This last week I was among some peers where one woman was telling us a story about her purchase of a plasma television, that after two years, had ceased to function. She called the manufacturer who pointed her to two local repair companies.
The first came out and explained to her that the television's life and usefulness had ended. The power supply and other components were listed as bad. She was told a replacement (at her cost of course!) was the only solution. Frustrated, but resigned, she decided to look at a new one from Best Buy...who would of course pick up and remove the old television when they delivered the new set.
Luckily, she had second thoughts and asked the second repair company to come have a look. It seems that only a single, small part would need to be replaced and the television was functioning again. One-to-two thousand dollars of their family's hard earned money was saved.
Now the take away of this story is simple. The person who purports to be the expert in fixing your broken product may be anything but and listening to their advice is going to be costly.
Let's analyze the situation of our economy and the steps being taken by the Obama white house, Geithner, Barnacke and the rest of the government "experts".
They claim that certain banks, insurance companies or financial institutions are "too big to fail". They state that the inter-connectedness of this institution is such that if it goes under it will pull down one, more or even many along with it. Now understand the institution became so large because of lack of oversight (either from the beginning or removed by the government) and tried to expand by investing either directly in the so-called exotic financial instruments (credit default swaps and mortgage backed securities) or in companies that did. Investments like this involve risk and if the products were successful the financial institution and it's bond holders and investors reaped a return but nothing was given to the general taxpayer.
The problem is that risk is risk. If you are willing to place your money into such instruments there is no guarantee that your money is safe. The swaps and mortgage securities listed above are NOT guaranteed by the government or anyone else. It is an open-ended bet with no net to catch you. Yet strangely enough we are being told that yes...the government is going to cover those failed bets with taxpayer money. The credit default swaps created by companies like AIG have resulted in losses in the billions and perhaps trillions of dollars. In each case two companies arranged a sort of insurance to cover the value of mortgage backed securities with one or both being undercapitalized (because of no legal oversight by the government) for the risk. That risk became apparent, the companies floundered and the federal government rushes in with taxpayer dollars. They are not being held responsible for that risk. WE ARE. Ridiculous.
What needs to happen is a complete overhaul. First, financial "experts" like Barnacke and Geithner need to be fired. Anyone who purports that there is a need for exotic financial tools like credit default swaps and mortgage backed securities needs to be kicked out. These have never been products that help "main street" and we should not be held accountable for them. The mistake has been and continues to be that banks should be allowed to make extra profits beyond the services they supply to their direct customers via business and retail loans. Intertwining these other unregulated instruments has resulted in a cancer that holds all of us hostage.
So what is the solution? Not one penny more should be given to any institution to cover credit default swaps or mortgage backed securities. For companies like AIG they should be placed into receivership, sell off the valuable and stable divisions and close down the groups that trade in the exotics. Those who put money into them...have lost it. They. Them. Those who took the risk and lost. Any financial institutions that have illiquid mortgage backed securities should be forced to mark them down. Congress and the White House should make it immediately illegal for regular banks to delve into any exotic financial instruments. If companies wish to do business with such tools they can run as separate corporations but with the big monikers on each document that reminds investors that these are not guaranteed and they accept full responsibility for the gains and losses reaped from them.
You see the point is the "professionals" who are telling us we must keep these companies afloat by pumping trillions of taxpayer dollars are simply wrong. Paulsen, Geithner, Barnacke and their respective administrations simply do not have a clue. Putting us trillions of dollars in debt and using your and my tax dollars to absolve the failed risk incurred by other investors and companies who wanted to make huge profits off of the unregulated, non-guaranteed financial instruments is ludicrous.
Sunday, March 29, 2009
Tuesday, February 10, 2009
Just Like Bush, Obama Hasn’t A Clue (Part One)
First…let’s analyze the TARP or Troubled Asset Relief Plan. $350 Billion dollars was spent after quickly being pushed through Congress by senators and representatives who turned a deaf ear to the overwhelming outcry from their constituents to say “NO” to the bailout. “The sky is falling,” Paulson claimed and without a single outside economist brought before Congress they passed the bill. No real accountability and no guarantees from the banks.
The result? Banks that took the money and spent it on dividends, acquisitions and hoarding of this free money to shore up their ledgers. Did they lend any credible amount to you or your businesses? Obama, his cabinet and Congress are quick complain about the results…but THEY are directly responsible for this mess and the lack of resolution. Too quickly we forget that Obama was a leading Senator pushing for the quick passage of the TARP instead of calling for more review and input by outside economists and experts. Have you heard any apologies? Anyone from the White House or Congress admitting they were wrong? No.
The problem is bailing out the banks in the first place. The concept that you take borrowed money (that taxpayers will have to pay for with interest eventually) and give that money to banks to loan back to individuals and businesses for a profit is ridiculous. The taxpayer has to pay once with interest for a bank to make a profit; twice if they acquire a loan from that bank.
What do you, the taxpayer receive in return? Obama and Co. argue that we are saving the economy and jobs. No, we are supporting free market banks and companies that made poor choices in unregulated mortgage backed securities and credit default swaps. The banks help inflate the perceived value of houses and created the real estate bubble that crashed. They are using OUR money to give banks continued profits off the backs of the taxpayer. This needs to end.
So the argument would be…but we NEED banks. No. Not the banks in their current form. If the banks won’t lend that original $350 Billion then the Fed should refuse any more low interest loans to those institutions and call in any loans they do have with them. They should immediately deploy legions of regulators to crawl through their books and accounting policies. The government should also start lending money to businesses…especially small businesses through the Small Business Administration or other avenues directly. Let the banks know that if they are going to stop lending we will not continue to prop them up but will inject taxpayer funds directly into the economy instead of simply giving banks more profit.
The TARP was never about helping Americans or America. It has been about helping banks continue their unregulated practices, customer interest rate and fee gouging and huge profits. This must end.
The result? Banks that took the money and spent it on dividends, acquisitions and hoarding of this free money to shore up their ledgers. Did they lend any credible amount to you or your businesses? Obama, his cabinet and Congress are quick complain about the results…but THEY are directly responsible for this mess and the lack of resolution. Too quickly we forget that Obama was a leading Senator pushing for the quick passage of the TARP instead of calling for more review and input by outside economists and experts. Have you heard any apologies? Anyone from the White House or Congress admitting they were wrong? No.
The problem is bailing out the banks in the first place. The concept that you take borrowed money (that taxpayers will have to pay for with interest eventually) and give that money to banks to loan back to individuals and businesses for a profit is ridiculous. The taxpayer has to pay once with interest for a bank to make a profit; twice if they acquire a loan from that bank.
What do you, the taxpayer receive in return? Obama and Co. argue that we are saving the economy and jobs. No, we are supporting free market banks and companies that made poor choices in unregulated mortgage backed securities and credit default swaps. The banks help inflate the perceived value of houses and created the real estate bubble that crashed. They are using OUR money to give banks continued profits off the backs of the taxpayer. This needs to end.
So the argument would be…but we NEED banks. No. Not the banks in their current form. If the banks won’t lend that original $350 Billion then the Fed should refuse any more low interest loans to those institutions and call in any loans they do have with them. They should immediately deploy legions of regulators to crawl through their books and accounting policies. The government should also start lending money to businesses…especially small businesses through the Small Business Administration or other avenues directly. Let the banks know that if they are going to stop lending we will not continue to prop them up but will inject taxpayer funds directly into the economy instead of simply giving banks more profit.
The TARP was never about helping Americans or America. It has been about helping banks continue their unregulated practices, customer interest rate and fee gouging and huge profits. This must end.
Wednesday, October 29, 2008
Do NOT Vote For Jackie Speier on November 4th
Representative Jackie Speier voted Yes twice on the $700 billion bailout against the wishes of her constituents. She fell in line behind Nancy Pelosi...one of first purveyors of support for President Bush and Henry Paulson instead of standing up for her district.
Weeks ago we watched as Paulson and Barnacke said "immediate action was necessary" and "that this was the only solution" to the nation's credit freeze. We taxpayers by the thousands contacted our representatives and said NO! on the this plan. "Let's find another" we asked. Yet Congress and our Representative Speier ignored us. We requested for Congress to interview other economists...there were over two hundred who said this was a bad idea. Other cabinet members from past presidencies said this was the wrong way. Yet not one was asked to go before Congress. Only Paulson and Bernanke.
These Congressional Representatives did not "represent" us at all. They finally passed a bill with $140 billion extra in earmarks ("pork") and claimed that there was nothing else they could do. They said they were forced to act; that it was this or nothing.
It was a lie.
Jackie Speier represents a Congress that really has no handle on reality. We are already running with a tremendous deficit. We are borrowing from China and other countries in order to fund the continuous bailouts ongoing. Think about that a moment. We didn't have the money to begin with and Speier and Congress agreed to give $700 billion to Henry Paulson to help "increase lending confidence" and "inject liquidity" into the market. They passed a bill that does not require banks and financial institutions to begin lending...in fact more than one bank is hoping to use your money to buy other banks to get even larger! Remember the logic? "We cannot afford for these institutions to fail" yet now we are allowing them to use our money to get even bigger? The latest news is that the life insurance companies and GM are lining up to get some of this money as well, with the latter wanting to use that money to buy Chrysler! This rush to pass the bill was to help with credit; not support two companies which are doing poorly and have no guarantee of survival under their poor management. Are you angry enough yet?
That is the other issue Congress blew through. You see, when they came up with this bailout, injection, whatever you want to call it, they did not require any real change by any of these companies. These companies have faltered through mismanagement, greed, problematic financial vehicles and will take a government handout. A handout from YOU the U.S. citizens. The banks will take it to provide loans back to you...on which they will charge interest. We bail them out...which costs you money and they provide loans which cost you more money. At the same time the companies can continue to use their derivatives, horde their money, provide poor service to the consumer at will. Right now you see banks tightening their lending standards, lowering your limits while raising your rates and fees even more so you are punished when you miss a payment deadline or carry a high balance...but no similar penalties to the institutions causing the problem.
Right now our bailout is at over a trillion dollars...I have heard almost three trillion. Remember...$700 billion...the $85 billion to AIG...money to support the takeover of Bear Stearns...and it continues. Congress has no perspective on the value of this money. It is YOUR money...being given to companies that are not trustworthy and are not being made to answer. Congress is not rushing to punish the greed or pass regulations...it won't happen.
To return to the focus of this BLOG however, I encourage you to vote for a candidate other than Jackie Speier in the 12th district in California. We need our Representative to vote the will of the people not simply the party or their own interests. We need them to quit making excuses about the vote and take responsibility. This current election is not just about Obama or McCain. It is about our representation in Congress or the lack thereof. You know you have been disappointed with our lawmakers. Act! Show your displeasure with your vote next week!
Weeks ago we watched as Paulson and Barnacke said "immediate action was necessary" and "that this was the only solution" to the nation's credit freeze. We taxpayers by the thousands contacted our representatives and said NO! on the this plan. "Let's find another" we asked. Yet Congress and our Representative Speier ignored us. We requested for Congress to interview other economists...there were over two hundred who said this was a bad idea. Other cabinet members from past presidencies said this was the wrong way. Yet not one was asked to go before Congress. Only Paulson and Bernanke.
These Congressional Representatives did not "represent" us at all. They finally passed a bill with $140 billion extra in earmarks ("pork") and claimed that there was nothing else they could do. They said they were forced to act; that it was this or nothing.
It was a lie.
Jackie Speier represents a Congress that really has no handle on reality. We are already running with a tremendous deficit. We are borrowing from China and other countries in order to fund the continuous bailouts ongoing. Think about that a moment. We didn't have the money to begin with and Speier and Congress agreed to give $700 billion to Henry Paulson to help "increase lending confidence" and "inject liquidity" into the market. They passed a bill that does not require banks and financial institutions to begin lending...in fact more than one bank is hoping to use your money to buy other banks to get even larger! Remember the logic? "We cannot afford for these institutions to fail" yet now we are allowing them to use our money to get even bigger? The latest news is that the life insurance companies and GM are lining up to get some of this money as well, with the latter wanting to use that money to buy Chrysler! This rush to pass the bill was to help with credit; not support two companies which are doing poorly and have no guarantee of survival under their poor management. Are you angry enough yet?
That is the other issue Congress blew through. You see, when they came up with this bailout, injection, whatever you want to call it, they did not require any real change by any of these companies. These companies have faltered through mismanagement, greed, problematic financial vehicles and will take a government handout. A handout from YOU the U.S. citizens. The banks will take it to provide loans back to you...on which they will charge interest. We bail them out...which costs you money and they provide loans which cost you more money. At the same time the companies can continue to use their derivatives, horde their money, provide poor service to the consumer at will. Right now you see banks tightening their lending standards, lowering your limits while raising your rates and fees even more so you are punished when you miss a payment deadline or carry a high balance...but no similar penalties to the institutions causing the problem.
Right now our bailout is at over a trillion dollars...I have heard almost three trillion. Remember...$700 billion...the $85 billion to AIG...money to support the takeover of Bear Stearns...and it continues. Congress has no perspective on the value of this money. It is YOUR money...being given to companies that are not trustworthy and are not being made to answer. Congress is not rushing to punish the greed or pass regulations...it won't happen.
To return to the focus of this BLOG however, I encourage you to vote for a candidate other than Jackie Speier in the 12th district in California. We need our Representative to vote the will of the people not simply the party or their own interests. We need them to quit making excuses about the vote and take responsibility. This current election is not just about Obama or McCain. It is about our representation in Congress or the lack thereof. You know you have been disappointed with our lawmakers. Act! Show your displeasure with your vote next week!
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