Miracles Do Happen

It must be the end of the world because Congress is finally doing its job!  Interesting, an unrecorded voice vote -- they all know that it is the right thing to do.

House Approves $600M For More Drones, Agents at U.S.-Mexican Border

The bill is a step in the right direction.  Comprehensive Immigration legislation is still needed but, not blanket amnesty.  Nothing will do any good though until the border is secure.

A Young Employee's Take on ObamaCare

A young employee commented the other day that he was concerned about the Health Care Bill that Congress was considering and the President was pushing. I wondered why.

He said that if he understood correctly, what would happen is that the Health Care currently provided by his employer would go away and be replaced by a Health Care program offered by the Federal Government. If that happened, the amount the employer was currently providing on a pre-tax basis would then become taxable income. The Health Care offered by the government was likely to be very restrictive on its coverage and therefore inferior to what he was currently being provided. The net result is that if passed, he would get inferior Health coverage and pay more for it because now it was being taxed.

I said, "that's about right."

Perry on Limited Government

Limited government. Is it only a dream now? Have we gone too far to turn back?

Governor Rick Perry of Texas has some timely comments in today's Washington Times:

Perry: Texas Proves Limited Government Works

Making Tough Decision

I almost titled this post "The Bitter Pill" but thought better.

The Senate has voted in favor of a $700 Billion bailout of Fannie Mae/Freddie Mac. Wow. $700 Billion is a lot of money no matter how you view it. What do the taxpayers get in exchange? We get to be in the mortgage investment business corporately (as in we're all in this thing together). We will own $700 Billion worth of mortgages which are secured by about $560 Billion worth of real estate (assuming a 125% of value mortgage).

Once we own those mortgages what will we do with them? The first hope is that we could re-sell them on the open market. That could be a problem. The one's the government will own are the one's no one else wanted in the first place. Will we foreclose on the properties for those mortgages that are non-performing? Hmm -- I have a hard time seeing that happening although it does in small doses already. FHA has been foreclosing on real estate for a long time.

Let's say that we eventually will recover about half of the $700 Billion by either selling the mortgages or the foreclosed properties. That means about $350 Billion will be non-recoverable debt -- that will be made up from taxes. That's what makes this such a bitter pill to swallow.

But, let's look at the other side of this. What happens without a bailout?

First, we have a bankrupt Fannie Mae and Freddie Mac. Their assets are liquidated by the court and the net result to the economy will still be a loss of about $350 Billion. But we also have all of the $5.3 Trillion in mortgages that were guaranteed by Fannie Mae/Freddie Mac whose guarantees are now worthless. Any of the mortgage based securities sold to various financial institutions and individuals that are non-performing are now worth considerably less than their previously guaranteed value.

In the case of securities held by individuals, it is a matter of writing down their value, taking the loss and moving on. In the case of those held by financial institutions there is suddenly a huge problem. When the securities are written down, the financial institutions must then "classify" those assets as non-performing. Those classified assets offset the capital of the financial institution and cause many to drop below the minimum threshold required by the FDIC or other regulatory bodies. It also drops the available funds for lending to borrowers even though they may be well-qualified borrowers. In other words, the credit market dries up and many banks fail.

What happens when the credit market dries up? Business comes to a halt. Grocery stores can no longer stock their shelves. Auto dealers can no longer extend credit because somewhere behind that dealership is a bank or other financial institution underwriting the loan. In fact, many businesses will fail if credit becomes tight. When businesses fail, people lose their jobs. When people lose their jobs in an economy which is contracting due to unavailability of credit, there is little hope of finding a new job. We enter into a Depression.

This financial disaster is NOT a Wall Street problem alone. It is a Main Street problem. It affects the stock market because corporations must have credit to operate. The real problem though is the impact on the credit markets. Without credit, our economy comes to a halt. The taxpayers are going to be hit whether a "fix" is passed or not. The hit will be much harder and much more severe without a fix. No fix means Depression and huge loss of equity in retirement plans and many other assets. A fix means buying time to come up with a longer-term solution.

I applaud those Senators, like John Cornyn, who voted in favor of the fix. They knew that it was not the popular thing on Main Street. But, they also know that it is sometimes necessary to make tough decisions. I mention Senator Cornyn because he is up for reelection this year. His opponent can make political hay of this vote and if he's smart, will do his best to make the Senator appear to favor Wall Street over his constituents. In fact, it's the other way around. By making the tough call, Senator Cornyn is siding with the people of Texas. I pray that he will have opportunity to present legislation that will begin the process of fixing the underlying problems that created the financial meltdown in the first place. We need to send him back to Washington for another term.

The Common Sense Fix

Dave Ramsey has a proposed solution to the current financial crisis that I believe merits the attention of our Congressional leaders. It is called The Common Sense Fix. Read it by clicking on the link and then go to this page to see how you can take action. This is critically important to our future.

A Transfusion to Buy Time: The Bleeding Financial Markets

How is the average person to understand the mess in the elite community of Financial Powerhouses that has prompted a complete shakeup on Wall Street, an $85 Billion loan to shore up a huge insurance company and a potentially $700 Billion bailout of two mortgage lenders? Even the gurus of Wall Street are struggling with making sense of the markets today. Congress, quite frankly, probably lacks the expertise to deal with the problems. Our legislators must rely on their staff for the expert advice on how to proceed. The influence peddlers will certainly be out in force attempting to shape the outcome.

To even begin to analyze what created the mess we are facing would require several volumes. We must examine the history of the financial markets, insurance markets and banking industry. We must dive into the history of legislative initiatives that have blurred the lines between the various kinds of financial institutions. We must look at the evolving attitude in business schools toward profit at any cost. We must examine the methodologies taught to MBA's and Financial Analysts. We must look at Federal Monetary Policy and interest rate markets. We would have to delve into the myriad financial instruments and types of financing arrangements that are the specialty of a minute few. We would need to discuss policies related to housing for low-income families and the necessary guarantees to enable availability of financing for individuals who have accumulated insufficient capital to merit loans without those guarantees. We would need to look at retirement packages and policies that regulate 401 K's and IRA's. We would need to look at the basic money management skills which should be taught to every individual passing through our school systems. We would need to investigate the investigators -- those regulatory agencies responsible for overseeing the various and complex behemoths that control the billions and trillions of dollars that pass through them. The list goes on....

The crisis is of a complexity that few fathom and none can fix quickly and easily. It is the result of the cumulative effects of decades of policies, legislation and regulation. However, we must stop the bleeding quickly. The wound may or may not be fatal. It will take much more than a Band aid to fix. It will require major surgery and years of therapy.

Hopefully, Congress will buy us some time with the bailout in order for the surgeons to begin their work. The transfusions have been started but the surgery will be long. I pray that our leaders, such as Senator Cornyn (his thoughts here), will have the wisdom to steer us through the surgery and onto the path of recovery.

Democrats Walk Out on the American Public

It has been awhile since I posted here. It seems that not much has changed in politics other than the Republicans speaking to an empty house and C-SPAM (slip intended) since the Democrats pulled their usual "don't give a rip what the American public thinks" act and went to Aspen or wherever for vacation. We need an energy bill. It won't happen on Pelosi and Reid's watch. Pelosi is so busy "trying to save the planet" that she may not save her job -- we can only hope.

Energy Fuels Political Games

While Washington plays politics with our energy future, the U.S. consumers continue to pick up the check. The bill to curb energy speculation appears to be merely a political move designed to fool the electorate into believing that Democrats really care about our cost of fuel. It is really an attack on free enterprise which fails to address the true issue -- supply and demand. The price of fuel is set where the quantity supplied equals the quantity demanded. We either need a greater supply or a lower demand. The economic growth of China and India make it difficult to lower demand even though we are burning less fuel in the U.S. Therefore, we must work on the supply side of the equation. We must produce more oil.

From all appearances, Harry Reid and Nancy Pelosi do not care about the American people. They only care about their power and the narrow interest groups that keep them there. Until Republicans control both the Senate and the House, there is little chance of meaningful energy legislation. That control means more than a simple majority of seats. It must be at least 60% to be truly effective.

Spin City

Talk about Spin -- recent legislative victories on measures favored by the President are being accredited to a new willingness to compromise on his part. Supposedly his "lame duck" status doesn't sit well with the administration and they are wanting to go out with a solid string of accomplishments.

I think the recent legislative victories are instead the result of the politics of the 2008 Presidential race. The Dems are seeing the need to give-in to the President on several issues because their candidate is needing the approval of the American public. His recent moves to the center are signalling to his cohorts that there are issues about which the majority of Americans care and Congress needs to support him in that move. You add to that the extremely low approval ratings of Congress and you have additional pressure on lawmakers. There are a lot of them fearful for their jobs as they head toward the fall.

It is pure pragmatism that moves the vote. Further stonewalling of these important measures by a Democrat controlled House and Senate would be seen by the public for what it is -- pure partisan politics. They are merely trying to assuage the fears of the average voter that a Democrat in the Executive plus Democrat control of Congress would be pure disaster.

Checks and Balances

The election cycle has not helped the American consumer. It rarely does. We jump behind a candidate thinking that things will be better with their promises of change. We are almost always disappointed. Although their promises are often based in the hopes and desires of their targeted constituencies, when they hit the political realities of Washington, those promises usually die. They crumble within the halls of Congress and join the cumulative dust of the thousands of preceding good ideas that met the withering fire of big money and big power.

The checks and balances of our system of government are wonderful. The Executive is checked by the Legislative which is checked by the Judicial. The Democrats are checked by the Republicans. The American public is check-mated by the powerful elite that hold the reins of government. It is all done at our expense. It is done on the backs of the hard-working people of this country.

Sometimes we become disillusioned by the sense of powerlessness that has gripped us. The sense that it doesn't matter what we do, we are at the mercy of Washington. It doesn't matter who we vote into office, they all fall to the corruption of power and the influence of the lobbyists. It is a sense that once we send them to Washington, they forget that they are there to represent our interests, they instead develop the attitude that they know what is best for us and we are too ignorant of the "real" picture to have properly informed opinions.

There are a few good men and women in Washington. They rarely rise to the highest positions of power because they don't "play by the rules." We don't hear much about them for that very reason. After a couple of terms they usually resign out of frustration or they begin to compromise in order to get things done. The first few times they compromise it is likely with the thought that they are achieving a higher good by caving on something minor. The trouble is that compromise leads to compromise leads to compromise. Eventually they succumb to the "ways" of the halls of power.

Generally the people talk of "throwing the bums out" because they see results of measures which pass being detrimental to themselves or antithetical to their personal beliefs. Such talk usually refers to "the other guy's" representative. Not their own. We tend to stick with the known. We tend to vote for the incumbent. But we remain frustrated because "our agenda" never seems to happen. Maybe that's why polls indicate the approval rating of Congress, the President and all of Washington to be so dismally low.

Along comes a candidate of change. He must be good because we see that the way things are going is not what we desire. Surely if he can accomplish changes it will be better than what we have. He is articulate, young and attractive. He represents the melting pot of open opportunity that is the best of America. He claims to represent the down-trodden, the common, the average person. He has little of the "taint" of the Washington establishment. He reminds us of another candidate that took the stage many years ago. He represents a shining light on the hill to many who have felt powerless. They rally about him and worship at his feet.

What does he really believe? What will be the effects of his social and economic agenda? Are the really hard questions being asked? Even more importantly, are they being answered?

We compare him to his opponent that sometimes appears old and grumpy. He has been part of the Washington establishment for years although often he has appeared to be something of a maverick. He doesn't exactly represent our interests. In fact, he's a mix of many interest groups but doesn't fit neatly into any particular one. It's hard to say he's in "the middle" of the political spectrum because on some issues he is to the right and others he is to the left. He's a veteran and a former POW. He isn't known for his flowery speeches or his ability to draw buckets of money from the pockets of the wealthy. He's been accused of being short-tempered and difficult. We don't understand him but we can see his record and know what he's done.

How do we vote? It seems easy on the surface. It isn't. We have to look down the road to the likely consequences of the agendas of each of the candidates. What will be the impact of their victory on me personally?

I want to be left alone to live my life in peace, quietly building for my family and eventually my retirement. I don't want someone else running my life. I do want security. I want to spend my own money the way I see fit -- not hand it over to someone else to spend for me. I want to see innocent people protected and I want there to be opportunity for everyone to succeed without special treatment -- just a "fair shake."

So, how do I vote? I vote for balance. I want to see Congress closely balanced so that the legislation that passes will pass on merit, not because one party or the other can shove their agenda through because they have the power. I vote for the man that most closely fits my values yet also will maintain the balance between the Executive, the Legislative and the Judiciary. Let me ask: What would happen to our country if there was an overwhelming majority of Democrats in the House and Senate, a liberal Democrat as President, and the appointment of two or more liberal judges to the Supreme Court? Consider carefully -- Comrade.