Update Mid March, 2009 - Homeowner Defaults Increase

If anyone was wondering, I haven't gone away!

I've been catching up on "business" and dealing with issues out there in the "real" world.

I also wanted to give the economy and our new congress and President some time to allow the "dust to settle". There has been more info available in the popular press than has been possible to digest, and it does take some time to establish new "programs".

Bailout of banks, bankers and investment houses continue, but homeowners, the source of the problem, have seen little assistance or relief. So mortgage defaults continue.
I am not entering the debate about whom deserves or doesn't deserve government bailout money. It is apparent that a lot of people were greedy, a lot of people made mistakes or were simply stupid, and a lot of people perpetrated various frauds. The question I have is, where and how is the best way to spend this money. It will and is being spent, afterall.

I am looking at this from the perspective of spending as little as possible to resolve the problem. We have about 7.3 million homeowners who have defaulted or are at risk of default. If these people were given a stipend by the government which was applied against their mortgages, this money would be passed to the banks who would be forced to lower the balance on their mortgages, it would find its way to those who hold the notes, etc. and should stabilize the system.

But how much money would it take? Or, how far could a trillion dollars, which is the amount routinely used as fodder for the pigs at the toughs, go? I'll round up the number of mortgages to 10 million. Well, one Trillion dollars = $1,000,000,000,000. If I were to divide that by 10 million distressed mortgages (10,000,000) I would have $100,000 per mortgage.

So which has been more effective? Throwing several trillion dollars at the banks and investmenr bankers, or throwing $50,000 at each distressed homeowner? We could bail out 10 million homeowners and the entire banking system directly tied to these failed mortgages, using "only" one-half trillion dollars, which is $500 billion.

So now you know why am so cynical about our politicians. They could get the job done and they should know what I know. But they don't operate accordingly. So looking beyond all the rhetoric of the politicians and their media pundits, who is really being served? I'll let you draw your own conclusions.

Note: one trillion is a really big number. How big? Let's do a little arithmetic and answer the question "how many seconds is a trillion?" There are 365 days each year, 24 hours each day, 60 minutes each hour and 60 seconds each minute. So a year is 365 x 24 x 60 x 60 seconds = 31,536,000 seconds. If I divide 1 trillion by the number of seconds in a year, I'll know how many years contain 1 trillion seconds. The answer is 31,709 years.

Illinoise, Land of Larceny

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.

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!

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.

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.

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

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!