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.