I Pinch.
It has been 4 months since my last post. Whew, I’ve been busy…but have accomplished remarkably little.
From a CNN.com article on Bernie Madoff: “Thus far, federal investigators have identified 1,341 investors in Madoff’s firm, with losses exceeding $13 billion.” Hmm… $13B between 1341 people. That’s $969,000+ each. Ouch.
CNN.com had an article about who would and would not be bailed out by Obama’s give-away to people disinclined to pay their mortgages. In the piece Joe Martinez, who is part of what is wrong with our country at the moment, proclaims that “there’s just no point to stay here,” because the value of his home is “never going to come back.” Prior to that point in the story it is explained that the $600,000 house that Martinez bought 2 years ago had fallen in value to about $450,000. Martinez has a fixed rate mortgage and can still afford the payment but stopped paying a couple of months ago in hopes of being able to have the balance of his loan reduced by the Hope for Homeowners program (this is a program that should be scrapped if he is successful). I posted something about some people in a similar position last march.
After only two years he’s certain that he will never recoup the money he put into the house. Joe, I hope that the bank sues you for the money that you should have been paying on your mortgage and that someone gives you the kick in the balls that you deserve.
Chuck Schumer says that Americans don’t care if the government wastes money as long as they get their cut. He’s right, but that’s probably because forty-something percent don’t pay any taxes so they don’t have any skin in the game.
“A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.”
Peter Schiff says that the result of the “stimulus” being debated by the Senate will be an “Unmitigated Disaster”. I’d say that just about sums it up.
Today I found a NY Times article from 1988 extolling the virtues of the secondary mortgage market and how it allows banks to lend more money with less risk.
Another good one from the WSJ in 2000 about government mandated lending in China — you only need to read the first paragraphs before it starts sounding familiar. Interesting in light of the Fed’s sudden interest in bank lending activity.
So if you have to put together a government stimulus plan (and there really never is a good reason to), how would you do it? The president elect has indicated that he is interested in providing a payroll tax reduction of something like $40 every two weeks for taxpayers with incomes of less that $200,000 (and many people who don’t pay any taxes). Again, if the government is going to try to stimulate the economy by redistributing large quantities of money, this is a much better way to go about it than what Bush & Company came up with last year.
For one thing, it’s really easy to waste an extra $80 a month, and the whole point is to get everyone to spend the money instead of saving or paying down bills like they did with the Bush checks (for the record, I put that money down on a new house). Also, you cut out two expensive chunks last springs stimulus plan: (1) the self-congratulatory letter that the IRS sent out prior to the checks being issued, and (2) the actual costs associated with printing and distributing the checks themselves. Note that those who, like me, had their refunds from the year before electronically deposited, did not actually receive a paper check thus reducing costs somewhat. The estimated cost of the first letter was in the neighborhood of $42 million while the printing, distribution, and administration of the remainder of the program was estimated to be between $300 million and $1 billion.
This is rare praise for the Obama administration, they may have been able to trim a billion dollars out of an $800 billion plan. So I guess the moral of the story is that if you’re going to go ahead and spend the money — and I don’t think that anything is going to stop that train — save on the extras.
Fannie Mae is holding up the sale of IndyMac, demanding that they pay $1billion for bad loans they sold Fannie. Interesting considering that they are both run by the feds. I’d personally like IndyMac to be sold, but that’s mostly because I bought several shares this summer at a price I thought was pretty cheap — just not as cheap as it is now. Its up about 400% since last Friday in anticipation of the sale.
Politicians just can’t stop talking about the audacity of Rick Wagner, Bob Nardelli, Alan Mulally flying to Wasington on private jets to meet with law makers on November 19. There is actually talk of making the sale of those jets a condition of receiving bailout money from the feds. Because I don’t have anything better to do on my lunch hour, I googled Rick Wagner’s salary (of the big three, his company is alleged to be in the most trouble). According to mlive.com in 2007 he received a salary of $1.56M and incentive bonuses of another $1.8M; he also received stock options that, at least in April, were valued at about $11.7M — I’m going to count those as being worth zero now. That totals $3.36M for the year or about $1680/hr based on a 2000 hr work year.
I also looked up the distance from GM’s corporate office to Capital Hill — 526 miles according to Google, or about 9 hours drive one way. So for the round trip flying takes about 14 hours less than driving, or about $23520 if you use the conservative number that I estimated above; it could be even more if you count the stock options. That’s pretty comparable to the $30000 that it supposedly costs to fly the jet.
Plus, we are talking about a bunch of politicians who pissed away, what, 20 times as much money on TARP just a few months ago. That wasn’t acceptable either, but the outrage over the stupid jets is ridiculous and hypocritical.
As for the role of politicians in this whole deal, the line seems to be that bankruptcy is not an option, but it sure seems like the only real solution out there is chapter 11, at least for GM and probably Chrysler (maybe a merger). It would be bad for the many people who would undoubtedly lose their jobs, but you can’t stop that; GM’s own turnaround plan calls for releasing thousands of people anyway. Plus, if they could work out a way to loosen the UAW’s stranglehold on the entire industry (it is union campaign $ that make bankruptcy unfathomable for most politicos), that would be great for the country.
John McCain proposes a spending freeze in tonight’s debate.
“How about a spending freeze on everything but defense, veteran affairs and entitlement programs.”
What else does the federal government spend money on? That’s like 95% of where federal money goes. Oh, I forgot about distressed mortgages.
A very cynical friend and bible scholar sent me this yesterday in an e-mail.
Is this what’s guiding W’s handling of Wall Street? This is his eighth year not his seventh.
“At the end of every seven years you shall grant a release of debts. And this is the form of the release: Every creditor who has lent anything to his neighbor shall release it; he shall not require it of his neighbor or his brother because it is called the LORD’s release.” (Deuteronomy 15:1-2)
