Wednesday, December 17, 2008

CNN Misses the Mark Again

What else is new? CNN finally recognized that there are some responsible people out there and did an article about them. Unfortunately, their take on things is that its not fair. Move on. That’s it. The poor, dumb, fools who took the short cut still get their bailout. They even got an econ professor from Mr. Potatohead State to chime in with some line of BS about hot we have to bail out the fools to save everyone else. As it is there are only a couple economists I trust these days, and Dr. Jellobrain from Mr. Potatohead State is not on the short list. Dr. Jellobrain and the rest of the CNN article failed to even consider any negative side effects of supporting the current price level. That’s fine, this link will be here for a long time, you'll be able to write CNN and Dr. Jellobrain to tell them how short sighted and self serving they were in December 2008.

Friday, December 12, 2008

I Told You So...

I don't draw a lot of comfort about being right on about something as bad as the current housing and credit crisis. However, I do believe that you can only save one group of people, the home owners who put themselves at risk with their bad bet on a risky loan or the people who are waiting on the sidelines because they saw that same bad bet for what it is. That said, I believe that in this situation, the prudent deserve their chance to flourish, as this country is designed to function.

That said, Bloomeberg and other news agencies are reporting that there will be another wave of loan foreclosures in 2009 after a lull late this year. Lull, that’s their word today. I was predicting this back in March. If you look at the chart in that posting, we are not much past the tip of the iceberg, 2010 isn't going to be good nor will 2011. Anyone forecasting a revival in real estate prior to 2012 is fooling themselves and trying to pull the wool over your eyes too. I am not sure that 2012 is the turn around point, but I am certain that the rebound will not come before then.

I also believe that any meddling that Congress, the President or President elect commit to in the real estate markets will only put off recovery even further. Its now widely understood that certain spending programs contributed to the length of the Great Depression. The catalyst for coming out of the Great Depression was World War II. I am not advocating war, but I am making a case against bailing out the individuals who put their homes at risk. Staggeringly low interest rates, 0%, contributed to Japan's lost decade after their housing crash in the 80s. Hard choices have to be made by our elected officials on Washington DC. I am not sure that there are many, or perhaps any, who are up to the task. The current Congressional leadership is certainly not up to the task. I see people who are blind to past lessons and are pushed to foolish actions because they are afraid to be perceived as doing nothing, but the fact of the matter is that by doing nothing and allowing the roughly 10% of the population who are at risk to go down with their bad bet is the only way to get back to equilibrium.

A third of the population of this country rents its home. Not all of them are would be home owners, but I am betting that there are more people who are frozen out of the market and will be frozen out of the market, than there are people at risk of losing their homes, if current price levels are maintained. Incomes are still not rising to meet costs of living if you want to own a home, regardless of where you live. Sure there are some markets that are legitimately holding their value or even going up, but they are the exception, not the rule. Even on the worst days on the NYSE, some stock some where sets its all time high.

In short people, wake up and smell the coffee, bailing out the individuals from their bad gamble is not going to turn things around. It will probably make things worse. So there you have, December 12th 2008, I am saying Congress, and people like FDIC chairperson Sheila Bair will make things worse if they continue to meddle with markets that can only be fixed by allowing them to naturally return to equilibrium.

Friday, December 05, 2008

Panic at the Fed?

I believe that the Fed & Treasury do not think they can keep the banking system afloat by either buying/guaranteeing the bad paper or offering cash infusions to the banks. There is no other good reason to be propping up home prices, which I think will contribute to a catastrophic round of inflation as cost of living indices readjust to the artificial housing prices and lack of creative finance options.

I think that this is a sign of panic on Bernake's part. They are willing to forsake the future for the current. I think they can wrap their heads around the consequences of massive banking failures. I believe that they think they can reign in the resulting inflation with higher, Paul Volker style interest rate hikes. If you don't own a home, you’re being sold down the river by both the current Fed and the incoming President.

Home prices are still dramatically out of sync with respect to personal incomes, costs of renting and historical norms. Even today, after 2 years of declines we are still close to double prices from 10 years ago. That’s twice the normal growth rate for home prices. Home prices used to be 2-4 times household incomes, now that number is more like 7-10 times household incomes. This correction is likely only half way though, at best. There are still 2-3 more years of ARM resets due. Plenty of them will be or have been refinanced, but the numbers are still remarkable. Look at the chart at the bottom of the blog linked below. 2010-11 still shows a lot of ARMs resetting. Right now and well into 2009, we are in a trough. Unfortunately the people who took the short cut are going to have bear the burden of their mistake. Bailing them out is foolish. There was no bailout for people who lost massive net worth’s when the dot com and telecom bubbles burst.

Allowing people to tap into their retirement is not a solution to this problem. First off, it probably will not be sufficient to stem the tide of foreclosures. Second, all that does is put off the inevitable. If you let people deplete their retirement to save their house, you are simply going to have to deal with them when they reach retirement age without sufficient savings.

People need to get over the idea that everyone is "entitled" to own a home. The CRA inflated the idea of the American Dream and now Congress is driving a stake through the heart of the American Dream.

Pay me now or pay me later. It's cheaper to pay now.

In looking at the current situation, home prices continue to be dramatically out of sync with personal incomes. Without the exotic loan products, people making a typical entry level salary, say $40k couldn't afford a 200k house. And 200k homes are not really available if you live in a major metro area. That average home price needs to come closer to $150k for entry level housing to be available. Keeping people in their over priced, ill financed homes will not get prices to where they need to be with respect to personal incomes. Similarly, it’s not practical to expect personal incomes to grow by 20% nor is it healthy.

So the question stands, who takes the sharp stick in the eye? The person who is over extended or the person who has not had the opportunity to make that same mistake.

Thursday, December 04, 2008

Even the NY Times Likes My Stuff

I posted this comment to an article on the New York Times and even the editor liked it.
The US auto industry has a giant sucking chest wound from a Desert Eagle .50 cal and the UAW offered up concessions that are roughly equivilent to the free sample of Breathe Right nasal strips which comes with the small box of bandaids.

I wonder how Gettelfinger was able to keep a straight face during his press conference.

Wednesday, December 03, 2008

A New Hero Emerges

If it ticks you off to see your neighbors, in their over priced and ill financed homes, getting a free ride from the mortgage bankers, someone is fighting your fight. William Frey is not going to stand by and let it happen. As I have said before, you can't just modify the terms of loan agreements when you no longer own the loan. William Frey owns a lot of them and that is why he is suing the authors of the 2005 Bankruptcy Reform Act Bank of America of their proposed plan to restructure 400,000 loans that were made to completely unworthy home buyers.

When asked about the lawsuit, Bank of America played dumb, kind of like when they agreed to buy Countrywide, the originator of those loans. I'll bet there is some serious buyers remorse related to that purchase. If you think you over paid for that big screen that the wife yells at you about? I'll bet Bank of America has it ten times as bad.

Like most hero's Frey has his flaws. He thinks you and I, the tax payers should have to pick up tab, another half trillion dollars, on these bad bonds. I can't say that I am a fan of that course of action, but as I continue to beat my drum here at The Last Good Idea, I will repeat my mantra. Support the banks, everyone benefits. Only our idiot, fool neighbors benefits from bailing out the individuals.

So, like the old saying ... the enemy of my enemy is my friend. So while Mr. Frey seeks to put off bailing out the individual morons who bought too much house and continues to wave his ink pen sword at the likes of Representatives Barney Frank, Maxine Waters, etc. I will call Mr. Frey our hero today. Especially since he has given Barney Frank another opportunity to make himself look like an ass. He can't really help it, it’s his nature. Barney Frank asked Mr. Frey to discuss alternatives, but quickly withdrew the invitation. I am sure he knew he was standing on the wrong ground.

Thursday, November 20, 2008

You Heard it Here First

You heard it here first. Barack Obama is truly the same old stuff that all Washington insiders are made of. He conned the electorate into believing that he was the candidate of change. However, as I said here, he forfeited that mantle a long time ago. The man is not yet in office and he’s already showing his true stripes as a Washington insider. Consider his early moves …

For Secretary of State, his first choice appears to be Hillary Clinton, never was there a bigger Washington insider than the former First Lady and 2 term Senator from New York.

As Health Secretary, he came up with former Speaker of the House, Tom Daschle who was first elected to the House of Representatives in 1978 and the Senate in 1986 where he served until 2004 before being ousted by a Republican challenger. Always the Washington insider, Daschle joined Alston & Bird who represent CVS Caremark, the National Association for Home Care and Hospice, Abbott Laboratories and HealthSouth. Daschle also holds a paid position as an advisor to the Mayo Clinic. In spite of all these entanglements, Obama, who pledged to avoid the K Street entanglements of various lobbying groups, still picked a man to hold a an appointed office of some serious significance.

Obama’s pick for Attorney General was yet another long time Washington insider. Eric Holder went to work for the Department of Justice, immediately after graduating from law school where, in 1997 President Bill Clinton nominated Holder as the deputy Attorney General. In 2000, after the election of George Bush, Holder joined Covington & Burling where he represented big spending and highly influential clients like Merck.

Janet Napolitano is Obama’s pick to head the Department of Homeland Security, Napolitano is another former Clinton appointee. In 1993, Bill Clinton appointed Napolitano as the United States attorney for the District of Arizona. She is the current governor of Arizona.

Obama’s closest advisor, his Chief of Staff, Rahm Emanuel is also similarly entangled in Washington’s seductive web. Emanuel was the chair of the Democratic Congressional Campaign Committee in 2006. He is the fourth-ranking Democrat in the House, behind Speaker Nancy Pelosi, Leader Steny Hoyer and Whip Jim Clyburn.

Mark My Words

Mark my words, if we bailout Detroit without fixing their labor problems we will be in the same boat the next time the US economy goes south, perhaps sooner.

Wednesday, November 19, 2008

Help Dick Armey Stop the Automaker Bailout

Use this link on FreedomWorks to send a message to our President and Congress, stating that your against a bailout for our bloated Detroit automakers.

Wednesday, November 12, 2008

Still Beating the Drum

A second round of calls for an individual home owner bailout went up this week. We shouldn't necessarily be trying to keep these homes out of foreclosure. Consider how out of whack home prices and personal incomes are right now. When Bill Clinton expanded CRA, home price appreciation accelerated while personal income continued to grow at a pace that was roughly equal to inflation. Just to put that in real terms, when homes were appreciating at 20% a year or more, personal incomes were growing at about 4% a year. Does anybody appreciate the significance of this? Does anyone understand that home prices need to come back to parity with personal income? Forget punishing he idiot homeowners who foolishly bit off far more than they could chew, they deserve it, but that is a debate for another time. Home prices have to retreat back toward natural levels with respect to personal incomes in order to avoid significant inflation. The only alternative to devaluing homes would be to massively inflate personal incomes, which would be good, except for the fact that the real gains in personal income would me negligible because the cost of everything else will increase with personal incomes.

Monday, November 03, 2008

How is This For Screwing You?

The NY Times did a story on people who bought homes they could afford or were saving up to buy a home getting shafted by the latest attempts to bailout the troubled individual home owners.

Friday, October 31, 2008

Use Your Head

I implore our elected leaders as well as those about to be elected to take the real pulse of the country before using our tax dollars in a wanton fashion. And pehaps before you use our tax dollars against us. This ABC News story has comments with a clear sentiment. That sentiment is clearly stating that foolish and irresponsible people should not be bailed out. By a 4 to 1 margin, CNN readers do not want to see their tax dollars used to bailout individual homeowners.

Thursday, October 30, 2008

Skeletons Falling Out of the Closet

It looks like someone who knows something about the deals Senator Dodd and others received on their Countrywide loans is spilling his guts to the Justice Department. Along with Senator Christopher Dodd, the story cites Sen. Kent Conrad, former Fanie Mae CEO Franklin Raines, Henry Cisneros, Richard Holbrooke, Alphonso Jackson, and Donna Shalala and James Johnson.

I wonder when they will start looking at loans from Northern Trust Bank and a certain junior Senator from Illinois.

This Will Be A Disaster

The government is working on a plan to remove the risk of foreclosure from 3 million home owners.

These over priced, ill financed homes need to be returned to the market in order to return home prices to historically normal levels that are in parity with costs of renting and personal incomes. Everyone who was priced out of the market by the real estate bubble along with the millions who have yet to come into the market place will NEVER be able to afford to own their own home without some sort of drastic action to readjust incomes to costs of ownership. In simple terms, I am talking about massive inflation with no real growth in wages. Incomes will rise to meet the cost of living indices. Other costs for food, energy and other consumer goods will rise too. Once again Washington is looking to rob Peter to pay Paul.

The other problem I have with this that "Paul" accounts for less than 10% of the households in the country, who are in trouble with a mortgage. Peter is a bit larger and more complex. The "Peter" who is paying is the rest of the population, who aren't in trouble with their mortgage. "Peter" is every potential home owner who was priced out of the market. "Peter" is every young person who has yet to graduate from school and enter the work force in pursuit of the American dream which is being stamped out by people like Christopher Dodd, Barney Frank, Nancy Pelosi, Harry Reid, Hillary Clinton and Barack Obama.

Their names and dozens of other political leaders who have pandered to an uniformed public, in the name of Main Street, will appear on the epitaph of the American Dream, as it killers.

Wednesday, October 29, 2008

This Must Be Really Bad

The LA Times is refusing to release a video where Barack Obama is at a dinner toasting and singing the praises of a man with ties to a Palestinian terror group. I say it must be bad, because the appearance of impropriety that the existence of this video creates is staggering in my mind. Lets not forget that Barack Obama is a man who has only one degree of separation between himself and the founder of Hezbollah, Hassan Nasrallah. There are far too many questionable ties between Senator Obama and terrorist organizations to allow this man to become President of the United States. Let’s not forget that these terrorists don't care if they kill, Democrats or Republicans, as long as they are American citizens.

Someone Explain How This is Legal

So, last night the wife and I are watching TV and on comes this Obama commercial, showing a web site with a calculator to show what the savings you'll reap from the 2 candidates tax plans if you plug in your salary, dependants, deductions, etc. I tell the wifey to go that URL, after all, I trust the Tax Policy Center as impartial and honest. We get to the web site and this is what we found ...
We have received many inquiries about an Obama campaign commercial that seems to imply that the Tax Policy Center (TPC) has a tax calculator that can be used to see how the candidates' tax plans would affect people. We don't. The calculator shown in the commercial was designed by the Obama campaign and is in no way affiliated with the nonpartisan TPC.
I have to say, I am really shocked at the out and out lying on the part of the Obama campaign. The ad doesn't imply it, it shows the TPC web site with an application that will tell you that you'll save more money with Obama's tax plan.

Its one thing to register homeless ghetto trash to vote. It’s quite another to tell a lie on TV, like the TPC tax calculator. Watch the video to the end when the guy says he wants to Obama do his hizzle or something. Classic.

Its a shame that McCain will not take of the gloves and start really fighting hard, because the Obama campaign is guilty of everything that the Democrats have accused the Republicans about. I guess for once the Democrats came up with the bigger scum bag.

Calling a Spade a Spade

Even The Boston Herald is calling out its brethren for being biased and partial. In fact The Boston Herald even goes so far as to suggest that people have more faith in Congress, whose approval rating is below that of the President, than they do in a fair and impartial media.

Tuesday, October 28, 2008

Corruption of the News Media

I really despise this years election cycle. I feel like it has robbed me of my pragmatism, which I valued so much. I've turned into a stark raving Republican and I don't like it very much, but I find it easier to stomach than the current hypocritical line of rhetoric from the Democrats. The way in which the business of electing our representative leadership has changed and not for the better.

My first caveat, I haven't watched much TV news over the last 5 years. Perhaps 10% of my news comes from TV, the rest from various internet outlets. Next, I am a Republican who has become highly disenchanted with W, to the extent that I voted for both Webb and Moran in the last few years. That will not happen again, after their votes on the housing bailout.

I have never really bought into the whole liberal media conspiracy thing. I have always felt that Fox News was overtly biased toward the right.

A recent spat of business travel had me spending a lot of time in airports, where I was subjected to a lot of CNN on airport TVs. I have say, what I saw left me disappointed, appalled and disgusted. CNN clearly displayed a Democratic bias in the amount of coverage and the tone of the coverage for the Presidential candidates. I find this to be a significant betrayal of CNNs principals. As a news outlet, which is what CNN likes to portray itself as, CNN should be offering fair and impartial coverage, but it isn't.

CNN is passing off its liberal agenda as fact or news, when in fact it seems more like CNN is helping to create news and sway events. The way I see it, CNN is overtly pressing its editorial agenda while trading on its solid gold reputation as news agency.

I will direct you all to this article, it describes a lot of what I have observed, from an insider in the inside of the news business.

Media's Presidential Bias and Decline

Monday, October 27, 2008

Summing it All Up

In a recent conversation, I reminded a friend of mine, that for months, I have been saying that we were entering the toughest economic stretch in generations. This was his response...
The 60s got weed and free love.
The 70s got coke and disco.
The 80s got heavy metal and coke.
What did we get? R&B, crystal meth and econnomic fuckery.

What can I say? We got screwed.

Tuesday, October 21, 2008

This Will Be The Trigger for Runaway Inflation

Recently, Boston Federal Reserve President Eric Rosengren called on the government to do something to bolster home prices. I find it incomprehensible that someone who is educated and informed, like a Federal Reserve President could be this short sighted. For some reason, the government and politicians fear being perceived as doing nothing, which is exactly what the current dilemma requires, because meddling with the natural way in which our economy works is what got us in this mess in the first place?

Even with the last 2 years worth of declines, home prices NEED to come back at least another 20% to approach historical norms, parity with the cost of renting and approach reasonable levels with respect to personal income.

Anything that artificially maintains current home prices will only serve to set the table for another economic crisis in the future. I believe that this crisis will be of epidemic inflation. The only thing that is going to get housing moving again is if younger people can afford entry level homes, which will allow subsequent echelons of home owners to move up. That is the way it has worked in this country for generations. Short circuiting the natural flow of home owners and buyers can only end negatively.

If entry level home prices, and other strata of home prices for that matter, remain at artificially supported levels the consequences will be dire. Cost of living indices will be higher and employers will be forced to pay higher wages to attract quality staff. Higher wages will translate into higher costs for other non-housing related goods and services. Thus, in the long run the working man will see little real growth in income. The relative growth in income will be another mirage that will suck in more and more unwitting people. While I lack the PhD in economics needed to forecast exactly where and how the next disaster will strike, my horse sense tells me that any kind of individual home owner bailout will be the catalyst for it, just like the CRA was for the housing bubble.

A final note on any potential bailout of the individual home owners ... If you are not a home owner and you are a tax payer, your tax dollars are being used against you. In a sense, the government is denying you your right to pursue the American dream; they are denying you, your Constitutional right to pursue happiness in order to help out the foolish, greedy, ignorant home owners who purchased homes that they truly couldn't afford. The time has come to pay the piper and putting off that bill will only make it worse in the future.

Monday, October 13, 2008

Obama’s Agenda, Not so Altruistic

Judge For Yourself

If you read this article and strip out the political rhetoric, you really have to sit back and scratch your head. Sure most of what the author presents is circumstantial, but there is an aweful lot of coincidence that is hard to just write off as coincidence.

How Can the Dems Sidestep Blame?

With evidence like this?

Friday, October 03, 2008

Thanks Moodys

Reuters is reporting that Moodys is now calling for a 2010 bottom. Its nice, but your still not there. Look at the ARM resets coming up. It will easily be 2011 before we find a bottom. Homes are still vastly over priced. And for some reason, fools with more money than sense are still over paying. For some reason Moodys thinks that banks will be done writing down bad paper by 2010, but I think the paper has to go bad before you can write it down, especially considering the just in time accounting processes banks use these days. Considering how caustic the 2006 ARMs are said to be, I can't quite see how the end of the tunnel comes before 2011 or even 2012.

Monday, September 29, 2008

Questioning the Voters of CA, NY, MO, AL & MA

How in the world did you people elect and reelect people like Rep. Maxine Watters, Rep. Greg Meeks, Rep. William Clay, Rep. Arthur Davis and Rep. Barney Frank? Ms. Watters calls Franklin Raines leadership outstanding shortly before he was forced to resign because of accounting irregularities at Fannie Mae. Keep in mind; this is the guy who is giving advice to Senator Barack Obama, who if GSE's weren't exempt from Sarbanes/Oxley, he would be in jail right now. One of these clowns, Rep. Greg Meeks, even accused the Director responsible for Federal Housing Enterprise Oversight of playing political games when he testified under oath before Congress to sound the alarm about the misdeeds of Fannie Mae and Freddie Mac. Seems like the truth is coming out. I hope the voters of California, New York, Missouri, Alabama and Massachusetts have the stones to votes these guys out of office. I don't care if you elect Republican or another Democrat, but for god sakes, replace these people with someone more competent.

Irresponsible & Incomplete Reporting at MSNBC

I find it highly irresponsible for MSNBC to have a Timeline of how we got to where we are today and they start that timeline is 2007. The Community Reinvestment Act and its roll in the current financial crisis which grips this country is not new. When a reputable front line news agency puts out half truths and incomplete stories its beyond irresponsible. Shame on MSNBC.

Obama's Double Standard

Its rather ironic that Barack Obama would hold Wall St and Main St to such a double standard. In reference to the $700 billion Wall St buy in, Obama said, "When taxpayers are asked to take such an extraordinary step because of the irresponsibility of a relative few, it is not a cause for celebration". Yet in the next breath he panders to uninformed voters in appealing for a bailout for an individual borrowers. Its seems to me, that the less than 10% of the population who are in trouble with an irresponsible mortgage, could easily be characterized as a relative few.

As someone who isn't in trouble with a mortgage, I see little to no value in helping the relative minority of the population who were clearly irresponsible. I depend on the banking industry for nearly every aspect of my day to day life. Conversely I do not depend on my neighbors all day long. Lets consider last Friday for me.
6:20AMArrive at the metro and use my bank debit card to add value to my metro card.
6:45AMArrive at Starbucks by my office and use my bank debit card for a coffee.
11:45AMShop online and use my bank debit card to buy a gift for my wife.
12:15PMPurchase lunch, using my bank debit card.
2:30PMCheck my bank account online to see that my payroll cleared.
2:35PMCheck my 401K account online to verify the correct contribution.
4:15PMArrive at the metro to go home and use my metro card which was funded by my debit card this morning.
4:50PMArrive at the grocery store on my way home to pick up milk, hamburger rolls and dog biscuits which I paid for with my bank debit card.
7:25PMSign onto to my bank website to pay bills for electric, phone, satellite TV, etc.

Not one single time last Friday was I dependant upon my neighbor staying in his over priced, ill financed home. I am betting most people's days work something like last Friday did for me. Similarly, none of the 90%+ Americans who are not in trouble with their mortgage need their neighbor to stay in their home to get through the day.

Friday, September 26, 2008

Subprime Meltdown Explained

The Dems Fiddled While Banking Burns

Here we are, in the middle of the worst financial crisis in two generations, perhaps ever, and instead of decisive action House and Senate Democrats are using this crisis and the legislation that would atleast soften the blow if not alleviate much of this mess, to push their own agenda. Don't forget that the Democrats are largely responsible for the beginning of the mess. Their guy, President Bill Clinton lit the fuse on this disaster. While perennial TheLastGoodIdea villain, Christopher Dodd rails at the President Bush for his lack of over sight he and the rest of his crony's forget that this problem was started by one of their biggest hero's.

Last night while you ate dinner or perhaps slept, another major cog, Washington Mutual (WaMu) failed. I place the blame squarely on the House and Senate Democrats who see their own agendas as more important than the well being of the institutions which you and I depend on for all of our daily business.

The thing the Democrats don't seem to grasp, is that I do not depend upon John Q Public to pay his mortgage, but I do depend on his bank and many others not to undermine my bank, so that I can continue to live a life that doesn't depend on my having a goat to trade for groceries or a chicken to trade for a couple of gallons of gas. Similarly, you don't need me to pay my mortgage, but you do need my bank to be a healthy member of the financial community to which your bank belongs and depends. I used to know how much money I needed to retire, now I wonder what piece of livestock I will have to trade for a few years in the sun, because that is the direction we are headed should people like Senator Christopher Dodd, Represenative Barney Frank or Senator Barak Obama continue push their own agenda, which is not integral to the health of our banking institutions, and holds up legislation that supports the banking industry upon which every man, woman and child in this country depends for the foundation of our day to day lives.

Monday, September 22, 2008

More Election Year Pandering

Our anti-hero, Senator Christopher Dodd continues to stick it to millions of US tax payers. His inability to pass a piece of legislation without tacking on his own agenda is already legendary and continues to foil intelligent plans, like they did when Fannie Mae & Freddie Mac were bailed out. Main St got its ill concieved bone. Dodd wants to put limits on compensation for executives of companies which accept help. That’s fine, but Dodd also wants more plans to prevent foreclosures among loans that are purchased under this plan.

In short, renters, Senator Dodd wants to use your tax dollars against you again.

By maintaining the value of over priced home homes, anyone who doesn't own a home will still be facing an over valued market that will have even less impetus to correct. While this chart is a little old, it still illustrates just how far out of parity home prices are respect to personal income which has grown at a rate under 5% and barely kept pace with stated inflation. Even with the last 2 years of stagnation in housing prices, its growth rate vastly outpaces the growth rate of personal income.

Historically its always been less expensive to rent than own, but never in modern history has the gulf between the cost of owning and renting been this big.

It would be fine if the add ons that Senator Dodd was trying to add had something to do with securing some profit or returned revenue to the US tax payer though this bailout, but by continuing to support a bailout of the individual home owners, Senator Dodd and other legislators, like Democratic Presidential nominee Barak Obama, continue to rob Peter to pay Paul. At present, nearly 60% of US citizens own homes that are within their means and almost one third of the population rents their home, leaving a scant 8% of the population in trouble with their mortgage. Any continued bailout of the individual home owners forsakes anyone who doesn't already own a home. It also leaves the next generation with very little chance of owning a home which obviously creates a titanic problem that future Presidents and aspiring home owners will have to deal with. In short, this bailout will short circuit itself and leave the US tax payer worse off in the long run, because of the myopic, partisan, election year pandering on the part of the fat cats who don't keep their eye on the till and are quick to point the finger at everyone but themselves when things go in tank.

The Leopard Changed Its Spots!

Back in 1999, the NY Times was telling anyone and everyone that the current lending standards were going to get Fanne and Freddie into trouble. Now today they are blasting away with both barrel's at Bush and McCain for allowing the banking industry to run amok of themselves and the output of sub prime mortgages. Most notably this was occurring under the express direction of a Democratic President, William J Clinton. The NY Times article said that a bailout of Fannie Mae and presumably Freddie Mac too would result in the largest bailout of the banking industry. And poof ... it happened. And now the leopard has changed its spots and has gotten into lockstep with the Obama campaign to blame the current Republican administration. Now, I am no fan of GWB, but at some point it gets absurd to blame the man for everything.

Thursday, September 18, 2008

Time For A Hard Look In The Mirror

I love how everyone is looking for a scape goat; politicians, bankers, fed chairmen, etc. How about looking at ourselves. And by ourselves, I mean the people who waded hip deep into these bad mortgages. Just because you "can" afford something doesn't mean you should buy it. I can afford the payment on an Mercedes SL 550, of course I can't pay the rest of my bills after that, but I "can" afford it. Fucking morons left and right. I say this because there is bound to be individual outcry from all over. Our do nothing Congress is already bitching.

Wednesday, September 17, 2008

Worst Case Playing Out, Quietly

While the Federal Government might have stepped in to bailout AIG, I think you have to consider this failure averted as a failure none the less. Nouriel Roubini predicted a cascade of failures and that is indeed what we're seeing, in spite of the fact that everyone is still trying to put lipstick on this pig. Lehman was tanking, they waited too long to try and find a dance partner. Merrill Lynch got gobbled up by nobody's favorite bank and legislation author, Bank of America. AIG has fallen. Only the government bailout prevents this story from truly sounding like what it is. And oh yea, Fannie and Freddie got bailed out last week. Now, we see Morgan Stanley taking a lesson from the Lehman Brothers failure. They appear to be looking for a meger partner/buyer before their balance sheet completely tanks. The day of the large investment banks is certainly beginning to wane. How the current situation can be viewed as anything other than the worst case scenario is impossible, yet the mainstream media continues to take a myopic view in its reporting.

Sunday, September 14, 2008

The Sky May Be Falling

And I am not Chicken Little.

The cascade of consequences from the subprime meltdown may be coming home to roost like you can’t believe. If you've read my blog for any amount of time, you know that right now, in this bear market, I have been a disciple of New York University economist, Nouriel Roubini. This weekend a post by Roubini describes a potential cascade of events which will likely start on Monday morning, probably while you read this blog entry if your up early.

In short, what Roubini described this spring and what he is surmising will happen Monday morning will go down in a manner that is eerily similar to the consumer bank failures of 1929. One key difference is that the failures will, mostly effect institutions that are not key consumer banks. The one notable exception is Washington Mutual (WaMu). While these are not big consumer banks that you and I depend on every day, the effect will be profound and make this summers events look like a walk in the park. The impending failure of Lehman Brothers is quite similar to the predicament that afflicted Bear Stearns this spring. However, the problem is that the Fed and Treasury Department have steadfastly said that there will be no further commercial bailouts after Fannie & Freddie. There is still a possibility that the Fed will flinch and give in and do the right thing. I still believe that preserving the banking system of this country and its key institutions is essential to our nation’s security.

Why am I blogging this? Because I think the $300 Billion that Congress committed to the Foreclosure Relief Act this summer, which I think is in vain, could have been very helpful in brokering a potential bailout of Lehman Brothers. Bailing out Lehman might avert a cascade of broker dealer and bank failures that will be historic. Remember where you are right now; history is unfolding right before our eyes. September 15th 2008 is going to be one very memorable and infamous day if things go down the worst case, but plausible path. I'm not talking about relatively trivial regional banks like Indy Mac. I am talking about financial institutions like WaMu and AIG, major financial institutions which affect most tax paying US citizens. The preservation of these institutions benefits us all, while keeping your irresponsible neighbors in their over priced homes does not.

In short, take cover, because it’s likely to be a bad day at the OK Corral.

Where are Randolph and Mortimer Duke when we need them

Wednesday, September 10, 2008

Surprise! Fannie and Freddie Loved Obama

According to CNN Money, Senator Barack Obama was the third largest beneficiary of a $178 million lobbying effort by disgraced mortgage giants Freddie Mac and Fanie Mae. Mean while, his opponent in the upcoming Presidential election received about $1900 a year from that same lobbying effort. Its getting really hard to believe that Senator Obama is really the voice of change. Change is guaranteed, someone other then George W Bush will be President in January. For Senator Obama to claim the mantle of candidate for change is a farce. He might be new, but his ideas, role and actions speak of times gone by. In other words ... Obama is the same old shit that has earned Congress a lower approval rating than that of embattled President Bush. Imagine that.

Tuesday, August 26, 2008

Obama Makes Me Laugh

Obama makes me laugh, but not enough that I could consider voting for a co-sponsor of the Foreclosure Relief Act of 2008. I laugh for two reasons.

First off, he claims to be targeting the middle class. Which could mean that he's trying to get their votes or perhaps he's trying to kill them off. While I think his intentions are for the former, his results will be for the later. The $9000 tax credit that is given to first time home buyers as part of the Foreclosure Relief Act is really just an interest free loan, since it has to be repaid in subsequent tax filings. $9000. $9000 is less than 5% of the price of a median home in this country ($212,000 last month). In most markets its more like 2%. Its a drop, in the drop in the bucket. For most first time home buyers, this $9000 is not going to get them over the hump. Sure, they will trot out success stories, but for the most part, this is an insignificant gesture on the part of the biggest do nothing Congress to ever sit in Washington DC.

Second, his energy policy is simply laughable. It entirely pursues "green" technologies. Some of which are not entirely proven or practical. He flip flopped on off shore drilling. Mind you, this is your candidate for change. Seems like the same old stuff to me. He fails to pursue pragmatic solutions in his energy policy when he ignores or even talks down nuclear power. Western Europe has been powered by nuclear power for decades. The French are net exporters of electricity to the rest of the EU, thanks to their nuclear program. McCain's energy plan calls for 30 new nuclear plants. The fact of the matter is that he was off by a factor of 10, but I am sure some pin head strategist said 300 nuclear plants will scare people to death.

Wednesday, July 30, 2008

Hall of Shame

If your Senator or Represenatives name isn't on this list, good for you, you can feel good about voting for the incumbent in your next election. Congrats to my Senator, John Warner, I am proud to be represented by you today. Senator Webb, Represenative Moran ... good luck in your next election. As soon as I find out who your most viable opponent is, I will be supporting them with my time, my money and my vote. I reccomend that the rest of you do the same if you find the name of your Senator or Represenative's name on this list.

Noteable non-votes in the Senate, Senators Obama, Clinton, McCain and Dole. Keep in mind Senators Obama and Clinton were key sponsors of the original Senate bill.

Senators voting for HR 3221: Foreclosure Prevention Act of 2008

HI Akaka, Daniel [D]
TN Alexander, Lamar [R]
CO Allard, Wayne [R]
MT Baucus, Max [D]
IN Bayh, B. [D]
UT Bennett, Robert [R]
DE Biden, Joseph [D]
NM Bingaman, Jeff [D]
MO Bond, Christopher [R]
CA Boxer, Barbara [D]
OH Brown, Sherrod [D]
KS Brownback, Samuel [R]
NC Burr, Richard [R]
WV Byrd, Robert [D]
WA Cantwell, Maria [D]
MD Cardin, Benjamin [D]
DE Carper, Thomas [D]
PA Casey, Robert [D]
GA Chambliss, C. [R]
MS Cochran, Thad [R]
MN Coleman, Norm [R]
ME Collins, Susan [R]
ND Conrad, Kent [D]
TX Cornyn, John [R]
ID Craig, Larry [R]
CT Dodd, Christopher [D]
NM Domenici, Pete [R]
ND Dorgan, Byron [D]
IL Durbin, Richard [D]
NV Ensign, John [R]
WI Feingold, Russell [D]
CA Feinstein, Dianne [D]
SC Graham, Lindsey [R]
IA Grassley, Charles [R]
IA Harkin, Thomas [D]
UT Hatch, Orrin [R]
TX Hutchison, Kay [R]
HI Inouye, Daniel [D]
GA Isakson, John [R]
SD Johnson, Tim [D]
MA Kennedy, Edward [D]
MA Kerry, John [D]
MN Klobuchar, Amy [D]
WI Kohl, Herbert [D]
LA Landrieu, Mary [D]
NJ Lautenberg, Frank [D]
VT Leahy, Patrick [D]
MI Levin, Carl [D]
CT Lieberman, Joseph [I]
AR Lincoln, Blanche [D]
IN Lugar, Richard [R]
FL Martinez, Mel [R]
MO McCaskill, Claire [D]
KY McConnell, Mitch [R]
NJ Menendez, Robert [D]
MD Mikulski, Barbara [D]
AK Murkowski, Lisa [R]
WA Murray, Patty [D]
NE Nelson, Ben [D]
FL Nelson, Bill [D]
AR Pryor, Mark [D]
RI Reed, John [D]
NV Reid, Harry [D]
KS Roberts, Pat [R]
WV Rockefeller, John [D]
CO Salazar, Ken [D]
VT Sanders, Bernard [I]
NY Schumer, Charles [D]
AL Sessions, Jefferson [R]
AL Shelby, Richard [R]
OR Smith, Gordon [R]
ME Snowe, Olympia [R]
PA Specter, Arlen [R]
MI Stabenow, Debbie Ann [D]
AK Stevens, Ted [R]
NH Sununu, John [R]
MT Tester, Jon [D]
SD Thune, John [R]
LA Vitter, David [R]
OH Voinovich, George [R]
VA Webb, Jim [D]
RI Whitehouse, Sheldon [D]
MS Wicker, Roger [R]
OR Wyden, Ron [D]

Represenatives voting for HR 3221: Foreclosure Prevention Act of 2008
TN-6 Gordon, Barton [D]
TX-9 Green, Al [D]
TX-29 Green, Raymond [D]
AZ-7 Grijalva, Raul [D]
IL-4 Gutierrez, Luis [D]
NY-19 Hall, John [D]
IL-17 Hare, Phil [D]
CA-36 Harman, Jane [D]
FL-23 Hastings, Alcee [D]
SD-0 Herseth Sandlin, Stephanie [D]
NY-27 Higgins, Brian [D]
IN-9 Hill, Baron [D]
NY-22 Hinchey, Maurice [D]
HI-2 Hirono, Mazie [D]
NH-2 Hodes, Paul [D]
PA-17 Holden, Tim [D]
NJ-12 Holt, Rush [D]
CA-15 Honda, Michael [D]
OR-5 Hooley, Darlene [D]
MD-5 Hoyer, Steny [D]
SC-4 Inglis, Bob [R]
WA-1 Inslee, Jay [D]
NY-2 Israel, Steve [D]
IL-2 Jackson, Jesse [D]
TX-18 Jackson-Lee, Sheila [D]
LA-2 Jefferson, William [D]
TX-30 Johnson, Eddie [D]
GA-4 Johnson, Henry [D]
IL-15 Johnson, Timothy [R]
OH-11 Jones, Stephanie [D]
WI-8 Kagen, Steve [D]
PA-11 Kanjorski, Paul [D]
OH-9 Kaptur, Marcy [D]
RI-1 Kennedy, Patrick [D]
MI-5 Kildee, Dale [D]
MI-13 Kilpatrick, Carolyn [D]
WI-3 Kind, Ronald [D]
IL-10 Kirk, Mark [R]
MI-9 Knollenberg, Joseph [R]
RI-2 Langevin, James [D]
WA-2 Larsen, Rick [D]
CT-1 Larson, John [D]
OH-14 LaTourette, Steven [R]
CA-9 Lee, Barbara [D]
MI-12 Levin, Sander [D]
GA-5 Lewis, John [D]
IL-3 Lipinski, Daniel [D]
NJ-2 LoBiondo, Frank [R]
IA-2 Loebsack, David [D]
CA-16 Lofgren, Zoe [D]
NY-18 Lowey, Nita [D]
MA-9 Lynch, Stephen [D]
FL-16 Mahoney, Tim [D]
NY-14 Maloney, Carolyn [D]
MA-7 Markey, Edward [D]
CA-5 Matsui, Doris [D]
NY-4 McCarthy, Carolyn [D]
MN-4 McCollum, Betty [D]
WA-7 McDermott, James [D]
MA-3 McGovern, James [D]
NY-23 McHugh, John [R]
NC-7 McIntyre, Mike [D]
CA-11 McNerney, Jerry [D]
NY-21 McNulty, Michael [D]
FL-17 Meek, Kendrick [D]
NY-6 Meeks, Gregory [D]
ME-2 Michaud, Michael [D]
CA-7 Miller, George [D]
NC-13 Miller, R. [D]
AZ-5 Mitchell, Harry [D]
WV-1 Mollohan, Alan [D]
KS-3 Moore, Dennis [D]
WI-4 Moore, Gwen [D]
VA-8 Moran, James [D]
CT-5 Murphy, Christopher [D]
PA-8 Murphy, Patrick [D]
PA-12 Murtha, John [D]
NY-8 Nadler, Jerrold [D]
CA-38 Napolitano, Grace [D]
MA-2 Neal, Richard [D]
MN-8 Oberstar, James [D]
WI-7 Obey, David [D]
MA-1 Olver, John [D]
TX-27 Ortiz, Solomon [D]
NJ-6 Pallone, Frank [D]
NJ-8 Pascrell, William [D]
AZ-4 Pastor, Edward [D]
NJ-10 Payne, Donald [D]
CA-8 Pelosi, Nancy [D]
CO-7 Perlmutter, Ed [D]
MN-7 Peterson, Collin [D]
WI-6 Petri, Thomas [R]
PA-19 Platts, Todd [R]
ND-0 Pomeroy, Earl [D]
NC-4 Price, David [D]
WV-3 Rahall, Nick [D]
MN-3 Ramstad, James [R]
NY-15 Rangel, Charles [D]
WA-8 Reichert, Dave [R]
TX-16 Reyes, Silvestre [D]
TX-23 Rodriguez, Ciro [D]
AR-4 Ross, Mike [D]
NJ-9 Rothman, Steven [D]
CA-34 Roybal-Allard, Lucille [D]
MD-2 Ruppersberger, C.A. [D]
IL-1 Rush, Bobby [D]
OH-17 Ryan, Timothy [D]
CO-3 Salazar, John [D]
CA-39 Sanchez, Linda [D]
CA-47 Sanchez, Loretta [D]
MD-3 Sarbanes, John [D]
IL-9 Schakowsky, Janice [D]
CA-29 Schiff, Adam [D]
PA-13 Schwartz, Allyson [D]
GA-13 Scott, David [D]
VA-3 Scott, Robert [D]
NY-16 Serrano, José [D]
PA-7 Sestak, Joe [D]
CT-4 Shays, Christopher [R]
NH-1 Shea-Porter, Carol [D]
CA-27 Sherman, Brad [D]
NC-11 Shuler, Heath [D]
NJ-13 Sires, Albio [D]
NY-28 Slaughter, Louise [D]
WA-9 Smith, Adam [D]
NJ-4 Smith, Christopher [R]
AR-2 Snyder, Victor [D]
CA-32 Solis, Hilda [D]
OH-18 Space, Zackary [D]
SC-5 Spratt, John [D]
CA-13 Stark, Fortney [D]
MI-1 Stupak, Bart [D]
OH-13 Sutton, Betty [D]
CA-10 Tauscher, Ellen [D]
MS-4 Taylor, Gene [D]
MS-2 Thompson, Bennie [D]
CA-1 Thompson, C. [D]
MA-6 Tierney, John [D]
NY-10 Towns, Edolphus [D]
CO-2 Udall, Mark [D]
NM-3 Udall, Tom [D]
MI-6 Upton, Frederick [R]
MD-8 Van Hollen, Christopher [D]
NY-12 Velazquez, Nydia [D]
IN-1 Visclosky, Peter [D]
NY-25 Walsh, James [R]
MN-1 Walz, Timothy [D]
FL-20 Wasserman Schultz, Debbie [D]
CA-35 Waters, Maxine [D]
CA-33 Watson, Diane [D]
NC-12 Watt, Melvin [D]
CA-30 Waxman, Henry [D]
NY-9 Weiner, Anthony [D]
VT-0 Welch, Peter [D]
FL-19 Wexler, Robert [D]
OH-6 Wilson, Charles [D]
VA-10 Wolf, Frank [R]
CA-6 Woolsey, Lynn [D]
OR-1 Wu, David [D]
MD-4 Wynn, Albert [D]
KY-3 Yarmuth, John [D]
NY-11 Clarke, Yvette [D]
MO-1 Clay, William [D]
NC-6 Coble, Howard [R]
FL-4 Crenshaw, Ander [R]
VA-1 Davis, Jo Ann [R]
VA-5 Goode, Virgil [R]
IL-14 Hastert, J. [R]
NC-8 Hayes, Robin [R]
TX-15 Hinojosa, Rubén [D]
CA-52 Hunter, Duncan [R]
LA-1 Jindal, Bobby [R]
TX-3 Johnson, Samuel [R]
FL-22 Klein, Ron [D]
OH-10 Kucinich, Dennis [D]
IL-18 LaHood, Ray [R]
CA-12 Lantos, Tom [D]
TX-14 Paul, Ronald [R]
NJ-3 Saxton, H. [R]
MO-4 Skelton, Ike [D]
CO-6 Tancredo, Thomas [R]

Friday, July 25, 2008

Sample 2008 SAT Questions

Tax payer is to Obama as ...
A) Grass is to mower
B) Sink is to dishes
C) Chicken is to Col. Sanders

The American dream is to Senator Christopher Dodd as ...
A) Bus is to stop
B) Paper is to ink
C) Hindenberg is to a match

The Forclosure Relief Act is to Bank of America as ...
A) Ocean is to green
B) Dog is to walk
C) The Constitution is to Thomas Jefferson

Lawrence Yun is to truth as ...
A) Stove is to hot
B) Rain is to fall
C) OJ Simpson is to innocent

Friday, July 11, 2008

News & Notes

It took 6 months, but CNN is finally seeing things my way. Admiting fully that a bailout will only prolong the real estate slump and probably result in further tax payer expense.

According to this article on Yahoo!, only 21% of the country supports this legislation. Which makes me wonder what in the world Congress is doing with their bailout legislation. I can only look forward to the day Senator Christopher Dodd gets drummed out of the office that he rode into on his daddy's coat tails.

Friday, July 04, 2008

Thanks For The Validation CNBC

9 out 12 analysts voted against a bailout. These highly respected analysts have comments like, "will only interfere with the price discovery process that is necessary in order to reach a clearing price for the housing market", or "This is an election year bill to pander to voters" and my personal favorite, "No, this is an oinker. Corporate welfare".

If all this sounds fimilar, your right, most of it you read here months ago.

Wednesday, July 02, 2008

Senator Obama Was Cheap Too

You can now have a low mileage Presidential candidate for a mere $300 a month. Senator Obama received a $1.32 million super jumbo loan below the average rate for similar loans at that time. He paid no fees and he bought no points up front.

The overt buying and selling of US politicians has to stop. Senator Obama is a prominent sponsor of a housing bailout that will surely benefit Northern Trust of Illinois. In fact, I contend that they got themselves a massive bargain when they over paid for a freshmen Senator with no influence, but it appears that their investment has matured nicely.

I have to wonder why Senator Obama didn't disclose this favorable treatment sooner, especially in light of the resignation of the head of Obama's vice presidential search committee after it was disclosed that he had received favorable treatment from Countrywide. Associate law professor Adam J. Levitin, a credit specialist at the Georgetown University Law Center said, "Do they do business like that for people who are not congressmen? If they don't, that's a problem". I think we know the answer to that question already. So here we are a Presidential candidate who has already been bought and sold. While he peddles a line of rhetoric that says he's the candidate of change, all I see here is the same old stuff, which makes Senator Obama far worse, in my opinion, than those who he claims to be fighting.

Northern Trust claims that unlike Countrywide, they had no formal program for taking care of VIPs. Sure that’s great, but it never hurts to have a Senator on the payroll, especially at the bargain basement price of $300 a month. Northern Trust Vice President John O'Connell even went so far as to say, "A person's occupation and salary are two factors; I would expect those are two things we would take into consideration". So yea, cutting a deal with a Senator is advantageous, because some day you might need some help getting some legislation passed.

Like Senator Dodd's loan, this is beginning to reek of quid pro quo.

Furthermore, it appears that the Senator Obama paid $300,000 less than the $1.95 million asking price, in 2005. In 2005, the housing market was still white hot. Unlike today, when the market is lousy, buyers still have a hard time getting a low ball bid accepted. Keep in mind; a low ball bid is defined by real estate professionals as being more than 10% below the seller’s asking price. Here we have Senator Obama getting a seller in a hot market to give him a 15% discount to go with his sweetheart loan. Makes you think doesn't it?

Monday, June 30, 2008

Senator Dodd Ceases to Amaze

While this high handed hypocrite is on vacation, along with the rest of Congress, he and his cronies have the audacity to tell the Fed, SEC and Treasury Dept that they should not take any action until they decide if its in the country's best interest. The exact quote is, "We ask that no action regarding implementation of the (agreement) be taken before we can determine that it is in the best interests of our nation's economy and the well-being of its citizens,".

Now I have to wonder if he means his best interest or his party's best interest, because I am certain that Senator with his BA in English Literature from Providence College does not qualify him to be making complex economic analysis. Nor does his JD from the University of Louisville. This guy sure did seek out the best and brightest institutions of higher education. But then we already knew that Congress was not where the best and brightest usually end up in this country.

Heck this guy didn't so much win his seat in House of Representatives in 1974, so much as ride his daddy's coat tails into office.

Wednesday, June 25, 2008

Senators Are Becomming More Affordable

Senators are becoming more affordable every day. You still can't afford to buy a house, but you might be able to afford a Senator. You might even be able to get the exact Senator you want, rather than settle for a junior Senator with no influence, as if he/she were a small house out in the boonies. Even better yet, you can get the Chairmen of the Senate Banking Committee for $200 a month and NO MONEY DOWN! WOW! Sounds amazing doesn't it? But it’s true, that’s the approximate savings that Senator Dodd reaped from his sweetheart deal from Countrywide Financial.

I think the Mob pays crooked judges and cops more than that. If you feel ripped off because your tax dollars are going to bail out greedy, irresponsible, arrogant, stupid, ignorant borrowers and lenders, imagine how Tony Soprano must feel. I'd be looking over my shoulder if I were one of those guys who were over charging the mob.

What is even more amazing and hard to believe is that Senator Dodd denies that he knew he got preferential treatment. Countrywide wasn't making these deals for ordinary Toms, Dicks or Harrys. Shocking that Senator Dodd took out a half million dollar loan and knew nothing of the terms of the deal. He must be really really really wealthy. It’s even more amazing that Senator Dodd seems to have no sense for avoiding the appearance of impropriety, because the Foreclosure Relief Act of 2008 is absolutely screaming QUID PRO QUO.

Noteworthy is our hero, the man in the white hat, Representative John A. Boehner who is calling for an ethics investigation into Senator Dodd's dealings with Countrywide and major campaign contributor, Bank of America, who coincidently is buying Countrywide Financial and taking over lots of unfavorable loans. Representative Boehner said, "Democrats who receive sweetheart deals from their campaign contributors shouldn't be pushing legislation forcing taxpayers to bankroll a $300 billion bailout of scam artists and speculators, and the American people have every right to demand answers if they do". Fortunately for Senator Dodd, his crony, Representative Barney Frank is doing everything in his power as the House Financial Services Committee chairman to stifle any investigation. Wonder if he has any skeletons in his closet.

Stay tuned, this might get good.

Tuesday, June 10, 2008

Thanks Bloomberg

Thank you for reporting what I have been saying for months.

The only fix at this point is to allow nature to run its course. You can not hold back the economic tides any better than you can hold back the ocean's tides. Over the long run, the natural order of things will come to bear.

Friday, May 30, 2008

I Know Home Prices Are Falling Fast ...

I know home prices are falling fast, but really, I expected better from the Economist. Just the like our fair Senator Dodd, the Economist tried in earnest to compare the current epidemic of foreclosures to the Great Depression. From CNN, I expect this kind of populist reporting, but not from the Economist.

It's sad to see people trying to evoke a response by trying to tie our current economic maliase the Great Depression. However, as with dear Senator Dodd, the context is all wrong. 100% wrong.

During the Great Depression people were being foreclosed because our economy failed. Businesses failed, jobs were lost, people were truely in need. There were no jobs to be had. People were truely facing homelessness though no action of their own. Today, every Tom, Dick and Harry who is sweating their ARM reset is in that prediciment because they stupid, ignorant, irresponsible and probably greedy too. Unlike during the Great Depression, the people being foreclosed still have jobs, still have prospects for a rich and full life. Yet bleeding heart liberal (note: I am not right winger either) media outlets like the New York Times and CNN continue to lobby for foreclosure relief which flies in the face of common sense. The people who are at risk of foreclosure today have jobs and means to rent a new and possibly nicer home. Hell, they even have the opportunity to own a home again, once their credit rehabs, provided the current legislation proposed, does not pass in any way, shape or form.

The bill is coming due, the dumb ones who over spent are going to have to pay the piper. Nobody dances for free, we all knew that before the mortgage market began to unravel. The Foreclosure Relief Act will forsake significantly more people than it helps out. When I say "significantly more", I mean TONS MORE. Perhaps 10% of the population will benifit from this legislation while 20-30%, perhaps more will be harmed by the Foreclosure Relief Act.

No Bailout for the stupid, ignorant, irresponsible or greedy.

Tuesday, May 20, 2008

I Knew The NY Times Was Left Leaning ...

However I had no idea that they were in the business of promoting out and out socialism.

The Times rails against the President and Senate Banking Committee for not stepping forward and just throwing money at the problem. Ironically the Times is advocating using Federal money to support prices and insure mortgages. If that sounds like price control efforts that Richard Nixon advocated in during his tenure as President, your right. And coming from such a liberal media outlet, I am almost confused.

The Times cites the levels of decline over and over again in an attempt to inflame its readers and urge action to save a bunch of wildly irresponsible home owners and borrowers. The Times editorial even tries to apply the law of supply and demand, yet it ignores the basic premise of this most basic of economic theories. The editorialist believes that prices just fall and people start buying. However, this anonymous editorialist ignores the fact that real estate markets from coast to coast were dramatically over priced and over bought.

Historically, home prices double every 20 years. The nine years have seen home prices increase 85%. If this market were to reach some kind of equilibrium, prices would have to retreat a good 40% if its gains, before it could realistically start moving upwards again. The Times cites a 7.6% drop from February 2007 thought February 2008. That percentage drop represents a fraction of the correction needed to bring the market back to equilibrium so that the law of supply and demand could begin to work again.

When prices fall to levels which buyers think are reasonable, they will start buying again. Instead The Times home price levels like they are Constitutional Rights. The fact is, even in foreclosure, many homes are still priced above what is a reasonable valuation against historic real estate cycles.

In a final move of cowardice, The Times closed off its interface for readers to provide comments. The overwhelming sentiment of those comments was in deference to the anonymous editorialist. Quite frankly, I think it’s shameful for a public forum to provide an opinion on a given subject and then when it doesn't like the backlash it runs away and hides, but I guess you have to cut your losses sometimes when your DEAD WRONG!

Wednesday, May 14, 2008

Tuesday, May 13, 2008

You Heard it Here A Long Time Ago

A Bloomberg article details how banks still have billions of dollars in unrealized losses related to the sub prime meltdown. Fortunatly? Unfortunatly? The foreign sovereign wealth funds from places like Abu Dhabi are probably going to cut their losses and see if they can cherry pick some low hanging fruit later on.


The Wall Street Journal is reporting that the Democrats may face the rath of voters because they are pushing so hard for a housing bailout. Thankfully our President, in his first sound decision since 2002, is vowing to veto the measure. Not that the Republican plan is any better.

There are some great Youtube clips of the Republicans coming out and blasting this bailout. How could any level headed, objective person be in favor of this bailout? Nearly a 1/3 (32%) of the population rents their home, 27% of people own their home free and clear and have no mortgage, another 33% of the population is living within its means and are current on their mortgage. Which leaves another 8% of the population who are behind or in foreclosure. So, basically the Dems are going to stick 92% of us with the tab for a small fraction of the population who were, dumb, ignorant and selfish. Now granted, a small portion of the people who are still current on their mortgages must be shitting their pants, so lets say that half of the 33% who are current on their mortgages will not be without a bailout at some point. I am certain that it isn't that much, but lets cut the dumb some slack. If you assume that 25% of the population needs a bailout, your still talking about sticking it to 75% of us. Including a large portion of the renter population who were royally horned over by the dumb 25%. And its not really 25%, but that’s a nice round number, and here's what it comes down to ... The Democrats want to shaft 1/3 of us to save another 1/4 of us someplace else. This kind of thought process is just plain broken. Really, its populist, so what can any of us expect from a bunch of politicians.

Tuesday, May 06, 2008

For Sale : The Fed Chairmen

And for that matter most other appointed and elected officials.

Ben bailed out Bear Stearns in the dark, behind the tax payers backs and got nothing for it. The American people will forgive a lot, but not the out and out corruption of its leaders and decision makers. Had Ben done this deal in full view, it might not have set off the amount of resistance that it did, but time would not allow for that. Where I think Ben failed in bailing our Bear Stearns was that he got nothing for the US tax payers. A number of times in recent history, the US government has bailed out big business and received an equity stake in return. Chrysler in the 80s comes to mind, so do the airlines following September 11th. Bailing out Bear Stearns was the right thing to do, all be it highly toxic and unpopular, but it was undeniably the right thing to do. In much the same way as George Bush shot his global credibility to hell when attacked Iraq, Bernake shot his credibility down the drain when he failed to get anything in return for the Bear Stearns bailout.

Now with no credibility for making another potential corporate bailout, Ben Bernake is reduced to pan handling for the big banks in the form of begging for an individual home owner bailout, since the administration’s soft dollar policy has failed to do anything to arrest our slide into recession. In fact, its probably contributing to our current predicament.


Tuesday, April 22, 2008

More Validation for Me!

Its not easy being so right about something so bad.

Many problems with mortgage bailouts

Yale economist Robert Shiller stated, "I'm not sure we can achieve continuing high home prices". Home prices are up 85% in roughly the last decade. Given the historic precedent of home prices doubling every 20 years, the recent 15% retreat in home prices is only fraction of the correction needed for the market to be at or near equilibrium. Considering the current tight credit markets, I think its safe to say that we haven't seen much more than the tip of the ice berg with respect to the correction in housing prices.

While many people think the Foreclosure Prevention Act of 2008 will arrest the slide of housing prices, they fail to grasp the concept and consequences of allowing housing prices to remain out of equilibrium with personal income. Barry Ritholtz, CEO of equity research Fusion IQ said, "If home prices don't go down, it means newlyweds can't go out and find a home they can afford". I have been saying this since Hillary Clinton first opened her yap on this subject. But I guess a PhD in economics or a successful Wall St career lends a certain amount of credibility that I don't have. Common sense just isn't worth much in this day an age.

Treasury Secretary Henry Paulson seemed to have the right idea, when he sought to insulate the major structural institutions from the housing market downturn. However, his Wall St roots can't help but allow him to be painted as being too good of a friend to Wall St. Although, some people see issues with this course of action. Keith Hembre, chief economist of First American Funds believes that by propping up the banks we are devaluing other financial objects. However, I think that he is under estimating the gravity of the situation that confronts our financial markets and banking institutions.

Friday, April 11, 2008

What a Turd

Read this story

Its the story of a moron who got in over their head and now they are basicly thumbing their noses at every single tax payer who is taking it in the back pocket while they squat mortgage free in their home in Stockton CA which is awaiting foreclosure. At one point they actually feel good that they aren't paying their mortgage, becasue they have money in the bank since they aren't paying for their mortgage that they can't afford. Just makes it burn, doesn't it?

Wednesday, April 09, 2008

Who Would Have Thought

Who would have thought that GWB was going to be cast as the smart one in the sub-prime meltdown? I sure didn't, but just as the do nothing Congress gets off its preverbal ass to do something, the wrong thing, W is there waiting to slap them down.

At yesterday's White House briefing, Spokeswoman Dana Perino gave the bill an emphatic thumbs down, saying it would be counterproductive, do more harm than good, and not be supported by the President.

"The bill will likely do more harm than good by bailing out lenders and speculators, and passing on costs to other Americans who play by the rules and honor their mortgage debt obligations."

While I have been an epic critic of GWB and the Fed, for once I find myself on the same side of the fence with him. It surely can't last long, but for now, I am enjoy a return to the dark side, my Republican roots, that W has worked so hard for the last 7 years to kill off. While they were almost dead, Clinton and Obama (who I was actually close to endorsing) managed to resuscitate them in one short sentence each, affirming their support for an individual homeowner bail out.

Now if the Fed would just get themselves an equity stake with the stealth banking bail out thats going on right now, all would be right in the world.

Monday, April 07, 2008

The Over Flow Has Begun in Earnest

Municipalities and businesses alike are beginning to take it on the chin thanks to the sub-prime melt down. Its seems as if everyone was looking for a short cut. The market for auction-rate securities has plunged like Brittany Spears' underwear. The District of Columbia is now paying an additional $1.2 million a month to cover the interest on these securities they sold to cover the cost of building Nationals Stadium. I wonder what that foreclosure will look like. Its not just poor relation municipalities taking in the back pocket either. Hospitals, universities and even the NY/NJ Port Authority are neck deep in these cut rate debt obligations. Apparently, nobody thought the rates would go up or that the market for them would go to hell.

Granted, I can only say that I thought that housing prices would have to collapse sooner or later, I can't lay claim to seeing anything further than that. Although Nouriel Roubini probably did, but nobody listened to him. He was the biggest bear, caught in the middle of the biggest bull market anybody, anywhere has ever seen. I think its safe to say the cascade will be far reaching and perhaps worse than anyone could imagine. Public works will grind to a halt as politicians look for ways to stretch their shrinking tax base to cover rapidly growing interest payments. Universities will be forced to make tough decisions on staffing, up keep on their physical plant and quality of their programs.

The question on the tip of everyone's tongue is when will the end come, and the undeniable answer is no time soon. Certianly not while nood-nick, know nothing Senators like Christopher Dodd keep trying to meddle in markets which they know nothing about and aren't qualifed to be making adjustments to. At this time, the most prudent course of action has to be one of inaction, for any move made right now, is likely to only prolong the markets finding a proper equilibrium. Our check is coming and its going to be a big one. Putting it off only makes it worse.

Sunday, April 06, 2008

Speaking of Irony

The Washington Post is reporting the Mortgage Bankers Association might not be able to afford its nice, new, shiney, big building in downtown Washington DC. The group's budget has been squeezed by membership that has been reduced by 17%, because sham, sub-prime brokerage firms went busto. Two senior VPs have jumped, like rats off a sinking ship. Furthermore, as closing time approaches, the group's borrowing costs are rising and their prostpects for leasing out space in the build are drying up. Tough break for those who were just laid off to support the MBA's hubris.

You've gotta love it when irony comes home to roost.

Saturday, April 05, 2008

Public Enemy #1 - Senator Chris Dodd

This week Senator Dodd wheeled out a bailout package that will forsake every single person in this country who currently does not own a home. He also did significant favor for the home building and real estate industries. He was promptly called out for doing this favor for big business, but most people still seem to be ignoring the long range implications of any individual home owner bailout. So after being called out, Senator Dodd retreated like a Washington Redskins corner back by saying, "I would have been more moderate on that, to put it mildly" and he acknowledged that he had reservations about the business-tax breaks, but he still put them out there in the hope that they would slide on by. So now, in addition to selling every single tax payer down the river to pay for this bailout, Senator Dodd is proposing that people who are late with mortgage payments take money penalty-free from their retirement accounts.

That’s just brilliant Senator Dodd, so in 2008 we will bail these people out of their bad mortgages and in 2040 we get to bail them out again because they have no retirement savings. Absolutely brilliant. I don't know where Senator Dodd gets his ideas from, but I am fairly sure my 6th grade social studies class could have figured out a better plan than wrecking our economy for years to come, just to save a relative handful of foolish, ignorant, stupid and reckless homeowners.

No thanks Senator Dodd. No Thanks Representative Barney Frank and of course, lets not forget Senator & Presidential candidate Hillary Clinton, who opened her mouth first about an individual homeowner bail out.

Friday, April 04, 2008

The Needs of the Many ....

The primary problem I have with this bill is that it does nothing to address the disparity between home prices and personal income. Growth of home prices has vastly out paced the growth of personal income for more than a decade. At this point, anything that maintains the current home prices will only prolong the problem and likely make it worse. If this bill passes as is, nobody who doesn't own a home today will EVER be able to afford a home since just about every single market in the country is over priced and the cost of borrowing is going to go through the roof if lenders have to worry about bankruptcy court modifying the loan terms and writing down the principal. $7000 or even $15000 would do nothing to spur investment in markets like the west coast or around any large city.

The only possible outcome would be rampant inflation of personal incomes and the goods/services that aren't housing related. That would turn our dollar into the Peso or Yen.

Unfortunately, I think the time has come for America to take its medicine. Those who took the short cut are going to have to pay the price and lose their homes. I don't see any way to fix the problem, without making a bigger problem down the road. Lets not forget that its not 1929. There isn't rampant unemployment. Just about everyone who is losing their homes due to a sub-prime mortgage has a job and the means to rent. And as long as this bill doesn't pass, they will have the opportunity to own a home again some day when their credit rehabs.

The paper gains people have made on their houses, without selling are just that. Paper gains. Granted a home is usually a much bigger investment. A much more emotional investment than say stock options from 2001, but its really no different. I, along with many friends had enormous paper net worth’s that evaporated as the dot com bubble burst leaving us with only a tax write off on the options we paid taxes on. Some of us were worth millions and ended up with a few thousand. Most of us got nothing.

This bailout is very expensive. It’s very difficult to implement. Its has a significant likelihood of making things worse. This bill will help alarmingly few people in relation to the whole population of the American home owners and citizens in general. It forsakes the next generation's ability to pursue their American dream.

The needs of the many must be accounted for before the needs of the few. While it might be distasteful to see the CEO of Bear Stearns cash out $63 million from a company that was run into the ground but, preserving the integrity of our financial institutions benefits every American and perhaps every citizen of the world.

I urge everyone to contact their Senators and Representative and tell them you will not support them with your time, money or votes in their next election if they support this legislation.

List of Senators
List of Representatives

Wednesday, April 02, 2008

Hey Newsweek! Thanks For the Validation

Newsweek: Why housing bailout plan is flawed

In Layman's Terms

I'll put this in relatively simple terms so that even the intellectually challenged can understand.

Imagine 2 people sitting at a blackjack table. One is your average young person. They have a few bucks in their pocket, they are just getting started. The other person is your sub-prime borrower. The young person has read up and studied the game of blackjack and is going to play perfect basic strategy blackjack, while the sub-prime guy is not playing smart strategy. Throughout the game, the sub-prime guy takes cards or stands at inopportune times, thus messing up the game for the whole table, especially the basic strategy guy. At the end of the night when the basic strategy guy and the sub-prime guy leave the casino broke, someone gives the sub-prime guy his money back. And just to make things stick a little for the basic strategy guy, he's forced to go to the ATM and withdraw cash to cover a portion the sub-prime guys loss.

Tuesday, April 01, 2008

Dear Senator

Dear Senator So-and-so, I would respectfully request that the tax dollars I am sending the IRS next week be earmarked for something less wasteful and more beneficial than this bailout, like the war in Iraq.


A Taxpayer

Nice Hyperbole Senator Dodd

Nice Hyperbole Senator Dodd, but your context is all wrong.

Dodd said that about 8,000 homes are being foreclosed on every day.

"Foreclosures of this magnitude are on a par with the severity of foreclosures during the great Depression," Dodd said. "Each day without action means more are losing their homes."

80 years ago people were getting foreclosed though no actions of their own. The markets crashed, businesses went under, and the Great Plains were a dust bowl. Today, EVERYONE who is facing foreclosure is facing it because they made a bad gamble. They are facing it because they were ignorant, dumb or irresponsible. It’s a totally different situation. Everyone being foreclosed still has jobs and can still afford to rent. Eventually those people's credit will be good enough to own homes again. Unlike the plan Senator Dodd is proposing which will make it so that millions of people who currently don't own homes, will never be able to afford them, because prices will remain higher than should naturally be expected, given personal income levels and the cost of borrowing will be significantly higher. Brilliant strategy to forsake the future in favor of the present. Sort of how we got into this mess, no? Typical American ideology.

My Review of the Fed Overhaul

Yet another ham handed effort on the part of W to salvage a situation that doesn't need to be salvaged. A bottom needs to be found and built upon with fundamentals.

This overhaul will never work. Has anyone seen what’s going on at DHS? The Department of Homeland Security is floundering and failing. 7 years later, it still isn't fully staffed, programs are not coordinated and key mandates aren't being met. All DHS does is protect our borders and ensure our safety. The Fed overhaul wants to create a Federal Reserve which is responsible for our money at the expense of other federal agencies. Does anyone in their right mind see that endeavor succeeding?

I am not saying that revamping our financial regulatory structures isn't important or needed, but there are more pressing issues at hand. I also disagree with how the government is going about this restructuring. Representative Barney Frank, D-MA, who is the chairman of the House Financial Services Committee, called it "a constructive step forward (in) a profound national discussion that cannot be concluded in the months before the election". Correct Congressman, but its like the 4th or 6th step from where we are now. I hate to say it, but for a change Hillary was right when she called this reorganization, arraigning deck chairs on the Titanic. Too bad she rendered herself irrelevant last week when she called for a bailout of the individual homeowners.

Saturday, March 29, 2008

Way to go Senator Coburn

Sen. Tom Coburn (R-Okla.) said he hopes that "the administration is not into subsidizing stupid behavior. It's one thing to help people who made a rational decision, who were spammed or defrauded. But it's another thing to reward people who thought they were getting something for nothing, and knew what they were getting into."

An Open Letter to Every Elected Official

President/Senator/Congressman, I find it totally unacceptable that this administration is even considering the possibility of bailing out troubled home owners, for a litany of reasons.

First, this kind of bailout can only reinforce poor decision making and risk taking in the future on the part of individuals and institutions. There will always be people looking for a short cut. Don't reward this kind of irresponsible behavior with my tax dollars.

Second, a bailout will create a situation where generations of potential home buyers are frozen out of the market, because of the current disparity between home prices and personal income is never going to be rectified.

Third, bailing out the banks is one thing. I consider maintaining and supporting the US banking system with tax payer dollars to be important and worthwhile. A healthy US banking system is matter of national security. Bailing out troubled US banks, benefits every single US tax payer. Bailing out the individual home owners bails out a staggering small percentage of the population.

Fourth, the home owners who are being put out of their homes are not destitute, they aren't unemployed, they don't face impending doom. They can easily rent, like millions of people who were frozen out of the market prior to the beginning of this price correction.

Fifth, if the government is going to bail out home owners who took on too much debt, will the government be bailing out people who took on too much student loan debt? How about the individuals who took on too much credit card debt? How about just expunging the criminal records of, say everyone under the age of 25? Those people could always plead ignorance or youthful stupidity, just like all the home owners who claim to be victimized by predatory lenders. Its a slippery slope President/Senator/Congressman, where does it end?

Sixth, a bailout of the individual borrowers punishes everyone who decided to buy within their means. It punishes everyone who chose to wait for a market correction, because it wasn't hard to see coming. It makes me wish I had been dumber and more irresponsible. Consider the illogic of my last statement. When would any normal, intelligent, rational person make that kind of statement? I think it illustrates just how foolish a bail out for the troubled, individual borrowers is.

Finally President/Senator/Congressman, I am highly offended that my tax dollars are being given to someone who was irresponsible and whose only plight is that of having to rent instead of own their home. Please do not condemn current and future generations to the same fate because they were unwilling or unable to have the opportunity to make a bad decision.


Friday, March 28, 2008

Pathalogical Stupidity

How stupid can you be. This person made $70k/year and took out an interest only loan with a $2500/month payment. Her mortgage was easily costing her something in the region of 2/3 of her take home salary. Plus run away property tax, insurance, a likely car payment, not to mention other luxuries like food, clothes, gas. And the real kicker, she was working as a loan processor, she should have more insight into the market place than the average bear. Watch the video, linked at the top of the page! Look at the kitchen in that house. No restraint what so ever. This family must have been the builder’s wet dream come true. Not to mention the electronics store and where ever she buys her wine from. She talks about taking off the Tiffany bracelet and Coach purse before going to the food bank. How about eBaying those little luxuries? With the stainless appliances, marble counter tops, there is undoubtedly an over priced car in the garage.

Then there are these fools who are paying an $800/month gas bill. Let me offer some basic advice, get rid of the family pick up for something more economical. Fine, the guy works in construction, he "needs" a pickup, so go get something that gets more than 11/miles per $4 gallon. I know its out there. And since they live in Florida, they probably voted for Bush, so screw'em.

This twit probably should have picked a more affordable school or a better major, because $1600/mo in student loan payments is absolutely absurd. What did she do, go to Harvard and major in "I don't want to make a lot of money"? Actually, I have no idea where she went to school, but coming out with a $1600/mo tab should probably make you a lawyer or doctor or something else that pays better than $40k yr. My wife has a private school education and her loan payments are a fraction of $1600/mo.

Some financial stimulus, for Bank of America, these two managed to get out from under their ARM and they are sending their bush bucks to the credit card company.

Terrific life choice here, she quit her $50k/yr job so that she could take some time off, thinking she could always get something later. NOT! I am sorry she didn't like her job, but there is a reason they call it work ... Shit and fuck were already taken. She must have some partner, to let her submarine the relationship like this.

Some health care system we have, that allows someone to go $5 million in the hole for cancer treatment.

Touch choice, make your car payment or send your kid to private school.

Grow up, neither party in the American political system has any interest in the middle class. You don't donate, you probably don't even vote and there aren't enough of us to make a difference.

It’s hard not to feel compassion, but how about the stupidity and lack common sense. While some of us bought within our means or didn't buy at all because we were priced out, other fools went full speed ahead. It never dawned on people to not buy something, just because someone said you could afford the loan. It’s like the Martha Stewart mentality that traded on inside information to make a few thousand dollars, when she was worth of tens of millions. I just don't get the lack of restraint and rational thought.

These people and millions like them, stuck their nuts in the ringer and turned the crank themselves, and now they want responsible people to make an irresponsible chioce to bail them out. No thank you.

How about CNN does a story on someone who is living within their means and sweating these morons getting bailed out to maintain an over priced market. Now that would be an interesting story.

Wednesday, March 26, 2008

Are homeowners the next bailout?

Absolutly not. I urge everyone who reads this to, email their elected representatives and urge them to not bail out the individual borrowers who have over extended themselves. There is no bail out for stupidity. There are no favors for people who over extend themselves with credit cards, car loans or the loan sharks in the back allies of the world.

The only possible rationale for bailing out the dumb is to bail out those who could afford those same homes, to protect their investment. However, that reasoning is flawed. If it weren't millions of dot com programmers, receptionists and others would have something to show for the millions of dollars in stock options that took them from being paper millionaires to being lucky to have the down payment on a house, when the dot com bubble burst. Those gains weren't real and neither are the present real estate gains. The only real gains are in the pockets of the person who sold their home before this bubble burst.

The housing market MUST be allowed to find a natural equilibrium. Until that happens, the banks will not know the value of the investments and the volatile stock markets will not stop swinging wildly as bad news follows false good news day after day.

For Hillary Clinton to suggest that bailing out the individual home owners because a large investment bank was bailed out is highly populist and self serving. Her statements are not meant to do anything other than to bolster her own cause to be President of the United States of America. There is nothing altruistic about her suggesting the troubled home owners be saved. They aren't facing impending doom or life on the hard streets of America. These are decent people who made a mistake, took a short cut. However, at the end of the day, these people still have jobs, families and retirement accounts to fall back upon and build upon for the future. Bailing them out only serves a few, while bailing out the banks benefits the whole United States.

Monday, March 24, 2008

Wake up Sheeple

With the root of the current unrest in our economy firmly rooted in the troubles of the real estate market, I have to question some of the current policies for our Federal Government. While distasteful to the mindless sheeple who are looking for someone to follow in railing against our government, bailing out the banking industry is the right thing to do. At least the lessons of 1929 are not lost. My issues there are with the way in which the deal was structured, and that it is not designed to have much of a return on investment to the US tax payers who funded the Bear Stearns buyout.

Getting back to the root of the problem, the idea of providing a bailout to the individual sheeple who took the short cut and found out that it didn't lead to the promised land is just a plain poor idea. It is my opinion that the first thing that has to happen for our economy to stabilize, is for the real estate markets to stabilize. for that to happen, everyone needs to get gigantic raises to bring the cost of home ownership back into reach or home prices need to come down significantly. This is especially troubling in the major metropolitan areas. Over the last decade or so, incomes have only increased about 25-30%, while at the same time home prices have appreciated more than 75%, even after the last 12 months of decline in prices. An entire generation of Americans will never have a chance to own homes if the present disparity continues to exist between home prices and wages. With the Federal Government contemplating a bailout of the individual, troubled, home owners, I can only stand by and shake my head and question the wisdom of the move.

I have several reasons for questioning a bailout of the individual borrowers.

First off, I am not sure that such an undertaking is achievable for a number of reasons. First off, there needs to be a way to modify the terms of the mortgage. I just don't see how it is practical to restructure millions of loans.

Second, the whole thing strikes me as very populist. Even if the endeavor fails, it seems as if our leadership is unwilling to make a challenging decision to forsake the few in favor of the many. I can identify with the problem faced by every incumbent who chooses this path, but that’s a whole different ball of wax.

Third, I believe that home valuations need to come back into line with incomes for stability of the market place to be achieved. I think that attempting to bail out the individual troubled borrowers only prolongs the market from finding a bottom which I believe is necessary for parity to be achieved. Parity in the real estate market needs to be achieved in order for Wall St to have a sporting chance at putting a real valuation on their CDO's. Only then will the true scope of the situation be known and understood. Until then, there will continue to be incomplete, yet staggering write downs from the investment banks on their CDO investments. Thus, the markets will remain unstable and the economy in recession.