, there were calls to reinstate this doctrine. However, right leaning radio station commentators turned this into such a controversy, that it is really difficult to ultimately determine whether there was a true push for the doctrine. As is usually the case, if either the right or the left stirs up their followers, the resulting "data storm" obliterates most of the traces. There is no doubt that the Obama campaign did issue a "wire" to democrats to block the call-in lines to a WGN radio program the night of August 27.
This type of behaviour should be of concern to Americans, but it apparently is not. It is of great concern to me. When a political party is reaching for power and predicting a landslide "victory", and then goes further and attempts to impede or prevent free speech, that is of grave concern to me. Of greater concern is the complicity of the media which raises no alarm bells and does not question overt attempts to limit one's free speech under the constitution. This does not bode well for individual freedom in this country.
5. A Power Shift, of Sorts
To win the primary and the election, the Obama campaign had to beat not only Hillary Clinton, but also the Democratic block from the liberal east and from the south. The fact that Obama did this and is now assembling a team including Mid-Westerners, signals a geographic shift in power in the country. Pres. elect Obama won as a liberal, or at least, as someone far more liberal than his Democratic opponent, Sen. Hillary Clinton. He also beat back challengers from the Southern Democrats. It remains to be seen if there is any permanent significance to this. However, it was a significant event in the Democratic party.
1. The End of Campaign Reform
I think that if only one conclusion is drawn from the recent election, it is that adhering to the discipline of campaign reform, as Sen. McCain did, is political suicide. There is no way to compensate when the spending is about 10 to 1 against you. The Obama campaign directly spent about $650 million dollars on his election bid. However, that does not include the amounts raised by the Democratic National Committee or Political Action Committees (PACs). While it is true that PACs are regulated to the extent that they directly contribute to a candidate, there is no limit to how much PACs can spend on advertising in support of candidates or in promotion of their agendas or beliefs, or against competing candidates.
How much the various PACs raise is available at the Federal Election Commission website. PACs are required under law to register with the commission and file detailed financial reports of monies raised and spent. Link: Federal Election Commission Candidate PAC Finances
2. The Death of the Political Intellectuals
On November 9, the New York Times ran an Op-ed piece about the Obama win being a win for "intellectuals". I am not so confident of that assessment. True, Governor Sarah Palin was a surprise candidate for Vice President. Her credentials were questionable and her educational background includes "only" a Bachelor of Science degree in Journalism from the University of Idaho. Both Governor Palin and Sen. McCain's lack of educational "fiber" were widely reported in the populist press. However, her opposite, Vice-President Elect Joe Biden graduated 76th in a class of 85 from Syracuse University College of Law. He was nearly expelled for plagiarism while at that school. Link: New York Times: Biden Admits Plagiarism in School According to the 1987 article "Mr. Biden released a 65-page file, obtained by the Senator from the Syracuse University College of Law, that he said contained all the records of his years there. It disclosed relatively poor grades in college and law school, mixed evaluations from teachers and details of the plagiarism".
Sen. Barack Obama was also a surprise candidate who did attend Harvard Law School after attending Occidental College and Columbia University. He graduated from Columbia University without honors, which indicates a GPA of less than 3.3. However, he did later graduate from Harvard Law School magna cum laude which according to that school puts him in the top 10% of his class. As Pres. Elect Obama has not released his transcripts of any college, it is unknown what his true GPAs were.
3. The Triumph of Populism over Brains.
If the Obama campaign was a triumph of "intellectuals" as has been posed by certain "journalists" including the New York Times, that was not reflected in the economics or the math. Both the McCain-Palin and Obama-Biden campaigns were marked by overt populism. The Obama-Biden campaign made consistent promises to protect the "Middle Class", but with little substance to back that up. Sen. Biden was effectively muzzled toward the end of the campaign, in part by a willing press, which ignored his gaffes, most notably his October 28 statement that the tax breaks "should go to middle-class people, people who make $150,000 a year." This was in direct conflict with the official statements of the Obama-Biden Campaign.
The McCain-Palin campaign also waffled in and out of populism, but candidate Sen. McCain seemed to have difficulty in this area, as his message was inconsistent and he could not effectively articulate the details of his health plan. It is pure speculation on my part, but this may have been because Sen. McCain was well aware that the Federal Government will have great difficulty in funding and delivering the current Social Security and Medicare plans, much less the expansionism promoted by his and the Obama-Biden campaigns. In March 2007, the former Comptroller General of the US stated that the current plans "are mortgaging the future of our children and grandchildren at record rates, and that is not only an issue of fiscal irresponsibility, it's an issue of immorality." Link: Comptroller General Walker on the 60 Minutes Show
The campaign of Sen. Hillary Clinton was also marked by more and more populism as it ground on and on, and gradually imploded. It also suffered with an inconsistent message, as she attempted to extend her message, and made more and more promises in her bid to win the Democratic Party nomination.
I attribute much of the inability of all of the opponents to the Obama juggernaut to clearly and concisely deliver their message, to an difficulty to make outlandish, populist promises that the more seasoned candidates knew they cannot deliver. Obama, in his naivete or political populist bent, had no such problems, no history and no difficulty articulating something for everybody which would easily be accomplished by "spreading the wealth around."
The platforms of all of the candidates included "tax breaks" for the middle and lower classes. However, the Obama-Biden campaign went far beyond this to include the protection of Social Security and Medicare, the expansion of Prescription Drug benefits, additional health care subsidies, the elimination of income taxes on lower income ($50,000) seniors, tax cuts for working families, energy rebates for all Americans, increasing the military by 92,000 men, protection and enhanced programs for veterans, eliminating 2.5 million barrels of imported oil per day by 2018, additional tax cuts, etc., etc. and the simultaneous restoration of fiscal discipline in Washington. All this would be accomplished while the economy is melting down and some economists are articulating massive unemployment, substantially reduced tax revenues, terrible deficits and possibly a depression.
In his November 9 article in the NYT, author Nicolas D. Kristof while lauding Obama's Intellectual win, stated that "We can’t solve our educational challenges when, according to polls, Americans are approximately as likely to believe in flying saucers as in evolution, and when one-fifth of Americans believe that the sun orbits the Earth." However, those same Americans can vote, and vote they did! That was the triumph of the election. Link: Obama and the War on Brains
4. The Naked Bias of the Media
There is little doubt that the media chose to ignore certain controversial aspects of Barack Obama during the primary and election processes. This was not questioned.
It was reported that certain members of the Democratic congress and party went beyond this one-sidedness to call for restoration of "fairness" laws to gag opponents, most notably right leaning talk shows. I am referring to the FCC "Fairness Doctrine" a policy that required radio and TV stations to, in effect, provide equal time on matters of public importance. Not doing so would be the basis for repealing the broadcast license of the station. During the recent election, there were calls to reinstate this doctrine. However, right leaning radio station commentators turned this into such a controversy, that it is really difficult to ultimately determine whether there was a true push for the doctrine. As is usually the case, if either the right or the left stirs up their followers, the resulting "data storm" obliterates most of the traces. There is no doubt that the Obama campaign did issue a "wire" to democrats to block the call-in lines to a WGN radio program the night of August 27.
This type of behaviour should be of concern to Americans, but it apparently is not. It is of great concern to me. When a political party is reaching for power and predicting a landslide "victory", and then goes further and attempts to impede or prevent free speech, that is of grave concern to me. Of greater concern is the complicity of the media which raises no alarm bells and does not question overt attempts to limit one's free speech under the constitution. This does not bode well for individual freedom in this country.
5. A Power Shift, of Sorts
To win the primary and the election, the Obama campaign had to beat not only Hillary Clinton, but also the Democratic block from the liberal east and from the south. The fact that Obama did this and is now assembling a team including Mid-Westerners, signals a geographic shift in power in the country. Pres. elect Obama won as a liberal, or at least, as someone far more liberal than his Democratic opponent, Sen. Hillary Clinton. He also beat back challengers from the Southern Democrats. It remains to be seen if there is any permanent significance to this. However, it was a significant event in the Democratic party.
Saturday, November 8, 2008
Congressmen and Women Stopping the Regulators
Click this to listen to the Congressmen. It's 2004 and there was time to stop the meltdown. But our Congress did what they do best, which is NOTHING:
Congress arguing about the necessity or lack of necessity for additional regulation at Fannie May and Fannie Mac
Congress arguing about the necessity or lack of necessity for additional regulation at Fannie May and Fannie Mac
Wednesday, November 5, 2008
Obama Wins! Spread the Pain!
The soon to be former and nearly always campaigning Senator from my state of Illinois, Barack Obama, won the presidency with 52% of the popular vote (with 97% percent of the votes tallied). Not exactly a landslide, considering the $100s of millions spent to buy the election. Note: the total raised by the Obama campaign was $640 million of which about $575 Million was spent on the election . Obama Campaign Fundraising Data
In celebration, the Dow Jones Industrial Average, which rose 305 points in the previous session as Americans went to the polls, fell 486.01 points, ending down 5.1%.
Forgive me for not celebrating. Despite the relief at the end of the "Bush Years", of political campaigns that went on for years, and the fact that now that Obama is out of the Senate, maybe we the people of Illinois will get a real Senator, not just a campaigner, I cannot say this is the end. The euphoria gripping some of the electorate is somewhat confusing. We have a huge budget problem and growing, with 70+ million retirees approaching the Social Security doors with hands outstretched, we have a Medicare and Medicaid system which, in terms of budgets, is "out of control". So I should celebrate?
Ok, so let's ignore those major and looming problems (our politicians do). Now what? Well, the easy part for the Obama campaign is over. Collecting half a billion dollars plus from supporters and running for office while telling us that this is about "spreading the wealth", "change", and "health insurance as good as he [Obama] gets" was very easy. Now to perform. And that quip about "spreading the wealth around", that was actually a white lie. What this is really about, is spreading the pain.
The pain of a contracting economy and falling tax revenues, the pain of a Federal Reserve which has been printing money at a dizzying rate to hand to our oil producing "friends" and those holding our debt, like the Chinese; and of course to those living on the dole, who will get a 5.8% SS increase which they can promptly spend on Chinese made goods at Wal-mart. There will be the pain of growing annual Federal budgets, of which $412 Billion goes to service the interest on the debt and $720 Billion goes to health and human services. The pain of designing and implementing various regulations on all sorts of industries, and in particular Wall Street and the Banking Industry. The pain of having to tell all of the Obama button toting supporters that, oops, sorry! We don't have the money to unionize the country, to really spread the wealth around in the manner you expect. Nor do we have the money to pay you the pensions and entitlements you expect. But we do have the will to tax the hell out of everyone who is working, to pay for the cleanup of the previous party.
That previous party was also earmarked with a lot of spreading the wealth around, to "homeowners" who couldn't afford the houses they bought; to the contractors, housing construction workers and "immigrants" who built them, to real estate agents and home sellers who "flipped" or unloaded them and made a killing at very high prices. To Wall Street and to the Bankers who designed and sold the wonderful financial products that permitted people to lie and get the house of their dreams at someone else's expense. To the congressmen and women who actively prevented the regulators from doing their jobs, while cleaning up with contributions from all of the "industries" that benefited from this scam. And finally, to those on the dole who continue to spend their children's legacy.
Which leaves the rest of us who are working and producing something in what remains of US manufacturing to pay for the mess. While watching our savings get hammered as the stock market, bonds and just about anywhere one can stuff the money we hope to retire on, also gets hammered. Finally, let us not forget about those under the age of 50, each of whom is putting a lot of money into a ponzi scheme called "Social Security". They are the one's who will, eventually, really get mad, when the taxes go up and when they too realize that the politicians are, for the most part, spewing bull.
Welcome to the real Obamanomics. That party was over before it even started. We will all share in the pain, of course unequally, as usual. However, there is an ominous tone and many people realize there is no where to hide. Pain will be experienced by all of us. For some, it will be not getting what they expect and yet feel they are entitled to. That reality is hitting the unions as the automobile industry contracts. That reality is apparent to anyone in municipal and state jobs, as the local economies face the reality of shrinking tax receipts and escalating costs, and blooming deficits and municipal worker layoffs. How about home owners who are "under water"? Will they be able to make their real estate tax payments? If not, think of the impact on education, which is funded in large measure by these taxes.
Here in Illinois, I expect our dysfunctional governor to declare a tax holiday or some such, for these people, with the help of the state legislature, which is equally inept.
President Elect Obama's staffers will surely hit the streets and begin toning down the expectations of his followers. The "new" administration simply cannot deliver. This is a long, difficult road we face.
However, New York and New Jersey sent representatives to Washington before the election to lobby for more federal bailout money. How disingenuous! The people of these fine states benefited from the largess of the hedge funds, banks and wall street firms which contributed greatly to the current conditions. Now we, the working taxpayers, should send them more of our hard earned money. Let them go the the "Forbes 400", 64 of whom live in New York City, and collect from them. Or to George Soros in White Plains, NY or to the rest of them! I am sure NYC can hardly wait to get their wonderful multi-bilion dollar "transportation center" completed with taxpayer money.
multi-billon dollare first class retail and restaurant space paid for by the US taxpayer
I always find it interesting how the New York Times makes a fuss about "bridges to nowhere" but avoids equally inflammatory terms when it comes to pork projects for New York the State and the City!
And let's not forget the 5.8% increase recently awarded to those currently living on social security. That's the largest increase ever awarded! I wonder how many small business owners will be getting 5.8% raises in 2009? I'll let you guess the answer to that one. But soon, these same small business owners will be expected to cough up more taxes, to cover those who are "less fortunate"; whatever that means. Let me see. I should continue working until 70 or whatever, forgo my SS benefits and continue paying taxes, all for the good of the country? OK, so am I really so stupid? I'll tell you something, I worked two jobs at lower wages at one point in my circuitous career to make ends meet, rather than go on the dole. So what do you think? Should I go on the dole now and collect what I am "entitled to", effectively taking my children's inheritance, or should I keep working? I'm interested in the votes out there. However, don't simply tell me what "I" should do. That is the game in America. Giving advice while we do just the opposite. Have you ever heard of "leadership by example"? Most Americans probably have not. So if you want to give me your comments, go ahead, but you also need to include what you are doing to increase the amount you pay in taxes, or reduce the federal budget deficits. Oh, and by the way, property taxes don't count; those dollars stay in the local economy.
Returning to the election and it's immediate aftermath, I suspect these realizations contributed to why the stock market dropped like a rock today, November 5 and also why it will drop tomorrow, too!
So it will get worse before it gets better. Hang on and enjoy the ride! Listen to the rhetoric and marvel at the stupidity of many in this formerly fine country of ours.
Following the election, the National Debt Awareness Center made the following observations on its website: "The majority of the U. S. Voters want to change the U. S. to Socialism, some to Marxism, want to ignore the U. S. Constitution, don't care about the nation's debt, or annual deficits". What do you think? The website went on to say "Effective 1 January 2009, the National Debt Awareness Center will be closed." That about sums it up, I think! Game over!
In celebration, the Dow Jones Industrial Average, which rose 305 points in the previous session as Americans went to the polls, fell 486.01 points, ending down 5.1%.
Forgive me for not celebrating. Despite the relief at the end of the "Bush Years", of political campaigns that went on for years, and the fact that now that Obama is out of the Senate, maybe we the people of Illinois will get a real Senator, not just a campaigner, I cannot say this is the end. The euphoria gripping some of the electorate is somewhat confusing. We have a huge budget problem and growing, with 70+ million retirees approaching the Social Security doors with hands outstretched, we have a Medicare and Medicaid system which, in terms of budgets, is "out of control". So I should celebrate?
Ok, so let's ignore those major and looming problems (our politicians do). Now what? Well, the easy part for the Obama campaign is over. Collecting half a billion dollars plus from supporters and running for office while telling us that this is about "spreading the wealth", "change", and "health insurance as good as he [Obama] gets" was very easy. Now to perform. And that quip about "spreading the wealth around", that was actually a white lie. What this is really about, is spreading the pain.
The pain of a contracting economy and falling tax revenues, the pain of a Federal Reserve which has been printing money at a dizzying rate to hand to our oil producing "friends" and those holding our debt, like the Chinese; and of course to those living on the dole, who will get a 5.8% SS increase which they can promptly spend on Chinese made goods at Wal-mart. There will be the pain of growing annual Federal budgets, of which $412 Billion goes to service the interest on the debt and $720 Billion goes to health and human services. The pain of designing and implementing various regulations on all sorts of industries, and in particular Wall Street and the Banking Industry. The pain of having to tell all of the Obama button toting supporters that, oops, sorry! We don't have the money to unionize the country, to really spread the wealth around in the manner you expect. Nor do we have the money to pay you the pensions and entitlements you expect. But we do have the will to tax the hell out of everyone who is working, to pay for the cleanup of the previous party.
That previous party was also earmarked with a lot of spreading the wealth around, to "homeowners" who couldn't afford the houses they bought; to the contractors, housing construction workers and "immigrants" who built them, to real estate agents and home sellers who "flipped" or unloaded them and made a killing at very high prices. To Wall Street and to the Bankers who designed and sold the wonderful financial products that permitted people to lie and get the house of their dreams at someone else's expense. To the congressmen and women who actively prevented the regulators from doing their jobs, while cleaning up with contributions from all of the "industries" that benefited from this scam. And finally, to those on the dole who continue to spend their children's legacy.
Which leaves the rest of us who are working and producing something in what remains of US manufacturing to pay for the mess. While watching our savings get hammered as the stock market, bonds and just about anywhere one can stuff the money we hope to retire on, also gets hammered. Finally, let us not forget about those under the age of 50, each of whom is putting a lot of money into a ponzi scheme called "Social Security". They are the one's who will, eventually, really get mad, when the taxes go up and when they too realize that the politicians are, for the most part, spewing bull.
Welcome to the real Obamanomics. That party was over before it even started. We will all share in the pain, of course unequally, as usual. However, there is an ominous tone and many people realize there is no where to hide. Pain will be experienced by all of us. For some, it will be not getting what they expect and yet feel they are entitled to. That reality is hitting the unions as the automobile industry contracts. That reality is apparent to anyone in municipal and state jobs, as the local economies face the reality of shrinking tax receipts and escalating costs, and blooming deficits and municipal worker layoffs. How about home owners who are "under water"? Will they be able to make their real estate tax payments? If not, think of the impact on education, which is funded in large measure by these taxes.
Here in Illinois, I expect our dysfunctional governor to declare a tax holiday or some such, for these people, with the help of the state legislature, which is equally inept.
President Elect Obama's staffers will surely hit the streets and begin toning down the expectations of his followers. The "new" administration simply cannot deliver. This is a long, difficult road we face.
However, New York and New Jersey sent representatives to Washington before the election to lobby for more federal bailout money. How disingenuous! The people of these fine states benefited from the largess of the hedge funds, banks and wall street firms which contributed greatly to the current conditions. Now we, the working taxpayers, should send them more of our hard earned money. Let them go the the "Forbes 400", 64 of whom live in New York City, and collect from them. Or to George Soros in White Plains, NY or to the rest of them! I am sure NYC can hardly wait to get their wonderful multi-bilion dollar "transportation center" completed with taxpayer money.
multi-billon dollare first class retail and restaurant space paid for by the US taxpayer
I always find it interesting how the New York Times makes a fuss about "bridges to nowhere" but avoids equally inflammatory terms when it comes to pork projects for New York the State and the City!
And let's not forget the 5.8% increase recently awarded to those currently living on social security. That's the largest increase ever awarded! I wonder how many small business owners will be getting 5.8% raises in 2009? I'll let you guess the answer to that one. But soon, these same small business owners will be expected to cough up more taxes, to cover those who are "less fortunate"; whatever that means. Let me see. I should continue working until 70 or whatever, forgo my SS benefits and continue paying taxes, all for the good of the country? OK, so am I really so stupid? I'll tell you something, I worked two jobs at lower wages at one point in my circuitous career to make ends meet, rather than go on the dole. So what do you think? Should I go on the dole now and collect what I am "entitled to", effectively taking my children's inheritance, or should I keep working? I'm interested in the votes out there. However, don't simply tell me what "I" should do. That is the game in America. Giving advice while we do just the opposite. Have you ever heard of "leadership by example"? Most Americans probably have not. So if you want to give me your comments, go ahead, but you also need to include what you are doing to increase the amount you pay in taxes, or reduce the federal budget deficits. Oh, and by the way, property taxes don't count; those dollars stay in the local economy.
Returning to the election and it's immediate aftermath, I suspect these realizations contributed to why the stock market dropped like a rock today, November 5 and also why it will drop tomorrow, too!
So it will get worse before it gets better. Hang on and enjoy the ride! Listen to the rhetoric and marvel at the stupidity of many in this formerly fine country of ours.
Following the election, the National Debt Awareness Center made the following observations on its website: "The majority of the U. S. Voters want to change the U. S. to Socialism, some to Marxism, want to ignore the U. S. Constitution, don't care about the nation's debt, or annual deficits". What do you think? The website went on to say "Effective 1 January 2009, the National Debt Awareness Center will be closed." That about sums it up, I think! Game over!
Thursday, October 23, 2008
Thomas Jefferson had it right!
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered." Thomas Jefferson - Letter to the Secretary of the Treasury Albert Gallatin (1802), 3rd president of US (1743 - 1826)
On Fannie and Freddie:
Congressional Hearing about Fannie and Freddie
Here's Barney Frank's opinion of how we got there:
Barney Frank passes the blame
On Fannie and Freddie:
Congressional Hearing about Fannie and Freddie
Here's Barney Frank's opinion of how we got there:
Barney Frank passes the blame
The Federal Bailout Continues and Expands
U.S. Agriculture Secretary Ed Schafer said the federal government is considering outlays of as much as $25 million to help ethanol plants, which have been hit by volatile commodity prices:
http://www.bizjournals.com/phoenix/stories/2008/10/20/daily45.html?ana=from_rss
FDIC Chaiman Shiela Bair Senate Banking Chairman Christopher Dodd urges the Treasury to use its new authority to spur servicers to modify loans. "This slender provision alone can help countless deserving Americans escape the foreclosure trap set by predatory lenders," Sen. Dodd said in prepared remarks. FDIC Chairman Sheila Bair testified before the banking committe and stated "Specifically, the government could establish standards for loan modifications and provide guarantees for loans meeting those standards.............by doing so, unaffordable loans could be converted into loans that are sustainable over the long term."
http://www.fdic.gov/news/news/speeches/chairman/spoct2308.html
http://www.bizjournals.com/phoenix/stories/2008/10/20/daily45.html?ana=from_rss
FDIC Chaiman Shiela Bair Senate Banking Chairman Christopher Dodd urges the Treasury to use its new authority to spur servicers to modify loans. "This slender provision alone can help countless deserving Americans escape the foreclosure trap set by predatory lenders," Sen. Dodd said in prepared remarks. FDIC Chairman Sheila Bair testified before the banking committe and stated "Specifically, the government could establish standards for loan modifications and provide guarantees for loans meeting those standards.............by doing so, unaffordable loans could be converted into loans that are sustainable over the long term."
http://www.fdic.gov/news/news/speeches/chairman/spoct2308.html
Wednesday, October 22, 2008
Morgan Stanley's Bonuses Get Saved By You and Me
http://www.bloomberg.com/apps/news?pid=20601039&sid=azo7aySdpFHw&refer=home
This from Jonathan Weil on the Bloomberg website:
"You can imagine the devilish grins on the faces of Morgan Stanley employees last week, after the Treasury Department said it would pump $10 billion into the bank. Not only did we, the taxpayers, save their company, with the help of a Japanese bank named Mitsubishi UFJ Financial Group Inc. More importantly, we funded their 2008 bonus pool."
Mr. Weil goes on to say: "Here's all you really need to know to see who lost and who benefited most at the Five Families of Wall Street, otherwise known as Goldman, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns. From the start of their 2004 fiscal years through yesterday, the big standalone investment banks lost about $83 billion of stock-market value. During the same period, they reported about $239 billion of employee-compensation expense........So, for every dollar of shareholder value destroyed, the employees got paid almost three. "
This from Jonathan Weil on the Bloomberg website:
"You can imagine the devilish grins on the faces of Morgan Stanley employees last week, after the Treasury Department said it would pump $10 billion into the bank. Not only did we, the taxpayers, save their company, with the help of a Japanese bank named Mitsubishi UFJ Financial Group Inc. More importantly, we funded their 2008 bonus pool."
Mr. Weil goes on to say: "Here's all you really need to know to see who lost and who benefited most at the Five Families of Wall Street, otherwise known as Goldman, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns. From the start of their 2004 fiscal years through yesterday, the big standalone investment banks lost about $83 billion of stock-market value. During the same period, they reported about $239 billion of employee-compensation expense........So, for every dollar of shareholder value destroyed, the employees got paid almost three. "
Cramer and his "Too little too late" advice
On October 6, CNBC "stock market analyst" Jim Cramer was appearing on NBC's Today Show.
The Dow had been rapidly dropping, had passed 10,000 and was continuing downward. It was now about 33% off it's high of about 14,000 which had been set a year earlier.
Cramer, ever the stock guru, offered this investment advice to the viewers of the show: "Whatever you may need for the next five years, please take it out of the stock market. Right now. This week. I do not believe that you should risk those assets in the stock market." Cramer said that his advice was prompted by the concern that "We could have as much as a 20% decline in the stock market." He went on to say "If you can withstand this, just ride it out."
(Update October 23: The Dow is down 16.21% since October 6; it seems Jim Cramer may have been too optimistic!)
Here is the interview: http://www.youtube.com/watch?v=uoSLVCEGKko
That was good advice. However, it was already a bit too late to offer it. It is recommended by most financial consultants that one shoud NEVER put money that is needed within 5 years into the stock market. And, if one is nearing or in retirement, that money shouldn't be put at risk. Money invested in the market is at risk.
So here we are. Thanks Jim Cramer. Any retirees watching your show "Mad Money" and playing the game, day after day, could possible have lost 1/3 to 1/2 of their retirement assets, before pulling the plug on your advice and then contributing to the "panic".
I suppose I could be criticized for lambasting Cramer. But I think my anger toward him, and others like him, is justified. No, I don't follow his advice. I do watch his show occasionally while using the tread mill at the gym. It strikes me that his show could be called "Having Fun and the Lure of Making Money through Trading". However, there is risk in the stock market and many people who had been lulled into complacency by the likes of Cramer have suddenly re-awoken to that risk. And when they did, they yanked all of their money out of stock, bonds, even gold!
The truth is, the only people guaranteed to make money in the stock market are stock brokers, who make a commission on every sale, and media types such as Cramer, who get paid very well to entice the lemmings to the cliff. There are those who say all of this is for the good of the "service economy".
Those of us who are "invested" are taking risks. True, over the long term, there is ample evidence that it is possible to make money buying quality stocks. Cramer is now advocating just that. He said yesterday (October 21) on his program that "It's still possible to make money in stocks... It's always been possible. But you have to know what to look for, particularly in this market!... As much as this market has made us lose some of our faith in the ability of stocks to go higher... As much as this market has pummeled us beyond all recognition... it's also given us a new touchstone... it has given us... a new faith in dividends..."
The title of that program, as per his website, was:
"Stick with the Dividend Plays for Capital Preservation..."
http://www.madmoneyrecap.com/index.html
So now Cramer says, take what is left of your retirement portfolio and put it into dividend paying stocks! Of course, there are stocks out there that pay dividends, healthy dividends, but won't survive the economic downturn. Oh, and by the way, if you get a healthy 5% growth on your remaining investments, and assuming you lost 40% in the past year, it could take 10 years using this investing technique to get back to where you were in September 2007! If you do very well and can get 10% growth on your ravaged portfolio, it will only take 6 years to recover. Which is why having a stock market time horizon of less than 5 to 10 years is dangerous to your financial health. It is I suppose why Jim Cramer told people to pull their money. However, there is frequently a sharp upswing in the market at the conclusion of a bear market. For example, at the conclusion of the bear markets of 1974 and 1982, which were very severe bear markets, the stock market returned at least 60% in the next 9 months. I have read that this also happened after the 1932 stock market bottom which was the Great Depression.
See this website: Bear Market Recoveries Since 1950
In the above, you will note that it took 10 years for the S&P 500 to fully recover. This was considered a worst case scenario. The important thing is to realize that these long, anemic or sideways markets do and did happen. Can you wait 10 years?
In fairness to Cramer, there is money to be made in trading stocks, and a lot of people have fun doing some trading. I suppose it's a healthy pastime, as long as one doesn't jeopardize their retirement funds. That means, probably no more than about 5% of one's worth should ever be invested for trading on a show such as Cramer's. If you "win" fine, and if you lose it all, you haven't lost much. But it is easy to get cocky and it is easy to get caught up in the excitement. People do it each and every day in casinos all across the USA.
You are probably wondering if I am invested in the stock market. The answer is yes. I do have my reasons. If you want to know what they are, then go to this site: http://letmethinkaboutthis.blogspot.com/2008/10/check-in-in-20-years.html
The Dow had been rapidly dropping, had passed 10,000 and was continuing downward. It was now about 33% off it's high of about 14,000 which had been set a year earlier.
Cramer, ever the stock guru, offered this investment advice to the viewers of the show: "Whatever you may need for the next five years, please take it out of the stock market. Right now. This week. I do not believe that you should risk those assets in the stock market." Cramer said that his advice was prompted by the concern that "We could have as much as a 20% decline in the stock market." He went on to say "If you can withstand this, just ride it out."
(Update October 23: The Dow is down 16.21% since October 6; it seems Jim Cramer may have been too optimistic!)
Here is the interview: http://www.youtube.com/watch?v=uoSLVCEGKko
That was good advice. However, it was already a bit too late to offer it. It is recommended by most financial consultants that one shoud NEVER put money that is needed within 5 years into the stock market. And, if one is nearing or in retirement, that money shouldn't be put at risk. Money invested in the market is at risk.
So here we are. Thanks Jim Cramer. Any retirees watching your show "Mad Money" and playing the game, day after day, could possible have lost 1/3 to 1/2 of their retirement assets, before pulling the plug on your advice and then contributing to the "panic".
I suppose I could be criticized for lambasting Cramer. But I think my anger toward him, and others like him, is justified. No, I don't follow his advice. I do watch his show occasionally while using the tread mill at the gym. It strikes me that his show could be called "Having Fun and the Lure of Making Money through Trading". However, there is risk in the stock market and many people who had been lulled into complacency by the likes of Cramer have suddenly re-awoken to that risk. And when they did, they yanked all of their money out of stock, bonds, even gold!
The truth is, the only people guaranteed to make money in the stock market are stock brokers, who make a commission on every sale, and media types such as Cramer, who get paid very well to entice the lemmings to the cliff. There are those who say all of this is for the good of the "service economy".
Those of us who are "invested" are taking risks. True, over the long term, there is ample evidence that it is possible to make money buying quality stocks. Cramer is now advocating just that. He said yesterday (October 21) on his program that "It's still possible to make money in stocks... It's always been possible. But you have to know what to look for, particularly in this market!... As much as this market has made us lose some of our faith in the ability of stocks to go higher... As much as this market has pummeled us beyond all recognition... it's also given us a new touchstone... it has given us... a new faith in dividends..."
The title of that program, as per his website, was:
"Stick with the Dividend Plays for Capital Preservation..."
http://www.madmoneyrecap.com/index.html
So now Cramer says, take what is left of your retirement portfolio and put it into dividend paying stocks! Of course, there are stocks out there that pay dividends, healthy dividends, but won't survive the economic downturn. Oh, and by the way, if you get a healthy 5% growth on your remaining investments, and assuming you lost 40% in the past year, it could take 10 years using this investing technique to get back to where you were in September 2007! If you do very well and can get 10% growth on your ravaged portfolio, it will only take 6 years to recover. Which is why having a stock market time horizon of less than 5 to 10 years is dangerous to your financial health. It is I suppose why Jim Cramer told people to pull their money. However, there is frequently a sharp upswing in the market at the conclusion of a bear market. For example, at the conclusion of the bear markets of 1974 and 1982, which were very severe bear markets, the stock market returned at least 60% in the next 9 months. I have read that this also happened after the 1932 stock market bottom which was the Great Depression.
See this website: Bear Market Recoveries Since 1950
In the above, you will note that it took 10 years for the S&P 500 to fully recover. This was considered a worst case scenario. The important thing is to realize that these long, anemic or sideways markets do and did happen. Can you wait 10 years?
In fairness to Cramer, there is money to be made in trading stocks, and a lot of people have fun doing some trading. I suppose it's a healthy pastime, as long as one doesn't jeopardize their retirement funds. That means, probably no more than about 5% of one's worth should ever be invested for trading on a show such as Cramer's. If you "win" fine, and if you lose it all, you haven't lost much. But it is easy to get cocky and it is easy to get caught up in the excitement. People do it each and every day in casinos all across the USA.
You are probably wondering if I am invested in the stock market. The answer is yes. I do have my reasons. If you want to know what they are, then go to this site: http://letmethinkaboutthis.blogspot.com/2008/10/check-in-in-20-years.html
Tuesday, October 21, 2008
Warren Buffett Says "Buy American, I am!"
Warren Buffett wrote and Op-Ed piece in the New York Times last week. On first blush, it sounds good. See:
http://www.nytimes.com/2008/10/17/opinion/17buffett.html?em
To Quote Mr Buffett:
"The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.
So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities...."
Mr. Buffett goes on to say:
"Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.
Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”"
This sounds good, and Mr. Buffett did purchase a stake in GE to the tune of $3 Billion, and before that in Goldman Sachs. Unfortunately, his investment is not in the same common stock I would be purchasing if I were to "Buy American". Mr. Buffett is getting the best equity investment possible via preferred stock, and in the case of GE, is also getting a 10% annual dividend. GE can buy the stock back after three years, but only at a 10% premium. Mr. Buffett also gets warrants to buy GE common stock at any time during the next five years at $22.25 a share. Keep in mind that one year ago, GE common stock was selling for $40 a share. If the stock recovers, Mr. Buffett could double his return on top of the dividends he is getting paid.
However, I will get no such deal if I "Buy American". Something to keep in mind when reading Mr. Buffett's piece.
In fairness to Mr. Buffett, he is stating that stocks at the moment are "cheap". Deal or no deal, the price is right! He also says that "If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities."
Sounds good to me! In fact, when the market tanked, I stopped everything and made a list of stocks in various companies I want to own, and had not previously purchased as I felt the stock was overpriced. I have since used that list to purchase stock in one company; I do expect to purchase stock from the other companies on my list and perhaps for all of those on my list.
http://www.nytimes.com/2008/10/17/opinion/17buffett.html?em
To Quote Mr Buffett:
"The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.
So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities...."
Mr. Buffett goes on to say:
"Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.
Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”"
This sounds good, and Mr. Buffett did purchase a stake in GE to the tune of $3 Billion, and before that in Goldman Sachs. Unfortunately, his investment is not in the same common stock I would be purchasing if I were to "Buy American". Mr. Buffett is getting the best equity investment possible via preferred stock, and in the case of GE, is also getting a 10% annual dividend. GE can buy the stock back after three years, but only at a 10% premium. Mr. Buffett also gets warrants to buy GE common stock at any time during the next five years at $22.25 a share. Keep in mind that one year ago, GE common stock was selling for $40 a share. If the stock recovers, Mr. Buffett could double his return on top of the dividends he is getting paid.
However, I will get no such deal if I "Buy American". Something to keep in mind when reading Mr. Buffett's piece.
In fairness to Mr. Buffett, he is stating that stocks at the moment are "cheap". Deal or no deal, the price is right! He also says that "If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities."
Sounds good to me! In fact, when the market tanked, I stopped everything and made a list of stocks in various companies I want to own, and had not previously purchased as I felt the stock was overpriced. I have since used that list to purchase stock in one company; I do expect to purchase stock from the other companies on my list and perhaps for all of those on my list.
Mark Zandi on the Risky Loans Behind the Meltdown
"'Financial Shock': Mark Zandi on the Risky Loans Behind the Meltdown"
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2076
Mark Zandi is chief economist, and founder of Moody's Economy.com. Moody's is one of the rating agencies that has been reported as dropping the ball in the recent financial meltdown, rating sophisticated mortgaged backed securities as AAA, or as good as U.S. Treasury bills and bonds. Mr. Zandi is in the process of publishing a book "Financial Shock" which is about the entire mess. Here is a quote from the above article:
"Well, many things surprised me. But at the most fundamental level, it was just how egregious the lending had become at the peak of the housing boom. It wasn't just simply making loans to people with low credit scores. It was making loans to people with low credit scores with no down payment, or down payment assistance. With no proof of income and just an enormous amount of risk layering that was going on. You know, I had a sense that obviously underwriting standards in the mortgage industry had fallen. I had no concept to what degree they had declined. And that's a bit surprising to me, because many of my clients are in the industry. They're mortgage companies, mortgage insurance companies; the Fannie Maes and Freddie Macs of the world. And I thought I had a pretty good understanding. I thought it was bad, but I had no understanding of how bad it really was."
Mr. Zandi closed the interview with this comment: "We still don't know -- really don't know -- how many people are being foreclosed on. No one knows. And that's not the fodder of good policy-making."
For some idea of what the foreclosure rate will look like for the near term (2008 to 2012) go to this link, which shows the anticipated increases in mortgage interest rate resets, or increases. Foreclosures will rise as these mortgages reset. The chart isn't pretty:
http://www.goodevalue.com/wp-content/uploads/2008/04/imfresets.jpg
As for Mr. Zandi's comment about the numbers of people being foreclosed on, consider this. It is anticipated that many option-ARM borrowers will face significantly higher monthly payment increases in the near future. How many? The statistics I have seen indicate that loans totaling about $30 billion will reset in 2009 and as much at $70 billion will reset in 2010. These are not sub-prime loans.
As a result, defaults are expected to double again. I think that politicians or economists who expect the housing market crises will “bottom” in early 2009 are absolutely wrong, unless there is strong government intervention to prevent these automatic resets. This event is not a surprise. In March 2008, Goldman Sachs estimated that a 15% decline in housing values would occur and that 21% of the total number of people with a mortgage would owe more than their house was worth. However, it was also estimated that if a recession occurred then there would be a total decline in the value of housing of 30% and a whopping 39% of people owing mortgages would be under water. It is now a certainty that we are in or are entering a serious recession.
I am not certain if our government will intervene until it is too late. At present, congress is working on committees of lynching parties rather than averting this looming crisis. So batten down the hatches and be prepared for a potentially rough ride for the next two or three years. However, the pessimists say it will be 2020 before all of this gets straightened out!
For more on the mortgage resets, go to:
http://letmethinkaboutthis.blogspot.com/2008/10/is-it-greed-or-stupidity.html
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2076
Mark Zandi is chief economist, and founder of Moody's Economy.com. Moody's is one of the rating agencies that has been reported as dropping the ball in the recent financial meltdown, rating sophisticated mortgaged backed securities as AAA, or as good as U.S. Treasury bills and bonds. Mr. Zandi is in the process of publishing a book "Financial Shock" which is about the entire mess. Here is a quote from the above article:
"Well, many things surprised me. But at the most fundamental level, it was just how egregious the lending had become at the peak of the housing boom. It wasn't just simply making loans to people with low credit scores. It was making loans to people with low credit scores with no down payment, or down payment assistance. With no proof of income and just an enormous amount of risk layering that was going on. You know, I had a sense that obviously underwriting standards in the mortgage industry had fallen. I had no concept to what degree they had declined. And that's a bit surprising to me, because many of my clients are in the industry. They're mortgage companies, mortgage insurance companies; the Fannie Maes and Freddie Macs of the world. And I thought I had a pretty good understanding. I thought it was bad, but I had no understanding of how bad it really was."
Mr. Zandi closed the interview with this comment: "We still don't know -- really don't know -- how many people are being foreclosed on. No one knows. And that's not the fodder of good policy-making."
For some idea of what the foreclosure rate will look like for the near term (2008 to 2012) go to this link, which shows the anticipated increases in mortgage interest rate resets, or increases. Foreclosures will rise as these mortgages reset. The chart isn't pretty:
http://www.goodevalue.com/wp-content/uploads/2008/04/imfresets.jpg
As for Mr. Zandi's comment about the numbers of people being foreclosed on, consider this. It is anticipated that many option-ARM borrowers will face significantly higher monthly payment increases in the near future. How many? The statistics I have seen indicate that loans totaling about $30 billion will reset in 2009 and as much at $70 billion will reset in 2010. These are not sub-prime loans.
As a result, defaults are expected to double again. I think that politicians or economists who expect the housing market crises will “bottom” in early 2009 are absolutely wrong, unless there is strong government intervention to prevent these automatic resets. This event is not a surprise. In March 2008, Goldman Sachs estimated that a 15% decline in housing values would occur and that 21% of the total number of people with a mortgage would owe more than their house was worth. However, it was also estimated that if a recession occurred then there would be a total decline in the value of housing of 30% and a whopping 39% of people owing mortgages would be under water. It is now a certainty that we are in or are entering a serious recession.
I am not certain if our government will intervene until it is too late. At present, congress is working on committees of lynching parties rather than averting this looming crisis. So batten down the hatches and be prepared for a potentially rough ride for the next two or three years. However, the pessimists say it will be 2020 before all of this gets straightened out!
For more on the mortgage resets, go to:
http://letmethinkaboutthis.blogspot.com/2008/10/is-it-greed-or-stupidity.html
Wednesday, October 15, 2008
We're Not the Only One's Feeling the Pain
With the stock market tanked, a recession on the horizon and US government deficits heading toward 10% of GDP, it is important to note that the ordinary middle class citizen isn't the only one feeling pain. After reading this, you may possibly feel a bit better. For example:
James E. "Jimmy" Cayne, former CEO and Chairman of Bear Stearns. His stock in that company was once worth over $1 Billion, but after the company's forced sale to JPMorgan Chase in March 2008, he sold his entire stake in Bear Stearns for "only" $61 million. However, it has been reported that in February, 2008, Mr. Cayne closed on two 14th-floor condominium units overlooking Central Park in New York's Plaza Hotel for $27.4 million.
Former Washington Mutual CEO and Chairman Kerry K. Killinger "exited" WaMu in September 2008, he was given a golden parachute worth $22.3 million which included about 75% in cash, or $16.5 million with the balance in special restricted stock valued at about $5.7 million. Due to the banking crisis, his stock has plummeted and his total package is now worth "only" about $16.5 million. The severance was apparently in recognition of Mr. Killinger's long service to WaMu. In 2001 Mr. Killinger was named American Banker's "Banker of the Year." However, shortly after leaving WaMu, the bank was seized by the FDIC on September 25, 2008 and sold off to JPMorgan Chase in the biggest failure in U.S. banking history.
Former Merrill Lynch & Co., Inc. Chairman and CEO Ernest Stanley "Stan" O'Neal exited ML&C in October 2007 with a golden parachute worth about $161 million. His resignation came on the heel of losses of about $8 billion at ML&C. His severance included about 75% stock and options, retirement benefits of about $25 million, about $5.5 million in deferred compensation and an additional $10 million in performance awards. Due to the financial turmoil, the value of his package was reported as now being worth "only" about $66 million. Mr. O'Neal led ML&CO to a record profit of $4 billion in 2003 after presiding over the elimination of more than 20,000 jobs at that company.
Former CEO and Chairman Charles O. Prince III of Citigroup, who exited that company in November 2007 was given a golden parachute worth about $30 million. This was about 95% stock and options and retirement benefits of about $1.5 million. Due to the turmoil, the value of his package was reported as now being worth "only" about $15 million. It should be noted that at the time Mr. Prince left Citigroup, he had vested stock holdings worth about $94 million and had received about $53 million in salary over the four years he headed Citigroup.
Former President and CEO Martin J. Sullivan of American International Group, who exited that company in June 2008 and was given a golden parachute worth about $48 million. This was about 40% stock and options and cash benefits of about $19 million. Due to the turmoil, the value of his package was reported as now being worth "only" about $35 million. In 2007 Mr. Sullivan was awarded the American Ireland Fund Leadership Award. He is a recipient of The International Center, New York "Award of Excellence" and in 2007 was awarded as a member of the Order of the British Empire.
Former President, Chairman and CEO G. K. Thompson of Wachovia, who exited that company in June 2008 and was given a golden parachute worth about $9 million. This was about 80% stock and options and cash benefits of about $1.5 million. Due to the turmoil, the value of his package was reported as now being worth "only" about $3.5 million. In the most recent fiscal year, his compensation was reported as being about $22 million.
A Historical Perspective
In 2004, the New York Times had an article entitled "For Wall Street Chiefs, Big Paydays Continue". The following is a link and the article is free, although you may have to "log in" as a member of the NYT's online community.
http://query.nytimes.com/gst/fullpage.html?res=9407EED81630F930A15750C0A9629C8B63
James E. "Jimmy" Cayne, former CEO and Chairman of Bear Stearns. His stock in that company was once worth over $1 Billion, but after the company's forced sale to JPMorgan Chase in March 2008, he sold his entire stake in Bear Stearns for "only" $61 million. However, it has been reported that in February, 2008, Mr. Cayne closed on two 14th-floor condominium units overlooking Central Park in New York's Plaza Hotel for $27.4 million.
Former Washington Mutual CEO and Chairman Kerry K. Killinger "exited" WaMu in September 2008, he was given a golden parachute worth $22.3 million which included about 75% in cash, or $16.5 million with the balance in special restricted stock valued at about $5.7 million. Due to the banking crisis, his stock has plummeted and his total package is now worth "only" about $16.5 million. The severance was apparently in recognition of Mr. Killinger's long service to WaMu. In 2001 Mr. Killinger was named American Banker's "Banker of the Year." However, shortly after leaving WaMu, the bank was seized by the FDIC on September 25, 2008 and sold off to JPMorgan Chase in the biggest failure in U.S. banking history.
Former Merrill Lynch & Co., Inc. Chairman and CEO Ernest Stanley "Stan" O'Neal exited ML&C in October 2007 with a golden parachute worth about $161 million. His resignation came on the heel of losses of about $8 billion at ML&C. His severance included about 75% stock and options, retirement benefits of about $25 million, about $5.5 million in deferred compensation and an additional $10 million in performance awards. Due to the financial turmoil, the value of his package was reported as now being worth "only" about $66 million. Mr. O'Neal led ML&CO to a record profit of $4 billion in 2003 after presiding over the elimination of more than 20,000 jobs at that company.
Former CEO and Chairman Charles O. Prince III of Citigroup, who exited that company in November 2007 was given a golden parachute worth about $30 million. This was about 95% stock and options and retirement benefits of about $1.5 million. Due to the turmoil, the value of his package was reported as now being worth "only" about $15 million. It should be noted that at the time Mr. Prince left Citigroup, he had vested stock holdings worth about $94 million and had received about $53 million in salary over the four years he headed Citigroup.
Former President and CEO Martin J. Sullivan of American International Group, who exited that company in June 2008 and was given a golden parachute worth about $48 million. This was about 40% stock and options and cash benefits of about $19 million. Due to the turmoil, the value of his package was reported as now being worth "only" about $35 million. In 2007 Mr. Sullivan was awarded the American Ireland Fund Leadership Award. He is a recipient of The International Center, New York "Award of Excellence" and in 2007 was awarded as a member of the Order of the British Empire.
Former President, Chairman and CEO G. K. Thompson of Wachovia, who exited that company in June 2008 and was given a golden parachute worth about $9 million. This was about 80% stock and options and cash benefits of about $1.5 million. Due to the turmoil, the value of his package was reported as now being worth "only" about $3.5 million. In the most recent fiscal year, his compensation was reported as being about $22 million.
A Historical Perspective
In 2004, the New York Times had an article entitled "For Wall Street Chiefs, Big Paydays Continue". The following is a link and the article is free, although you may have to "log in" as a member of the NYT's online community.
http://query.nytimes.com/gst/fullpage.html?res=9407EED81630F930A15750C0A9629C8B63
Tuesday, October 7, 2008
Comments on the Senator's Letter to Constituents
Here are a few morsels:
To quote the Senator "my proposal, S.2133, which would have authorized the bankruptcy courts to restructure interest and scheduling of payments. The so-called variable rate mortgages have confronted many homeowners with the surprise that original payments, illustratively, of $1200 a month were soon raised to $2000 which resulted in defaults." and "Senator Durbin's proposed legislation, S.2136, which would have authorized the bankruptcy courts to reset the principal balance depending on the value of the home."
Comment: these two proposals would attempt to reward mortgage defaulters. Sen. Specter justifies the courts "restructuring" of variable rate mortgages to avoid the "surprise" confronting "many" homeowners. What is he talking about? The "surpise" that people didn't have sufficient financial knowledge, aka common sense, to make the purchase in the first place and always expected they would have sufficiently increasing earnings to cover their debts, or the surprise that the people who obtained adjustable rate mortgages couldn't flip their houses quickly enough to make money and then move on to their next quick buck scheme? What will that be? Making money through foreclosures? So now the Senators want the taxpayer to pay their defaulted mortgages, thereby keeping these people in their houses and maintaining their lifestyle?
Of course, the rest of us, who practiced LBYM; "living below your means", we haven't defaulted on our mortgages, we pay our creditors and bills on time, and we may have some cash saved "for emergencies". So we can now turn it over to the imbeciles and scafflaws. And why? Because we are responsible with our money, don't take greedy chances with that money. So the Senators' reward to us? We will not be given the opportunity to "restructure interest and the scheduling of payments".
To quote the Senator "my proposal, S.2133, which would have authorized the bankruptcy courts to restructure interest and scheduling of payments. The so-called variable rate mortgages have confronted many homeowners with the surprise that original payments, illustratively, of $1200 a month were soon raised to $2000 which resulted in defaults." and "Senator Durbin's proposed legislation, S.2136, which would have authorized the bankruptcy courts to reset the principal balance depending on the value of the home."
Comment: these two proposals would attempt to reward mortgage defaulters. Sen. Specter justifies the courts "restructuring" of variable rate mortgages to avoid the "surprise" confronting "many" homeowners. What is he talking about? The "surpise" that people didn't have sufficient financial knowledge, aka common sense, to make the purchase in the first place and always expected they would have sufficiently increasing earnings to cover their debts, or the surprise that the people who obtained adjustable rate mortgages couldn't flip their houses quickly enough to make money and then move on to their next quick buck scheme? What will that be? Making money through foreclosures? So now the Senators want the taxpayer to pay their defaulted mortgages, thereby keeping these people in their houses and maintaining their lifestyle?
Of course, the rest of us, who practiced LBYM; "living below your means", we haven't defaulted on our mortgages, we pay our creditors and bills on time, and we may have some cash saved "for emergencies". So we can now turn it over to the imbeciles and scafflaws. And why? Because we are responsible with our money, don't take greedy chances with that money. So the Senators' reward to us? We will not be given the opportunity to "restructure interest and the scheduling of payments".
One Senator's Note to Constituents re: $700B Bill
Thank you for contacting my office regarding the financial rescue legislation. I appreciate your views on this matter.
I reluctantly supported this package because the failure of Congress to act would run the risk of dire consequences, including an economic downturn which could cause more foreclosures, jeopardize retirement accounts, and further restrict credit which is necessary for small businesses to operate. I am philosophically opposed to bailouts. I think that when you have Wall Street entrepreneurs who take big risks to make big profits and they go sour, they ought to sustain the loss themselves and not look to the government for a bailout which ends up in the laps of the taxpayers. However, I supported the plan to avoid economic disaster that would extend well beyond Wall Street.
From the outset, I cautioned against Congress's rushing to judgment. When the initial proposal was made in mid-September, I wrote to Majority Leader Harry Reid and Republican Leader Mitch McConnell by letter dated September 21, 2008 urging we take the time necessary to get the legislation right. By letter dated September 23, 2008, I wrote to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke asking a series of questions which have not yet been answered. Then by letter dated September 27, 2008, accompanied by a Senate floor statement, I made a series of suggestions to the executive and legislative negotiators. Again, there has been insufficient time for a reply. Copies of these letters are available on my website:
http://specter.senate.gov
Whenever we deviate from regular order which has been developed during more than 200 years of serving our country very well, we are on thin ice. On regular order, the legislative process customarily begins with a bill which members of Congress can study and analyze. After the legislation is in hand, there are hearings with proponents and opponents of the bill and an opportunity for members to examine, really cross examine, to get to the heart of the issues and alternatives. Regular order calls for a markup in the committee of jurisdiction going over the language line by line with an opportunity to make changes with votes on those proposed modifications. Then the committee files a report which is reviewed by members in advance of floor action where amendments can be offered and debate occurs. The action by each house is then subjected to further refinement by a conference committee which makes the presentment to the President for yet another line of review. The process used to finalize this legislation drastically shortcut regular order.
The legislation passed by the Senate is enormously improved over the first Paulson proposal. The $700 billion is not to be authorized immediately, but instead there are installments of $250 billion, $100 billion at the request of the president and $350 billion more subject to congressional objection, although the latter phase may be unconstitutional under INS v. Chadha, which requires following regular legislative process with passage by both houses and Presidential approval to overrule Presidential action and perhaps inferentially legislative conditions. For protection of the taxpayers, the proposal contains a provision that if the government does not regain its money after five years, the President would be required to submit a plan for compensating the Treasury "from entities benefiting from the programs." While that provision is a far way from a guarantee or even assurances that such recovery legislation would be enacted, it gives some important comfort to the taxpayers' position.
There are provisions for multiple layers of oversight including a Financial Stability Oversight Board that will meet monthly to oversee the program. The Treasury Secretary will be required to report to Congress on a regular basis on the actions taken, along with a detailed financial statement. These reports will include information on each of the agreements made, insurance contracts entered into, and the nature of the asset purchased and projected costs and liabilities. Additional oversight will be provided by the Comptroller General (reports to Congress), a new Inspector General (audits and quarterly reports), a congressionally-appointed oversight panel (market and regulatory review, and reports to Congress on the program and the effectiveness of foreclosure mitigation efforts), and by the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) (cost estimates). A report will be required from the Secretary of the Treasury with an analysis of the current financial regulatory framework and recommendations for improvements.
There are substantial limitations on having benefits for entities which created the problem and limitations on executive pay. In cases where financial institutions sell troubled assets directly to the government with no competitive bidding and where the government receives a meaningful equity position, the legislation states that, until that equity stake is sold, executives would not get incentives "to take unnecessary and excessive risks" and would have to give up or repay bonuses or other incentives based on financial statements that "are later proven to be materially inaccurate." The bill also would prohibit "any golden parachute payment to senior executives."
The legislation is less stringent in provisions for financial institutions that sell their assets to the government through an auction. Such provisions would apply only to companies that sell more than $300 million in assets and would subject companies and employees to extra taxes. Corporations would not be able to deduct any salary or deferred compensation of more than $500,000, and top executives would face a 20% excise tax on golden parachute payments if they left for any reason other than retirement. In evaluating limitations on executive salaries, it is relevant to note that the Institute for Public Studies found that chief executives of large U.S. companies made an average of $10.5 million last year. That is more than 300 times the pay of the average worker.
The final proposal does provide for debt insurance, as advocated for by House Republicans, but leaves it to the Secretary of the Treasury to utilize that approach so it seems unlikely that it will be implemented in light of the fact that Secretary Paulson has bluntly stated his disagreement with it. Had there been floor amendments, Congress could have structured standards for utilization of debt insurance.
Had we followed regular order with an opportunity to propose amendments, consideration could have been given to my proposal, S.2133, which would have authorized the bankruptcy courts to restructure interest and scheduling of payments. The so-called variable rate mortgages have confronted many homeowners with the surprise that original payments, illustratively, of $1200 a month were soon raised to $2000 which resulted in defaults. Individualized examination by the bankruptcy courts might show misrepresentation or even fraud to justify revising the interest payments and rearranging the payment schedule. Or consideration could have been given to Senator Durbin's proposed legislation, S.2136, which would have authorized the bankruptcy courts to reset the principal balance depending on the value of the home. I opposed that bill because I thought it would discourage future lending, and in the long run raise the cost to homebuyers. But at least, following regular order, there would have been an opportunity to consider Senator Durbin's proposal as well as my suggested legislation.
The legislation contains authority for the Treasury Secretary to compensate foreign central banks under some conditions. It provides that troubled assets held by foreign financial authorities and banks are eligible for the Toxic Assets Recover Program (TARP) if the banks hold such assets as a result of having extended financing to financial institutions that have failed or defaulted. Had there been an opportunity for floor debate, that provision might have been sufficiently unpopular to be rejected or at least sharply circumscribed with conditions.
As a step to help keep borrowers in their homes, I proposed language found in Section 119 (b) of the bill to address the concern that some loan servicers have been reluctant to modify home mortgage loan terms because they fear litigation from investors who hold securities or other vehicles backed by the mortgage in question. The loan servicers have a legal duty to the investors to maximize the return on their investments. In testimony on December 6, 2007, before the House Committee on Financial Services, Mark Pearce, speaking on behalf of the conference of State Bank supervisors, discussed a meeting with the top 20 subprime servicers. He explained that "many of them brought up fear of investor lawsuits" as a hurdle to voluntary loan modification efforts. Because the rescue legislation encourages the government to seek voluntary loan modifications, it is important to remove any impediments to such modifications. To that end, the language provides a legal safe harbor for mortgage servicers making loan modifications, if the loan modifiers take reasonable mitigation steps, including accepting partial payments from homeowners.
On reforms to prevent a recurrence of this crisis, we need to question whether the rating agencies adequately analyzed mortgage-backed securities before issuing investment-grade ratings. These agencies appear to have failed. In July of 2007, when it became apparent that ratings issued by the big three rating agencies-Moody's, S&P and Fitch- could not be relied upon, I urged the relevant committees to look into the ratings that those agencies issued in recent years regarding mortgage-backed securities. Financial institutions that issue asset-backed securities obtain ratings for such securities. The failure to issue reliable ratings misrepresented the facts and fed the ability of financial institutions to tout the value of securities even though their value was declining. Congress and the regulators need to take up the rating agencies issue, and consider whether ratings agencies that have utterly failed to detect and reflect the risks associated with the securities they were rating should be accorded any reliance or role in our financial system. Some have suggested they should be regulated and we may need to consider that.
In addition, Congress and the regulators should review "off-balance sheet" transactions and leveraging. There should be a close examination on whether banks are sufficiently transparent and providing accurate accounting that truly reflects risk and leverage. Similarly there should be a review on Credit Default Swaps (CDS), which are privately traded derivatives contracts that have ballooned to make up what is a $2 trillion dollar market according to the Bank of International Settlements. They are a fast-growing major type of financial derivative. Many experts assert that they have played a critical role in this financial crisis as various financial players believed that they were safe because they thought CDS fully insured or protected them, but the CDS market is unregulated and no one really knows what exposure everyone else has from the CDS contracts. Consideration should be given to subjecting all over-the-counter derivatives onto a regulated exchange similar to that used by listed options in the equity markets.
Overleveraging has been a contributing factor in the turmoil that now threatens our financial institutions. We have seen a massive expansion of the practice of leveraged financial institutions (banks, investment banks, and hedge funds) making investments with borrowed money. In turn, they borrow more money by using the assets they just purchased as collateral. This sequence is continued again and again. The financial system, in its efforts to deleverage, is contracting credit. They must guard against future losses by holding more capital. Deleveraging is leading to difficulty on Main Street for individuals seeking to get a mortgage or buy a car. If a financial institution is able to unload its toxic assets onto the government, it will again be able to resume its lending activities that are crucial for economic growth in the United States. Unfortunately, much of the financial crisis has arisen from miscalculations of the risks involved with purchasing large amounts of securities backed by subprime mortgages and other toxic assets. We now see a situation where we are not just talking about a handful of firms. This is a widespread problem that should be addressed by this package and in future reforms of our financial regulatory structure.
In addition, the package crafted by Senate leaders includes two notable changes from the version that was rejected by the House on Monday. It includes a tax package that was previously passed in the Senate by a vote of 93-2 on September 23, 2008, but has since been rejected by the House in a dispute over revenue offsets. It includes tax incentives for wind, solar, biomass, and other alternative energy technologies. It also includes critically important relief from the Alternative Minimum Tax, which threatens to raise the tax liability of over 22 million unintended filers in 2008 if no action is taken. Finally, the package includes a host of provisions that either expired in 2007 or are set to expire in 2008, including the research and development tax credit, rail line improvement incentives, and quicker restaurant and retail depreciation schedules. I supported the Senate-passed tax extenders bill because it struck a responsible balance on the issue of revenue raising offsets.
The package also includes a provision to temporarily increase the Federal Deposit Insurance Corporation (FDIC) insurance limit to $250,000. Currently, the FDIC provides deposit insurance which guarantees the safety of checking and savings deposits in member banks, up to $100,000 per depositor per bank. Member banks pay a fee to participate. The current $100,000 limit has been unchanged since 1980 despite inflation. This approach is supported by both Senator McCain and Senator Obama, by House Republicans, and by the FDIC Chairman Sheila Bair. Raising the cap could stem a potential run on deposits by bank customers, particularly businesses, who fear losing their money. Such fears contributed to the collapse of Washington Mutual and Wachovia Bank.
Congress has been called upon to make the best of a very bad situation. Careful oversight of the authority given to the Treasury Department will need to be undertaken, and a review of our regulatory structure will be necessary as we move forward.
Again, thank you for writing. The concerns of my constituents are of great importance to me, and I rely on you and other Pennsylvanians to inform me of your views. If you require assistance with a federal agency, please contact my state office in your area. The contact information can be found on my website at specter.senate.gov.
Sincerely,
Arlen Specter
I reluctantly supported this package because the failure of Congress to act would run the risk of dire consequences, including an economic downturn which could cause more foreclosures, jeopardize retirement accounts, and further restrict credit which is necessary for small businesses to operate. I am philosophically opposed to bailouts. I think that when you have Wall Street entrepreneurs who take big risks to make big profits and they go sour, they ought to sustain the loss themselves and not look to the government for a bailout which ends up in the laps of the taxpayers. However, I supported the plan to avoid economic disaster that would extend well beyond Wall Street.
From the outset, I cautioned against Congress's rushing to judgment. When the initial proposal was made in mid-September, I wrote to Majority Leader Harry Reid and Republican Leader Mitch McConnell by letter dated September 21, 2008 urging we take the time necessary to get the legislation right. By letter dated September 23, 2008, I wrote to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke asking a series of questions which have not yet been answered. Then by letter dated September 27, 2008, accompanied by a Senate floor statement, I made a series of suggestions to the executive and legislative negotiators. Again, there has been insufficient time for a reply. Copies of these letters are available on my website:
http://specter.senate.gov
Whenever we deviate from regular order which has been developed during more than 200 years of serving our country very well, we are on thin ice. On regular order, the legislative process customarily begins with a bill which members of Congress can study and analyze. After the legislation is in hand, there are hearings with proponents and opponents of the bill and an opportunity for members to examine, really cross examine, to get to the heart of the issues and alternatives. Regular order calls for a markup in the committee of jurisdiction going over the language line by line with an opportunity to make changes with votes on those proposed modifications. Then the committee files a report which is reviewed by members in advance of floor action where amendments can be offered and debate occurs. The action by each house is then subjected to further refinement by a conference committee which makes the presentment to the President for yet another line of review. The process used to finalize this legislation drastically shortcut regular order.
The legislation passed by the Senate is enormously improved over the first Paulson proposal. The $700 billion is not to be authorized immediately, but instead there are installments of $250 billion, $100 billion at the request of the president and $350 billion more subject to congressional objection, although the latter phase may be unconstitutional under INS v. Chadha, which requires following regular legislative process with passage by both houses and Presidential approval to overrule Presidential action and perhaps inferentially legislative conditions. For protection of the taxpayers, the proposal contains a provision that if the government does not regain its money after five years, the President would be required to submit a plan for compensating the Treasury "from entities benefiting from the programs." While that provision is a far way from a guarantee or even assurances that such recovery legislation would be enacted, it gives some important comfort to the taxpayers' position.
There are provisions for multiple layers of oversight including a Financial Stability Oversight Board that will meet monthly to oversee the program. The Treasury Secretary will be required to report to Congress on a regular basis on the actions taken, along with a detailed financial statement. These reports will include information on each of the agreements made, insurance contracts entered into, and the nature of the asset purchased and projected costs and liabilities. Additional oversight will be provided by the Comptroller General (reports to Congress), a new Inspector General (audits and quarterly reports), a congressionally-appointed oversight panel (market and regulatory review, and reports to Congress on the program and the effectiveness of foreclosure mitigation efforts), and by the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) (cost estimates). A report will be required from the Secretary of the Treasury with an analysis of the current financial regulatory framework and recommendations for improvements.
There are substantial limitations on having benefits for entities which created the problem and limitations on executive pay. In cases where financial institutions sell troubled assets directly to the government with no competitive bidding and where the government receives a meaningful equity position, the legislation states that, until that equity stake is sold, executives would not get incentives "to take unnecessary and excessive risks" and would have to give up or repay bonuses or other incentives based on financial statements that "are later proven to be materially inaccurate." The bill also would prohibit "any golden parachute payment to senior executives."
The legislation is less stringent in provisions for financial institutions that sell their assets to the government through an auction. Such provisions would apply only to companies that sell more than $300 million in assets and would subject companies and employees to extra taxes. Corporations would not be able to deduct any salary or deferred compensation of more than $500,000, and top executives would face a 20% excise tax on golden parachute payments if they left for any reason other than retirement. In evaluating limitations on executive salaries, it is relevant to note that the Institute for Public Studies found that chief executives of large U.S. companies made an average of $10.5 million last year. That is more than 300 times the pay of the average worker.
The final proposal does provide for debt insurance, as advocated for by House Republicans, but leaves it to the Secretary of the Treasury to utilize that approach so it seems unlikely that it will be implemented in light of the fact that Secretary Paulson has bluntly stated his disagreement with it. Had there been floor amendments, Congress could have structured standards for utilization of debt insurance.
Had we followed regular order with an opportunity to propose amendments, consideration could have been given to my proposal, S.2133, which would have authorized the bankruptcy courts to restructure interest and scheduling of payments. The so-called variable rate mortgages have confronted many homeowners with the surprise that original payments, illustratively, of $1200 a month were soon raised to $2000 which resulted in defaults. Individualized examination by the bankruptcy courts might show misrepresentation or even fraud to justify revising the interest payments and rearranging the payment schedule. Or consideration could have been given to Senator Durbin's proposed legislation, S.2136, which would have authorized the bankruptcy courts to reset the principal balance depending on the value of the home. I opposed that bill because I thought it would discourage future lending, and in the long run raise the cost to homebuyers. But at least, following regular order, there would have been an opportunity to consider Senator Durbin's proposal as well as my suggested legislation.
The legislation contains authority for the Treasury Secretary to compensate foreign central banks under some conditions. It provides that troubled assets held by foreign financial authorities and banks are eligible for the Toxic Assets Recover Program (TARP) if the banks hold such assets as a result of having extended financing to financial institutions that have failed or defaulted. Had there been an opportunity for floor debate, that provision might have been sufficiently unpopular to be rejected or at least sharply circumscribed with conditions.
As a step to help keep borrowers in their homes, I proposed language found in Section 119 (b) of the bill to address the concern that some loan servicers have been reluctant to modify home mortgage loan terms because they fear litigation from investors who hold securities or other vehicles backed by the mortgage in question. The loan servicers have a legal duty to the investors to maximize the return on their investments. In testimony on December 6, 2007, before the House Committee on Financial Services, Mark Pearce, speaking on behalf of the conference of State Bank supervisors, discussed a meeting with the top 20 subprime servicers. He explained that "many of them brought up fear of investor lawsuits" as a hurdle to voluntary loan modification efforts. Because the rescue legislation encourages the government to seek voluntary loan modifications, it is important to remove any impediments to such modifications. To that end, the language provides a legal safe harbor for mortgage servicers making loan modifications, if the loan modifiers take reasonable mitigation steps, including accepting partial payments from homeowners.
On reforms to prevent a recurrence of this crisis, we need to question whether the rating agencies adequately analyzed mortgage-backed securities before issuing investment-grade ratings. These agencies appear to have failed. In July of 2007, when it became apparent that ratings issued by the big three rating agencies-Moody's, S&P and Fitch- could not be relied upon, I urged the relevant committees to look into the ratings that those agencies issued in recent years regarding mortgage-backed securities. Financial institutions that issue asset-backed securities obtain ratings for such securities. The failure to issue reliable ratings misrepresented the facts and fed the ability of financial institutions to tout the value of securities even though their value was declining. Congress and the regulators need to take up the rating agencies issue, and consider whether ratings agencies that have utterly failed to detect and reflect the risks associated with the securities they were rating should be accorded any reliance or role in our financial system. Some have suggested they should be regulated and we may need to consider that.
In addition, Congress and the regulators should review "off-balance sheet" transactions and leveraging. There should be a close examination on whether banks are sufficiently transparent and providing accurate accounting that truly reflects risk and leverage. Similarly there should be a review on Credit Default Swaps (CDS), which are privately traded derivatives contracts that have ballooned to make up what is a $2 trillion dollar market according to the Bank of International Settlements. They are a fast-growing major type of financial derivative. Many experts assert that they have played a critical role in this financial crisis as various financial players believed that they were safe because they thought CDS fully insured or protected them, but the CDS market is unregulated and no one really knows what exposure everyone else has from the CDS contracts. Consideration should be given to subjecting all over-the-counter derivatives onto a regulated exchange similar to that used by listed options in the equity markets.
Overleveraging has been a contributing factor in the turmoil that now threatens our financial institutions. We have seen a massive expansion of the practice of leveraged financial institutions (banks, investment banks, and hedge funds) making investments with borrowed money. In turn, they borrow more money by using the assets they just purchased as collateral. This sequence is continued again and again. The financial system, in its efforts to deleverage, is contracting credit. They must guard against future losses by holding more capital. Deleveraging is leading to difficulty on Main Street for individuals seeking to get a mortgage or buy a car. If a financial institution is able to unload its toxic assets onto the government, it will again be able to resume its lending activities that are crucial for economic growth in the United States. Unfortunately, much of the financial crisis has arisen from miscalculations of the risks involved with purchasing large amounts of securities backed by subprime mortgages and other toxic assets. We now see a situation where we are not just talking about a handful of firms. This is a widespread problem that should be addressed by this package and in future reforms of our financial regulatory structure.
In addition, the package crafted by Senate leaders includes two notable changes from the version that was rejected by the House on Monday. It includes a tax package that was previously passed in the Senate by a vote of 93-2 on September 23, 2008, but has since been rejected by the House in a dispute over revenue offsets. It includes tax incentives for wind, solar, biomass, and other alternative energy technologies. It also includes critically important relief from the Alternative Minimum Tax, which threatens to raise the tax liability of over 22 million unintended filers in 2008 if no action is taken. Finally, the package includes a host of provisions that either expired in 2007 or are set to expire in 2008, including the research and development tax credit, rail line improvement incentives, and quicker restaurant and retail depreciation schedules. I supported the Senate-passed tax extenders bill because it struck a responsible balance on the issue of revenue raising offsets.
The package also includes a provision to temporarily increase the Federal Deposit Insurance Corporation (FDIC) insurance limit to $250,000. Currently, the FDIC provides deposit insurance which guarantees the safety of checking and savings deposits in member banks, up to $100,000 per depositor per bank. Member banks pay a fee to participate. The current $100,000 limit has been unchanged since 1980 despite inflation. This approach is supported by both Senator McCain and Senator Obama, by House Republicans, and by the FDIC Chairman Sheila Bair. Raising the cap could stem a potential run on deposits by bank customers, particularly businesses, who fear losing their money. Such fears contributed to the collapse of Washington Mutual and Wachovia Bank.
Congress has been called upon to make the best of a very bad situation. Careful oversight of the authority given to the Treasury Department will need to be undertaken, and a review of our regulatory structure will be necessary as we move forward.
Again, thank you for writing. The concerns of my constituents are of great importance to me, and I rely on you and other Pennsylvanians to inform me of your views. If you require assistance with a federal agency, please contact my state office in your area. The contact information can be found on my website at specter.senate.gov.
Sincerely,
Arlen Specter
Thursday, October 2, 2008
Costs Escalate for New York City’s “Hub to Somewhere”
The US taxpayer is currently on the hook for “only” about $2.2 Billion for New York City’s new transportation hub. However, it has been reported that while over $174 million has been spent for architects and engineers, no construction has yet begun. Nor does the report indicate where the funds will come from for the latest cost escalation. It would be reasonable to expect that additional funding will be requested from the taxpayer.
The latest details are contained in a 70 page report issued October 2, 2008 by the Port Authority of NY and NJ.
In 2004 the transportation hub project was unveiled with a projected cost of $2.2 Billion. In this, the latest round of re-estimates, the projected costs for the hub have now risen to $3.2 Billion. However, as no construction has yet begun and as construction is not scheduled for completion until the “probabilistic date” of the second quarter of 2014, it is also reasonable to assume that the costs will further increase. The report states that for the period 2004 to 2007, construction costs in NYC increased at the rate of 12% per year. The project is not even scheduled to go to market for the purchase of steel until “as early as” November 2008.
To put the cost of the hub into perspective, the cost of the “One World Trade Center, Freedom Tower” is currently projected to be less than the hub, at $3.1 Billion!
Cost projections include additional payments of $128 Million to the architects, for a total bill of about $302 Million for design. It is to be noted that the taxpayer’s money is administered through the Federal Transit Administration. A FTA spokesman has been quoted as saying that the design cost of "10% for design is consistent with best practices.” The report acknowledges however, that the FTA “has long called for greater project controls and a candid and on-going assessment of where this project stands.”
The report states that “If you consider how much value this money is buying, it begins to put the cost into perspective”.
The hub is intended to be a “Grand Central Station” for lower Manhattan and will be 800,000 square feet in size. However, according to the report, the hub will include “500,000 square feet of first class retail and restaurant space [which is] larger than the retail contained in the Time Warner Center” and is “a world-class retail venue serving all of lower Manhattan.”
As further stated in the report, this hub is to help “revitalize the Lower Manhattan Economy.”
I have to ask the question whether or not this is a good use of taxpayer money. While other communities all over the USA are struggling, the taxpayer is footing what could be argued to be most of the bill to construct a world-class shopping mall for Manhattan.
Note: After this was posted, a decision was made by the owners of the World Trade Center site in which they announced "scaled back designs for ...[the] transit hub....and delay...[of] other projects by several years...costs will still be more than $1 billion over budget".
The latest details are contained in a 70 page report issued October 2, 2008 by the Port Authority of NY and NJ.
In 2004 the transportation hub project was unveiled with a projected cost of $2.2 Billion. In this, the latest round of re-estimates, the projected costs for the hub have now risen to $3.2 Billion. However, as no construction has yet begun and as construction is not scheduled for completion until the “probabilistic date” of the second quarter of 2014, it is also reasonable to assume that the costs will further increase. The report states that for the period 2004 to 2007, construction costs in NYC increased at the rate of 12% per year. The project is not even scheduled to go to market for the purchase of steel until “as early as” November 2008.
To put the cost of the hub into perspective, the cost of the “One World Trade Center, Freedom Tower” is currently projected to be less than the hub, at $3.1 Billion!
Cost projections include additional payments of $128 Million to the architects, for a total bill of about $302 Million for design. It is to be noted that the taxpayer’s money is administered through the Federal Transit Administration. A FTA spokesman has been quoted as saying that the design cost of "10% for design is consistent with best practices.” The report acknowledges however, that the FTA “has long called for greater project controls and a candid and on-going assessment of where this project stands.”
The report states that “If you consider how much value this money is buying, it begins to put the cost into perspective”.
The hub is intended to be a “Grand Central Station” for lower Manhattan and will be 800,000 square feet in size. However, according to the report, the hub will include “500,000 square feet of first class retail and restaurant space [which is] larger than the retail contained in the Time Warner Center” and is “a world-class retail venue serving all of lower Manhattan.”
As further stated in the report, this hub is to help “revitalize the Lower Manhattan Economy.”
I have to ask the question whether or not this is a good use of taxpayer money. While other communities all over the USA are struggling, the taxpayer is footing what could be argued to be most of the bill to construct a world-class shopping mall for Manhattan.
Note: After this was posted, a decision was made by the owners of the World Trade Center site in which they announced "scaled back designs for ...[the] transit hub....and delay...[of] other projects by several years...costs will still be more than $1 billion over budget".
Wednesday, October 1, 2008
Secretary of the Treasury to be given broad powers to hire outside firms
It was reported today in the Washington Post that as a part of the HR3997 and possibly also the Senate version, Secretary of the Treasury Paulson will be give broad powers to hire contractors to administer the $700B he will be spreading to banks and investment banks, both foreign and domestic.
To quote Joe Davidson in the Washington Post: "Treasury Secretary Henry M. Paulson Jr. wants the ability to move quickly to smooth the very rocky road that is now Wall Street. He proposed granting his office essentially unlimited authority to hire outside firms to help manage the assets of companies the government basically nationalizes."
What a deal! Wall Street creates this mess and then gets bailed out and collects fees!
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/29/AR2008092903163.html
http://www.washingtontechnology.com/online/1_1/33599-1.html
To quote Joe Davidson in the Washington Post: "Treasury Secretary Henry M. Paulson Jr. wants the ability to move quickly to smooth the very rocky road that is now Wall Street. He proposed granting his office essentially unlimited authority to hire outside firms to help manage the assets of companies the government basically nationalizes."
What a deal! Wall Street creates this mess and then gets bailed out and collects fees!
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/29/AR2008092903163.html
http://www.washingtontechnology.com/online/1_1/33599-1.html
Tuesday, September 30, 2008
Thanked my Congressman for Voting Against HR3997
I have read HR3997 and I am convinced this is a bad deal. I am also disappointed that so many of our politicians have been so poor in articulating the probem; don't just tell me it's no good (another version of "trust me; I'm more knowedgeable than you", or "it's too complicated and you would never understand it"). Don't pander to me either; simply tell me "why" in plain english!!!
This is the note I emailed and faxed to my congressman:
"Thank you for voting against HR 3997 Emergency Economic Stabilization Act of 2008.
I read the act and I have many questions. One of which is, why are we including the troubled assets of "any" financial institution, and specifically "foreign authorities and central banks"?
I further agree with the numerous statements of Rep. Marcy Kaptur, D. Ohio on the subject of rushing to bail out wall street and ignoring the problems on main street.
I understand the compexity and the issues of bailing out home owners who may have made poor decisions or stupid ones. However, why are we spending $700B (or at the very least guaranteeing that amount)???
There must be a better way that protects american assets, provides the credit that the markets requires and does not hand billions of dollars to the same people who got us into this mess in the first place. If this problem is so complex, that ordinary citizens can't understand it, as has been said, then I must question the wisdom of the people who got us into the mess in the first place.
They obviously didn't understand the compexity of what they were doing, or if they did, they they made rash and equally poor decisions and must not be trusted to implement a solution.
Thank you again!"
This is the note I emailed and faxed to my congressman:
"Thank you for voting against HR 3997 Emergency Economic Stabilization Act of 2008.
I read the act and I have many questions. One of which is, why are we including the troubled assets of "any" financial institution, and specifically "foreign authorities and central banks"?
I further agree with the numerous statements of Rep. Marcy Kaptur, D. Ohio on the subject of rushing to bail out wall street and ignoring the problems on main street.
I understand the compexity and the issues of bailing out home owners who may have made poor decisions or stupid ones. However, why are we spending $700B (or at the very least guaranteeing that amount)???
There must be a better way that protects american assets, provides the credit that the markets requires and does not hand billions of dollars to the same people who got us into this mess in the first place. If this problem is so complex, that ordinary citizens can't understand it, as has been said, then I must question the wisdom of the people who got us into the mess in the first place.
They obviously didn't understand the compexity of what they were doing, or if they did, they they made rash and equally poor decisions and must not be trusted to implement a solution.
Thank you again!"
Full Text of "HR 3997 Emergency Economic Stabilization Act of 2008"
The following site has the full text of the ""HR 3997 Emergency Economic Stabilization Act of 2008"
http://www.rules.house.gov/110/text/110_hr3997_amnd_samnd.pdf
HR 3997 is a 109 page document. The following is a condensation of the first 32 pages including selected excerpts:
The US Government, that is, the US Taxpayer, will establish a fund called "the TARP" and will purchase "any and all" of the troubled assets from "any" financial institution. This includes "foreign authorities and central banks". The terms and conditions (if any) will be determined by the Secretary of the Treasury.
Everyone, that is, Paulson and the politicians in favor of this legislation, say there is a "good chance" the taxpayer will break even on this. However, this could only be a good deal for the taxpayer if the government were to purchase the troubled assets at market prices. However, our government has already said it WILL NOT be paying market prices. Our government will purchase these troubled assets by paying ABOVE MARKET prices. It appears the purpose of this legislation is to recapitalize the banks without getting much equity in exchange. The cost of this WILL be passed on to the taxpayer!
It gets worse. What "troubled assets" are we talking about? "Any residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages...originated on or before March 14, 2008...[and] any other financial instrument that the Secretary after consultation with the Chairman...of the Federal Reserve System,"
"The Secretary shall take such steps as my be necessary to prevent unjust enrichment of financial institutions participating in a program established under this section [section 101 - purchases of troubled assets]."
There is also a provision for an "insurance program". This is contained in "Sec. 102. Insurance of Troubled Assets". "the Secretary shall establish a program to guarantee troubled assets originated or issued prior to March 14, 2008". "the Secretary may guarantee the timely payment of principal of, and interest on, troubled assets in the amounts not to exceed 100 percent of such payments." "the Secretary shall collect premiums from any financial institutions participating in the program". "Such premiums shall be in the amount that the Secretary determines necessary to meet the purposes of this Act and to provide sufficient reserves ["to meet anticipated claims, based on an actuarial analysis, and to ensure that taxpayers are fully protected."]."
The Secretary will be "providing financial assistance to financial institutions... that have assets less than $1,000,000,000, that were well or adequately capitalized as of June 30, 2008, and that as a result of the devaluation of the preferred government sponsored enterprises stock will drop one or more capital levels..".
The Secretary will be "protecting the retirement security of Americans by purchasing troubled assets held by or on behalf of eligible retirement plan described in clause (iii), (iv), (v) or (vi) of section 402(c)(8)(B) of the Internal Revenue Code of 1986 except...not compensation arrangements subject to section 409A..". "and the utility of purchasing other real estate owned and instruments backed by mortgages on multifamily properties." [Note: IRS section 402(c)(8)(B) defines an "eligible retirement plan" as (i) and individual retirement account as described in Code section 408(a), (ii) an individual retirement annuity as described in Code section 408(b), (iii) a section 401(a) qualified retirement plan, and (iv) and an annuity plan as described in section 403(a)].
"there is established the Financial Stability Oversight Board, which shall be responsible for...reviewing the exercise of authority under..this Act, including.. policies implemented by the Secretary and the Office of Financial Stability...including appointment of financial agents [and]... the asset classes to be purchased.." The FSOB will be "reporting any suspected fraud, misrepresentation, or malfeasance to the Special Inspector General for the Troubled Assets Relief Program.."
"The Financial Stability Oversight Board shall be comprised of..the Chairman of..the Federal Reserve System, the Secretary, the Director of the FHA, the Chairman of the SEC and the Secretary of HUD." "The chairperson shall be elected by the members of the board of the FSOB from among the members other than the Secretary."
The bill includes a list of reporting requirements.
Section 106 of the bill pertains to "Rights; Management; Sale of Troubled Assets; Revenues and Sale Proceeds". "the Secretary shall have authority to manage troubled assets purchased under this Act, including revenues and portfolio risks therefrom." "the Secretary may, at any time...sell or enter into securities loans, repurchase transactions, or other financial transactions in regard to, any troubled asset purchased under this Act." "Revenues...shall be paid into the general fund of the Treasury for the reduction of public debt."
Steamlined Process. "the Secretary may waive specific provisions of the Federal Acquisition Regulation upon a determination that urgent and compelling circumstances make compliance with such provisions contrary to the public interest."
"Additional Contracting Requirements. In any solicitation or contract....to the maximum extent practicable, the inclusion and utilization of minorities...and women- and minority and women-owned business."
"Eligibility of FDIC". "the Corporation...shall be elibible for...selection of asset managers for residential mortgage loans and residential mortgage-backed securities, and shall be reimbursed by the Secretary for any services provided."
Section "108. Conflicts of Interest." "The Secretary shall issue regulations or guidelines...to address and manage or to prohibit conflicts of interest..."
Section "109. Foreclosure Mitigation Efforts." "the Secretary shall implement a plan that seeks to maximize assistance for homeowners and use the authority of the Secretary to encourage the servicers of the underlying mortgages, considering net present value to the taxpayer, to tak advantage of the HOPE for Homeowners Program..".
Section "110. Assistance to Homeowners". To the extent that the [FHFA, bridge depository institution of the FDIC, Federal Reserve Bank] holds, owns or controls mortgages, mortgage backed securities, and other assets secured by residential real estate including multi-family housing...shall implement a plan that seeks to maximize assistance for homeowners and use its authority to encourage the servicers of underlying mortgages, and considering net present value to taxpayer, to take advantage of the HOPE for Homeowners Program...". Modifications... of a residentail mortgage loan... may include... reduction in interest rates, reduction in loan principal and other similar modifications. Tenant protections..on residential rental properties, modifications..shall ensure...the continuation of existing...subisidies; and that modifications take into account the need for operating funds to maintain decent living conditions at the property.
"Actions with respect to servicers. In any case in which [the FHFA, bridge depository institution of the FDIC, Federal Reserve Bank] is not the owner of a residential mortgage loand, but holds an interest in obligations or pools of obligations secured by residential morgage loans, the [FHFA, bridge depository institution of the FDIC, Federal Reserve Bank] shall encourage implementation by the loan servicers of loan modifications developed in section (b) [Homeowner Assistance by agencies] and... assist in facilitating such modifications...".
Section "111. Executive Compensation and Corporate Governance". "Any financial institution that sell troubled assets to the Secretary under this Act shall be subject to the executive compensation requirements of subsections (b) and (c) and the provisions under the Internal Revenue Code of 1986, as provided under the amendment by section 302, as applicable". " The standards requited under this subsection [criteria] shall include...limits on compensation that exclude incentives for senior executive officers [defined as one of the 5 top highly paid executives of a public company, whose compensation is required to be disclosed pursuant to SEC act of 1934...] of a financial institution to take unnecessary and excessive risks...". "A provision for the recovery by the financial institution of any bonus or incentive compensation paid to a senior exective officer...based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate; and ...a prohibition on ...making golden parachute payment..".
Section "112. Coordination with Foreign Authorities and Central Banks." "...to the extent that such foreign authorities or banks hold troubled assets as a result of extending financing to financial institutions that have failed or defaulted on such financing, such troubled assets qualify for purchase...".
http://www.rules.house.gov/110/text/110_hr3997_amnd_samnd.pdf
HR 3997 is a 109 page document. The following is a condensation of the first 32 pages including selected excerpts:
The US Government, that is, the US Taxpayer, will establish a fund called "the TARP" and will purchase "any and all" of the troubled assets from "any" financial institution. This includes "foreign authorities and central banks". The terms and conditions (if any) will be determined by the Secretary of the Treasury.
Everyone, that is, Paulson and the politicians in favor of this legislation, say there is a "good chance" the taxpayer will break even on this. However, this could only be a good deal for the taxpayer if the government were to purchase the troubled assets at market prices. However, our government has already said it WILL NOT be paying market prices. Our government will purchase these troubled assets by paying ABOVE MARKET prices. It appears the purpose of this legislation is to recapitalize the banks without getting much equity in exchange. The cost of this WILL be passed on to the taxpayer!
It gets worse. What "troubled assets" are we talking about? "Any residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages...originated on or before March 14, 2008...[and] any other financial instrument that the Secretary after consultation with the Chairman...of the Federal Reserve System,"
"The Secretary shall take such steps as my be necessary to prevent unjust enrichment of financial institutions participating in a program established under this section [section 101 - purchases of troubled assets]."
There is also a provision for an "insurance program". This is contained in "Sec. 102. Insurance of Troubled Assets". "the Secretary shall establish a program to guarantee troubled assets originated or issued prior to March 14, 2008". "the Secretary may guarantee the timely payment of principal of, and interest on, troubled assets in the amounts not to exceed 100 percent of such payments." "the Secretary shall collect premiums from any financial institutions participating in the program". "Such premiums shall be in the amount that the Secretary determines necessary to meet the purposes of this Act and to provide sufficient reserves ["to meet anticipated claims, based on an actuarial analysis, and to ensure that taxpayers are fully protected."]."
The Secretary will be "providing financial assistance to financial institutions... that have assets less than $1,000,000,000, that were well or adequately capitalized as of June 30, 2008, and that as a result of the devaluation of the preferred government sponsored enterprises stock will drop one or more capital levels..".
The Secretary will be "protecting the retirement security of Americans by purchasing troubled assets held by or on behalf of eligible retirement plan described in clause (iii), (iv), (v) or (vi) of section 402(c)(8)(B) of the Internal Revenue Code of 1986 except...not compensation arrangements subject to section 409A..". "and the utility of purchasing other real estate owned and instruments backed by mortgages on multifamily properties." [Note: IRS section 402(c)(8)(B) defines an "eligible retirement plan" as (i) and individual retirement account as described in Code section 408(a), (ii) an individual retirement annuity as described in Code section 408(b), (iii) a section 401(a) qualified retirement plan, and (iv) and an annuity plan as described in section 403(a)].
"there is established the Financial Stability Oversight Board, which shall be responsible for...reviewing the exercise of authority under..this Act, including.. policies implemented by the Secretary and the Office of Financial Stability...including appointment of financial agents [and]... the asset classes to be purchased.." The FSOB will be "reporting any suspected fraud, misrepresentation, or malfeasance to the Special Inspector General for the Troubled Assets Relief Program.."
"The Financial Stability Oversight Board shall be comprised of..the Chairman of..the Federal Reserve System, the Secretary, the Director of the FHA, the Chairman of the SEC and the Secretary of HUD." "The chairperson shall be elected by the members of the board of the FSOB from among the members other than the Secretary."
The bill includes a list of reporting requirements.
Section 106 of the bill pertains to "Rights; Management; Sale of Troubled Assets; Revenues and Sale Proceeds". "the Secretary shall have authority to manage troubled assets purchased under this Act, including revenues and portfolio risks therefrom." "the Secretary may, at any time...sell or enter into securities loans, repurchase transactions, or other financial transactions in regard to, any troubled asset purchased under this Act." "Revenues...shall be paid into the general fund of the Treasury for the reduction of public debt."
Steamlined Process. "the Secretary may waive specific provisions of the Federal Acquisition Regulation upon a determination that urgent and compelling circumstances make compliance with such provisions contrary to the public interest."
"Additional Contracting Requirements. In any solicitation or contract....to the maximum extent practicable, the inclusion and utilization of minorities...and women- and minority and women-owned business."
"Eligibility of FDIC". "the Corporation...shall be elibible for...selection of asset managers for residential mortgage loans and residential mortgage-backed securities, and shall be reimbursed by the Secretary for any services provided."
Section "108. Conflicts of Interest." "The Secretary shall issue regulations or guidelines...to address and manage or to prohibit conflicts of interest..."
Section "109. Foreclosure Mitigation Efforts." "the Secretary shall implement a plan that seeks to maximize assistance for homeowners and use the authority of the Secretary to encourage the servicers of the underlying mortgages, considering net present value to the taxpayer, to tak advantage of the HOPE for Homeowners Program..".
Section "110. Assistance to Homeowners". To the extent that the [FHFA, bridge depository institution of the FDIC, Federal Reserve Bank] holds, owns or controls mortgages, mortgage backed securities, and other assets secured by residential real estate including multi-family housing...shall implement a plan that seeks to maximize assistance for homeowners and use its authority to encourage the servicers of underlying mortgages, and considering net present value to taxpayer, to take advantage of the HOPE for Homeowners Program...". Modifications... of a residentail mortgage loan... may include... reduction in interest rates, reduction in loan principal and other similar modifications. Tenant protections..on residential rental properties, modifications..shall ensure...the continuation of existing...subisidies; and that modifications take into account the need for operating funds to maintain decent living conditions at the property.
"Actions with respect to servicers. In any case in which [the FHFA, bridge depository institution of the FDIC, Federal Reserve Bank] is not the owner of a residential mortgage loand, but holds an interest in obligations or pools of obligations secured by residential morgage loans, the [FHFA, bridge depository institution of the FDIC, Federal Reserve Bank] shall encourage implementation by the loan servicers of loan modifications developed in section (b) [Homeowner Assistance by agencies] and... assist in facilitating such modifications...".
Section "111. Executive Compensation and Corporate Governance". "Any financial institution that sell troubled assets to the Secretary under this Act shall be subject to the executive compensation requirements of subsections (b) and (c) and the provisions under the Internal Revenue Code of 1986, as provided under the amendment by section 302, as applicable". " The standards requited under this subsection [criteria] shall include...limits on compensation that exclude incentives for senior executive officers [defined as one of the 5 top highly paid executives of a public company, whose compensation is required to be disclosed pursuant to SEC act of 1934...] of a financial institution to take unnecessary and excessive risks...". "A provision for the recovery by the financial institution of any bonus or incentive compensation paid to a senior exective officer...based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate; and ...a prohibition on ...making golden parachute payment..".
Section "112. Coordination with Foreign Authorities and Central Banks." "...to the extent that such foreign authorities or banks hold troubled assets as a result of extending financing to financial institutions that have failed or defaulted on such financing, such troubled assets qualify for purchase...".
Why Americans are Really Mad!
While Americans were enthralled by the campaign rhetoric about "tax cuts" and the drama unfolding in congress to pass a "Bailout" to the bankers and investment bankers out there, congress actually trashed the small guy. It's time for a reality check.
Congress has appeared unwilling to act on the tax bill which includes extending tax breaks to million of Americans. This will allow the Alternative Minimum Tax, or AMT which has been described as a stealth tax, to ensnare about 25 MILLION Americans next year.
This has been reported in the WSJ and elsewhere and is not an accident. "Some fiscally conservative House Democrats have insisted that extensions of expiring tax cuts should be paid for so as not to add to the deficit."
Tax breaks that will be eliminated, therefor INCREASING taxes for the same Americans on "Main Street" that the politicians keep crying crocodile tears over, including the elimination of deductions for state sales taxes, deductions for college tuition, deductions for teachers to help pay for "out-of-pocket" classroom expenses.
Businesses will be dinged by the roll back or elimination of tax cuts for research and development, renewable energy credits and so on. This will, however, raise $Billions in taxes.
How does the congress justify this? To quote House Majority Leader Rep. Steny Hoyer (D., Md.) "We cannot continue simply using the credit card of the nation to continue to buy without paying for what we buy." A group of 49 fiscally conservative Democrats called the "Blue Dogs" have taken a hard stand. Said Rep. Dennis Cardoza, D-Calif. "It's time for us to say 'no more.'" One of the leaders of the group Rep. Mike Ross, D-Ark., was widely quoted as saying that they have "taken the morally and fiscally responsible position."
Meanwhile, congress is to work on legislation to pass $700B or more to bail out Wall Street and the banks. Should we be surprised that millions of Americans have said "enough"?
Congress has appeared unwilling to act on the tax bill which includes extending tax breaks to million of Americans. This will allow the Alternative Minimum Tax, or AMT which has been described as a stealth tax, to ensnare about 25 MILLION Americans next year.
This has been reported in the WSJ and elsewhere and is not an accident. "Some fiscally conservative House Democrats have insisted that extensions of expiring tax cuts should be paid for so as not to add to the deficit."
Tax breaks that will be eliminated, therefor INCREASING taxes for the same Americans on "Main Street" that the politicians keep crying crocodile tears over, including the elimination of deductions for state sales taxes, deductions for college tuition, deductions for teachers to help pay for "out-of-pocket" classroom expenses.
Businesses will be dinged by the roll back or elimination of tax cuts for research and development, renewable energy credits and so on. This will, however, raise $Billions in taxes.
How does the congress justify this? To quote House Majority Leader Rep. Steny Hoyer (D., Md.) "We cannot continue simply using the credit card of the nation to continue to buy without paying for what we buy." A group of 49 fiscally conservative Democrats called the "Blue Dogs" have taken a hard stand. Said Rep. Dennis Cardoza, D-Calif. "It's time for us to say 'no more.'" One of the leaders of the group Rep. Mike Ross, D-Ark., was widely quoted as saying that they have "taken the morally and fiscally responsible position."
Meanwhile, congress is to work on legislation to pass $700B or more to bail out Wall Street and the banks. Should we be surprised that millions of Americans have said "enough"?
Monday, September 29, 2008
A Note to the Chairman of the RNC on the Failure of the $700B Bailout Bill
I also sent a letter to the RNC, to spread the bile around a bit:
"Mr. Mike Duncan, RNC Chairman:
As a registered Republican, I must tell you that I am very concerned. How can you expect me or my spouse to vote for the Republican Party? Today, while Rome was Burning, I saw Republicans in the House vote down the $700B “Bailout Bill” and use partisan politics as their excuse. I saw Republican Congressmen justify this with political blather about protecting the future of their children! Another stunning failure for the 110th congress as a “Do Nothing and Say NO to Everything” Congress!
In the last two weeks, I have personally witnessed two plant closings. I am watching people make a run on the bank. I am watching people hunker down and freeze up expecting the end of the world.
I am listening to Senator John McCain promote plans and make speeches. However, it seems that the party he is to lead is incapable of achieving the results necessary.
The road to hell is paved with good intentions, as the saying goes. Senator McCain may be a “maverick” running on a platform as a “reformer” but if he cannot lead or if his party has a totally different agenda, then he will be a lame duck from the get go, as they say.
I will remember this day and if the Republican Party can't get this job done, than we will certainly be voting for someone else, and we’ll vote for a candidate and a majority in congress that can get the job done!"
"Mr. Mike Duncan, RNC Chairman:
As a registered Republican, I must tell you that I am very concerned. How can you expect me or my spouse to vote for the Republican Party? Today, while Rome was Burning, I saw Republicans in the House vote down the $700B “Bailout Bill” and use partisan politics as their excuse. I saw Republican Congressmen justify this with political blather about protecting the future of their children! Another stunning failure for the 110th congress as a “Do Nothing and Say NO to Everything” Congress!
In the last two weeks, I have personally witnessed two plant closings. I am watching people make a run on the bank. I am watching people hunker down and freeze up expecting the end of the world.
I am listening to Senator John McCain promote plans and make speeches. However, it seems that the party he is to lead is incapable of achieving the results necessary.
The road to hell is paved with good intentions, as the saying goes. Senator McCain may be a “maverick” running on a platform as a “reformer” but if he cannot lead or if his party has a totally different agenda, then he will be a lame duck from the get go, as they say.
I will remember this day and if the Republican Party can't get this job done, than we will certainly be voting for someone else, and we’ll vote for a candidate and a majority in congress that can get the job done!"
A Note to John McCain on the Failure of the $700B Bailout Bill
I also skewered the Republicans with signed letters to my congressman and to Senator McCain and the RNC:
"Senator McCain:
How can you expect me or my spouse to vote for you and the Republican Party? Today, while Rome was Burning, I saw Republicans in the House vote down the $700B “Bailout Bill” and use partisan politics as their excuse. I saw Republican Congressmen justify this with political blather about protecting the future of their children! Another stunning failure for the 110th congress as a “Do Nothing and Say NO to Everything” Congress!
In the last two weeks, I have personally witnessed two plant closings. I am watching people make a run on the bank. I am watching people hunker down and freeze up expecting the end of the world.
I am listening to you promote plans and make speeches. As a Senator with decades of experience and a leader in your party, you seem incapable of achieving the results necessary with your party.
The road to hell is paved with good intentions, as the saying goes. You may be a “maverick” running on a platform as a “reformer” but if you cannot lead, then you will be a lame duck from the get go, as they say.
I will remember this day and if you can't get this job done, than we will certainly be voting for someone else!"
"Senator McCain:
How can you expect me or my spouse to vote for you and the Republican Party? Today, while Rome was Burning, I saw Republicans in the House vote down the $700B “Bailout Bill” and use partisan politics as their excuse. I saw Republican Congressmen justify this with political blather about protecting the future of their children! Another stunning failure for the 110th congress as a “Do Nothing and Say NO to Everything” Congress!
In the last two weeks, I have personally witnessed two plant closings. I am watching people make a run on the bank. I am watching people hunker down and freeze up expecting the end of the world.
I am listening to you promote plans and make speeches. As a Senator with decades of experience and a leader in your party, you seem incapable of achieving the results necessary with your party.
The road to hell is paved with good intentions, as the saying goes. You may be a “maverick” running on a platform as a “reformer” but if you cannot lead, then you will be a lame duck from the get go, as they say.
I will remember this day and if you can't get this job done, than we will certainly be voting for someone else!"
A Note to Barack Obama on the Failure of the $700B Bailout Bill
How can you expect me or my spouse, a registered Democrat, to vote for you and the Democratic ticket? Today, House Speaker Pelosi again took the position of “Party First” to prevent action in the House. I am referring to the non-partisan and very rational statement her office issued on September 28 regarding the $700B "bail out” plan, which she then contradicted with the typically partisan remarks made from the floor today and which resulted in the voting down of that bill as the Democrats of the House cowered before the retreating Republicans and decided to save their seats.
She and the Democratic Party have now, once again, upheld the 110th congress as a “Do Nothing and Say NO to Everything” Congress!
Democrats seem to forget that President Bush is a lame duck and we the electorate are voting for a different Republican or a Democrat this year. Frankly, I consider the congress to be worse than the Bush Presidency and believe me, I will remember this day and will vote accordingly!
Senator, I realize you may consider the issues in the house as none of your concern as you campaign your way across the USA. However, you would have me believe that you will be the leader of your party and will march us down that road of "change" as you call it. Well, show some leadership now and lead your party to a rapid resolution of this crisis. If you can't get this job done, than we will certainly be voting for someone else!
She and the Democratic Party have now, once again, upheld the 110th congress as a “Do Nothing and Say NO to Everything” Congress!
Democrats seem to forget that President Bush is a lame duck and we the electorate are voting for a different Republican or a Democrat this year. Frankly, I consider the congress to be worse than the Bush Presidency and believe me, I will remember this day and will vote accordingly!
Senator, I realize you may consider the issues in the house as none of your concern as you campaign your way across the USA. However, you would have me believe that you will be the leader of your party and will march us down that road of "change" as you call it. Well, show some leadership now and lead your party to a rapid resolution of this crisis. If you can't get this job done, than we will certainly be voting for someone else!
Congratulations to the DNC!
I sent a signed copy of the following to the Democratic National Committee today:
"How can you expect me or my spouse, a registered Democrat, to vote Democratic? Today, House Speaker Pelosi again took the position of “Party First” to prevent action in the House. I am referring to the non-partisan and very rational statement her office issued on September 28 regarding the $700B "bail out” plan, which she then contradicted with the typically partisan remarks made from the floor today and which resulted in the voting down of that bill as the Democrats of the House cowered before the retreating Republicans and decided to save their seats.
She and the Democratic Party have now, once again, upheld the 110th congress as a “Do Nothing and Say NO to Everything” Congress!
Democrats seem to forget that President Bush is a lame duck and we the electorate are voting for a different Republican or a Democrat this year. Frankly, I consider the congress to be worse than the Bush Presidency and believe me, I will remember this day and will vote accordingly!"
"How can you expect me or my spouse, a registered Democrat, to vote Democratic? Today, House Speaker Pelosi again took the position of “Party First” to prevent action in the House. I am referring to the non-partisan and very rational statement her office issued on September 28 regarding the $700B "bail out” plan, which she then contradicted with the typically partisan remarks made from the floor today and which resulted in the voting down of that bill as the Democrats of the House cowered before the retreating Republicans and decided to save their seats.
She and the Democratic Party have now, once again, upheld the 110th congress as a “Do Nothing and Say NO to Everything” Congress!
Democrats seem to forget that President Bush is a lame duck and we the electorate are voting for a different Republican or a Democrat this year. Frankly, I consider the congress to be worse than the Bush Presidency and believe me, I will remember this day and will vote accordingly!"
Congratulations to House Speaker Pelosi
I sent a signed copy of the the following to House Speaker Nancy Pelosi today:
"Congratulations, House Speaker Pelosi on again allowing your position of “Party First” to prevent action in the House today. I am referring to the non-partisan and very rational statement your office issued on September 28 regarding the $700B ‘bail out” plan, which you contradicted with the typically partisan remarks you made from the floor today and which resulted in the voting down of that bill as your fellow Democrats cowered before the retreating Republicans and decided to save their seats.
You have now, once again, upheld the 110th congress as a “Do Nothing and Say NO to Everything” Congress!
You and your party seem to forget. President Bush is a lame duck and we the electorate are voting for either a different Republican or a Democrat this year. Frankly, I consider you and your congress to be worse than the Bush Presidency and believe me, I will remember this day and will vote accordingly!"
"Congratulations, House Speaker Pelosi on again allowing your position of “Party First” to prevent action in the House today. I am referring to the non-partisan and very rational statement your office issued on September 28 regarding the $700B ‘bail out” plan, which you contradicted with the typically partisan remarks you made from the floor today and which resulted in the voting down of that bill as your fellow Democrats cowered before the retreating Republicans and decided to save their seats.
You have now, once again, upheld the 110th congress as a “Do Nothing and Say NO to Everything” Congress!
You and your party seem to forget. President Bush is a lame duck and we the electorate are voting for either a different Republican or a Democrat this year. Frankly, I consider you and your congress to be worse than the Bush Presidency and believe me, I will remember this day and will vote accordingly!"
"No Banker Left Behind" Bailout Fails
Just got the word, the House failed to pass the $700B bailout bill with a vote of 205-228 against the plan.
It was just a few hours ago that a conciliatory sounding House Speaker Pelosi announced calmly that an agreement had been reached. I read the statement released by the House Speaker and it was very matter of fact with none of the political bile that Pelosi likes to interject at any opportunity.
However, Pelosi just couldn't keep her mouth shut and so she reverted to her normal "Party First" position and decided to give another one of her speeches in which she claimed credit for rescuing the economy for the Democrats and blasted Republicans for their resistance. So what was the result? She succeeded in driving away Republican votes. Other Democrats in the House, apparently fearful of looking timid and backing the bankers, and therefore fearful for their seats, bailed.
Here is what Pelosi said from the floor. You decide who screwed this one up:
"Today, we will act to avert this crisis, but informed by our experience of the past eight years with the failed economic leadership that has left us left capable of meeting the challenges of the future. We choose a different path. In the new year, with a new Congress and a new president, we will break free with a failed past and take America in a New Direction to a better future."
Note the marked difference of the above from the statement she issued on Sunday:
"Significant bipartisan work has built consensus around dramatic improvements to the original Bush-Paulson plan to stabilize American financial markets -- including cutting in half the Administration's initial request for $700 billion and requiring Congressional review for any future commitment of taxpayers' funds. If the government loses money, the financial industry will pay back the taxpayers."
I think we ought to give Speaker Pelosi a "Good Job" button for keeping party first and maintaining the reputation of the "Do Nothing and Say NO to Everything" 101st Congress!
The Bushwhacking that has been going on by this "Do Nothing, Say "No" to Everything" Congress finally came home to roost. They thought they were above the fray. Not so and the electorate has spoken: "We don't trust any of you" and for good reason. So when the chips were down, the Democrats ran. And the electorate won!
The game of "party first" has finally turned the electorate on the self styled aristocrats and the rich bankers. Two years of party bickering and jockeying to take over the white house has come to roost. I don't think we'll be listening to debates about Iraq any longer; that one has been milked for all it was worth and now the politicians are forced to face real issues.
I suspect the electorate isn't crazy and we all want this resolved in a manner in which the economy can go forward. I certainly don't trust these politicians and the line has to be drawn somewhere. Enough is enough!
Good, may the games begin!
It was just a few hours ago that a conciliatory sounding House Speaker Pelosi announced calmly that an agreement had been reached. I read the statement released by the House Speaker and it was very matter of fact with none of the political bile that Pelosi likes to interject at any opportunity.
However, Pelosi just couldn't keep her mouth shut and so she reverted to her normal "Party First" position and decided to give another one of her speeches in which she claimed credit for rescuing the economy for the Democrats and blasted Republicans for their resistance. So what was the result? She succeeded in driving away Republican votes. Other Democrats in the House, apparently fearful of looking timid and backing the bankers, and therefore fearful for their seats, bailed.
Here is what Pelosi said from the floor. You decide who screwed this one up:
"Today, we will act to avert this crisis, but informed by our experience of the past eight years with the failed economic leadership that has left us left capable of meeting the challenges of the future. We choose a different path. In the new year, with a new Congress and a new president, we will break free with a failed past and take America in a New Direction to a better future."
Note the marked difference of the above from the statement she issued on Sunday:
"Significant bipartisan work has built consensus around dramatic improvements to the original Bush-Paulson plan to stabilize American financial markets -- including cutting in half the Administration's initial request for $700 billion and requiring Congressional review for any future commitment of taxpayers' funds. If the government loses money, the financial industry will pay back the taxpayers."
I think we ought to give Speaker Pelosi a "Good Job" button for keeping party first and maintaining the reputation of the "Do Nothing and Say NO to Everything" 101st Congress!
The Bushwhacking that has been going on by this "Do Nothing, Say "No" to Everything" Congress finally came home to roost. They thought they were above the fray. Not so and the electorate has spoken: "We don't trust any of you" and for good reason. So when the chips were down, the Democrats ran. And the electorate won!
The game of "party first" has finally turned the electorate on the self styled aristocrats and the rich bankers. Two years of party bickering and jockeying to take over the white house has come to roost. I don't think we'll be listening to debates about Iraq any longer; that one has been milked for all it was worth and now the politicians are forced to face real issues.
I suspect the electorate isn't crazy and we all want this resolved in a manner in which the economy can go forward. I certainly don't trust these politicians and the line has to be drawn somewhere. Enough is enough!
Good, may the games begin!
Saturday, September 20, 2008
First Post September 20, 2008
I decided that a separate blog was warranted for my observations about politics and our culture.
I love this country. I think it is and can be "the land of opportunity". I have worked with Europeans, middle easterners, Eurasians, South Americans and others. They don't necessarily agree with our politics or our culture, but they do generally admire the opportunity that is available in this country.
That opportunity is not "free" and it takes application, hard work and "sweat equity", good luck and the will of God to succeed. Success is, however, a real possibility. And yes, it does also require education. Some careers require more than others and in this increasingly competitive world, some college is probably mandatory. But there are exceptions to the rule, and in some careers, such as "entertainment" too much education could be an impediment.
What disturbs me about our country and our culture is the social and economic engineering that our politicians are willing to promote and advance, with no certainty of what the exact outcome will be. Some changes take decades for the consequences to fully appear and many are not trivial. It is unfortunate that our politicians are seldom willing, able or capable of managing these changes for more than an election interval.
A case in point, is the wholesale selling of the "service economy" to the American public in the 1990's. It sounded good, and if it didn't politicians worked overtime to make it sound good. Even "Hizzonor" Mayor Daley of Chicago went on the public record and said "we don't need manufacturing any more". Frankly, at the time this frightened me. I had a lot of questions. Such as: if manufacturing is passe' then what jobs will replace them? Are our citizens fully prepared for this "new economy" and if not, then how do we get from here to there? Are our schools teaching curriculum's that will permit American workers to learn the necessary skills and prepare our children for this brave new world? If not, have we designed and implemented and budgeted the necessary education programs to get us there? What about those who are unable, unwilling or incapable of adapting to this change? What jobs will we prepare them for and how will we get these people to a place where they can be a viable part of society?
I also was very skeptical as our political leaders have done a poor job to date of managing change. So here they were, promoting it!
Now, I had been very skeptical of President Clinton. In terms of the domestic economy, he didn't do all that poorly. Probably would be rated a "C" in my book. On the other hand, he had a penchant for wetting his finger and raising it into the air so he could determine which way the political wind was blowing, and then moving in that direction. He also picked his spouse to head the most significant change agenda he had campaigned on, and that was "health care reform". She bombed and while I was disappointed, I wasn't too surprised by this. Ms. Clinton after all was a relatively inexperienced newcomer. That was my problem with President Clinton. He should have picked the absolute best people to do this job and he didn't. So here we are in 2008, a few $trillion under the bridge and health care in this country is a joke. Far too expensive and far too ineffective. And the politicians have successfully changed this into an agenda about health insurance. So we can all get the same mediocre care, but someone else should pay!
In defense of President Clinton, as a former governor of a state with a relatively small economy, I don't think we should be surprised that he was constantly checking the political wind. That was possibly a shrewd mechanism acquired in his success as the governor of Arkansas. But that approach is totally inadequate when leading a diverse and fractious country like ours.
President Bush, another product of state leadership, has demonstrated his faults time and time again. A penchant for spending money, poor judgement and leadership in the war in Iraq. He and his administration have been completely absorbed in the "war on terror" and then in Iraq. When he was elected, I told some associates that he was a "spend and tax" Republican, as in, he would spend the money and his successors would raise the taxes necessary to pay the bill. He has proved me correct in this.
As for the "service economy" people today are very unhappy with the loss of manufacturing jobs. Very few sectors of our economy are growing. Well, when we went down this road of "service economy" what did we expect? That we would all become "web site" designers? In the 1990's there were naysayers who said we would all wind up working in a fast food restaurant. That was a bit melodramatic. However, we may still get there! So what economic sectors have prospered in the last 20 years? Apparently finance and banking, and health care. For the most part, that is it!
Energy has become a problem. This too, escaped our politicians. No nuclear plants, no wind generators off of the shores of the political haunts of the north east, no improvements to transmission and distribution infrastructure, no national energy policy of any kind, except "NO" to everything! But a few doomsday predictors have done well and have prospered. Former Vice President Gore is a notable example.
Here we are in the soup of our own making. Another 20 years squandered. GM is asking for help in developing high energy batteries for automobiles so we can drive electric cars. However, the politicians argue about the issues of interfering in the "market driven economy" or "free markets" and we are told there is no money available for this type of endeavor. Nor is there an electrical distribution or generation system capable of supporting such a transformation. The government argues about "drilling" for oil. I understand the multi billion dollar pipe line carrying oil southward through Alaska won't have enough oil to pump in a few years to even fill it! We send hundreds of billions of dollars to countries for oil and complain about ever "mounting deficits"! But we have no political will to solve these problems. However, at present we can bail out banks, brokerages engaged in all kinds of speculative activities. And I mean bail out to the tune of hundreds of billions of dollars, perhaps a trillion dollars or more. The government is also gearing up to bail out homeowners who got loans they could not afford for homes they could not afford!
It's OK to interfere with the economy to the tune of hundreds of billions of dollars, when it is for the powerful banking and finance lobby in the east. But GM and the electric car is a different matter.
Politicians are debating this and talking about the unfairness of bailing out "Wall Street"and ignoring "Main Street". The conversation they have is that some of these entities are "too big" to fail. Apparently, sub prime and other prime mortgage holders and "homeowners" who made really poor choices are too small to fail. So it will be up to me and the other hard working, saving and not spending every darn nickel, never mortgage our future forever members of the middle class, to take on the tax burden of paying for this.
Meanwhile, the politicians say "don't you worry, we won't raise your taxes". Who are they talking to? All I have to do is check the http://www.opensecrets.org/ website and I can see who the McCain and Obama donors are. It's obvious who is buying access to the candidates and a lot of them are in finance, etc. Besides, history in this country over the past 20 years shows that the "rich" are definitely getting richer.
So should I be concerned about the direction of this country under our political leaders? I think so and I most certainly am! I am also concerned that with these ill conceived government plans, we will lose the opportunity so many generations of Americans worked, fought and died for to hand to us, the current generations. So that is what this blog will be about.
I love this country. I think it is and can be "the land of opportunity". I have worked with Europeans, middle easterners, Eurasians, South Americans and others. They don't necessarily agree with our politics or our culture, but they do generally admire the opportunity that is available in this country.
That opportunity is not "free" and it takes application, hard work and "sweat equity", good luck and the will of God to succeed. Success is, however, a real possibility. And yes, it does also require education. Some careers require more than others and in this increasingly competitive world, some college is probably mandatory. But there are exceptions to the rule, and in some careers, such as "entertainment" too much education could be an impediment.
What disturbs me about our country and our culture is the social and economic engineering that our politicians are willing to promote and advance, with no certainty of what the exact outcome will be. Some changes take decades for the consequences to fully appear and many are not trivial. It is unfortunate that our politicians are seldom willing, able or capable of managing these changes for more than an election interval.
A case in point, is the wholesale selling of the "service economy" to the American public in the 1990's. It sounded good, and if it didn't politicians worked overtime to make it sound good. Even "Hizzonor" Mayor Daley of Chicago went on the public record and said "we don't need manufacturing any more". Frankly, at the time this frightened me. I had a lot of questions. Such as: if manufacturing is passe' then what jobs will replace them? Are our citizens fully prepared for this "new economy" and if not, then how do we get from here to there? Are our schools teaching curriculum's that will permit American workers to learn the necessary skills and prepare our children for this brave new world? If not, have we designed and implemented and budgeted the necessary education programs to get us there? What about those who are unable, unwilling or incapable of adapting to this change? What jobs will we prepare them for and how will we get these people to a place where they can be a viable part of society?
I also was very skeptical as our political leaders have done a poor job to date of managing change. So here they were, promoting it!
Now, I had been very skeptical of President Clinton. In terms of the domestic economy, he didn't do all that poorly. Probably would be rated a "C" in my book. On the other hand, he had a penchant for wetting his finger and raising it into the air so he could determine which way the political wind was blowing, and then moving in that direction. He also picked his spouse to head the most significant change agenda he had campaigned on, and that was "health care reform". She bombed and while I was disappointed, I wasn't too surprised by this. Ms. Clinton after all was a relatively inexperienced newcomer. That was my problem with President Clinton. He should have picked the absolute best people to do this job and he didn't. So here we are in 2008, a few $trillion under the bridge and health care in this country is a joke. Far too expensive and far too ineffective. And the politicians have successfully changed this into an agenda about health insurance. So we can all get the same mediocre care, but someone else should pay!
In defense of President Clinton, as a former governor of a state with a relatively small economy, I don't think we should be surprised that he was constantly checking the political wind. That was possibly a shrewd mechanism acquired in his success as the governor of Arkansas. But that approach is totally inadequate when leading a diverse and fractious country like ours.
President Bush, another product of state leadership, has demonstrated his faults time and time again. A penchant for spending money, poor judgement and leadership in the war in Iraq. He and his administration have been completely absorbed in the "war on terror" and then in Iraq. When he was elected, I told some associates that he was a "spend and tax" Republican, as in, he would spend the money and his successors would raise the taxes necessary to pay the bill. He has proved me correct in this.
As for the "service economy" people today are very unhappy with the loss of manufacturing jobs. Very few sectors of our economy are growing. Well, when we went down this road of "service economy" what did we expect? That we would all become "web site" designers? In the 1990's there were naysayers who said we would all wind up working in a fast food restaurant. That was a bit melodramatic. However, we may still get there! So what economic sectors have prospered in the last 20 years? Apparently finance and banking, and health care. For the most part, that is it!
Energy has become a problem. This too, escaped our politicians. No nuclear plants, no wind generators off of the shores of the political haunts of the north east, no improvements to transmission and distribution infrastructure, no national energy policy of any kind, except "NO" to everything! But a few doomsday predictors have done well and have prospered. Former Vice President Gore is a notable example.
Here we are in the soup of our own making. Another 20 years squandered. GM is asking for help in developing high energy batteries for automobiles so we can drive electric cars. However, the politicians argue about the issues of interfering in the "market driven economy" or "free markets" and we are told there is no money available for this type of endeavor. Nor is there an electrical distribution or generation system capable of supporting such a transformation. The government argues about "drilling" for oil. I understand the multi billion dollar pipe line carrying oil southward through Alaska won't have enough oil to pump in a few years to even fill it! We send hundreds of billions of dollars to countries for oil and complain about ever "mounting deficits"! But we have no political will to solve these problems. However, at present we can bail out banks, brokerages engaged in all kinds of speculative activities. And I mean bail out to the tune of hundreds of billions of dollars, perhaps a trillion dollars or more. The government is also gearing up to bail out homeowners who got loans they could not afford for homes they could not afford!
It's OK to interfere with the economy to the tune of hundreds of billions of dollars, when it is for the powerful banking and finance lobby in the east. But GM and the electric car is a different matter.
Politicians are debating this and talking about the unfairness of bailing out "Wall Street"and ignoring "Main Street". The conversation they have is that some of these entities are "too big" to fail. Apparently, sub prime and other prime mortgage holders and "homeowners" who made really poor choices are too small to fail. So it will be up to me and the other hard working, saving and not spending every darn nickel, never mortgage our future forever members of the middle class, to take on the tax burden of paying for this.
Meanwhile, the politicians say "don't you worry, we won't raise your taxes". Who are they talking to? All I have to do is check the http://www.opensecrets.org/ website and I can see who the McCain and Obama donors are. It's obvious who is buying access to the candidates and a lot of them are in finance, etc. Besides, history in this country over the past 20 years shows that the "rich" are definitely getting richer.
So should I be concerned about the direction of this country under our political leaders? I think so and I most certainly am! I am also concerned that with these ill conceived government plans, we will lose the opportunity so many generations of Americans worked, fought and died for to hand to us, the current generations. So that is what this blog will be about.
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