It has been awhile since I have posted anything. My travel schedule has been crazy and will continue to be that way until almost Christmas.
I am writing this from Jacksonville, Florida, while waiting until time to board my flight west.
It has been a good week working in the Southeast. The people are friendly and the weather was great. Attitudes are good.
Every newspaper that I pick up has gloom-and-doom headlines about the economy and yet as I look around, I don't see it. Business is happening and people are spending money. There is certainly an underlying current of anxiety because people don't know what may really be happening in the economy. That anxiety is fed by the newspaper headlines. Yet, there lifestyles really haven't changed.
In agriculture, things really look pretty good. There is certainly some market turmoil -- but that's the way it always is. The markets go up, the markets go down. You do the best that you can.
The only negative that I've heard is a rumor that one very large outfit that is an industry leader is financed by one of the BIG 5 banks. The word is that their credit line has been squeezed.
So, why is our government bailing the big banks out? I know that it's because it would devastate our economy if they fail because it would create a cascading effect that would start with the big boys and work its way down until everyone was affected.
My thought though, is that they need to seriously consider breaking the big banks up into multiple smaller institutions. Kind of a Ma Bell breakup. Let's spread our risk instead of allowing it to concentrate into a few hands.
What bothers me is that the very banks that the Fed is propping up are the ones buying other financial institutions. If I had a bent toward conspiracy theories, I think we could certainly build a case that this whole financial meltdown smacks of a conspiracy to gain financial control of the world. But, being the rational individual that I am, maybe it's just a function of human stupidity instead.
Maybe I should run for President. Is there anybody out there that would vote for me?
Showing posts with label finance. Show all posts
Showing posts with label finance. Show all posts
Friday, October 17, 2008
Monday, September 29, 2008
A Failure of Socialist Measures in the U.S.
Many are touting the current financial crisis in the U.S. as a failure of capitalism. That is wrong. It is a failure of socialism. The crisis is a result of socialist tending policies implemented by our legislators.
The current $700 Billion “bailout” of the financial industry is a case in point. In 1977 the Community Reinvestment Act became law. It was intended to “encourage” financial institutions to provide credit to moderate and low-income individuals. It was meant to stop the practice of “red-lining” which is not making loans into neighborhoods that were considered poor credit risks.
The Federal National Mortgage Association (Fannie Mae) was started in 1938 as part of FDR’s New Deal. It was a government sponsored enterprise until 1968 when it was converted to a private corporation. It was designed to purchase mortgages from private financial institutions and then to re-sell them in “packages” as mortgage-backed securities. It became the vehicle for lenders to meet the requirements of the Community Reinvestment Act. As of 2008, Fannie Mae owned or guaranteed about half of the U.S.’s $12 Trillion mortgage market. The loans held by Fannie Mae as of August, 2008, amounted to approximately $700 Billion – the estimated cost of the bailout.
The size of Fannie Mae backed mortgages has increased through the years to the point that a loan for a single-family dwelling in excess of $400,000 can qualify. It is not just the need for low-income housing that was being met by their guarantees. It was part of the reason for highly inflated housing markets across the country. When that bubble burst due to high oil prices which sent a ripple through our economy, the worthless nature of their guarantees became apparent.
The public belief that Fannie Mae backed loans are guaranteed by the U.S. Treasury is incorrect. Fannie Mae was a private corporation with traded stock. Investors who purchased Fannie Mae backed mortgage securities did so in the belief that the government backed the guarantees of principal and interest on those securities. It does not – or, it didn’t until the current bailout package.
Credit-worthiness should be the primary criteria for loans -- not pseudo-guarantees. The idea that everyone should be able to purchase their home is worthy, the method for accomplishing that through government intervention in the marketplace is not. People need to learn self-reliance, not government reliance. It is time to get the government out of the marketplace.
The current $700 Billion “bailout” of the financial industry is a case in point. In 1977 the Community Reinvestment Act became law. It was intended to “encourage” financial institutions to provide credit to moderate and low-income individuals. It was meant to stop the practice of “red-lining” which is not making loans into neighborhoods that were considered poor credit risks.
The Federal National Mortgage Association (Fannie Mae) was started in 1938 as part of FDR’s New Deal. It was a government sponsored enterprise until 1968 when it was converted to a private corporation. It was designed to purchase mortgages from private financial institutions and then to re-sell them in “packages” as mortgage-backed securities. It became the vehicle for lenders to meet the requirements of the Community Reinvestment Act. As of 2008, Fannie Mae owned or guaranteed about half of the U.S.’s $12 Trillion mortgage market. The loans held by Fannie Mae as of August, 2008, amounted to approximately $700 Billion – the estimated cost of the bailout.
The size of Fannie Mae backed mortgages has increased through the years to the point that a loan for a single-family dwelling in excess of $400,000 can qualify. It is not just the need for low-income housing that was being met by their guarantees. It was part of the reason for highly inflated housing markets across the country. When that bubble burst due to high oil prices which sent a ripple through our economy, the worthless nature of their guarantees became apparent.
The public belief that Fannie Mae backed loans are guaranteed by the U.S. Treasury is incorrect. Fannie Mae was a private corporation with traded stock. Investors who purchased Fannie Mae backed mortgage securities did so in the belief that the government backed the guarantees of principal and interest on those securities. It does not – or, it didn’t until the current bailout package.
Credit-worthiness should be the primary criteria for loans -- not pseudo-guarantees. The idea that everyone should be able to purchase their home is worthy, the method for accomplishing that through government intervention in the marketplace is not. People need to learn self-reliance, not government reliance. It is time to get the government out of the marketplace.
Tuesday, September 23, 2008
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.
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.
Saturday, August 16, 2008
Dancing With The Devil - 2
Money drives politics. Nothing new there. The average person really doesn't think too much about that fact except in the abstract. Occasionally, however, we get a glimpse of the murky side of the money equation.
The Democratic Party of Texas has struggled for several years now -- since Republicans took control of state government -- including both the House and Senate. In fact, they have steadily lost ground at the state level. There are some Democratic strongholds around the state, such as the Rio Grande Valley and parts of the larger cities, that continue to send Democrats to Austin and Washington to represent their interests.
One of the difficulties the party has faced in Texas is funding. With the majority of their support in low-income areas, they have struggled with the financial side of intrastate party politics. The national party has injected some funding, but when there are no hotly contested races, that funding is sparse -- until 2005, when Dallas lawyer, Fred Baron, teamed with Matt Angle, a long-time aid to Democratic Representative Martin Frost of Dallas to create the Texas Democratic Trust (TDT). The TDT has since become the primary source of funding for Democratic candidates in state contests.
Now comes the real twist. Baron has been implicated as being involved in John Edwards recent troubles with Rielle Hunter. According to The Austin American Statesman:
"After Edwards admitted last week that he had had an affair with Rielle Hunter when she was his campaign videographer, reports surfaced that Baron had helped Hunter financially. Baron told several media outlets that he had helped Hunter and former Edwards campaign aide Andrew Young, along with Young's family, move to California from North Carolina to escape tabloid reporters and paparazzi. Despite reports in the National Enquirer that Edwards is the father of Hunter's baby, Young has claimed to be the father.
Baron has said that he did not tell Edwards that he helped Hunter and Young, and he has not said how much money he gave them."
The Edwards scandal threatens to taint many of those connected with Baron because of his alleged involvement. One of the candidates who appears to have benefited greatly from the largess of the TDT is Diana Maldonado who is running for the House seat currently occupied by Rep. Mike Krusee, R-Williamson County.
I wonder how much influence $1.9 million can buy? In the same Statesman article:
"Other big donors were skeptical, Baron has said, so he paid for most of the effort himself.
He started the Texas Democratic Trust and gave it $1.9 million in 2005 and 2006, providing more than 80 percent of its funding.
In turn, the group gave about $855,000 to the Texas Democratic Party, $530,000 to the House Democratic Campaign Committee and $360,000 to the Texas Progress Council, an independent research and advocacy group.
Slightly more than half of the money raised by the state party's political action committee in 2005 and 2006 came from the Democratic Trust. Baron's recent donations are unmatched in Texas by anyone in his party."
It certainly makes you stop and think....
The Democratic Party of Texas has struggled for several years now -- since Republicans took control of state government -- including both the House and Senate. In fact, they have steadily lost ground at the state level. There are some Democratic strongholds around the state, such as the Rio Grande Valley and parts of the larger cities, that continue to send Democrats to Austin and Washington to represent their interests.
One of the difficulties the party has faced in Texas is funding. With the majority of their support in low-income areas, they have struggled with the financial side of intrastate party politics. The national party has injected some funding, but when there are no hotly contested races, that funding is sparse -- until 2005, when Dallas lawyer, Fred Baron, teamed with Matt Angle, a long-time aid to Democratic Representative Martin Frost of Dallas to create the Texas Democratic Trust (TDT). The TDT has since become the primary source of funding for Democratic candidates in state contests.
Now comes the real twist. Baron has been implicated as being involved in John Edwards recent troubles with Rielle Hunter. According to The Austin American Statesman:
"After Edwards admitted last week that he had had an affair with Rielle Hunter when she was his campaign videographer, reports surfaced that Baron had helped Hunter financially. Baron told several media outlets that he had helped Hunter and former Edwards campaign aide Andrew Young, along with Young's family, move to California from North Carolina to escape tabloid reporters and paparazzi. Despite reports in the National Enquirer that Edwards is the father of Hunter's baby, Young has claimed to be the father.
Baron has said that he did not tell Edwards that he helped Hunter and Young, and he has not said how much money he gave them."
The Edwards scandal threatens to taint many of those connected with Baron because of his alleged involvement. One of the candidates who appears to have benefited greatly from the largess of the TDT is Diana Maldonado who is running for the House seat currently occupied by Rep. Mike Krusee, R-Williamson County.
I wonder how much influence $1.9 million can buy? In the same Statesman article:
"Other big donors were skeptical, Baron has said, so he paid for most of the effort himself.
He started the Texas Democratic Trust and gave it $1.9 million in 2005 and 2006, providing more than 80 percent of its funding.
In turn, the group gave about $855,000 to the Texas Democratic Party, $530,000 to the House Democratic Campaign Committee and $360,000 to the Texas Progress Council, an independent research and advocacy group.
Slightly more than half of the money raised by the state party's political action committee in 2005 and 2006 came from the Democratic Trust. Baron's recent donations are unmatched in Texas by anyone in his party."
It certainly makes you stop and think....
Friday, June 20, 2008
Will the Media Call Obama to Task?
Occasionally you see a story or commentary from a national left-leaning publication that points the finger at the hypocrisy in the media. I was pleased to see just such a story today regarding Obama's rejection of Federal campaign funds. Interesting.
Tuesday, June 10, 2008
Clinton's Campaign Debts
For one who has made her lifelong ambition to live off of public funds, Mrs. Clinton took the art of using other people's money to a new high in her campaign for the Presidency. She owes a record amount to businesses who will likely be short-changed. She also "loaned" the campaign a large amount of money which she has until the General Election in November to repay (or she is limited to $250,000). Any bets as to who gets paid back first?
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