What If?

The US Government spends approximately $338 billion dollars a year on interest payments on the US debt.

What does $338 billion buy? I don’t really know and I don’t feel like mindlessly googling to find it out, but I do know that $338 billion buys a lot of teachers, policemen, Joint Strike Fighters and a host of other programs and entitlements without raising taxes. When you combine federal taxes, state taxes, city taxes, social security and whatever other things are withheld from your pay check, you’re damn near paying European style taxes, yet we reap only a fraction of the benefits. Think of this along the lines of the homeowner who is in over his head, walking away from his mortgage. Same thing, except that you and I aren't on the hook, its China who takes it on the chin.

Obviously, a bold move like this doesn’t come without consequences. However, at this point, you have to wonder if it’s not worth a roll of the dice. The Federal Reserve isn’t going to foreclose on Delaware or Virginia. China isn’t going to come over here and repossess California and Oregon, not that many of us would miss California at this point in the game. Just kidding.

The dollar as a currency would be shot which would have some consequences. Some would have some nice silver linings.

Oil would become prohibitively expensive, but so what, US lawmakers have been trying to coerce consumers into using less, this would achieve that goal as well as spur investment in alternatives like electric cars, fuel cell technology and other green technologies. And no sham legislation would be needed, like Cap & Trade.

Imports would be very expensive, that would be a boon to besieged US industries, like the automakers, whom we are all invested courtesy of obama’s largess in bailing out Chrysler and GM. Not to mention, many imported cars are actually built on US soil, like Toyotas built in Georgetown Kentucky or Mercedes Benz’s built in Tuscaloosa Alabama.

Although my wife would beg to differ, we’ll all survive without Gucci handbags and Godiva chocolates. Coach and Hershey will do just fine.

US exports would become wildly successful. Talk about a jobs stimulus, this would actually create real jobs unlike the farce which is obama’s stimulus. The rest of the world would get a taste of what they have been doing to us for decades. The party is over.

Global clout? Who is really interested in listening to us these days, unless they are on the business end of an M1A1 or a B2 Stealth bomber?

So what if no one will ever lend to us again? Then what, we have to live within our means? That’s not tragic. Texas manages to do just this while having its economy thrive in one of the worst US economies ever. Texas is the 15th largest economy in the world. California is the 8th largest economy in the world. Look at what living outside of its means is doing to California for a contrast and perhaps a peek at the future. Why continue to throw billions if not trillions down the drain.

The US probably accounts for about 20% the world economy, I am guessing that the rest of the world will adjust and pay their tab, which I believe they have been dodging for generations. Conventional will not work anymore; it’s time for some revolutionary thinking.

Has Real Estate Hit Its Bottom?

No.

Next question.

While the NAR continues to cheerlead as fools grab the falling knife, foreclosure filings go through the roof. Our President's biggest cheerleader, CNN reports that we have just finished the worst quarter of all time for foreclosures. So while obama has continued to pour millions if not billions of tax dollars down the drain, on trying to raise the Titanic, he can't out run economics. It’s a shame he doesn't have those billions of dollars to spend on one of his other pet projects.

Good money after bad is how I have seen debacles like this described. Unfortunately, this is the worst one of all time. Way to go Barry, you've continued to screw us all and just like I said, there is no way in hell you were ever going to salvage the foreclosure constituency. And now, the price is just that much steeper and we're miles away from market stability.

If you see prices going up, there is a name for what your seeing. Its called a dead cat bounce.

Health Care Reform

A friend recently blew out his ACL playing rec league football. Thats what us thirty something year old guys do. He went to the orthopedist on Friday, got his MRI on Monday and has his surgery scheduled for later this week. This story tells the tale of a terribly ill Canadian citizen who is going to have to wait more than 6 months for an MRI. And of course, like any person who feels spited by obama, my friend bitched and lamented that were he living in an obama care world, he wouldn't be receiving treatment so quickly.

And then it dawned on me, obamacare is going at the problem the wrong way. Our President has no idea how to tackle the problem. He has no qualms going after Wall Street bankers salaries, yet he will not go after the costs of health care. My dad had a bypass a few years back. In the backwater he lived in, the whole procedure took 12 hours and cost less than $8000. I broke my wrist and required a screw to repair it. The procedure took just over an hour and cost just over $7000. It seems to me, a little tort reform and some forced socialism, like he's pushed it on the auto industry would really rectify the problem without sticking everyone who has worked hard to have good benifits. Why not treat doctors like bankers or other responsible citizens who are taking it in the back pocket every time obama finds another constituancy to play robin hood with.

I feel like a kulak.

Picking Up the Tab Again

I'll plead guilty to being out of the loop. Becoming a parent will do that to you.

I see that after taking care of home debtors with an $8000 incentive for first time buyers and $3500 for fools who drive gas guzzlers to get an affordable greenmobile, our Emperor in Chief is pushing hard for health care and immigration reform.

If your a citizen and you work hard, its just not that hard to put yourself in a position to have decent health insurance. On the other hand, if you chose not to take advantage of the public school education that is afforded every citizen in this country, then you have made your road that much harder to hoe. But again, that was your choice no matter how you want to cut it or excuse it. Its unfortunate if someone chooses not to avail themselves of the free primary education and inexpensive options for higher education in this country. To quote Judge Smails, "the world needs ditch diggers too ...”

I am sick and tired of having to carry the water that it seems like everyone else gets to drink without putting in a fraction of effort and sacrifice I put in.

Thanks to the NAR ...

I'd like to thank the NAR for publishing the information I need to make my case against them as complete and utter lying sacks of elephant dung. Here is a table that I found which is based on NAR statistics.

Price Range	Year over Year Change
$0 - $100,000	Up 38.8%
100,000 - $250,000	Up 8.7%
$250,000 - $500,000	Down 6.2%
$500,000 - $750,000	Down 8.9%
$750,000 - $1,000,000	Down 10.6%
$1,000,000 - $2,000,000	Down 23.3%
$2,000,000 +	Down 32.4%

I'll also wager that +/-5%, that a third of the sales in those lower ranges are also foreclosures, short sales or otherwise sales under duress.

Now, day in and day out, I am bombarded with NAR propaganda, as are most DC commuters who listen to the radio as we creep along in our steel coffins on the highways and byways of the city. I assume the same is for commuters just about everywhere.

The NAR continues to trumpet that now is a good time to buy, yet their statistics seem to indicate otherwise. I'll define "a good time to buy" as a place and point in time in which the value of the home you buy isn't going to continue to fall for the foreseeable future. I don't know where $250k buys you much of a home, but I can tell you for certain, that no place within the listening radius of the stations I listen to.

Lies, damn lies and statistics. So, there you have it, only the cheapest inventory in the lower valued markets are making gains, while the NAR continues to misuse statistics to the benifit of their constituants.

A Picture is Worth a 1000 Words

Senator Dodd Looking More Guilty

As reported here, last year, Senator Dodd (D CT) and his good buddy, Senator Conrad (D ND) appeared to be in some hot water over their participation in the Countrywide VIP loan progam. The Washington Times is reporting, that the noose is tightening on these two hypocrites.

Our Delusional Senate

These guys must be out to lunch. Or they think we're all really dumb. Massachusetts Senator John Kerry, you might remember him from his pitiful attempt to unseat George W. Bush from the Presidency, has floated an idea to allegedly pay for Obama's bank breaking healthcare reform.

His idea is to tax the insurance companies on the revenue for their most expensive plans. This will surely get passed onto the consumers. It will likely even get passed onto the consumers who do not have that insurers most expensive plan. An indirect tax is still a tax.

Arizona Senator John Kyl must not understand the concept of contradicting himself.

“There’s very little evidence the tax on the insurer would have an impact on the insured’s behavior, which is the whole point,” Arizona Senator Jon Kyl said. “Secondly, it’s a tax on employment since it clearly would be passed on to employees.”

His first point is completely naive and probably inaccurate. His second comment is pretty accurate and makes my point while contradicting his first statement.

Employees who found it easy to elect for the top end PPO coverage through their employer will be faced with a tough descision when it comes time between shouldering the cost of good coverage versus making a cut in some other aspect of their family lives. The difference between PPO and the lower end POS & HMO plans is significant. There is a reason I have opted for the better coverage at every job I have ever had. Making health care something other than a dollars an cents descision is exactly what Obama is trying to do for the uninsured, but at the same time, he's just shifting the constituancy who has to make that descision. I will have to have less so someone else can have more. Its one thing when we are talking vacations, cars and big screen TVs. Its entirely different when when we are talking about healthcare.

Obama’s era will be recalled as the era of the indirect tax.

How About The Truth?

This US News/Yahoo article lists several reasons why foreclosures continue to rise and talks about the outlook for the markets. They are all valid reasons, but none of them are the actual reason. The author of this piece either works for the NAR or he's totally deluded.

His first argument is unemployment. I don't really buy into this reason. Every downward cycle in the economy has had its unemployment casualties. While I can't find any hard numbers, I am guessing the relationship between foreclosures and unemployment has been fairly closely related from one recession to the next. I feel for the casualties of the recession. These people are usually the innocent bystanders.

The author’s next contributing factor is plunging home values. I guess I see the rationale here. Why pay for something that is worth less, or even way less than you owe? However, I don't buy that there are massive hoards of people sending the keys to the bank and walking away from a mortgage that they can afford. If you’re walking away from a mortgage you can afford, I can understand the business rationale, but I still think you’re the scum of the earth for bailing on a contractual agreement.

Lastly, the author cites the end of foreclosure moratoriums. This is just camouflage. Someone who got a free ride for the last 6-8 months, finally getting foreclosed does not mean there is a rise in foreclosures. They should have gotten the ax months ago, but we decided to pause and look around and see if there was a way to avoid the inevitable. These are the exact fools who provided the fuel for this debacle. I despise you, because I am the person who you priced out of the market and I am the person who is now getting stuck with the tab for trying to bail you out.

Not once, not one single time in this 750 word piece did the author cite the one reason for all these foreclosures. An overwhelming majority of the people getting foreclosed today, are getting booted from their homes because they were fools who couldn't afford the house in the first place. Its that plain and simple. I don't know why our media and elected leadership in Washington can't get that through their thick skulls. Robert Reich said in his blog that we're basically playing a new ball game. Thats a pretty accurate apprasial of the situation. I believe that the more time and resources we devote to trying to get back to playing the old game, the longer and more difficult this recession will be.

Personal Rant

Lets see, where to begin. I rent my house. Correction, I rent a house I can afford, so every single time I have to read about a foreclosure moratorium or another bailout for people who can't afford their home, it just spikes my rage meter up a little.

I spent years educating myself. I took tough classes like calculus, organic chemistry, physics, cellular theory of finite automata. Yea, that last one was a mouthful. You should have seen the book too. I think it was at least 50 bucks, used, 15 years ago and it was only like 150 pages, that we didn't even come close to getting through in a semester. For easy classes, I took classes like micro & macro econ, geology, meteorology so that I would understand the way the world works when some day I had a child asking tough questions.

I've worked hard to build experience that will allow me to maintain employment in the tough times. This didn't always work, the dot com bust was, as String described it, a humiliating kick in the crotch. However, in the long run, I can't complain about the breaks and how they have gone for me. I know a lot of people have fared far worse. At the same time, I am not living in 5000 sqft McMansion or a real mansion for that matter. My wife and I have worked hard to build a good life for ourselves and the child who is coming in about 2 months.

Lately, every single time I tune into the interweb, I am bombarded with yet another politician reaching into my pocket to take away from me and my family to give to someone else who is at a disadvantage. More often than not, that disadvantage is self inflicted at one level or another.

Today I read that our President is considering mortgage aid for the unemployed. I feel for you, if you find yourself in a predicament where you’re unemployed. Its no fun, I have been there and I don't really care for it. Really, when do the entitlements end? We don't live in utopia; we live in the United States of America where resources aren't unlimited. There was nobody lifting a finger to help me, back in 2003, when the dot com bubble burst for me. There was nobody worrying about my ability to pay my rent, electric, phone or credit card bills. I lived on my credit card for a while. My credit took some dings in that period, but I have worked hard to get my credit back up into the high 700s. Nobody helped me do it. I lifted myself up by my own boot straps, because nobody else was going to help me.

Unemployment is a bigger whammy than anyone thinks, because once you find a job, in this crap economy, it’s not necessarily a good job or wage. Why would an employer pay anything other than market value today, which is a shadow of market value 2 years ago or 2 years from now? It took me years to recover my lost wage level. Nobody helped me get to where I am. I paid my way through school. I recently paid off my loans, by myself.

I refused to buy a Chrysler or GM car, because I thought the styling was lame, because I had questions about their quality, because I didn't think the price for the features & quality was competitive, but they still got my money. On the high side, at least I wasn't one of the secured bond holders who had a century's worth of bankruptcy law yanked out from under me. But once again, the President reached into my pocket and gave my money to someone else, who got themselves in a pickle on their own. The UAW rank and file continued to elect leadership who repeatedly held a gun to management's head and drove up the cost of producing cars. Everyone should read about unintended consequences.

The "law of unintended consequences" (also called the "law of unforeseen consequences") states that any purposeful action will produce some unintended consequences. A classic example is a bypass — a road built to relieve traffic congestion on a congested road — that attracts new development and with it more traffic, resulting in two congested streets instead of one.

This maxim is not a scientific law; it is more in line with Murphy's law as a warning against the hubristic belief that humans can fully control the world around them. Stated in other words, each cause has more than one effect, and these effects will invariably include at least one unforeseen side effect. The unintended side effect can potentially be more significant than any of the intended effects.

The really interesting question is this ... If the UAW and its members had known of the unintended consequences of their repeated wage and benefit grabs, would they still have done it.

I carry some balances on my credit card. A little high living here and there. My share of a wedding, because my family didn't help me out. To modest degree, I am guilty. I recognize and accept it. The part that gets me chapped is that I had a fairly low fixed rate on my card, because of my good credit. My credit card provider recently decided to tie my rate to the prime rate, which is near an all time low. I called them to sort out a fixed rate, because this adjustable rate can only go up. Bank of America acted like the idea of this rate actually going up was absurd. Its not absurd, its an iron clad guarantee. My 6 credits of econ tells me that. Common sense tells me that. Let’s not forget, BoA is a TARP recipient, one of the biggest. They are only liquid because of my tax dollars. In the mean time, while I was managing my credit and taking care of my credit score, hoards of idiots were out buying Sub-zero refrigerators, big screen TVs, vacations, etc. Those people are getting a reduced interest rate and reduced principal. In short, I was taxed to keep BoA in business and BoA turns around and sticks it to me while reserving its most favorable terms for its biggest and most irresponsible losers.

Then there is healthcare reform. Yet again, the President reaches into my pocket and yanks out a chunk of change to help out people who haven't done what they need to do to take care of themselves. Get an education, work hard, earn a living and hold down a job with benefits. Its not that hard, if you apply yourself. I am sick and tired of subsidizing other people’s poor life choices.

The bill would impose a 5.4 percent federal surtax on couples earning more than $1 million annually and a 1.5 percent tax on couples earning between $500,000 and $1 million. Households earning more than $350,000 would get hit with a 1 percent tax.

I am not buying the math. Just because the CBO said it added up, doesn't mean its really going to pay for itself, in my opinion.

Lastly, there are all the mortgage bailout plans. You've all read my blog, I think they are essentially using my tax dollars against me by propping up unsustainable home prices.

I've always considered myself to be a pragmatic person. That certainly applied to my politics. I have always been a centrist with certain liberal social leanings and conservative spending priorities. I think a diverse smattering of ideas and political interests is healthy. Following one paradigm limits you, in my opinion. 24 months ago, there was no chance I was going vote Republican. I thought GWB was intellectually challenged. I didn't care for his decisions, but I never felt like his plans were working directly against me. As the primary election was spinning up, Senator Obama put out an idea that I was aghast at. He proposed bailing out the fools who were in over their head on a mortgage. I found it a bad idea then and a worse idea today. In November, I didn't so much vote Republican as vote against Senator Obama. Today, 6 odd months into his grand social engineering experiment, the seeds have been sown to make me a life long and staunch Republican. I hate the idea of embracing the religious right. I hate the idea of over turning Rowe v Wade. I hate a litany of Republican ideologies. However, as I sit here, watching our President and Democratic Congress drive a stake through my American dream while they continue to fleece me for the betterment of a lot of people who might not be so deserving, I can't see how I can forgive this. In 6 months, not one single piece of legislation has been proposed which does not work directly against me.

Why Nobody Wants CA's IOUs

The big banks are running from the idea of accepting the IOUs the state of California is issuing. Really, who could blame them given the year they have had. I'm not here to make excuses for the banks, but consider this from their standpoint.

In the last year, the banks have been subjected to what can, at a minimum be called arbitrary treatment, at the hands of the Obama administration. I am sure some would even call this treatment harsh.

In the last year the Obama administration has subverted more than century of bankruptcy law, in sticking it to the most senior debt holders in GM & Chrysler to benefit his friends in the UAW.

The banks have to be mortified at the prospect at accepting an unknown and at present, unregulated debt security with more than a passing chance that California could default or need a government funded bailout. It’s not much of a stretch to see the government bailing out California (The worlds 8th largest economy) and its Electoral College high 55 electoral votes that often elect Democratic Presidents. Even if the IOUs were made secured senior debt, it is still likely that Obama's whipping boys on Wall Street could be forced to forego their due in a bailout of California in much the same way as the senior debt holders in GM & Chrysler got dimes on the legally guaranteed dollar.

I have yet to see anyone do a serious analysis of what the long term implications are for corporate debt financing in the wake of the Detroit debacle which is the Chrysler and GM bankruptcies. However, my 6 credits of college economics tell that it is not going to be pretty or inexpensive.

A Frequent Target

Everyone here knows that the NAR is persona non-grata on this blog. I've regularly railed against them for their misuse of statistics. This next graph is no change from that modus operandiYou can clearly see how the NAR manufacturers some cheer.

Now we come to find that the NAR is lobbying against objective home appraisals. Business Week is running a piece that talks about their lobbying points. That’s fine, anyone and everyone is entitled to employ lobbyists to advance their cause in Washington. Its one of the great things about this country. However, don't stand there with a shocked look on your face and tell me that your innocent when I blame you for the current mess along with fools who signed for loans, Wall Street, 2 Presidents and a Congress who advanced a home ownership agenda that was at best faulty.

Here is a novel idea ... How about just letting values tank, find a true bottom and get on with the business of living life the way Americans have for decades, prior to the late 90s beginning of the real estate boom that has led us to ruin. It’s called taking your medicine.

Obama Sticks it to Renters ... Again

President Obama is going to let Fannie Mae and Freddie Mac refinance loans that are worth up to 125% of the collateral's value in an attempt to stem the tide of foreclosures according to an article on Bloomberg.

Other than sticking it to the third of the population who rents their homes in an effort to bail out the 10% who are over extended, President Obama tosses empathy under the bus for renters to save the fools who willingly over extended themselves.

Can anyone explain the logic in that? Anybody ... Bueller ... Bueller? Has anyone seen Ferris Bueller?

An Ounce of Common Courtsey Please?

So, I sent my Senator an email, expressing my rage at one of his potential votes. I used what he called a 3rd party website to send the email and this is the response that I got.

Unfortunately, due to the fact that your message was sent through an outside third party website, I will not be sending a detailed response. If you would like to receive a response, I would encourage you to visit my website at http://webb.senate.gov. By visiting my website directly, Virginians can request regular updates about my activities and positions on matters that are important to Virginia and our nation.

So, I went to his website, explained my position on the subject in a short email that used no big words and I closed by stating that I had emailed him previously and that I would be expecting a detailed and hopefully personal response. This is what I got back from Senator Webb.

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

If this looks like nothing, your seeing exactly what I got from Senator Webb and his staff. Nothing, which is roughly the odds that I will be voting for him when his job is up for reelection. As a pragmatic voter, I cross party lines voting for him in the last election, but I will not be making that mistake again.

Essentially what the man said to me was this ... I don't like getting spammed with messages that I don't like, so F you tax paying constituent. I don't like your message or view, but rather than just say that, I'll make your message appear unimportant because of the means of delivery. So, in response, I gave him what he asked for, a concise message submitted in a one off format. His response was nonexistent, because he couldn't find a logical or intelligent way to rebut my message. Thanks Senator Webb, I really enjoy paying you and your staff to not serve me. I look forward to voting you back to having to work for a living.

Terrific Michael Lewis Video

I'm Just Saying ...

Wasn't it George HW Bush who said, "read my lips, no new taxes? Wasn't it Barack Obama who said he wasn't going to tax health care benifits during his campaign? Look at how the ball is bouncing now. The senior George Bush was promptly voted out of office. I wonder how much coverage this comparison will get from the mainstream media. I am guessing little to none.

Option ARMs, Coming Home To Roost

As my regular readers know, this blogger has a big ego when it comes to big fat I told you so's. Mind you, I don’t think its funny for someone to end up homeless, but having to rent your home is completely different from being homeless.

Bloomberg is running a piece that says the option ARMs that are going to be recasting next year though late summer of 2011 will be a threat to the current housing recovery. Now, I dispute that we're in any kind of recovery, but I guess that’s semantics. Bottom line, I have been beating this drum since March of last year, that there would be no true recovery until at least 2012, once we're done with all the recasts. So, throw another log on the fire, we'll be torching another $750 billion for the pay option ARMs. Also, keep in mind, that $750 billion number does not include the pending Alt-A carnage.

Pay option ARMs are especially insidious, since the monthly payments started so low. Disgustingly low if you ask me. The article cites two cases, where payments started under $100 and will jump to over $3500. Once again, the ignorant consumer gets painted in a favorable light, but its high time the ignorant or foolish consumer get called out for their role in the current debacle. If people would have looked at these loan products as fools gold, instead of some get rich quick scheme, we might not be nearly the trouble we are in. We all learned at an early age that if something is too good to be true, it probably is. Home loans are no different, especially since its everyone's biggest expense and everything is handed to the loan recipient in black and white.

The phrase of the year for 2010 will be negative amortization.

Negative amortization, occurs whenever the loan payment for any period is less than the interest charged over that period so that the outstanding balance of the loan increases. As an amortization method the shorted amount (difference between interest and repayment) is then added to the total amount owed to the lender. Such a practice would have to be agreed upon before shorting the payment so as to avoid default on payment.

I just wanted to add this little nugget of info, because I so, despise the NAR and the cost added, faux innocent acting, constituency they represent. The NAR was well aware of the likely cave ins with option ARMs and Alt-A when they started running commercials this spring saying that "now" was a great time to buy. I find that highly unethical and self serving, but what else do we expect from an organization that pulls the strings on Lawrence Yun.

Need Affordable Housing? Call Your Senator

If you’re like me, you chose to sit out the tail end of the real estate boom while fools rushed in. Now today, as the fools wait for their bad loans to come home to roost, our elected leadership continues to meddle in markets which they are in part responsible for fouling up. Rep. Maxine Waters (D-CA) and Rep. Elijah Cummings (D-MD) spent hours on the phone trying to help constituents renegotiate the mortgages which they signed for and now can't afford.

I'll sum that for you, like this ... As tax payers, your paying the salary of these Representatives so that they can try and enact bills like the one sponsored by Illinois Senator Dick Durban that would continue to artificially prop up home prices that use your tax dollars against you, while at the same time, they pretend to be mother hen to undeserving home owners on your dime.

If your an aspiring home owner, these types of actions and legislation only prolongs the time in which you can achieve your American dream. If you’re a responsible home owner who would like to sell a home at a reasonable profit, this meddling in the markets will only put off the time in which you can sell your home at decent and historically typical profit.

So, I urge you to use the links on your right to find the contact information for your Senators and Representative. Call them, write them and email them to tell them that you want them to stop using your tax dollars against you. Tell them to stop meddling in markets which are in dire need of a natural correction, not more artificial fixes. Artificial fixes got us in this mess in the first place. If you want to tell them why they need to stop meddling in the real estate markets, direct them here, read my past posts, they explain the rationale for not tinkering with the real estate markets very plainly. I even used a lot of pictures so that they will be able to understand why proping up home prices at even the presently depressed levels is still unsustainable.

Picking Up the Tab

The President went to Nevada to help raise funds for Harry Reid and pander to the good people of Nevada. I don't know what else the President did while he was in the great state of Nevada, but none of it was front page news, except the appearance at the fund raiser.

It seems to me, Senator Reid's campaign should be paying for thousands of dollars worth of jet fuel, security arraignments and whatever else it costs when the President travels. As a tax payer who has been on the short end of just about every proposal President Obama and Senator Reid have put forward in the last few months, I don't like the idea of picking up the tab on Senator Reid's re-election efforts. Someone other than the tax payers should be on the hook for the cost of the President campaigning. Ditto for his hollywood fund raiser. The man has to stop chasing celebs around.

This sounds like exactly the kind of waste, which the President has been speaking out against. This whole thing sounds very hypocritical in my opinion. I guess that’s the Obama double standard at work.

If It's Too Good To Be True ...

Grandma had a saying ... if its too good to be true, than it probably isn't. For the last few days Turbo Tax Timmy has been running around telling anyone who would listen, that the banks are healing. Perhaps this is one of those misuses of statistics that the NAR is so fond of.

Unless you have your head buried in the sand, there is no way you could possibly believe that we are in recovery. There is a massive wave of Alt-A and Option ARM resets just a few months away.Then there is commercial real estate, the proverbial "other shoe" that is just waiting to drop. Nobody who should have known bettter, could foresee the failures in residential real estate. Its stands to figure that same lack of foresight will be dogging commercial real estate. As everyone’s home equity piggy bank dries up, as company's lay people off there will be decreased demand for Abercrombie clothes, vacations, dining out, gourmet junk from stores like Williams Sonoma, Sony big screens and a whole host of other consumer goods, which as we have seen, has fed back on itself to perpetuate even more economic downturn. If those stores aren't making money, the chains will shut them down or the chains will just go out of business leaving real estate investments swinging in the breeze. The chart below shows that delinquencies are on the rise in all facets of commercial real estate. So, my question to the Secretary of the Treasury and his MA from Johns Hopkins is this ... Are things really turning around or are you just trying to will a recovery with a nice bouquet of flowers while whispering sweet nothings in everyone’s ear?

Nothing being the operative word. This blogger is not buying this idea that we're in recovery or even some contrived pre-recovery phase. Best case, the carnage is taking a break, because there are tens of thousands of homes which are due to be foreclosed. The only reason they haven't been foreclosed is because the President imposed a moratorium on foreclosures which just ended. The banks are hiding somewhere in the region of 600,000 homes. That’s six hundred thousand homes that banks will need to liquidate, thus adding additional inventory to the already bloated inventory of homes on the market. As noted above, there will be more foreclosures starting later this year and all through next year as the holders of shifty loans on homes they can't afford begin to face the music of a rate recast with few options for refinancing. Lastly, there is that other shoe. There are some people placing that the bank's exposure to commercial real estate losses as high as $1.8 trillion. Somehow, I don't think the bankers had the foresight to get coverage on their commercial real estate holdings from AIG, like they did with their residential real estate. There will be no intermediary to help the government backstop the commercial real estate losses, like there was with the residential real estate paper that went bad. It was easy for banks to report profits with billions in TARP dollars backstopping them. What are they going to do when the commercial paper goes bad?

You Can't Handle the Truth

Somebody better press Col. Nathan Jessup's dress blues and see if we can squeeze Jack Nicholson into them, because that’s what needs to happen, pretty much every where across the country.

The shortest distance between two points is a straight line. Right now we are at a point where our economy is sadly broken. We want to be at a point where our economy functions normally and predictably. So, how do we get there? I'll tell you how, we take our medicine, we let the mechanisms within our economy function normally, as they have for generations. We stop undercutting contract and bankruptcy law with artificial "fixes" that will only prolong our slump and make a more bitter pill to swallow when we're forced to do so.

There is no pretty way to say it. You don't need a JD from Harvard or an MA from Johns Hopkins to figure it out. Its time to stop meddling with the complex economic machinery that drives entire world, we no longer have the power to just makes things happen like we did 20 years ago. Its time for real leadership. Leadership that realizes that the needs of the many vastly out weigh the needs of the feeble minded few who willingly and with great vim and vigor over extended themselves. Over extended home owners, I am sorry, its time to line up a rental and drop the keys at the bank. Mr. Banker, you leveraged everything but the door knobs, its time for a margin call. Put up or sell out, your short sighted profit mongering has come to an end. The people who didn't share in your gains certainly do not want to share in your losses. I used to say save the banks, we all rely on them. I was wrong, they can't be saved.

Its sink or swim time. Those with the anvil strapped to their backs are going to the bottom. A regular poster here, likened the current situation to forest fire. It was such an apropos analogy. Before man learned how to fight fires, forest fires were nature's way of renewing. The flora and fauna that was burnt died, but its nutrients were returned to the soil. Soon after the fire ended, new species began to sprout up and life began a new.

The Wall St Journal is Even on Board

Yesterdays WSJ piece closed with some really interesting comments. I'd like to say that those comments were an original sentiment, but I have been standing on top of the hill waving my arms like a mad man and screaming the exact same things. The closing comments of the article were also rather chilling for the "its almost over" crowd.

I looked at Case-Shiller's index back to 1987 and compared it to federal data on average earnings. The result, rebased to 100 in January 1987, can be seen here. And it's alarming. By this (admittedly very simple) measure, today's home prices are actually more expensive, in relation to average earnings, than at the peak of the 1989 property bubble.

Equally noteworthy is that when the last property bubble burst, it took about eight years before the market showed really strong signs of revival. This bubble was far, far bigger

A New Foundation? I am Not Buying it.

President Obama touted a new foundation for growth in his 100 day press conference. He blamed an economy built on sand for our current economic condition. Those were good analogies, courtesy of his speech writer. However, upon even distant observation, it’s obvious to anyone with an ounce of common sense, that the continued individual home owner bailouts, $75 billion at last count, are nothing more than adding more sand to the pile.

Can someone, anyone, please explain to me, how artificially supporting home prices will truly, in the long run, do anything to relieve the economic conditions which grip this country? Reworked mortgages are still failing nationwide. Banks are still holding billions, perhaps a trillion dollars worth of toxic paper that rides on top of hundreds of thousands of bad mortgages. It was a set of artificial conditions which got us in this mess and more artificial "fixes" will only prolong this mess as well as drive up the cost of fixing it. Einstein defined insanity as "doing the same thing over and over again and expecting different results".

The very best short term case is that this mortgage bailout plan supports prices for a short time and stalls our economic slide. It may even stall the slide long enough to get President Obama reelected. That’s the best case, with probably the poorest possible outcome as the slide at the end of any artificial stall will be far more precipitous than we are currently experiencing. In short, its good for him and bad for us. This is what we get, because we have allowed our politician's focus to become staying in office, rather than best serving the people.

Another Interesting NAR Tidbit

These guys are masters of misusing statistics. I was reading the Wall St Journal this morning when I came across this little nugget of information.

The NAR has been touting decent sales numbers over the last month, 360,000 sales versus 375,000 sales in the same month last year. Its the truth, but here is the real catch according to the WSJ piece ... Over half of those homes sold last month were foreclosures and short sales, while that number was under 20% a year ago.

Lies, damn lies and statistics.

Keeping Track

A lot of Republicans were drummed out of office, in some cases for lesser offences, yet the main stream media continues to provide obscene amounts of top cover. Where is the outrage?

Pennsylvania Rep. Jack Murtha - Faces allegations of steering defense spending to the consulting firm his brother works for and another firm that a former staffer founded.

New York Rep. Charlie Rangel - Currently faces no fewer than 4 House Ethics Committee investigations.

California Rep. Jane Harman - Is fighting allegations that she offered to help seek reduced charges for two pro-Israel lobbyists suspected of espionage in exchange for help from a pro-Israel donor, also suspected Israeli agent.

California Sen. Dianne Feinstein - Is accused of devising legislation that helped her husband get a federal contract to sell foreclosed properties at compensation rates higher than the industry norms. Her defense is that the legislation never became law.

Connecticut Sen. Chris Dodd - Continues to stonewall information requests in relation to allegations that he was the recipient of VIP loans from disgraced subprime lender, Countrywide.

North Dakota Sen. Kent Conrad - Continues to hide in Chris Dodd's shadow while he fights off the same allegations.

President Barack Hussein Obama - Continues to avoid scrutiny regarding the preferential treatment he received from TARP recipient Northern Trust Bank in negotiating a loan and purchasing his Chicago area home for beyond lowball discount of 15% under market prices at the height of this nations real estate boom.

So Which is it Timmy?

This morning, yesterday morning, by the time most of you get around to reading this post, I was perusing Bloomberg and I came across this article where Secretary of the Treasury, Timothy Geithner states, in testimony to Congress no less, that, “Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators,”. At no time did he question the levels which the regulators might use to yard stick these banks and their assets & liabilities. He goes on to state that lending is beginning to thaw. Thaw being his word not mine. Then, this evening I come across this gem on USAToday, recapping Turbo Tax Timmy's testimony in front of Congress. In this article titled, "Geithner: Toxic assets hinder banks' lending", our vacant Secretary of the Treasury says that toxic assets are still a problem for the banks and are preventing banks from lending to their fullest ability. Geithner's statements from this afternoon seem to be in conflict with his testimony earlier today.

So, I put it to you Timmy, which is it? The former or the later? It can’t possibly be both.

People used to complain about the Byzantine statements and testimony of Alan Greenspan, but he pales in comparison to Tim Geithner who stagers about with a blank, dog ate my homework look on his face whenever he is pressed on a challenging topic. A few months ago I questioned his intelligence and moral turpitude to hold the office of Secretary of the Treasury. Today, I am calling for his resignation. Its clear that he is not capable of holding the leash on the largest economy in the history of man, let alone guide it though the most troubled waters we have ever seen.

Have We Reached the Beginning of the End?

China is clearly trying to reduce its exposure to the dollar. I can't fathom that the Federal Reserve will be able to pick up the slack. I wonder if this is what it was like in Argentina before they defaulted.

Anecdotal Evidence

Relying on anecdotal evidence, The Washington Post is running a piece that is suggesting that the real estate markets are bottoming and the light at the end of the tunnel is not a freight train. This piece of cheerleading fluff does nothing but further erode the declining credibility of what was once one of the nation's leading news outlets.

The math and historical trends show that the bottom is no where in site, but why pay attention to the math, when you have anecdotal evidence? The article even seems to pay lip service to the recently received March housing statistics before dismissing them in lieu of anecdotal evidence.

Overall, I find this headline, "Housing Data Could Signal If Bust Is Over", from the Washington Post to be highly irresponsible.

Its Not Over By A Long Shot

Read this chart, understand it, analyze it. If you come to the conclusion that we anywhere, but a long way from the end of the road, please post your rationale here. While some, mostly in the Obama White House and from the National Association of Realtors think that we're coming out of this slump and now is the time to buy a new home. I differ, in examining this data from Robert Shiller, I conclude that most markets have a very long way to fall before they reach a proper parity. At present, the market is no where near approaching recovery and thus a real buying opportunity does not exist at this time. Ignore those pleas from the NAR on your local radio stations, telling you that now is a great time to buy because affordability is at a recent low.

Harvard Student Takes on Barney Frank

Link

How it is

The Washington Post is running a piece talking about how aid to lenders isn't helping reduce or prevent foreclosures. I find the theme of the article misplaced, but in lock step with our government.

It’s of course unfortunate when someone loses their home. I feel for the people who have done things the right way and because of the economic downturn are facing foreclosure due to unemployment or illness. However, in every downturn, there are casualties. You hope that you can avoid the bullet, but it is a fairly indiscriminate executioner.

I feel for the people who bought homes they could afford with traditional mortgages they could afford. They typically made sacrifices with respect to size, amenities and location. Now, those people are stuck in homes which have lost a lot of value and are perhaps even under water on their loans. I feel for them, because they did things the right way and their plans of upsizing in a normal progression are severely impacted. Their only mistake was allowing themselves to be over sold on the American dream by our media, realtors and the general hardwiring that makes us Americans.

I feel for the renters who were priced out of the market. Perhaps they wouldn't or couldn't sacrifice on location and couldn't stomach the reality of buying in close to the city. Renters are essentially having their tax dollars used against by any plan to bail out troubled debtors.

The people I do not feel for are the ones who over bought and are now being squeezed by a recasting ARM. Those people took a gamble, they have lost. I do not see how saving that <10% slice of the population is equitible, smart or a good idea, especially when such a high number of reworked loans are still defaulting. Its the bottom that needs to be found, not a false top or even middle that should be preserved.

There was no bailout for millions of tech workers when Bill Clinton's dot com bubble burst. Billions of dollars in unrealized equity gains were wiped out. People's lives, plans and aspirations were wiped out and there was no grand call to prop them up. There should not have been then, nor should there be today.

A little under a third of this country rents. Another 30% owns within their means and a similar number owns their home outright, without a loan. If the 10% are displaced, so be it, there are plenty of willing an able potential owners among the third who rent, provided the market is properly corrected.

The American Dream is Dead

80% of respondants in a USAToday poll think that the American dream is unattainable.

The question posed was this, "Are people who work hard and play by the rules being treated fairly as we try to fix the economic crisis?" 80% of respondants said no, 15% said yes (although there was no attention paid to what plant they were voting from) and 5% did not know.

Wake up Mr. President, stop meddling in complex economic systems about which neither you nor your advisors know anything about.

An April Fools Prank

An April fools prank got me thinking. Its a simple thought, so I will keep it short. Car & Driver ran a prank story that Obama was going to force Chevy and Dodge give up their NASCAR sponsorships, because they received so much government bailout money. That got me thinking, the banks have been pressed to give up their stadium and event sponsorships, because they took so much government money. In that light, I have to wonder why people aren't protesting out front of NASCAR tracks protesting against Chevy and Dodge's sponsorship.

What Does 4 in 10 Mean?

ABC News performed a poll and found that 42% of the US population believes that President Obama has the country headed in the right direction. They even made this sound like a good thing, knowing that the lemmings who read the news with a closed mind will not do the math and realize that this means 6 in 10, a majority for those of you who can't do the math, do not think we're headed in the right direction. I guess this is what you get when you call 52% of the popular vote a mandate.

You wanted it? You got it, along with Pelosi, Reid, Dodd, Waters and Frank.

Land of the Free to Whine

And home of the over entitled. So, our President, in his entire web enabled glory, invited us, his loyal subjects to the White House website to submit questions on a variety of subjects. Obviously the one that most interests and concerns us, was his housing forum. The range of the questions was pretty narrow and most questions came in a few different forms, but the overall theme of the questions was sadly narrow.

Krysty from Corsicana, TX asks

Instead of bailing out banks, why can't we pay off the mortgages in foreclosure so banks would still get the $$ AND people can keep their homes? If we can give away $$ to huge corporations, why can't we give it to the American people who pay for it?

Well, Krysty with an extra 'y', its like this. You’re proposing a massive welfare state, which this country just isn't quite ready for, in spite of the socialist leanings of our President. Besides, how long will it be before someone like you is whining that someone down the street or around the corner got their bigger house paid for by this magical program you’re suggesting? I think it will take less than 5 minutes. Corporate welfare isn't optimal, but far more people depend on the big banks and the infrastructure they provide, than depend on the individuals staying in their over priced ill financed homes. This problem is far bigger than many people truely comprehend. Then there is this fool...

Jenn from Honolulu, Hawaii states

My husband and I work FOUR jobs to stay current on our mortgage. I was forced into an ARM and am afraid of my mortgage adjusting. No one will refinance our loan and I would need to default for loan modification. What options are available?

Well Jenn, I admire your aggressive effort and willingness to work FOUR jobs, but nobody forced anyone into an ARM, most people ran head long into an ARM, as they irrationally pursued homeownership with all the trimmings. The only option that should be available is foreclosure and a market correction to more normal pricing. The American Dream, as the cliché of homeownership has become is really a privilege, not a right. Same goes for refinancing.

Alan McVickers from Hagerstown, MD, not far from our nations capitol seems to think otherwise

We pay our house on time (bought in 2007), have great FICO but can't refinance due to housing loan to value issues (economy based). What plan is there for people like us to get a lower rate without points, more cash down and no mortgage insurance?

Sorry Alan, if you couldn't afford it, you shouldn't have bought it.

I appologise Alan, it was incorrect of me to assume you couldn't afford the home.

What I should have said is that a refi is simply not a right guaranteed to everyone. Yes, if you could refi along with millions of other home owners, you would have money to put into the economy, however, based on your comments for this posting, you haven't read any of my blog. If you had, you would understand that a correction, of epic proportions is absolutly necessary for our ecomomy to begin functioning normally again. Forestalling that correction only prevents a natural recovery, which at this point is our only option. We've over spent for 2 decades, our credit is maxed out. Furthermore, I think you over estimate the impact of the resulting spending if everyone were able to refi.

Then there are the people who will be most shafted by any bailout of our nations irresponsible borrowers.

Keesha from Valley, AL asks the real question, which I doubt our President will answer.

Is there are way to stop holding up home ownership as a banner for the American dream? Do you have a plan to give renters the same attention and opportunities for tax credits that homeowners get?

In fact, I will send an apology to the White House and post it here, if President Obama goes on national TV an answers this question or one in the same vein, in forth coming and believable manor. I'll be even more shocked if they answer my question.

Mr. President, I get the impression that your plans are essentially using my tax dollars against me, by using public funds to put a floor under troubled home owners. Whats in this for me, besides paying the freight on the death of my American dream?

The question length was limited, or I would have added that the feeble tax credits that put forward as part of this bailout, for first time buyers are a drop in the ocean, considering current price levels.

UPDATE:
The President didn't take any tough questions. Mostly, he appeared to take questions which allowed him to further present his favorite issues and agenda. You can read the recap here. Like a good lawyer, he didn't allow any questions to be asked which he wasn't prepared to answer. Disappointing, eventually we'll see the emperor isn't wearing any clothes.

Stop Pouring Money Down the Drain

Look at this chart. All this money down the drain in a vain effort to stem the tide of mortgage failures. As I have said so often on this blog, you can only hold the tides back for so long. Eventually nature runs its course and frequently, its a far more angry course when we have meddled with its processes.

Interesting Video

Politicians & AIG

Since it looks like Congress has taken square aim at a few dozen AIG employees, perhaps it time we all took the same aim at our elected officials. The Center for Responsive Politics, which tracks campaign finance reports that the donations continued after AIG received the first cash infusion of $85 million in September of 2008.

The top 10 recipients of cash contributions from AIG in 2008

1. Sen. Chris Dodd, D-Conn., $103,100
2. Sen. Barack Obama, D-Ill., $101,332
3. Sen. John McCain, R-Ariz., $59,499
4. Sen. Hillary Clinton, D-N.Y., $35,965
5. Sen. Max Baucus, D-Mont., $24,750
6. Former Gov. Mitt Romney, (R) Pres $20,850
7. Sen. Joe Biden, D-Del., $19,975
8. Rep. John Larson, D-Conn, $19,750
9. Sen. John Sununu, R-N.H., $18,500
10. Former Mayor Rudolph Giuliani (R) Pres $13,200

It’s high time our Congress stops feigning indignation and has a look in the mirror, because they are only fooling themselves, if they think that they are doing their, already low approval ratings any favors at the moment. In another move that screams quid pro quo; Chris Dodd was the biggest recipient of our tax dollars which were funneled back to him by AIG in 2008. He was also responsible for allowing the AIG bonuses to occur at all.

It’s a shame that Iowa Senator Chuck Grassley didn't include Senator Dodd, along with the AIG execs when he implored them to follow the Japanese model. After all, he was their biggest enabler in crafting the bill which allowed AIG to give these bonuses.

Bubble Stages

A little humor, in this dark time.

NAR Continues to Amaze

Or perhaps I should say, the NAR continues to deceive?

NAR stooge, Walter Molony said,

"You are looking at the best affordability conditions since we have measurement back in 1970"

Am I missing something? Did prices drop 40% last night? Last time I looked, at best prices were in the 2004 neighborhood. Is there some even more unbelievable loan type out there that makes pay option ARMs look expensive?

Oh wait, read a little further, he picks one of the most deflated and over supplied markets in the country to apply his hyperbole to. Someone once told me that there were three kind of lies ... lies, damn lies and statistics.

Once again, we see the NAR behaving in an unscrupulous manor. Basically, they will put someone out there as an expert and have them say something positive about a market that is 90% lousy. They will say anything to help one more fool buy a house at an inflated price.

Based on the Mr. Molony's comments, I have to wonder why the NAR president, Charles McMillan is upset about potential changes to the mortgage interest deduction proposed by President Obama. In fact, I have to wonder why, if these homes are sooooooo affordable, why they aren't flying off the market. Please note, my tongue is placed firmly in my cheek. Perhaps we don't need Congress and the President to be bailing out foolishly over extended homeowners.

Once again, the NAR proves itself to be less trustworthy than my dog when I leave a hamburger unattended on the table.

Thanks Investor's Business Daily

Conservative writer, Thomas Sowell, wrote this piece for the IBD. It should sound fimilar, I have been singing this tune for a year now on this blog.

Now that the federal government has decided to bail out homeowners in trouble, with mortgage loans up to $729,000, that raises some questions that ought to be asked but are seldom being asked.

Since the average American never took out a mortgage loan as big as seven hundred grand — for the very good reason that he could not afford it — why should he be forced as a taxpayer to subsidize someone else who apparently couldn't afford it either but who got in over his head anyway?

Why should taxpayers who live in apartments, perhaps because they did not feel that they could afford to buy a house, be forced to subsidize other people who could not afford to buy a house but who went ahead and bought one anyway?

We hear a lot of talk in some quarters about how any one of us could be in the same financial trouble that many homeowners are in if we lost our job or had some other misfortune. The pat phrase is that we are all just a few paydays away from being in the same predicament.

Another way of saying the same thing is that some people live high enough on the hog that any of the common misfortunes of life can ruin them.

Who hasn't been out of work at some time or other, or had an illness or accident that created unexpected expenses? The old and trite notion of "saving for a rainy day" is old and trite precisely because this has been a common experience for a very long time.

What is new is the current notion of indulging people who refused to save for a rainy day or to live within their means. In politics, it is called "compassion" — which comes in both the standard liberal version and "compassionate conservatism."

The one person toward whom there is no compassion is the taxpayer.

The current political stampede to stop mortgage foreclosures proceeds as if foreclosures are just something that strikes people like a bolt of lightning from the blue — and as if the people facing foreclosures are the only people that matter.

What if the foreclosures are not stopped?

Will millions of homes just sit empty? Or will new people move into those homes, now selling for lower prices — prices perhaps more within the means of the new occupants?

The same politicians who have been talking about a need for "affordable housing" for years are now suddenly alarmed that home prices are falling. How can housing become more affordable unless prices fall?

The political meaning of "affordable housing" is housing that is made more affordable by politicians intervening to create government subsidies, rent control or other gimmicks for which politicians can take credit.

Affordable housing produced by market forces provides no benefit to politicians and has no attraction for them.

Study after study, not only here but in other countries, shows that the most affordable housing is where there has been the least government interference with the market — contrary to rhetoric.

When new occupants of foreclosed housing find it more affordable, will the previous occupants all become homeless? Or are they more likely to move into homes or apartments that they can afford?

They will of course be sadder — but perhaps wiser as well.

The old and trite phrase "sadder but wiser" is old and trite for the same reason that "saving for a rainy day" is old and trite. It reflects an all-too-common human experience.

Even in an era of much-ballyhooed "change," the government cannot eliminate sadness. What it can do is transfer that sadness from those who made risky and unwise decisions to the taxpayers who had nothing to do with their decisions.

Worse, the subsidizing of bad decisions destroys one of the most effective sources of better decisions — namely, paying the consequences of bad decisions.

In the wake of the housing debacle in California, more people are buying less-expensive homes, making bigger down payments and staying away from "creative" and risky financing. It is amazing how fast people learn when they are not insulated from the consequences of their decisions.

No Sign of a Bottom

The stock market is in free fall. The housing markets are delusional. With no end in site, we are all bystanders as our government plunges head long into economic poliy which will take the US down the same route as Japan following the end of their real estate bubble. Our economic course is going to take our stock market close to if not beyond historic lows. Our housing market is stuck on emotion as a significant portion of sellers are comfortable letting the property languish well about current values and vastly above true values. Our President is comfortable submarining our markets with an indecisive set of policies and at best weak leadership. President Obama might have been the best campaigner we have ever seen, but so far, his first 50 days can only inspire the delusional and unobjective.

If you aren't worried about the markets, you don't have a dog in the fight and by dog in the fight, I mean a retirement savings.Heck, things are so bad, even Jon Stewart found a way to be relevant for once. Perhaps some day he will find humor too.

Don't Believe Me?

How about Robert Shiller. This chart clearly shows that home prices need to get back to a curve which parallels personal income growth.And then there is this chart from the US Census, which indicates just how far from the the pre-boom levels we are. A return to pre-boom, adjusted for inflation, levels would put us back on or near a point on the line which parallels personal income.

Look at the Left Hand, Pay No Attention to the Right Hand

It’s an old sleight of hand trick. Distract your subject by doing something with one hand while the real "magic" occurs in the other hand. At the end of the act, the subject is amazed that something seemingly occurred right before their eyes, yet they didn't see it.

In one breath President Obama chastises us like this, “Short-term gains were prized over long-term prosperity… we failed to look beyond the next payment, the next quarter, or the next election… difficult decisions were put off for some other time on some other day,”. Yet actions speak louder than words, provided you can take your eyes off the distraction. The President still intends to bailout irresponsible homeowners who got them selves over extended with a loan they didn't even bother to read the terms on.

The President even said “people bought homes they knew they couldn't afford”, yet he still intended to help those people out, at the expense of people who were smart and avoided the bad gamble.

The President went easy on Iran, North Korea and China, but not once did he mention that his plan was going to take tax dollars from tens of millions of Americans who don't own their home and use those tax dollars against them by propping up unsustainably high home prices. I guess it’s smart to not alienate our biggest creditor and our 2 biggest protagonists whom we lack the stomach to coerce. Not only will that action forsake much of the current and future generation to salvage a relatively small minority, it will prolong the economic malaise which grips this country.

She Was Right

I've read the stimulus package and I have come to the conclusion that this woman is right and we're all a bunch of chumps and suckers.

The White House Press Secretary Gets Pwned

Pay particular attention to Mr. Denninger's closing remarks in the video from 9:20 though 9:30.

The Chicago Tea Party

Rick Santelli from the floor of the CBOT yesterday morning.

Rep. Maxine Watters : Complete Moron

I base the title of this posting on my observations from her interview with Newsweek.

The first question asked will TARP be enough to provide relief to consumers. Her reply was, "Yes, it will. But I'm worried that it won't be enough". She's concerned that not enough will be done help consumers. Well duh! The goal of TARP is to keep banks sufficiently capitalized.

The next question posed was, "What else can you do"? Representative Watters thinks Congress needs to regulate lending to weed out predatory lending. Lets keep in mind, this is the same Maxine Watters who appeared in this video and was against regulating Fannie Mae & Freddie Mac any further, when her good buddy Frankin Raines was running things into the ground. Without the GSEs buying up these bad mortgages, sub-prime never gets off the ground.

Honestly, what ever happened to the idea that the best and brightest are the ones who ascend to the leadership roles? The glow from Washington DC is almost out and there is nothing convincing me that the new crop of leaders who were sworn into office last month are going to be markedly better than those who were ushered out the door.

Bill Clinton : Revisionist Historian

On Monday's Today Show, Ann Curry did a softball interview with Bill Clinton. She asked him about his appearance on Time Magazine's list of 25 People to Blame for the real estate bubble. Like the good politician who has enjoyed ample top cover from the media, he hit the softball out of the park.

President Clinton said, "oh no", and went on to say, "My question to them is: Do any of them seriously believe if I had been president, and my economic team had been in place the last eight years, that this would be happening today? I think they know the answer to that: No."

That’s a really tough question to answer, since he wasn't the decision maker as this bubble began to burst, he also wasn't out there calling for changes in policy for dealing with the real estate bubble's collapse. Where was President Clinton, when his good ideas could have been heard and possibly helped influence policy? He was busy collecting donations from foreign governments for his foundation.

Now I blame Ms. Curry for not following up with a tough and obvious question. I would have asked him something like this ... "Mr. President, how do you explain that in 1998, the home price appreciation curve began climbing away from the personal income growth & inflation curves"? However she either wasn't ready to give this interview or she agreed to give a softball interview. Either circumstance is unacceptable and unprofessional. There were only 2 possible answers to her original question, "yes I belonged on that list" or "no I didn't belong on that list", Ms. Curry should have been prepared for either. I don't know what her follow up question would have been had he agreed with the piece in Time, but she fell down like the lady in the I've fallen and I can't get up commercials, when she failed to follow up with any kind of challenging, pointed question.

Lets also not forget that the tech bubble began on Bill Clinton's watch and was left to blow up on George W. Bush's plate. President Clinton was the beneficiary of the prosperity the tech bubble's expansion and President Bush's legacy took the lumps for cleaning it up, the real estate bubble is no different. I don't agree with the way in which the Bush admninistration dealt with some of the bailouts, particularly AIG & Bear Stears, but he certainly should not shoulder all the blame. In fact, were this a corporate scandal, Bill Clinton, as the chief executive, would potentially be on the hook under Sarbanes/Oxley, which ironically is part of President Bush's legacy in cleaning up another debacle which began forming on President Clinton's watch. Bill Clinton handled himself about as well in this interview as Alex Rodriguez did yesterday. There has been talk of claw backs on bonuses paid to financial executives for their performance prior to the bubble bursting, mostly at the behest of Democratic Senators and Congressmen. If bank executives are subject to revisionist compensation, than so should a Presidents legacy, but Ann Curry let President Clinton off the hook.

If someone else can explain away Bill Clinton's culpability on this matter, the comment box is below. I look forward to seeing the defense argument on Bill Clinton's behalf.

A Letter to the President

Dear Mr. President,

I see where you are considering a housing plan that would allow homeowners to stay in their over priced, ill financed homes, by allowing them to rent the home from the bank and hopefully buy the home back from the bank at some point in the future. I can certainly see and respect the motivations of your plan.

However, I am troubled by any plan which keeps homes off the market and delays or worse yet, forestalls any amelioration in home prices. As I am sure you have been told by your economic advisors, the disparity between personal incomes and home prices are at or near all time highs. So is the disparity between costs of renting and home ownership. Home price appreciation is vastly ahead of historical trends. I believe that it is essential to a healthy economy for these costs and prices to adhere to historical trends and be in relative equilibrium with respect to affordability. Past housing booms have been ended by a return to pre-boom pricing levels, adjusted for inflation. If these homes are not returned to the market there will be no end to the bubble and I, along with millions of others who did not make the mistake of taking a bad loan on an over priced home will forever be denied the American dream.

All of that said, I believe that your intentions are altruistic and I would understand if you felt it was essential to forsake the American dream of millions of savers who did not buy an over priced home with flim flam style loan, in order to save millions of people who made a bad investment on a home during the latter part of the bubble cycle. The only things I would ask for are these … First, an acknowledgement that renters like myself are being told to take one for the team. Second, since I watched you on TV, take an oath to uphold the Constitution, I would like an explanation as to why someone else’s pursuit of happiness is worth more to you than mine and that of other renters in this country.

Sincerely,

A Taxpayer

A Prime Piece of Pork

Here is $30 million for the Speaker of House's home district. To preserve wetlands and an obscure mouse breed which Speaker Nancy Pelosi has championed before. Once again, the President's word is devalued, after shouting from the highest hill top in Washington that there WAS NO PORK in this bill. This was a read my lips sort of moment for President Obama.

Oh yea, don't forget to spend that $13 a week in one place. You voted these bafoons into office, they are yours, I am just a concerned bystander at this point. For the first time in my life, there isn't a single sitting politician that I voted for.

The Audacity of Pork

First it was a promise of doing things differently. A more ethical White House, but that dream flew out the window with Turbo Tax Timmy, Tom Daschle and some woman who didn't stick around long enough for anyone to remember her name as a nominee for some made up office. George Bush may have made up words, but President Obama is making up 6 figure jobs, one at a time. In truth, President Obama should be in charge of collections at the IRS. Nobody gets people to pay their delinquent taxes any better than he does with his nominations.

Later it would be a $1.1 trillion dollar stimulus package that had something for everyone. And the best part was that Congressional Democrats would take the rap for all that pork. Senator Max Baucus got $26 billion for private equity firms. Senator Robert Byrd got 4.6 billion for his constituents and clean coal, which Obama contends is a fallacy. Even under the guise of green education, there was $100 million for children to learn green construction. Seriously? Children can learn green construction on the job after they drop out of high school, they don't need $100 million for it in elementary school. Don't forget, this is a do as I say, not a do as I do White House.

However, while Nancy Pelosi, Harry Reid and the rest of the Dems on the Hill loaded up the stimulus with pork barrel spending, the President was still watching out for his friends. There was $4 billion, give or take, for community action groups like ACORN.

Now with the door of public opinion getting slammed on the fingers of hill Democrats, they revised the bill down, from $1.1 trillion, to $827 billion. They cut the bill by about a third, but does anyone believe that the pork is all gone? I sure don't. You can rest assured that there is plenty of extraneous spending in this bill and that there will be plenty of favors returned. Eight and quarter billion dollars to be spent at break neck speed leaves a lot of room for fudging and not much time to catch the pork spending.

One last thing to consider... when a Senator or Congressman attaches a piece of pork to a piece of spending, he or she is doing what they need to do, to keep their constituents happy and get themselves reelected, but are they really acting in the best interests of their constituents? Not very often. That’s the inherent conflict of interest in Capitol Hill politics. All to often, the players are busy trying to get reelected as opposed to fulfilling their oath of office to best serve the people.

Entire US Population Growing & Unemployed

According to the mathematically challenged Speaker of the House, Nancy Pelosi, the United States suddenly added 200,000,000 citizens to go on the unemployement & welfare rolls along with the currently verified 300,000,000 US citizens who will all be unemployed tomorrow. There is no word on whether or not they will continue paying their mortgages.

Daschle Gives Up

Once, unmasked, like the villan in a Scooby Doo cartoon, former US Senator and nominee for Secretary of Health & Human Services, Tom Daschle withdrew his name from consideration. I suspect he said something like this, "Curses! I would have gotten the job if it wasn't for you meddling bloggers".

Speaking of Irony Mr. Daschle...

We all know that former health care industry lobbyist, Tom Daschle, owes a ton of money to the IRS. If you’re a pro athlete, $128,000 is not a lot of money, but for the average American, that is about 3 years worth of a wages. And know the irony bug is rearing its ugly head.

Sen. Tom Daschle, Congressional Record, May 7, 1998, p. S4507.

“Make no mistake, tax cheaters cheat us all, and the IRS should enforce our laws to the letter. ”

If Christopher Dodd is Delighted ...

We are all in deep kaka. When the chairman of the Senate Banking Committee is happy with a policy decision at the Fed, I immediately reach for my wallet, to make sure its still there. Sort of like when I am in a crowd and someone bumps into me.

The Fed decision to take action against foreclosures can only turn out poorly. For 2 decades Washington and the economists they have employed, have meddled with and held back economic tides which were not meant to be messed with. Preventing foreclosures should not be the goal of the Fed, the Treasury or the Senate Banking Committee. They should be concerned with guiding the US economy out of the wilderness and back to an equilibrium which we can use as a starting point for new growth. Preventing foreclosures is like holding back the tides. It can't work for long and its likely to cause stiffer consequences. If anything has been evident over the last couple of years, its exactly that. Our financial policy makers need to take their hands off of things which they can't really control and allow our economy to reset itself to a normal and sustainable level.

Instead we have a feltcher like Christopher Dodd influencing financial policies about which he knows nothing and is not qualified to be meddling with. There were no economics courses at the Mr. Potatohead State law school Christopher Dodd went to. Seriously, read this part ...

The school fails to make an appearance on any of USNews’ specialty rankings lists, and is not well known outside of its own region.

Christopher Dodd, went to Louisville, after growing up and living his entire life in Connecticut, which means he couldn't get in anywhere close to home and he obviously didn't get in there any place desireable.

Don't Believe Me?

How about CNBC? Cram downs are just an out and out bad idea that will only extend the housing downturn.

What is the President's Word Worth?

Less and less, every day.

I seem to recall a point in time, when Senator Barack Hussein Obama was running for the presidency, when he was being very critical of the spending programs of George W Bush while trying to tie Senator John McCain to those programs. That’s fine, that’s the business of electoral politics.

Even as Senator Barack Hussein Obama promised that he would not tolerate special interests or the Washington old guard to reign supreme in his vision of Washington, something sounded too good to be true. Slowly, but surely, President-elect Barack Hussein Obama began laying out his policies and appointees. Surprise, surprise, the self-anointed candidate for change is already straying from his promises, by appointing long time Washington insiders to key and glamorous roles in his administration and going against campaign & pre-inauguration promises. He appointed a derisive Congressman and former Clinton advisor from his home state as Chief of Staff. Long time Senator Tom Daschle was appointed Secretary of Health and Human Services. Another long time Clintonista, Susan Elizabeth Rice is the nominee for ambassador to the United Nations. And then there is Hillary Clinton, as big an insider as there ever was.

Today, the New York Post is reporting President Barack Hussein Obama, as part of his "stimulus" package has included a $4.19 billion line item for groups like ACORN. Keep in mind, as President-elect, Barack Hussein Obama promised a line by line review of wasteful programs. Let’s not forget that the Ohio state electoral board called 12% of the voter registrations turned in by ACORN questionable. At least with Hillary Clinton or John McCain, you knew what you were getting.

By the way, where is the NY Times, cnn, MSNBC coverage of this story?

Thanks Peter Schiff

I have been beating this drum for year, but now, someone with some real credentials is now saying what I have been saying for so long. Let home prices fall, let the foreclosure process run its course. The run up in housing prices was artificial; it needs to be allowed to correct itself.

So easy, even a software engineer with 6 credits of college economics can do it.

Your TARP Recipients

Bank of America Corporation $40,000,000,000.00
Bank of New York Mellon Corporation $25,000,000,000.00
Citigroup Inc. $25,000,000,000.00
The Goldman Sachs Group, Inc. $25,000,000,000.00
JPMorgan Chase & Co. $20,000,000,000.00
Morgan Stanley $15,000,000,000.00
State Street Corporation $10,000,000,000.00
Wells Fargo & Company $10,000,000,000.00
Merrill Lynch & Co., Inc. $10,000,000,000.00
Bank of Commerce Holdings $9,400,000,000.00
1st FS Corporation $7,579,200,000.00
UCBH Holdings, Inc. $6,599,000,000.00
Northern Trust Corporation $5,000,000,000.00
SunTrust Banks, Inc. $4,000,000,000.00
Broadway Financial Corporation $3,555,199,000.00
Washington Federal Inc. $3,500,000,000.00
BB&T Corp. $3,500,000,000.00
Provident Bancshares Corp. $3,408,000,000.00
Umpqua Holdings Corp. $3,133,640,000.00
Comerica Inc. $3,000,000,000.00
Regions Financial Corp. $2,500,000,000.00
Capital One Financial Corporation $2,330,000,000.00
First Horizon National Corporation $2,250,000,000.00
Huntington Bancshares $2,000,000,000.00
KeyCorp $1,715,000,000.00
Valley National Bancorp $1,576,000,000.00
Zions Bancorporation $1,400,000,000.00
Marshall & Ilsley Corporation $1,398,071,000.00
U.S. Bancorp $1,350,000,000.00
TCF Financial Corporation $1,000,000,000.00
First Niagara Financial Group $967,870,000.00
HF Financial Corp. $935,000,000.00
Centerstate Banks of Florida Inc. $866,540,000.00
City National Corporation $600,000,000.00
First Community Bankshares Inc. $525,000,000.00
Western Alliance Bancorporation $400,000,000.00
Webster Financial Corporation $400,000,000.00
Pacific Capital Bancorp $376,500,000.00
Heritage Commerce Corp. $361,172,000.00
Ameris Bancorp $347,000,000.00
Porter Bancorp Inc. $330,000,000.00
Banner Corporation $306,546,000.00
Cascade Financial Corporation $303,000,000.00
Columbia Banking System, Inc. $300,000,000.00
Heritage Financial Corporation $300,000,000.00
First PacTrust Bancorp, Inc. $300,000,000.00
Severn Bancorp, Inc. $300,000,000.00
Boston Private Financial Holdings, Inc. $298,737,000.00
Associated Banc-Corp $295,400,000.00
Trustmark Corporation $250,000,000.00
First Community Corporation $235,000,000.00
Taylor Capital Group $216,000,000.00
Nara Bancorp, Inc. $215,000,000.00
Midwest Banc Holdings, Inc. $214,181,000.00
MB Financial Inc. $200,000,000.00
First Midwest Bancorp, Inc. $196,000,000.00
United Community Banks, Inc. $193,000,000.00
Wesbanco Bank Inc. $184,011,000.00
Encore Bancshares Inc. $180,634,000.00
Manhattan Bancorp $180,000,000.00
Iberiabank Corporation $154,000,000.00
Eagle Bancorp, Inc. $151,500,000.00
Sandy Spring Bancorp, Inc. $150,000,000.00
Coastal Banking Company, Inc. $140,000,000.00
East West Bancorp $130,000,000.00
South Financial Group, Inc. $125,198,000.00
Great Southern Bancorp $124,000,000.00
Southern Community Financial Corp. $120,000,000.00
CVB Financial Corp $104,823,000.00
First Defiance Financial Corp. $100,000,000.00
First Financial Holdings Inc. $100,000,000.00
Superior Bancorp Inc. $95,000,000.00
Southwest Bancorp, Inc. $90,000,000.00
Popular, Inc. $87,631,000.00
Blue Valley Ban Corp $84,784,000.00
Central Federal Corporation $83,094,000.00
Bank of Marin Bancorp $81,698,000.00
Bank of North Carolina $80,347,000.00
Central Bancorp, Inc. $80,000,000.00
Southern Missouri Bancorp, Inc. $76,898,000.00
State Bancorp, Inc. $76,458,000.00
TIB Financial Corp $75,000,000.00
Unity Bancorp, Inc. $75,000,000.00
Old Line Bancshares, Inc. $72,278,000.00
FPB Bancorp, Inc. $72,000,000.00
Sterling Financial Corporation $71,000,000.00
Oak Valley Bancorp $70,000,000.00
Old National Bancorp $70,000,000.00
Capital Bank Corporation $69,000,000.00
Pacific International Bancorp $67,000,000.00
SVB Financial Group $65,000,000.00
LNB Bancorp Inc. $64,450,000.00
Wilmington Trust Corporation $62,158,000.00
Susquehanna Bancshares, Inc $59,000,000.00
Signature Bank $58,000,000.00
Citizens Republic Bancorp, Inc. $55,000,000.00
Indiana Community Bancorp $52,372,000.00
Bank of the Ozarks, Inc. $52,000,000.00
Center Financial Corporation $50,000,000.00
NewBridge Bancorp $50,000,000.00
Sterling Bancshares, Inc. $48,200,000.00
The Bancorp, Inc. $45,220,000.00
TowneBank $43,000,000.00
Wilshire Bancorp, Inc. $42,750,000.00
Valley Financial Corporation $42,000,000.00
Independent Bank Corporation $41,500,000.00
Pinnacle Financial Partners, Inc. $41,279,000.00
First Litchfield Financial Corporation $40,000,000.00
National Penn Bancshares, Inc. $40,000,000.00
Northeast Bancorp $38,970,000.00
Citizens South Banking Corporation $38,235,000.00
Virginia Commerce Bancorp $38,000,000.00
Fidelity Bancorp, Inc. $37,515,000.00
LSB Corporation $37,000,000.00
Intermountain Community Bancorp $37,000,000.00
Community West Bancshares $36,842,000.00
Synovus Financial Corp. $36,282,000.00
Tennessee Commerce Bancorp, Inc. $36,000,000.00
Community Bankers Trust Corporation $35,500,000.00
BancTrust Financial Group, Inc. $35,000,000.00
Enterprise Financial Services Corp. $35,000,000.00
Mid Penn Bancorp, Inc. $34,000,000.00
Summit State Bank $32,382,000.00
VIST Financial Corp. $31,762,000.00
Wainwright Bank & Trust Company $31,260,000.00
Whitney Holding Corporation $30,255,000.00
The Connecticut Bank and Trust Company $30,000,000.00
CoBiz Financial Inc. $30,000,000.00
Santa Lucia Bancorp $30,000,000.00
Seacoast Banking Corporation of Florida $28,000,000.00
Horizon Bancorp $27,875,000.00
Fidelity Southern Corporation $27,000,000.00
Community Financial Corporation $26,918,000.00
Berkshire Hills Bancorp, Inc. $26,038,000.00
First California Financial Group, Inc $26,000,000.00
AmeriServ Financial, Inc $25,223,000.00
Security Federal Corporation $25,054,000.00
Wintrust Financial Corporation $25,000,000.00
Flushing Financial Corporation $25,000,000.00
Monarch Financial Holdings, Inc. $25,000,000.00
StellarOne Corporation $25,000,000.00
Union Bankshares Corporation $25,000,000.00
Tidelands Bancshares, Inc $24,000,000.00
Bancorp Rhode Island, Inc. $23,864,000.00
Hawthorn Bancshares, Inc. $23,393,000.00
The Elmira Savings Bank, FSB $22,000,000.00
Alliance Financial Corporation $21,750,000.00
Heartland Financial USA, Inc. $21,500,000.00
Citizens First Corporation $21,000,000.00
FFW Corporation $20,649,000.00
Plains Capital Corporation $20,500,000.00
Tri-County Financial Corporation $19,300,000.00
OneUnited Bank $18,000,000.00
Patriot Bancshares, Inc. $17,680,000.00
Pacific City Finacial Corporation $17,000,000.00
Marquette National Corporation $16,641,000.00
Exchange Bank $16,369,000.00
Monadnock Bancorp, Inc. $16,200,000.00
Bridgeview Bancorp, Inc. $16,019,000.00
Fidelity Financial Corporation $15,600,000.00
Patapsco Bancorp, Inc. $15,540,000.00
NCAL Bancorp $15,000,000.00
FCB Bancorp, Inc. $14,964,000.00
First Financial Bancorp $14,700,000.00
Bridge Capital Holdings $14,448,000.00
International Bancshares Corporation $13,795,000.00
First Sound Bank $13,500,000.00
M&T Bank Corporation $12,643,000.00
Emclaire Financial Corp. $12,063,000.00
Park National Corporation $12,000,000.00
Green Bankshares, Inc. $11,600,000.00
Cecil Bancorp, Inc. $11,560,000.00
Financial Institutions, Inc. $11,350,000.00
Fulton Financial Corporation $11,300,000.00
United Bancorporation of Alabama, Inc. $10,800,000.00
MutualFirst Financial, Inc. $10,685,000.00
BCSB Bancorp, Inc. $10,400,000.00
HMN Financial, Inc. $10,300,000.00
First Community Bank Corporation of America $10,000,000.00
Sterling Bancorp $10,000,000.00
Intervest Bancshares Corporation $10,000,000.00
Peoples Bancorp of North Carolina, Inc. $10,000,000.00
Parkvale Financial Corporation $10,000,000.00
Timberland Bancorp, Inc. $9,950,000.00
1st Constitution Bancorp $9,550,000.00
Central Jersey Bancorp $9,294,000.00
Western Illinois Bancshares Inc. $9,090,000.00
Saigon National Bank $9,000,000.00
Capital Pacific Bancorp $8,779,000.00
Uwharrie Capital Corp $8,500,000.00
Mission Valley Bancorp $7,500,000.00
The Little Bank, Incorporated $7,500,000.00
Pacific Commerce Bank $7,400,000.00
Citizens Community Bank $7,290,000.00
Seacoast Commerce Bank $7,289,000.00
TCNB Financial Corp. $7,225,000.00
Leader Bancorp, Inc. $7,000,000.00
Nicolet Bankshares, Inc. $7,000,000.00
Magna Bank $6,855,000.00
Western Community Bancshares, Inc. $6,500,000.00
Community Investors Bancorp, Inc. $6,000,000.00
Capital Bancorp, Inc. $5,830,000.00
Cache Valley Banking Company $5,800,000.00
Citizens Bancorp $5,500,000.00
Tennessee Valley Financial Holdings, Inc. $5,448,000.00
Pacific Coast Bankers' Bancshares $4,767,000.00
SunTrust Banks, Inc. $4,700,000.00
The PNC Financial Services Group Inc. $4,227,000.00
Fifth Third Bancorp $4,060,000.00
Hampton Roads Bankshares, Inc. $4,000,000.00
CIT Group Inc. $4,000,000.00
West Bancorporation, Inc. $3,000,000.00
First Banks Inc. $3,000,000.00
AIG $2,600,000.00
GMAC LLC $2,000,000.00
General Motors Corp. $1,834,000.00