"If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions." (Article)
WC - Fannie Mae and Freddie Mac gathered 388 billion in AAA rated mortgages either by owning or guaranteed. The securities being backed by these mortgages were doing fine as long as real estate appreciated. When they failed, the house came down.
If there wasn’t a Fannie Mae or Freddie Mac or if they had been better regulated, there would be no market for these low rated mortgages and therefore none would have been made.
In 2004 these two organizations had an accounting scandal. Legislation was created (co-sponsored by John McCain) to create regulation that would have forced them to diversify out of these mortgages, yet the Democrats tied it up on committee and it was never voted on in the Senate.
The Democrats had very close ties to the lobby groups representing Freddie and Fannie so much that 3 of the biggest recipients of their money were Chris Dodd (1st), Barack Obama (2nd) and Hillary Clinton (12th) and Sen. Obama has only been in the Senate for 3 years!
“Socializing risk, while privatizing profit.” – Peter Wallison
Tuesday, September 23, 2008
Saturday, September 20, 2008
Is Sen. Obama the “ACORN Candidate”?
Cutting your teeth in Chicago politics is tough. Luckily the young lawyer had help. According to some (Blog) the Senator was introduced to ACORN by a person named Madeleine Talbot who still works for them. Sen. Obama was not only council but a trainer for the organization that has been linked to voter registration fraud. (Article)
Later the Senator served on the board of the Woods Fund of Chicago which gave grants to ACORN. This of course is not unusual except that this organization continues to be the center of investigations that they file bogus voter registration cards for people like Dick Tracy! Although they are “non-partisan” he has stated they were key to his 2004 primary race for Senator.
With many states tightening up ACORN could be the difference for the Senator.
© WithComment.com
Later the Senator served on the board of the Woods Fund of Chicago which gave grants to ACORN. This of course is not unusual except that this organization continues to be the center of investigations that they file bogus voter registration cards for people like Dick Tracy! Although they are “non-partisan” he has stated they were key to his 2004 primary race for Senator.
With many states tightening up ACORN could be the difference for the Senator.
© WithComment.com
Thursday, September 18, 2008
Cash is King!
The recent problems with Lehman Brothers and A.I.G. insurance is a liquidity problems and not a solvency problem. It is estimated that A.I.G. has a trillion dollars in assets and needs 75 billion in cash to weather this financial storm. To put this in perspective, if you have a house worth $100,000 dollars and you would need $7,500 to keep it. This is confusing isn’t it? The reason they can’t get a loan is the same as Lehman Brothers and that is sub prime loans.
Sub prime loans are loans to less qualified individuals and companies, but let’s go back and look at the industry of mortgages.
In the 1980’s a security was developed that was backed by mortgages through Fannie Mae and Freddie Mac corporations. Until recently the U.S. Gov. had said it would back these securities and that was enough.
In the last few years a larger percent of mortgages created were sub prime and also adjustable mortgages. This allowed people to get into homes for no money down and a low interest rate. These rates went up within a few years to a point were these marginal customers couldn’t cover the loan and default. It is estimated that 13.1% of mortgages are sub prime and account for 55% of foreclosures.
Last week the government had to go in and purchase preferred stock of Fannie Mae and Freddie Mac to show foreign investors that they are backed by the government. Lehman Bros. showed a 7 billion dollar write off from its residential and commercial real estate leading to its cash crunch and no buyers.
Now A.I.G. which insured those mortgages against failure is being downgraded on its credit rating which is forcing them to cover $14.5 billion in obligations and potentially another $5.4 billion in terminated contracts because of the downgrade.
They and others have enough assets and are not insolvent but just have no cash and further more these are accounting losses not real losses. They have not sold these and taken a real loss, however, regulations force them to reflect real value and this is the loss being shown.
© WithComment.com
Sub prime loans are loans to less qualified individuals and companies, but let’s go back and look at the industry of mortgages.
In the 1980’s a security was developed that was backed by mortgages through Fannie Mae and Freddie Mac corporations. Until recently the U.S. Gov. had said it would back these securities and that was enough.
In the last few years a larger percent of mortgages created were sub prime and also adjustable mortgages. This allowed people to get into homes for no money down and a low interest rate. These rates went up within a few years to a point were these marginal customers couldn’t cover the loan and default. It is estimated that 13.1% of mortgages are sub prime and account for 55% of foreclosures.
Last week the government had to go in and purchase preferred stock of Fannie Mae and Freddie Mac to show foreign investors that they are backed by the government. Lehman Bros. showed a 7 billion dollar write off from its residential and commercial real estate leading to its cash crunch and no buyers.
Now A.I.G. which insured those mortgages against failure is being downgraded on its credit rating which is forcing them to cover $14.5 billion in obligations and potentially another $5.4 billion in terminated contracts because of the downgrade.
They and others have enough assets and are not insolvent but just have no cash and further more these are accounting losses not real losses. They have not sold these and taken a real loss, however, regulations force them to reflect real value and this is the loss being shown.
© WithComment.com
Thursday, July 24, 2008
A brief history of the economy
The cyclical nature of the economy has always existed, although we have many people still alive that remember the last great depression over the next 20 years there will be very few that have a good memory of what a real economic disaster is and I fear people will always believe they are living in the worst of times.
I hope you already know some of this but I have to make sure we are on the same page. There are two major areas in economics being macro and micro. Macro is the study of the larger picture on a country or world scale, micro is the study at the transaction level or between people. This paper will focus on the macro economy.
At any given point in time there is a local, regional, national and world economy. They interact but are not always in the same condition as far as growth, retraction, inflation or deflation. If you live in a farming community and have a massive flood your town could be devastated for years. If a major employer closes in a smaller town, it may destroy that town forever. However, that doesn’t mean that even the state you are in is suffering the same. Even if all of these areas are in a recession that does not mean the whole country is in one, and the federal government or Federal Reserve should not act as such. The last “recession” was 8 months long from March to November 2001, however, because of the sluggishness of the economy it did not fully recover until 1st quarter 2003.
This is why no single solution will solve everyone’s problems and why others will use this to their political advantage by saying leaders don’t feel their pain or act as if one thing can fix all. So what is a President or Congressional body to do?
First you create an atmosphere of equal opportunity, I stress here opportunity not equity, no one has figured that one out yet. You do this by creating a consistent educational system for the citizens, a tax code that is both family and business friendly, and an infrastructure of roads, sewage, electricity and now broadband internet services that promote business and freedom of movement. In larger cities freedom of movement include mass transit and in small communities this is a well maintained freeway and street system.
Second, you have laws that protect individual rights, ensure that there is equal opportunity to resources giving no group an advantage over another through political, religious or racial differences. These laws would have to be written by officials elected by the population of the area or country and a court system that is willing to strike down laws that are inconsistent with the constitution but not create or see new rights that are not either laid out in the constitution or by legislation.
Finally, you need a sound monetary system that keeps inflation in check. Inflation rips away at the value of products and services. In a longer period wages can catch up with inflation, however, during the time of turmoil, wealth is destroyed and creates unstable social and thus political atmosphere that can lead to rash decisions or allow groups like the Nazi’s or Communists to come to power.
Specifically:
The Feds will reduce the interest rate on money in order to stimulate borrowing for business and since the “Great Depression” the government will increase its spending to make sure that someone is moving the economy along.
The current economic troubles are similar to the 1970’s in that we have a spike in fuel prices. In the 1970’s it was OPEC flexing its muscles buy reducing its output of oil. However, the killer was Pres. Nixon’s freeze on wages and prices! Yes, there was a federal freeze on pricing and thus the market reacted the way it always does to a limit on prices, there will be a limit on quantity supplied. This created the long gas lines.
Under Pres. Carter it happened again (I remember the lines for this one) and we had the double whammy of inflation and higher then normal unemployment and price controls leading to the recession of 1980. The raising of rates by the Feds broke inflation and has been policy ever since.
However, because we are having another spike in oil prices an increase in Fed rates would have the opposite effect and close down the economy. The rate raise would tighten money and even small increases of a few years ago lead to the “sub-prime” mortgage situation of today. Some Banks may fail or get bought out. S&L’s of the 1980’s were completely wiped out. Credit card companies will have massive right offs, killing their stock and reduce taxable income, thus taxes either paid by them or through dividends paid out.
What to do?
We don’t have to go much farther then the constitution which states that its purpose is to “establish justice, insure domestic tranquility, provide for the common defence, promote the general welfare and secure the blessings of liberty…” Tranquility & Welfare gives the federal government control over commerce, Justice and Defence is our boarders and Welfare also means health (of the economy), and the family unit.
First, much like the cover of, “The Hitchhikers’ guide to the galaxy”, “don’t panic.” Second, don’t have the federal government spend anymore, just change were it is spending. Along with giving money out through extended unemployment benefits or expanded welfare programs, the government should expand college education. By having more people enter the college ranks it will delay their need for work and in a couple of years they will be ready for a better job with a higher education. The flip side is to expand vocational schools.
We still need money available to borrowers by having lower Fed Rates, and I would exempt the first $10,000.00 of interest and dividends earned from the tax return. This would help seniors on fixed incomes and give investments with lower interest rates a leg up on its effective tax rate and keep money in banks to lend out.
Through the tax code I would give bonus deductions on expansion of business equipment and other improvements that include job growth. Increase credits for lower income filers who put money into their retirement plans. Expansion of child tax credits for higher income people, currently limits begin at 100K, I would increase to 200K.
Make transfer of wealth from parents to children much easier by raising limits on yearly amounts and erasing the death tax. Families need to take care of each other. Ease the ability of parents to keep children on their health insurance to 25 even if they are not in college.
Security of the boarder between the U.S. and Mexico to limit drugs and crossing of people shrinking the work force available and have more jobs available for our citizens. A better migrant work program needs to happen. Then during times of strong growth and a need for workers we can increase the number that can come in for short periods of time. This needs a double edge with increased ability to check Id’s and a more standard Id system for none citizens.
Much like your home you want secure doors, the ability to take care of your children, and save without it costing you in the long run.
I hope you already know some of this but I have to make sure we are on the same page. There are two major areas in economics being macro and micro. Macro is the study of the larger picture on a country or world scale, micro is the study at the transaction level or between people. This paper will focus on the macro economy.
At any given point in time there is a local, regional, national and world economy. They interact but are not always in the same condition as far as growth, retraction, inflation or deflation. If you live in a farming community and have a massive flood your town could be devastated for years. If a major employer closes in a smaller town, it may destroy that town forever. However, that doesn’t mean that even the state you are in is suffering the same. Even if all of these areas are in a recession that does not mean the whole country is in one, and the federal government or Federal Reserve should not act as such. The last “recession” was 8 months long from March to November 2001, however, because of the sluggishness of the economy it did not fully recover until 1st quarter 2003.
This is why no single solution will solve everyone’s problems and why others will use this to their political advantage by saying leaders don’t feel their pain or act as if one thing can fix all. So what is a President or Congressional body to do?
First you create an atmosphere of equal opportunity, I stress here opportunity not equity, no one has figured that one out yet. You do this by creating a consistent educational system for the citizens, a tax code that is both family and business friendly, and an infrastructure of roads, sewage, electricity and now broadband internet services that promote business and freedom of movement. In larger cities freedom of movement include mass transit and in small communities this is a well maintained freeway and street system.
Second, you have laws that protect individual rights, ensure that there is equal opportunity to resources giving no group an advantage over another through political, religious or racial differences. These laws would have to be written by officials elected by the population of the area or country and a court system that is willing to strike down laws that are inconsistent with the constitution but not create or see new rights that are not either laid out in the constitution or by legislation.
Finally, you need a sound monetary system that keeps inflation in check. Inflation rips away at the value of products and services. In a longer period wages can catch up with inflation, however, during the time of turmoil, wealth is destroyed and creates unstable social and thus political atmosphere that can lead to rash decisions or allow groups like the Nazi’s or Communists to come to power.
Specifically:
The Feds will reduce the interest rate on money in order to stimulate borrowing for business and since the “Great Depression” the government will increase its spending to make sure that someone is moving the economy along.
The current economic troubles are similar to the 1970’s in that we have a spike in fuel prices. In the 1970’s it was OPEC flexing its muscles buy reducing its output of oil. However, the killer was Pres. Nixon’s freeze on wages and prices! Yes, there was a federal freeze on pricing and thus the market reacted the way it always does to a limit on prices, there will be a limit on quantity supplied. This created the long gas lines.
Under Pres. Carter it happened again (I remember the lines for this one) and we had the double whammy of inflation and higher then normal unemployment and price controls leading to the recession of 1980. The raising of rates by the Feds broke inflation and has been policy ever since.
However, because we are having another spike in oil prices an increase in Fed rates would have the opposite effect and close down the economy. The rate raise would tighten money and even small increases of a few years ago lead to the “sub-prime” mortgage situation of today. Some Banks may fail or get bought out. S&L’s of the 1980’s were completely wiped out. Credit card companies will have massive right offs, killing their stock and reduce taxable income, thus taxes either paid by them or through dividends paid out.
What to do?
We don’t have to go much farther then the constitution which states that its purpose is to “establish justice, insure domestic tranquility, provide for the common defence, promote the general welfare and secure the blessings of liberty…” Tranquility & Welfare gives the federal government control over commerce, Justice and Defence is our boarders and Welfare also means health (of the economy), and the family unit.
First, much like the cover of, “The Hitchhikers’ guide to the galaxy”, “don’t panic.” Second, don’t have the federal government spend anymore, just change were it is spending. Along with giving money out through extended unemployment benefits or expanded welfare programs, the government should expand college education. By having more people enter the college ranks it will delay their need for work and in a couple of years they will be ready for a better job with a higher education. The flip side is to expand vocational schools.
We still need money available to borrowers by having lower Fed Rates, and I would exempt the first $10,000.00 of interest and dividends earned from the tax return. This would help seniors on fixed incomes and give investments with lower interest rates a leg up on its effective tax rate and keep money in banks to lend out.
Through the tax code I would give bonus deductions on expansion of business equipment and other improvements that include job growth. Increase credits for lower income filers who put money into their retirement plans. Expansion of child tax credits for higher income people, currently limits begin at 100K, I would increase to 200K.
Make transfer of wealth from parents to children much easier by raising limits on yearly amounts and erasing the death tax. Families need to take care of each other. Ease the ability of parents to keep children on their health insurance to 25 even if they are not in college.
Security of the boarder between the U.S. and Mexico to limit drugs and crossing of people shrinking the work force available and have more jobs available for our citizens. A better migrant work program needs to happen. Then during times of strong growth and a need for workers we can increase the number that can come in for short periods of time. This needs a double edge with increased ability to check Id’s and a more standard Id system for none citizens.
Much like your home you want secure doors, the ability to take care of your children, and save without it costing you in the long run.
Saturday, February 23, 2008
If I have plagairized you.....
If I have plagairized you I am sorry, every word I have written has been written before. No two words can I put together that someone eles hasn't done already. I doubt I have had an origianl thought, with 6 billion people on Earth, most Ideas have been worked out. If I say, "The sky is blue" do I have to credit "theskyisblue.co.uk" website? Or do I hae to give credit to Bruce Willis in "The Last Boy Scout" because he said,"The sky is blue, water is wet, women have secrets." Or the writer of the script?
It is very confusing to know what has been said and what hasen't. No candidate speaks without a writer so it is they who need to reference source materials and not the candidate. Obama, may have said the words, but it is one of his writers who stole the phrasing.
- C. Mendelsohn
It is very confusing to know what has been said and what hasen't. No candidate speaks without a writer so it is they who need to reference source materials and not the candidate. Obama, may have said the words, but it is one of his writers who stole the phrasing.
- C. Mendelsohn
Thursday, October 11, 2007
Review: "Collapse of the American Empire" by Kirkpatrick Sale
© WithComment.com 2007 (Article) Link
This article is a link from The Middlebury Institute about why empires fail. Of course the premise has to be accepted that the United States is an empire. Although the term, “lone superpower” has been used since the mid 90’s buy both Democrats and Republicans, empire it is not.
This article went after “neocons” in D.C. as the power using the U.S.as an empire with the fall of the Soviet Union. However, a “Google” search found only leftist articles using the term “empire” against the neocons. I found no articles written by the right that advocates an American empire, and the only interesting thing I found was an article by a self claimed “associate” of the neocons, that indicated the original neocons were former liberals who became disenchanted with the excesses of the Democrat party of the 60’s and 70’s, and still saw a need to stand strong against the Soviets and be pro-Israel.
This is probably why the liberals are so obsessed with neocons, they were once one of them. Much like the guy who stops smoking and becomes overly anti-smoking, current smokers hate them.
Kirkpatrick’s proof of the fall of the “American Empire” is as follows:
This article is a link from The Middlebury Institute about why empires fail. Of course the premise has to be accepted that the United States is an empire. Although the term, “lone superpower” has been used since the mid 90’s buy both Democrats and Republicans, empire it is not.
This article went after “neocons” in D.C. as the power using the U.S.as an empire with the fall of the Soviet Union. However, a “Google” search found only leftist articles using the term “empire” against the neocons. I found no articles written by the right that advocates an American empire, and the only interesting thing I found was an article by a self claimed “associate” of the neocons, that indicated the original neocons were former liberals who became disenchanted with the excesses of the Democrat party of the 60’s and 70’s, and still saw a need to stand strong against the Soviets and be pro-Israel.
This is probably why the liberals are so obsessed with neocons, they were once one of them. Much like the guy who stops smoking and becomes overly anti-smoking, current smokers hate them.
Kirkpatrick’s proof of the fall of the “American Empire” is as follows:
Environmental degradation – Destruction of land and water by over use & climate change.
- The examples given by Kirkpatrick such as erosion of topsoils, over fishing and depletion of oil & minerals, are happening mostly in other parts of the world and not in our “empire”. Topsoil is eroding but we know were it is. At the end of the Mississippi river. We can always dredge it up and bring it back north. It just costs too much right now. The quote Kirkpatrick uses is, "ecological footprint is already too large for the planet to sustain, and it is getting larger." Uses the word, “planet” I think Europe & China might argue that they are part of our “Empire”
Economic meltdown – Excessive resource exploitation, colonizing.
- Although the numbers the author uses are correct and disturbing, he has nothing to compare them too. What was Rome’s percent of manufacturing? What was their percent of GDP used for military or trade deficit? Why is the manufacture worker so cherished by the left but the owner of that company is such a villain? Our economy is not fragile, it is the continued over spending of our government and our own selves that needs to change.
Overextended military – Because of colonizing they are forced in more and more engagements.
- We don’t colonize! Iraq is not and never will be a U.S. colony. Is Germany a colony of the U.S.? We have troops there since 1945! Every soldier in Iraq has over $17,000 worth of equipment on them. Democrats can help the military by just supporting the President and thus sending a signal to our enemies that they have no choice but to deal with us.
Finally, Domestic dissent and upheaval – Collapsing from within and attacked from without.
- Well overextending the military is to fight the attack from outside, and it is mostly the liberals that are trying to destroy us from within, with its persistent demand for increased social programs, welfare, Medicaid, Medicare, Universal healthcare, making every minority group equal to the majority of the country. This leads to the bad economics point out previousely. Also other social issues such that homosexual marriage is an important issue for everyone, populations of 5% (Muslims & Jewish religions) need to have equal stance in our society like schools and city hall lawns, like the majority.
This is how you destroy from within. It use to be in America you could live your life they way you wanted as long as you left the rest of us out of it. Now you have to stick my nose in it too. Yuk!
Chris Mendelsohn
Wednesday, October 3, 2007
Government Obligation and future costs.
© WithComment.com 2007
Elected officials believe they have their constituent’s best interest in mind when they vote on a program or a project that will spend some money now and in the future. Programs like Social Security, Medicaid, Medicare and Welfare have had both positive and negative influences on our society. However, all of these programs had a current expense and a projected expense when they were first created and all of them, without exception, have been wrong in its projection of future expenses. Not just wrong, but devastatingly wrong by factors of 10.
Thirty years ago the City of Urbandale entered a contract with the Urbandale School District to open and operate an indoor pool on the school property. The operation costs were split out 60% for the city and 40% for the school. The lease was for 50 years and apparently no one did a good job at projecting costs out that far ahead or envisioning the need for massive repairs down the road. Something I might add that every home owner knows they will need to have done when they buy a home and that is why we ask about the furnace, roof and water heater.
Now 30 years later the building needs 2.8 million in repairs. The school can only pay for it out of its general funds and so voted to support the park and rec.’s suggestion to close the pool and void the contract.
The school district will still be on the hook for 40% of the cost to close and demolish the building and apparently that number is unknown at this time, although usually the costs of all project outcomes are calculated so that the managers involved can determine the best course of action, in this case it was not.
It is becoming more and more clear that any project or program that any politician, either elected or appointed, wants to pursue must not only have the cost of today and 10 years from now, but the cost of renovations and population growth and changes decades down the line, otherwise we are just sticking our kids and grandkids with a bill that can not be paid.
Follow up: If the pool is closed the school district will get out of the lease. Why not just ask the city to renegotiate the lease? One that is user based and not a set percentage. Then the city can raise rates on public swimming to make up difference, have a vote on a bond for the repairs & improvements and for god's sake allow the school to have enough money in to teach our kids to read, write, solve math & learn how to learn.
Follow up to the Follow up: The city council punted on Sept. 25th and will now hold open meetings to get the opinion Urbandale's citizens on the issue. Dates TBA.
Chris Mendelsohn
Elected officials believe they have their constituent’s best interest in mind when they vote on a program or a project that will spend some money now and in the future. Programs like Social Security, Medicaid, Medicare and Welfare have had both positive and negative influences on our society. However, all of these programs had a current expense and a projected expense when they were first created and all of them, without exception, have been wrong in its projection of future expenses. Not just wrong, but devastatingly wrong by factors of 10.
Thirty years ago the City of Urbandale entered a contract with the Urbandale School District to open and operate an indoor pool on the school property. The operation costs were split out 60% for the city and 40% for the school. The lease was for 50 years and apparently no one did a good job at projecting costs out that far ahead or envisioning the need for massive repairs down the road. Something I might add that every home owner knows they will need to have done when they buy a home and that is why we ask about the furnace, roof and water heater.
Now 30 years later the building needs 2.8 million in repairs. The school can only pay for it out of its general funds and so voted to support the park and rec.’s suggestion to close the pool and void the contract.
The school district will still be on the hook for 40% of the cost to close and demolish the building and apparently that number is unknown at this time, although usually the costs of all project outcomes are calculated so that the managers involved can determine the best course of action, in this case it was not.
It is becoming more and more clear that any project or program that any politician, either elected or appointed, wants to pursue must not only have the cost of today and 10 years from now, but the cost of renovations and population growth and changes decades down the line, otherwise we are just sticking our kids and grandkids with a bill that can not be paid.
Follow up: If the pool is closed the school district will get out of the lease. Why not just ask the city to renegotiate the lease? One that is user based and not a set percentage. Then the city can raise rates on public swimming to make up difference, have a vote on a bond for the repairs & improvements and for god's sake allow the school to have enough money in to teach our kids to read, write, solve math & learn how to learn.
Follow up to the Follow up: The city council punted on Sept. 25th and will now hold open meetings to get the opinion Urbandale's citizens on the issue. Dates TBA.
Chris Mendelsohn
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