View From Table 9

November 18, 2008

Things Looking Bad? Try being a Wounded Veteran

Dear Wounded Vet,

Thank you for fighting for us in our ‘war on terror’. Thank you for sacrificing your time, your family, your health and your freedom so that we may enjoy ours.

Now we’re not going to give you a job, we’re going to fire your spouse for being with you while you’re wounded, we’re going to reposess your house and we’re not going to pay you anything for a really long time (if ever) for the injuries – physical and mental – you sustained for us.

When you complain, we’ll remind you that you ‘volunteered’ and that this was what you signed up for and besides, you’re probably faking your injury/illness so you can ‘live off the Government”.

By the way, those of us who made like $400 Million a year to run the economy into the ground, making things worse for you, get to keep all their money and don’t go to jail.


A Grateful Nation (not really).

Honestly, we should be ashamed….

November 18, 2008

New Veterans Hit Hard by Economic Crisis

After a mortar sent Andrew Spurlock hurtling off a roof in Iraq, ending his Army career in 2006, the seasoned infantryman set aside bitterness over his back injury and began to chart his life in storybook fashion: a new house, a job as a police officer and more children.

“We had a budget and a plan,” said Mr. Spurlock, 29, a father of three, who with his wife, Michelle, hoped to avoid the pitfalls of his transition from Ramadi, Iraq, to Apopka, Fla.

But the move proved treacherous, as it often does for veterans. The job with the Orange County Sheriff’s Office fell through after officials there told Mr. Spurlock that he needed to “decompress” after two combat tours, a judgment that took him by surprise. Scrambling, he settled for a job delivering pizzas.

Mr. Spurlock’s disability claim for his back injury took 18 months to process, a year longer than expected. With little choice, the couple began putting mortgage payments on credit cards. The family debt climbed to $60,000, a chunk of it for medical bills, including for his wife and child. Foreclosure seemed certain.

While few Americans are sheltered from the jolt of the recent economic crisis, the nation’s newest veterans, particularly the wounded, are being hit especially hard. The triple-whammy of injury, unemployment and waiting for disability claims to be processed has forced many veterans into foreclosure, or sent them teetering on its edge, according to veterans’ organizations.

The problem is hard to quantify because there are no foreclosure statistics singling out veterans and service members. Congress recently asked the Veterans Affairs Department to find out how badly veterans were being affected, particularly by foreclosures. The Army, too, began tracking requests for help on foreclosure issues for the first time. Service organizations report that requests for help from military personnel and new veterans, especially those who were wounded, mentally or physically, and are struggling to keep their houses and pay their bills, has jumped sharply.

“The demand curve has gone almost straight up this year,” said Bill Nelson, executive director for USA Cares, a nonprofit group that provides financial help to members of the military and to veterans. Housing, Mr. Nelson said, “is the biggest driver in the last 12 months.”

Congress has recently taken small steps to help, banning lenders from foreclosing on military personnel for nine months after their return from overseas, up from three months, and ensuring that interest rates on their loans remain stable for a year. Another relief bill to prevent certain injured veterans from losing their homes while they wait for their disability money was signed into law in October. The protection is good for one year.

“We owe these men and women more than a pat on the back,” said Senator John Kerry, Democrat of Massachusetts, who introduced one of the bills.

But the short-term measures do little to address the underlying economic difficulties that new veterans face, beginning with the job hunt. Veterans, particularly those in their 20s, have faced higher unemployment rates in recent years than those who never served in the military, though the gap has shrunk as the economy has worsened. (Veterans traditionally have lower unemployment rates than nonveterans.)

Recently discharged veterans, though, fared worst of all. A 2007 survey for the Veterans Affairs Department of 1,941 combat veterans who left the military mostly in 2005 showed nearly 18 percent were unemployed as of last year. The average national jobless rate in October was 6.5 percent.

A quarter of those who found jobs failed to make a living wage, earning less than $21,840 a year.

“You fill out a job application and you can’t write ‘long-range reconnaissance and sniper skills,’ ” said Mr. Spurlock, who searched a year for a better-paying job than delivering pizza, finally finding one as a construction supervisor.

The situation is especially troubling for the injured, whose financial problems begin almost immediately.

“The wife drops everything to be by his bedside,” said Meredith Leyva, founder of Operation Homefront, a nonprofit group that provides emergency money and aid to 33,000 military families a year, including the Spurlocks. “She stays at the nearest hotel to make sure he is alive. They live that way for months. She either has to quit her job or she is fired. This bankrupts people.”

Some injured veterans cannot work at all and must rely on disability checks and other government payouts. The wait for a disability check from the Veterans Affairs Department averaged six months in August, enough to financially crush some families.

Those who can work struggle to find employers willing to accommodate their injuries, including mental health problems. The Labor Department recently started a Web site, America’s Heroes at Work, that prods employers into hiring more wounded veterans and explains that post-traumatic stress disorder and traumatic brain injury are manageable conditions and not necessarily long-term.

Some believe that the government has to do more.

“There have to be incentives for employers,” said Thomas L. Wilkerson, a retired Marine Corps general who is chief executive of the Naval Institute, an independent nonprofit group.

Active duty troops who switch installations also find themselves struggling. Many of those forced to sell their homes this year are finding a scarcity of buyers, or even renters, particularly in states hit hard by the mortgage crisis. Military spouses must choose between taking a loss on their homes or riding out the housing slowdown and facing another separation from their loved one.

Although the government offers safeguards for some federal employees in similar circumstances, it will not help service members make up the difference if they are forced to sell a home at a loss.

What is worse, foreclosure or excessive debt can damage a service member’s career by leading to discharge, the loss of security clearances or, in extreme cases, jail.

A 2007 California task force reported that in the Navy, the number of security clearances revoked because of debt increased to 1,999 in 2005, from 124 in 2000.

“It’s the crash in the market,” said Joe Gladden, managing partner of Veteran Realty Service America’s Military, who sees families in extremis out of Northern Virginia. “It’s not that they have made stupid decisions.”

Mr. Gladden said e-mail messages and phone calls to his office had become so routine that he encouraged military families to share their stories anonymously on his company Web site,

“I am about sick over this situation,” one woman wrote. “Our two young boys have to go without seeing Daddy until we can sell our house. Not only that, but we face the possibility of Daddy deploying to Iraq again. Shouldn’t we be able to spend as much time together until that happens?”

For the Hatchers, the financial decline began after Roger, a Navy reservist and father of four, returned from his first tour of duty in Iraq. When he got back to Ventura, Calif., in 2004, his job as a groundskeeper for a school district was gone. He was offered a custodial job for less pay. Mr. Hatcher decided to find another job. He looked for several months, then was redeployed to Iraq. By then, the family had moved to Bakersfield, to a cheaper house near relatives.

His second tour was tougher. Iraq had grown more violent, and in late 2006, Mr. Hatcher was blown out of a Humvee after it hit a roadside bomb. The blast injured his shoulder, arm and neck. Back home, Mr. Hatcher, 49, fell prey to nightmares and rages. He drank heavily, said Tami, his wife of two decades. The pain in his shoulder never let up.

It took Mr. Hatcher eight months to find a job, and the family fell behind on their house payments. A disability claim filed in 2007 was still pending in August, Mrs. Hatcher said.

Mr. Hatcher wound up hospitalized for post-traumatic stress disorder three times. “We noticed there was a change after the first tour, but not as drastic as this time,” Mrs. Hatcher said. “The person comes back a different person, and then you have financial issues on top of it.”

His new employer, a construction company, welcomed him back after each medical absence. Still, weeks off the job meant weeks without pay.

Meanwhile, the mortgage company ratcheted up the pressure. Feeling cornered, the Hatchers signed a forbearance agreement, which significantly increased their monthly payment. “They knew about my husband’s situation,” Mrs. Hatcher said of the mortgage company. “They wouldn’t work with us.”

The Hatchers borrowed from friends and relatives but still came up short. Then two nonprofit groups stepped in to help. One of them, Operation Homefront, negotiated with the lender to keep them in their house.

Mrs. Hatcher, a purchasing agent, tried her best to shield her husband from their financial troubles. “It’s putting a big strain on me,” she admitted. “But only one of us can lose it at a time right now, and it’s his turn.”

The Spurlocks, back in Florida, were not so lucky. Operation Homefront managed to stop foreclosure proceedings, but the couple had to agree to a deed in lieu, turning over their house to the bank. Their debt was forgiven.

The family moved into a rental house and whittled down its credit card debt to $26,000.

“It feels impossible right now to pay off our bills,” said Michelle Spurlock, 28, her voice breaking. “I had to get my mom to bring diapers over. We couldn’t go grocery shopping. As soon as we turn a corner, it’s something else.”

Copyright 2008 The New York Times Company


November 8, 2008

Reality has Strangled Invention

That’s what Philadelphia Inquirer columnist and blogger Dick Polman wrote this week, himself channeling sportswriter Red Smith (writing about an improbable baseball climax).  Yep, that about sums it up.   In a way, every presidential election is historic.  This one, though, is special not just for the ethnicity and personal histories of the candidates (first former POW, first bi-racial American).  It is special because it shows we’ve finally woken up from our daydreamed collective fears of imagined boogeymen destroying ‘the American way of life’ and realized that while we were sleeping, that’s exactly what the tale-spinners who enchanted us with these stories were doing all along.  While they were scaring us with stories of terrorists and gays and the Godless and the immoral they themselves were robbing us blind, proof once again that greed is the worst sin of all.

So now we’ve got hope, and boy does that feel good.

Some reality:

We will not be able to exit Iraq and Afghanistan for some time.  Why?  Because a significant portion of our nation’s income is made in defense.  Like it or not, we are a Warrior Nation.  Don’t believe me?  Watch the movie Why We Fight.

Deficits are going to get bigger.  And, really, given the state of the mess we’re in, they are the least of our worries.   Balanced budgets are for future administrations, ones who have a more stable economy not so highly dependent on consumer spending without supporting industry to pay those consumers living wages.

See, that’s the thing we deluded ourselves into thinking we could get away with – more spending without more income.  Spending without industry. We exported our earning power while keeping our spending power, creating basically a large house of cards (no pun intended).  Now, once again, we know that’s not sustainable nor is it desirable.

Lastly, we won’t see wholesale changes in our healthcare system for some time.  Again, this is a significant source of employment for our country.  What I hope we’ll see is improvement in the insurance rating systems to improve the insurability of many – something modeled on community rating where all employers in an area can secure insurance at the same rates regardless of their individual group experience.  This allows better access with fewer cost barriers for those who are the sickest.

Oh yeah, and those Bush Tax cuts due to end in 2010?  I’d be surprised if they’re not repealed in 2009.


What I hope is that we’ll use this time to develop a more progressive tax system that ensures that those who benefit the most pay in the most, fueling this democratic society properly.

I hope that we’ll turn our attention back to creating and sustaining real industry, rather than exporting industry and importing debt.  Perhaps built on sustainable, domestic energy rather than petroleum?  That alone guarantees our freedom and creates employment infrastructure more than any oil drilling can.

Lastly I hope the boogeymen are finally vanquished to their closets for a while. These are serious times and they demand serious people with serious solutions.   Let’s hope that the purveyors of these scary fairy tales of gay terrorist atheists who hate NASCAR’s 15 minutes are up.

Hope.  What a wonderful feeling.

October 26, 2008

Bait and Switch

One of the things I’ve been doing over the past couple of weeks was talking with others about this whole bailout. Talking with the young man driving the hotel shuttle in Charlottesville VA. Talking with my seat mate on a train. Talking with waiters and campaign workers and colleagues and telephone customer service folks and friends and my doctor and the grocery store clerk. My principal question: What the heck are they going to use our $700 billion for and how will that fix the mess we’re in?

The answers I got:

Somehow pay off people’s mortgages so they can keep their houses (no one was really clear on how this would work or who would benefit)

Buy the mortgage loans and keep collecting them

Buy the foreclosed houses from the market

Let people refinance their bad loans through the Government

Give banks money they can lend out to people and businesses

Not one person could describe how any of that above would fix the economy, and nobody was really sure of any of what they said above. Almost universally, the answers started with “I don’t really know, but I think…” We’re talking about $700 Billion (or, in other terms, 75% of the gross national product of Mexico) of our tax dollars, and we couldn’t say how this would work to help us get out of this Second Great Depression. Do you smell a rat too?

Guess what? None of us were right. We’re now starting to see how this great Bailout (which our children and grandchildren and great grandchildren) will save us:

Banks will use the money to buy other banks whom the Treasury believes are ‘weaker’, using Bailout dollars and getting special tax breaks (meaning paying less in taxes) on top of that. Stronger banks will get stronger, and weaker banks will get absorbed, and all at our Federal Government’s behest and direction.

Who says Republicans can’t be Socialists? (Not to mention hypocrites – progressive tax plans are Socialist but direct ownership and control of our banking system is not. Amazing.)

Now, notice, there’s not a word in there that talks about loans – in fact, what’s coming out that despite telling Congress that they’re insisting that banks use the money to make loans, they’re essentially asking really really nicely with sugar on top and hoping that this is what banks will do. These same banks who lied about so much, who cheated and stole, are being asked rather than told what to do with our taxpayer dollars that they insisted they needed to fix things, and then turning around and enriching themselves even further at our now very direct and very equally distributed expense. In other words, they’re still lying, cheating, greedy bastards. Heck, there’s even more of them begging for our money so they can remain, well, rich. White Collar Gangsters on Welfare.

I say we repeal that law that gives Treasury the $700 Billion, recoup the money given out already, and have Really Smart People who don’t have an interest in their post-election private sector big money jobs develop a bailout that really works

Something like the We Deserve it Dividend. Now, when I outlined that fabulous We Deserve it Dividend program (which can be accomplished for a fraction of the Fatcat Bailout), there was also not one person who could not describe exactly how they would use their dividend, and relate how that would help solve the economic conditions for which the ‘bailout’ was designed. People would pay off their mortgages, pay off their cars, buy a new car, invest, put the money in the bank, save for kids’ college, do home improvements, buy a condo or house (if they didn’t own one) and near the very bottom of the list they would take a small vacation. All of these things would fix problems – of debt, infusing capital, distributing wealth, helping businesses survive. What a great idea! Much better than the “We-have-no-idea-how-this-works-bailout”, don’t you think?

Or, and maybe alongside the Dividend, something like Paul Krugman’s idea of taking those dollars (he didn’t say these specifically) and getting people to work fixing our crumbling bridges and roads, infusing dollars into our National Parks and schools and public transportation and developing new industries so we don’t make money only lending to each other so we can buy big screen TVs. Something not totally unlike FDR’s WPA and Civilian Conservation Corps. Both programs worked – giving people jobs, building infrastructure we still use today (many of our National Park buildings were CCC projects). Many regard the programs as lifesavers and sources of great hopes during our First Great Depression.

What is it they say? Those who don’t remember history are condemned to repeat it? Yep. I’d rather say “Fool me once, shame on you. Fool me twice, shame on me.”

October 10, 2008

What do Jesus and the Stock Market have in Common?

Filed under: Uncategorized — table9 @ 10:18 am
Tags: , , , , ,

1. Both ask for our (blind) faith and complete trust in them.

2. Both ask us to sacrifice and look at things over the long-haul.

3. Both have promised us salvation and future riches.

4. Both will rise again some day. Whether we’re around when that happens is another story.


October 6, 2008

Pin the Tail on the Other Guy

Probably one of the most interesting side-show phenomenon of this whole Economic Meltdown Mess is the intense scrambling by many to pin the blame on somebody else (particularly someone who is on the ‘other side’). Depending on whom you hear from it’s the fault of:

1. President George W. Bush

2. Former President Bill Clinton

3. Wall Street Brokers

4. Alan Greenspan/Henry Brennacke/Henry Paulson

5. Fannie Mae and Freddie Mac

6. Congress

7. Banks

8. Countrywide

9. People who borrowed more than they can afford

10. Real Estate Marketers

11. Liberals

12. Conservatives

and so on…

What’s interesting is that there is no one smoking gun – no Ken Lay for Enron as the Bad Guy, no Michael Milikin for Junk Bonds, no Osama Bin Laden for 9/11 or Saddam Hussein for WMDs. No one whom everyone can drag out into the Village Square and throw tomatoes at because ITS THEIR FAULT WE’RE IN THIS MESS.

This would be especially convenient for those who are running for office, as having a scapegoat would conveniently absolve them of any responsibility.

The truth here is that we are all responsible –

from the person who borrowed way more than they knew somewhere in their heart they could not afford but did so because the bank said it was OK to the bank who lent that person money even though they knew in their heart that this loan would not be paid out because hey the computer models said it was OK and besides prices are going up up up

to the reseller who bundled loans and labeled them improperly even though they knew in their hearts that this was not good because hey, history says that most of these loans won’t go bad to the rating entity who labeled these loans without thoroughly checking them to the purchaser who knew in their hearts these were too complex to verify but did so because they didn’t want to be ‘left behind’

to the Wall street Broker who sold these bundles knowing in their heart they were not as good as they were purported to be to the investor who knew in their hearts that the market was way, way, overheated and based on no real wage growth but bought these securities anyway because they couldn’t resist the profits and hey Moodys said it was OK

to Congress and the President who knew in their hearts that this market buildup was not based on real sustainable growth but allowed it anyway, even to the point that they pressured lenders and purchasers of mortgages (that would be the Banks and Fannie/Freddie) to make those loans and buy them to sustain this ‘growth’ because they and their rich constituents were making money and they desperately did not want the house of cards to fall ‘on their watch’ and because ideologically they believed that more regulation was bad and the market corrects itself always.

The truth is we are all to blame, even those who did not gorge themselves on the feast, because we are all part of the system that created this. Failure to act does not absolve oneself of responsibility to act.

You see, we really can’t say we didn’t know what was going on. At least five years ago we knew, in our hearts, that something was wrong with our economy. When banks offered us loans without reason or rationality. When housing prices when insane. When our paychecks stopped getting bigger but we could still ‘afford’ so much thanks to mortgages and equity loans and credit cards.

The truth is that the “average” American trusted our leadership, the Really Smart People Whom We Elected, to take care of us, to protect us, and to help us live better lives. After all, they saved us in the Great Depression, right? They know best so we should let them Do Their Jobs.

Those Really Smart People Whom We Elected took that trust in their large, comforting hands, wrapped it in the American Flag and the rhetoric of good times, God, the American Dream and Patriotism, and then they promptly screwed us all.

Fool me once, shame on you. Fool me twice, shame on me.

September 30, 2008

The We Deserve it Dividend

Filed under: Uncategorized — table9 @ 12:57 am
Tags: , , , , , , , ,

I *really* wish I could give proper shout out to the OP of this idea, because I think it’s quite good.  Found this on the Daily Show website (of course!).

09.26.08 at 02:42pm

I’m against the $85,000,000, 000.00 bailout of AIG. Instead, I’m in favor of giving $85,000,000, 000 to America in a We Deserve It Dividend. To make the math simple, let’s assume there are 200,000,000 bonafide U.S. Citizens 18+. Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up. So divide 200 million adults 18+ into $85 billon that equals $425,000.00. My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend. Of course, it would NOT be tax-free. So let’s assume a tax rate of 30%. Every individual 18+ has to pay $127,500.00 in taxes. That sends $25,500,000, 000 right back to Uncle Sam. But it means that every adult 18+ has $297,500.00 in their pocket. A husband and wife has $595,000 .00. What would you do with $297,500.00 to $595,000.00 in your family? Pay off your mortgage housing crisis solved. Repay college loans what a great boost to new grads Put away money for college it’ll be there Save in a bank create money to loan to entrepreneurs. Buy a new car create jobs Invest in the market capital drives growth Pay for your parent’s medical insurance health care improves Enable Deadbeat Dads to come clean or else Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces. If we’re going to re-distribute wealth let’s really do it…instead of trickling out a puny $1000.00 ( “vote buy” ) economic incentive that is being proposed by one of our candidates for President. If we’re going to do an $85 billion bailout, let’s bail out every adult U S Citizen 18+! As for AIG liquidate it. Sell off its parts. Let American General go back to being American General. Sell off the real estate. Let the private sector bargain hunters cut it up and clean it up. Here’s my rationale. We deserve it and AIG doesn’t. Sure it’s a crazy idea that can “never work.” But can you imagine the Coast-To-Coast Block Party! How do you spell Economic Boom? I trust my fellow adult Americans to know how to use the $85 Billion We Deserve It Dividend more than the geniuses at AIG or in Washington DC. And remember, The Family plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam. Ahhh…I feel so much better getting that off my chest. Kindest personal regards, A Creative Guy & Citizen of the Republic. Interesting ‘Be kinder than necessary because everyone you meet is fighting some kind of battle.

by smknmom420<!–

September 28, 2008

Ben Stein and I

I surely never thought I’d see the day when I, Liberal Patriot, would ever agree with anything Ben Stein, Arch-Conservative Patriot (yeah, I’m calling him a Patriot just like me…stunning) would write. So his article published in today’s NY Times is something of a surreal moment for me…one where I’d have to say right friggin on, Ben.

It also tells me that the Neo Cons (who are neither Neo or Con) are in more serious trouble than they may have previously thought.

From the article:

IMAGINE, if you will, that a man who had much to do with creating the present credit crisis now says he is the man to fix this giant problem, and that his work is so important that he will need a trillion dollars or so of your money. Then add that this man thinks he is so indispensable that he wants Congress to forbid any judicial or administrative questioning of anything he does with your dollars.

You might think of a latter-day Lenin or Fidel Castro, but you would be far afield. Instead, you should be thinking of Treasury Secretary Henry M. Paulson Jr. and the rapidly disintegrating United States of America, right here and now.

But I am getting ahead of myself. First, I am furious at what the traders, speculators, hedge funds and the government have done to everyone who is saving and investing for retirement and future security. Millions of us did nothing wrong, according to the accepted wisdom of the age. We saved. We put a large part of our money into the stock market, as we were urged to do. Because the market wasn’t at ridiculously high levels, it seemed prudent to invest in broad indexes, foreign indexes and small- and large-cap indexes.

Now we have had the rug pulled out from under us.


Then this:

Almost no one (except Mr. Buffett) saw this coming, at least not on this scale. But let’s get back to the man of the hour. Why didn’t Mr. Paulson, the Treasury secretary, see it? He was once the head of Goldman Sachs, an immense player in the swaps world. Didn’t people at Treasury have a clue? If they didn’t, what was going on in their heads? If they did, why didn’t they do something about it a year ago, when saving the world would have been a lot cheaper?

If Mr. Paulson and Ben S. Bernanke, the chairman of the Federal Reserve, didn’t see this train coming, what else have they missed? What other freight train is barreling down the track at us?

All of this would be bad enough. But by far the most terrifying item I read in my morning paper last week was this: Mr. Paulson demanded that Congress forbid judicial review of his decisions on use of the money in the mortgage bailout. This would amount to an abrogation of the Constitution. Not only would his decisions be sacrosanct and above the law, but so would the actions of his pals in the banking world in connection with this bailout.

The people whose conduct got us into this catastrophe have not only taken our money, hopes and peace of mind, but they apparently also want a trillion or so more dollars to put into their Wall Street Buddy System Fund. This may be the most dangerous attack on the law in my lifetime. What anarchists even dared consider this plan? Thank heaven that minds more devoted to the Constitution on Capitol Hill are questioning this shocking request.

Exactly!  Woo hoo!

Finally, this (read the whole article, it’s really great….and I’m still in shock that I’m calling anything Ben Stein writes ‘great’).

Then there was Mr. Paulson’s insistence that there be no compensation caps for executives of companies being bailed out by the factory workers, the farmers, the schoolteachers and the medical doctors. He told a skeptical Congress on Tuesday that if these caps were put into place, bank executives simply wouldn’t participate in the bailout or sell us suckers their debts. Fine with me. If the banks are in good enough shape so that petulant executives can simply opt out rather than live on a few million a year, maybe we don’t need the bailout at all. Maybe we would be better off if those executives simply bailed out and were replaced by people with more sense and more patriotism.

One final little thought bubbles into my mind: Maybe the bailout should not be of the banks at all, but of homeowners themselves. Maybe if we make the government the buyer of last resort of homes, we will stabilize the markets, stabilize the debt associated with the markets and take the gain out of the credit-default swaps for the speculators. Yes, price would be a huge issue, but so it is for Mr. Paulson’s plan for buying debt from banks.

Why not? We do it for farmers. Why not for the individual homeowner? Oh, right. Because Treasury secretaries don’t know any of those people.

Game, set and match.  Thank you Ben (again, WOW!) for speaking truth.  Now let’s hope America hears it.

September 26, 2008

Want to REALLY Fix the Mortgage Crisis? Fix the Homeowners

Okaaay….so you big Wall Street Fat Cats have screwed the pooch (for lack of a better term) by lying and cheating so you could make huge profits and salaries.  Now that you’ve been caught,  rather than fix it you’re flapping around crying for a ‘bail out’ otherwise the World Will End.

But will the ‘bail out’ fix anything except P & L sheets of big investment funds and banks?  Interestingly, more and more I’m hearing that it won’t, because there’s still the fundamental problems out there:

1. The investment vehicle called a mortgage-backed security was sold as highly safe because Americans have a long history of always paying their mortgages, even when they didn’t pay other debt.   Now that, thanks to irresponsible loan origination (because it made tons in the resale market) and gross breach of fiduciary and shareholder responsibility (lying about the quality of mortgages being resold), there’s a trust issue in the market.

2.  Mortgages are being defaulted on (because people can’t afford the loans primarily and investors are walking away from investment properties they are under-water on) because of irresponsible loan origination (because it made tons in the resale market) and gross breach of fiduciary responsibility.

So how would taking these securities off private companies’ ledgers and putting them on the taxpayer’s fix either of the underlying causes?

Think about it.

OK if you’re thinking:  Uhhh…it won’t, than your right. And you’re not alone.  From the WSJ article linked here:

Congressional Budget Office Director Peter Orszag told lawmakers on Wednesday “that loss of trust has sharply increased the cost of raising capital and rolling over debt, which threatens the solvency of all financial institutions.”

But Robert Shapiro, a former Clinton economic advisor and the chairman of the globalization program at NDN, a Washington think tank, said the program outlined by the administration aimed at the wrong target. Rather than buying assets, he says, the government should provide money to people facing foreclosure, which would prevent the assets from going sour in the first place.

“This crisis will continue until the housing market stabilizes and as increasing foreclosures reduce the value of more mortgage-based securities,” Mr. Shapiro said.

Hmmm…. and more. This plan doesn’t actually reward or help those who responsibly made mortgages and held them, rather than repackaging them and selling them:

Much of the focus has been on mortgage-backed securities, not on the so-called whole loans that reside on the books of smaller lenders.

Cynthia Blankenship, chairman of Washington-based trade group Independent Community Bankers of America, said the government’s $700 billion fund won’t help smaller lenders unless it accepts whole real-estate loans, which bankers say is unlikely to happen, at least in the early stages of the program.

Ms. Blankenship, who runs Bank of the West in Irving, Texas, said struggling community banks in such once-hot but now sagging real-estate markets as Florida, California and Arizona would be eager to unload distressed mortgage or commercial real-estate loans. “It’s vitally important because it allows these banks to have some relief, as well as some big banks,” she said. “It’s just a matter of fairness.”

“We will not benefit from any of the programs that the federal government is proposing,” said J. Downey Bridgwater, CEO of Sterling Bancshares Inc., a Houston-based banking company whose $4.9 billion in assets don’t include any toxic mortgage-backed securities. But Mr. Bridgwater said the government’s efforts will “hopefully ease any concerns depositors may have about financial institutions across the country.”

So, it would seem to me this is a bailout for those who took the risks and lied, instead of even for those who are holding their loans and taking a lump where they have to.  Huh.

Now, seeing as how the underlying problem is that people can’t afford their mortgage payments, undermining both the note itself and the security it’s traded within, wouldn’t it make more sense just to funnel that $700 Trillion to the homeowner themselves in the form of either an increase in real wages or an ‘economic stimulus’ package or something like that?

Yeah, I get that it’s rewarding irresponsibility – I’ve gone on the record as saying that I think if you’re dumb enough to borrow more than you can afford, you should lose your house.  The way I see it though, bailing out large investors (who can afford it) is doing the same thing – rewarding them for irresponsibility and, worse, letting them off the hook for gross breach of trust and fiduciary responsibility.

So, if we’re going to bail out anyone, it should really truly be the little guy with the mortgage they can’t afford. Make them do it through the courts who can be sure the money gets funneled, make the banks refinance the loan to a reasonable amount, do all those things you need to do, but fix the problem. Then those securities will stabilize in value, investors can understand their true worth, and the markets go back to some semblance of normal.

(Come to think of it – this is not far off from how FDR pulled us out of the last Great Depression – by putting money in everyday people’s pockets via the WPA and other work programs and putting stricter regulations on both banks and the stock market…..)

What I see coming through Congress now does none of that.

September 24, 2008

Between a Rock and a Voting Booth

Oh I nearly died laughing when I saw an ad by McCain claiming that Obama would mean Big Government and he wouldn’t. What he heck do you call creating a new oversight to bail out your rich friends and spending to the high heavens in debt the likes of which we’ve never seen in the history of our country?  Government is gigantic and getting bigger.  Really funny.

What’s really interesting is the bind our Congress is in. On the one hand, they REALLY want to adjourn so they can all campaign for the upcoming elections.  On the other hand, they ‘get’ that if they don’t fix this the right way, it could mean their heads.

And there’s lots of tricky questions. Like:

1. What mortgage backed securities will we buy?  There are literally thousands of configurations out there.

2.  For how much?  Remember, we have no idea how much many of the notes packaged are worth since, well, um, the people who wrote the paper lied so much.   Many are worth zero, so why would anyone pay anything for them?  Capital markets won’t.

3. From whom?  Investment Banks (oh yeah, aren’t any now).  Standard banks?  Hedge funds?  Foreign banks? Foreign funds?  Pension funds?

3.  What do we get in exchange (note: Rich guys do NOT want to give up any ownership stake, control, stocks, etc. to the taxpayers).

4.  How would this stop any foreclosures and should it?  What will the taxpayer do with a bunch of bad debt and the properties used to secure the debt?

5.  Where in the Constitution or the current code can we draw power from (hint: Nowhere) in managing the affairs of the private marketplace?

6.  Will this actually calm the markets and allow capital to flow again?  Right now the crux of the problem is that because there’s so much garbage and gross breaches of fiduciary responsibility mixed with lies that nobody trusts anybody.   So nobody’s lending anybody money, and without that most of the markets can’t survive long.

7. How do we spin this to our political advantage so we don’t get fired in 6 weeks from our jobs by the very taxpayers we wish would just shut up and trust us even though we may not have their best interest at heart? (Maybe we should just say 9/11 and that Osama Bin Laden is behind the mortgage meltdown)

The real risk here is that credit won’t free up by this action, meaning we really have thrown good money after bad.   Worse, that if credit doesn’t free up, that this ‘crisis’ really will begin to affect the average American.  Because so much of our capital infrastructure relies on credit – retail stores borrow to buy inventory, sell for a profit, then pay back the retail loan.  Farms borrow against future crop revenue to purchase capital equipment.  Governments borrow against future tax revenue.  Businesses ‘sell’ their future revenue in exchange for cash infusions needed for operations and improvements.  If that system isn’t restored to health, we will see potentially catastrophic job loss as businesses collapse.   Then we really do have the Great Depression all over again.  Except this time with Medicaid and Medicare and Unemployment Insurance and Social Security and food stamps and other safety-net programs which would be accessed by more and more people (all of which are funded by taxpayer dollars, of which there’d be fewer because of the collapse).

For once, I’d rather they not rush this so they can get back to politicking. I believe it may be the only way to really potentially save their own skins.

September 22, 2008

Cash for Trash, or Save the Loan Holder…I mean Home Owner!

I’ve got to agree with Krugman on this one – this ‘rescue’ deal is throwing good taxpayer money after bad. I especially don’t like that the taxpayer doesn’t gain ownership over anything in the deal – just bails out those who should rightfully lose their shirts based on the risks they took. That means both the investors in mortgage-backed securities AND the people who borrowed more than they could pay back.  Krugman writes:

So let’s try to think this through for ourselves. I have a four-step view of the financial crisis:

1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.

2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.

3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.

4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”

The Paulson plan calls for the federal government to buy up $700 billion worth of troubled assets, mainly mortgage-backed securities. How does this resolve the crisis?

Well, it might — might — break the vicious circle of deleveraging, step 4 in my capsule description. Even that isn’t clear: the prices of many assets, not just those the Treasury proposes to buy, are under pressure. And even if the vicious circle is limited, the financial system will still be crippled by inadequate capital.

Or rather, it will be crippled by inadequate capital unless the federal government hugely overpays for the assets it buys, giving financial firms — and their stockholders and executives — a giant windfall at taxpayer expense. Did I mention that I’m not happy with this plan?

The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.

That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)

Another interesting tidbit – now Morgan Stanley and Goldman Sachs, the other two investment banks, get to become holding banks (i.e. banks like BofA and Wachovia). Lucky them! This gives them access to the discount rate that banks borrow from. The bad news for them is that they’re more highly regulated. The good news? They don’t go under.

Now this sweet deal which will be packaged to “Save the Homeowner!” when in reality the market does not give a crap about the homeowner, they care about the loan holder – or the holder of that mortgage backed security that’s tanking. Those holders would be primarily large investors, who would lose all their investment.

But, to get the TAXPAYER (who will not make a dime off this ‘rescue’ in it’s current form ) to buy it, they’ve got to position this in more populist terms = Congress doesn’t want you to lose your house because some mean old bankers made a bad loan to you. So we’re going to give them a pile of your money to go away so you can keep your house. That’s on top of the pile of money they already have. Oh, and your taxes are going to have to go up and that whole healthcare business? Yeah, don’t have any money to fix that, we know we said that before we ‘found’ $700 billion extra but hey, now we really mean it. Until the next time our rich friends need a bailout. Except since we’re already in the largest debt ever thanks to Iraq, this is just going to add to the multi-trillion dollar credit card bill (i.e., the federal deficit) we have going here that your great great grandchildren will pay off.

Thanks, but I’d rather just lose my house, deal with a bad credit report (hey, everyone will have one now!) and go rent and maybe have a shot at decent Veterans benefits and healthcare packages for everyone. Let the big investors take the hit. They did, after all, take the risk.

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