Showing posts with label $700 Billion Bailout. Show all posts
Showing posts with label $700 Billion Bailout. Show all posts
Wednesday, August 25, 2010
Wednesday, March 11, 2009
Update Mid-March 2009
If anyone was wondering, I haven't gone away!
I've been catching up on "business" and dealing with issues out there in the "real" world.
I also wanted to give the economy and our new congress and President some time to allow the "dust to settle". There has been more info available in the popular press than has been possible to digest.
The economy continues is decline, in fits and starts, toward a 10% national unemployment rate, and our government continues to throw the bulk of its financial support to the banks and financial institutions. The experts, who for the most part missed all of the signals leading to the current situation are now saying it may be late 2009 or 2010, or later for a recovery to begin, in earnest. Why should I believe them now?
Today the U.S. Labor Department reported that in January four states had unemployment rates above 10% and two other were close behind. Highest unemployment reported:
California 10.1%
Georgia 8.6%
Michigan 11.6%
North Carolina 9.7%
Oregon 9.9%
South Carolina 10.4%
Rhode Island 10.3%
Note: If you want a job, go to Wyoming. The jobless rate was reported as 3.7% for January, 2009, which is the lowest in the nation!
The stimulus promoted by the government, including the new Obama administration, includes what I would classify as a lot of "earmarks" which will not stimulate the economy and will burden our future with debt. Is it any wonder that many people are so morose?
My "personal" recession began in 2006 when my clients, all of whom are involved in heavy industry as it applies to construction, rapidly cancelled or postponed projects and contracts. MBA programs have been teaching the technique which Jack Welch of G.E. fame used during the period 1981-1985 and the related recession. Jack cut jobs deep and hard; it is my understanding that 100,000 jobs were eliminated by "Neutron Jack " as he was called, apparently in reference to his similarity to the Neutron Bomb, which destroys people but leaves factories intact. CEOs and managers emulated this technique in the 1990s and it worked very well, and I also think it contributed to the depth of that recession, as it is, now.
An associate made the statement to me on Monday "Don't I know what's going on out there?" Wake up, Virgil, as the saying goes, I have not been sleeping nor has my head been embedded in the sand! I suspect that associate hasn't been listening during our conversations, or simply rejected what I was saying at the time. He does have the opinion that I am off my rocker, most of the time.
So I'll be posting my updated perspective on the economy in the very near future. However, we are on track per my blog of October 21, 2008:
http://letmethinkaboutthis.blogspot.com/2008/10/how-bad-recession.html
Meanwhile, while our politicians debate, the government continues to send money to bail out banks, bankers and investment companies. Very little of this is apparently finding its way to the millions of distressed homeowners. In Obama's stimulus package, there is $75 billion earmarked for "distressed homeowners". I am not entering the debate about whom deserves or doesn't deserve government bailout money. It is apparent that a lot of people were greedy, a lot of people made mistakes or were simply stupid, and a lot of people perpetrated various frauds.
I am looking at this from the perspective of spending as little as possible to resolve the problem. We have about 7.3 million homeowners who have defaulted or are at risk of default. If these people were given a stipend by the government which was applied against their mortgages, this money would be passed to the banks who would be forced to lower the balance on their mortgages, it would find its way to those who hold the notes, etc. and should stabilize the system.
But how much money would it take? Or, how far could a trillion dollars, which is the amount routinely used as fodder for the pigs at the toughs, go? I'll round up the number of mortgages to 10 million. Well, one Trillion dollars = $1,000,000,000,000. If I were to divide that by 10 million distressed mortgages (10,000,000) I would have $100,000 per mortgage.
So which has been more effective? Throwing several trillion dollars at the banks and investment bankers, or throwing $50,000 at each homeowner? We could bail out 10 million homeowners and the entire banking system directly tied to these failed mortgages, using "only" one-half trillion dollars, which is $500 billion.
So now you know why am so cynical about our politicians. they could get the job done and they should know what I know. But they don't operate accordingly. So looking beyond all the rhetoric and the politicians and their media pundits, who is really being served? I'll let you draw your own conclusions.
Note: one trillion is a really big number. How big? Let's do a little arithmetic and answer the question "how many seconds is a trillion?" There are 365 days each year, 24 hours each day, 60 minutes each hour and 60 seconds each minute. So a year is 365 x 24 x 60 x 60 seconds = 31,536,000 seconds. If I divide 1 trillion by the number of seconds in a year, I'll know how many years contain 1 trillion seconds. The answer is 31,709 years.
I've been catching up on "business" and dealing with issues out there in the "real" world.
I also wanted to give the economy and our new congress and President some time to allow the "dust to settle". There has been more info available in the popular press than has been possible to digest.
The economy continues is decline, in fits and starts, toward a 10% national unemployment rate, and our government continues to throw the bulk of its financial support to the banks and financial institutions. The experts, who for the most part missed all of the signals leading to the current situation are now saying it may be late 2009 or 2010, or later for a recovery to begin, in earnest. Why should I believe them now?
Today the U.S. Labor Department reported that in January four states had unemployment rates above 10% and two other were close behind. Highest unemployment reported:
California 10.1%
Georgia 8.6%
Michigan 11.6%
North Carolina 9.7%
Oregon 9.9%
South Carolina 10.4%
Rhode Island 10.3%
Note: If you want a job, go to Wyoming. The jobless rate was reported as 3.7% for January, 2009, which is the lowest in the nation!
The stimulus promoted by the government, including the new Obama administration, includes what I would classify as a lot of "earmarks" which will not stimulate the economy and will burden our future with debt. Is it any wonder that many people are so morose?
My "personal" recession began in 2006 when my clients, all of whom are involved in heavy industry as it applies to construction, rapidly cancelled or postponed projects and contracts. MBA programs have been teaching the technique which Jack Welch of G.E. fame used during the period 1981-1985 and the related recession. Jack cut jobs deep and hard; it is my understanding that 100,000 jobs were eliminated by "Neutron Jack " as he was called, apparently in reference to his similarity to the Neutron Bomb, which destroys people but leaves factories intact. CEOs and managers emulated this technique in the 1990s and it worked very well, and I also think it contributed to the depth of that recession, as it is, now.
An associate made the statement to me on Monday "Don't I know what's going on out there?" Wake up, Virgil, as the saying goes, I have not been sleeping nor has my head been embedded in the sand! I suspect that associate hasn't been listening during our conversations, or simply rejected what I was saying at the time. He does have the opinion that I am off my rocker, most of the time.
So I'll be posting my updated perspective on the economy in the very near future. However, we are on track per my blog of October 21, 2008:
http://letmethinkaboutthis.blogspot.com/2008/10/how-bad-recession.html
Meanwhile, while our politicians debate, the government continues to send money to bail out banks, bankers and investment companies. Very little of this is apparently finding its way to the millions of distressed homeowners. In Obama's stimulus package, there is $75 billion earmarked for "distressed homeowners". I am not entering the debate about whom deserves or doesn't deserve government bailout money. It is apparent that a lot of people were greedy, a lot of people made mistakes or were simply stupid, and a lot of people perpetrated various frauds.
I am looking at this from the perspective of spending as little as possible to resolve the problem. We have about 7.3 million homeowners who have defaulted or are at risk of default. If these people were given a stipend by the government which was applied against their mortgages, this money would be passed to the banks who would be forced to lower the balance on their mortgages, it would find its way to those who hold the notes, etc. and should stabilize the system.
But how much money would it take? Or, how far could a trillion dollars, which is the amount routinely used as fodder for the pigs at the toughs, go? I'll round up the number of mortgages to 10 million. Well, one Trillion dollars = $1,000,000,000,000. If I were to divide that by 10 million distressed mortgages (10,000,000) I would have $100,000 per mortgage.
So which has been more effective? Throwing several trillion dollars at the banks and investment bankers, or throwing $50,000 at each homeowner? We could bail out 10 million homeowners and the entire banking system directly tied to these failed mortgages, using "only" one-half trillion dollars, which is $500 billion.
So now you know why am so cynical about our politicians. they could get the job done and they should know what I know. But they don't operate accordingly. So looking beyond all the rhetoric and the politicians and their media pundits, who is really being served? I'll let you draw your own conclusions.
Note: one trillion is a really big number. How big? Let's do a little arithmetic and answer the question "how many seconds is a trillion?" There are 365 days each year, 24 hours each day, 60 minutes each hour and 60 seconds each minute. So a year is 365 x 24 x 60 x 60 seconds = 31,536,000 seconds. If I divide 1 trillion by the number of seconds in a year, I'll know how many years contain 1 trillion seconds. The answer is 31,709 years.
Tuesday, January 6, 2009
The Tab for the Current Economic Crisis
Well, the tab is finally coming in for the "economic crisis". So far, the goverment has spent or is planning on spending $8.5 trillion in bailouts and "economic stimulus".
The tab works out to about $142,000 per American household. This is debt, that will have to be repaid at some point in the future. This figure does not include the "evaporation" of wealth that accompanied this "economic crisis".
The tab works out to about $142,000 per American household. This is debt, that will have to be repaid at some point in the future. This figure does not include the "evaporation" of wealth that accompanied this "economic crisis".
Sunday, November 9, 2008
China Does it Right
China announced a $586 Billion stimulus package, this will be spent on infrastructure by 2010. According to the New York Times, the money will include "constructing new railways, subways, airports and rebuilding communities".
Meanwhile, here in the US, we have a nearly trillion dollar "bailout package" for Wall Street and the Banks!
So the Chinese will be getting buildings, roads, public transportation and cities. All of that good stuff that creates jobs and produces something. What will we get? We'll get bankers buying other bankers, bonuses and dividends to stockholders. No infrastructure, no jobs.
So who is in action? That's a rhetorical question. Over the same period, our politicians are talking about a few hundred billion in stimulus checks, perhaps $30 billion or so to energy infrastructure. According to the "Obama-Biden Energy Plan", they will be "strategically investing $150 billion over the next ten years to catalyze private efforts to build a clean energy future". It is important to note that this plan permits the new administration and congress to earmark energy monies for bailing out the automotive manufacturers. This will be done to reward the UAW and other unions who strongly supported the Obama-Biden campaign. However, unless the transportation system in the US is transformed, this money will be wasted. Unfortunately, insufficient funds have been allocated by the Obamam-Biden team to do such a thing.
Do you think we have a problem here?
The article: China Unveils Sweeping Plan for Economy
The Obama-Biden Energy Plan: http://my.barackobama.com/page/content/newenergy
Meanwhile, here in the US, we have a nearly trillion dollar "bailout package" for Wall Street and the Banks!
So the Chinese will be getting buildings, roads, public transportation and cities. All of that good stuff that creates jobs and produces something. What will we get? We'll get bankers buying other bankers, bonuses and dividends to stockholders. No infrastructure, no jobs.
So who is in action? That's a rhetorical question. Over the same period, our politicians are talking about a few hundred billion in stimulus checks, perhaps $30 billion or so to energy infrastructure. According to the "Obama-Biden Energy Plan", they will be "strategically investing $150 billion over the next ten years to catalyze private efforts to build a clean energy future". It is important to note that this plan permits the new administration and congress to earmark energy monies for bailing out the automotive manufacturers. This will be done to reward the UAW and other unions who strongly supported the Obama-Biden campaign. However, unless the transportation system in the US is transformed, this money will be wasted. Unfortunately, insufficient funds have been allocated by the Obamam-Biden team to do such a thing.
Do you think we have a problem here?
The article: China Unveils Sweeping Plan for Economy
The Obama-Biden Energy Plan: http://my.barackobama.com/page/content/newenergy
Thursday, October 23, 2008
Here Comes Socialism
If you don't think it is coming, in a serious way, then consider this. Today Alan Greenspan, former chairman of the Federal Reserve, former Treasury Secretary John Snow and Securities and Exchange Commission Chairman Christopher Cox testified before the U.S. House Committee on Oversight and Government Reform.
After testimony by the regulators, Committee Chairman Henry Waxman said "The list of mistakes is long and the cost to taxpayers is staggering......Our regulators became enablers rather than enforcers. Their trust in the wisdom of the markets was infinite. The mantra became that government regulation is wrong. The market is infallible."
After testimony by the regulators, Committee Chairman Henry Waxman said "The list of mistakes is long and the cost to taxpayers is staggering......Our regulators became enablers rather than enforcers. Their trust in the wisdom of the markets was infinite. The mantra became that government regulation is wrong. The market is infallible."
Wednesday, October 22, 2008
Myths About the Financial Crisis of 2008
The Research Department of the Federal Reserve Bank of Minneapolis has published a paper with the title above:
http://www.minneapolisfed.org/research/WP/WP666.pdf
This is an 18 page document, consisting substantially of charts and diagrams. It states the following:
"The financial press and policymakers have made four claims about the nature of the crisis.
1. Bank Lending to nonfinancial corporations and individuals has declined sharply.
2. Interbank lending is essentially nonexistent.
3. Commercial paper issuance by nonfinancial corporations has declined sharply and rates have risen to unprecedented levels.
4. Banks play a large role in channeling funds from savers to borrowers.
Here we examine these claims using data from the Federal Reserve Board. At least based on data up until October 8, 2008, we argue that all four claims are false."
http://www.minneapolisfed.org/research/WP/WP666.pdf
This is an 18 page document, consisting substantially of charts and diagrams. It states the following:
"The financial press and policymakers have made four claims about the nature of the crisis.
1. Bank Lending to nonfinancial corporations and individuals has declined sharply.
2. Interbank lending is essentially nonexistent.
3. Commercial paper issuance by nonfinancial corporations has declined sharply and rates have risen to unprecedented levels.
4. Banks play a large role in channeling funds from savers to borrowers.
Here we examine these claims using data from the Federal Reserve Board. At least based on data up until October 8, 2008, we argue that all four claims are false."
Thursday, October 16, 2008
Candidates Avoiding the Really Tough Issues
This from the Wharton School, University of Pennsylvania. Link to full article is below.
"In the closing weeks of the U.S. presidential campaign, the candidates are focused largely on the global financial meltdown, which is formidable enough. But looming behind this front-burner concern are the very difficult long-term economic challenges of restoring Social Security and Medicare to solid footing, and providing health care coverage to the millions of Americans who are uninsured or inadequately insured....."
"We were so concerned about the $700 billion in the bailout bill, but nobody is talking seriously about the $12 trillion we need to make Social Security whole and the $65 trillion we need to make Medicare whole," says Wharton professor of insurance and risk management Olivia Mitchell. She worries that that when it comes to Social Security and Medicare, both candidates are more focused on the revenue side of the equation than on addressing the rampant growth of benefit obligations which would require cuts for beneficiaries...."
"According to Wharton insurance and risk management professor Kent Smetters, a former Congressional Budget Office economist, the Obama proposal would place a high percentage of the tax burden on one, small segment of the population and would only generate about 20% to 30% of the revenue needed. "There's not much talk about how to control growth on spending -- that's the real issue," says Smetters. "If you get more revenue, it doesn't solve the problem until you can control spending....."
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2070
"In the closing weeks of the U.S. presidential campaign, the candidates are focused largely on the global financial meltdown, which is formidable enough. But looming behind this front-burner concern are the very difficult long-term economic challenges of restoring Social Security and Medicare to solid footing, and providing health care coverage to the millions of Americans who are uninsured or inadequately insured....."
"We were so concerned about the $700 billion in the bailout bill, but nobody is talking seriously about the $12 trillion we need to make Social Security whole and the $65 trillion we need to make Medicare whole," says Wharton professor of insurance and risk management Olivia Mitchell. She worries that that when it comes to Social Security and Medicare, both candidates are more focused on the revenue side of the equation than on addressing the rampant growth of benefit obligations which would require cuts for beneficiaries...."
"According to Wharton insurance and risk management professor Kent Smetters, a former Congressional Budget Office economist, the Obama proposal would place a high percentage of the tax burden on one, small segment of the population and would only generate about 20% to 30% of the revenue needed. "There's not much talk about how to control growth on spending -- that's the real issue," says Smetters. "If you get more revenue, it doesn't solve the problem until you can control spending....."
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2070
Monday, October 13, 2008
Ouch!
What else can I say about the latest "bang" to our economy? The market dropped as panic selling took hold. I actually purchased some stock in the past week, looking toward the long term.
Is it gambling? Could be, as our political leaders are as clueless as ever. I watched Sen. Joe Biden at a political rally on C-SPAN and there was Sen. Hillary Clinton, head rhythmically moving up and down, looking so much like a bobble headed doll on his right.
This is getting close to my "worst case" scenario of about a 50% loss. The problem is, we haven't even "officially" entered the recession yet, and already the market was down 43% off it's high set about 1 year ago.
I do have to admit, I am glad the waiting is over. I have been waiting for this "bang" for a few years now. Perhaps it is me, but I really couldn't see how we could avoid this. Too many people way, way overextended, too many people making money by moving money around, too many people always willing to blame someone else, way too many people willing to live beyond their means, and too many people expecting it will all turn out well, no matter what they do.
I have always had confidence in the American system, but the past 10 years have put that confidence under quite a strain. I am of the opinion that we as a nation face quite a "headwind". Americans have been too willing to put their trust in politicians, who really do little but make laws about collecting and spending our money. There is no long term planning! Thanks to the Internet and 100s of cable TV channels, we all have access to the same "information" and the picture is not pretty.
I use the word "information" with some hesitation. There is actually little true information available on the popular media, which has evolved from that age when it bragged that "we don't report the news, we make the news" to the very modern "we are the news". So there's not much reason to watch TV or radio news. Even NPR and PBS are very narrow in their news focus, although there is some air time given to the BBC. While travelling across Nebraska last year, I was delighted to be within range of the Omaha PBS radio station and expected to be able to hear at least a part of General Petraeus testimony before congress. However, the NPR channel had decided to play religious music for the Jewish holy days, instead. So I did not hear that testimony until I returned home and was able to get a copy of the transcript.
Th current financial crisis will, I fear, accelerate the flight from the dollar and further erode our ability as a nation to accomplish the many daunting tasks which do face us. It will also make world cooperation far more difficult as people all over the world have realized that this emperor really doesn't have any clothes!
After reading this, you may wonder if I am optimistic or pessimistic. As a businessperson, I am optimistic. I think that American businesses can and will continue to innovate and to operate successfully within the strictures imposed by our politicians. As a citizen, I am pessimistic. We have no viable energy bill and, for example, the Democrat's proposal of $15B per year for 10 years is laughable and woefully inadequate. We still have 78 million baby-boomers who will be retiring in the near future and a broken social security ponzi scheme. We have a failed medical system in which all comers are rewarded if people are ill. Need I go on?
Is it gambling? Could be, as our political leaders are as clueless as ever. I watched Sen. Joe Biden at a political rally on C-SPAN and there was Sen. Hillary Clinton, head rhythmically moving up and down, looking so much like a bobble headed doll on his right.
This is getting close to my "worst case" scenario of about a 50% loss. The problem is, we haven't even "officially" entered the recession yet, and already the market was down 43% off it's high set about 1 year ago.
I do have to admit, I am glad the waiting is over. I have been waiting for this "bang" for a few years now. Perhaps it is me, but I really couldn't see how we could avoid this. Too many people way, way overextended, too many people making money by moving money around, too many people always willing to blame someone else, way too many people willing to live beyond their means, and too many people expecting it will all turn out well, no matter what they do.
I have always had confidence in the American system, but the past 10 years have put that confidence under quite a strain. I am of the opinion that we as a nation face quite a "headwind". Americans have been too willing to put their trust in politicians, who really do little but make laws about collecting and spending our money. There is no long term planning! Thanks to the Internet and 100s of cable TV channels, we all have access to the same "information" and the picture is not pretty.
I use the word "information" with some hesitation. There is actually little true information available on the popular media, which has evolved from that age when it bragged that "we don't report the news, we make the news" to the very modern "we are the news". So there's not much reason to watch TV or radio news. Even NPR and PBS are very narrow in their news focus, although there is some air time given to the BBC. While travelling across Nebraska last year, I was delighted to be within range of the Omaha PBS radio station and expected to be able to hear at least a part of General Petraeus testimony before congress. However, the NPR channel had decided to play religious music for the Jewish holy days, instead. So I did not hear that testimony until I returned home and was able to get a copy of the transcript.
Th current financial crisis will, I fear, accelerate the flight from the dollar and further erode our ability as a nation to accomplish the many daunting tasks which do face us. It will also make world cooperation far more difficult as people all over the world have realized that this emperor really doesn't have any clothes!
After reading this, you may wonder if I am optimistic or pessimistic. As a businessperson, I am optimistic. I think that American businesses can and will continue to innovate and to operate successfully within the strictures imposed by our politicians. As a citizen, I am pessimistic. We have no viable energy bill and, for example, the Democrat's proposal of $15B per year for 10 years is laughable and woefully inadequate. We still have 78 million baby-boomers who will be retiring in the near future and a broken social security ponzi scheme. We have a failed medical system in which all comers are rewarded if people are ill. Need I go on?
Friday, October 10, 2008
Paul O'Neil on "The Root Cause" of the Banking Crisis
Paul O'Neil as quoted in Business Week, October 13, 2008:
The root cause of this crisis was "A combination of things. It begins with the stupid idea that you can put people in homes who have no income, no wealth, no regular job history. [Then there's the notion ] that in this marvelous world we've created of complex financial instruments, the originator of the loan can throw [the mortgage] out into cyberspace and someone will put a guarantee on it and it'll be amalgamated with a bunch of other stuff. And even though there may be a 3% to 5% risk of default, that's a manageable risk, and nobody will bet hurt. It's all a fiction".
Note: Mr. O'Neil was deputy director of the Office of Management & Budget, then CEO of Alcoa, and finally Treasury Secretary.
The root cause of this crisis was "A combination of things. It begins with the stupid idea that you can put people in homes who have no income, no wealth, no regular job history. [Then there's the notion ] that in this marvelous world we've created of complex financial instruments, the originator of the loan can throw [the mortgage] out into cyberspace and someone will put a guarantee on it and it'll be amalgamated with a bunch of other stuff. And even though there may be a 3% to 5% risk of default, that's a manageable risk, and nobody will bet hurt. It's all a fiction".
Note: Mr. O'Neil was deputy director of the Office of Management & Budget, then CEO of Alcoa, and finally Treasury Secretary.
Wednesday, October 1, 2008
It is Time to Take Back Our Country from the Politicians
We need to transform this country. To do this we must move beyond the political status quo, and we need a 21st century transformational energy policy NOW!
I got a letter from Al Gore yesterday. OK, so it wasn’t really a letter prepared for me; it was a form letter sent to me because I am on the MoveOn.org mailing list. In many respects, it was similar to many emails and letters I have received during the past 10 years. This particular letter was written on behalf of a group called the DSCC.
The DSCC's purpose is a variation on the familiar theme of “take back America”. This time, they want me to send a donation to assist them in building a filibuster proof Senate with at least 60 Senators from the Democratic party.
I find it amazing that these people want me to join millions of Americans to take America and hand it to them on a gold platter! What they are essentially telling me is "Take back America from the Republicans and give it to us. We'll take care of it and of you."
I have been voting for about 40 years and I am absolutely convinced that none of these people is going to take care of me. Their promises keep getting greater and the debt keeps getting larger. Now it is over $10 Trillion and growing. After multiple Democratic and Republican governments we have no energy plan and we have no funds in the SS trust fund (only IOUs which our descendants will have to pay back). So much for the good life!
I have had enough!
The only way we will take back America is if WE THE PEOPLE take it for ourselves.If you have any doubts about who REALLY owns this country, then the events of the past few weeks should have been a “wake up call”. I am referring to the bill before the congress, HR3997 Emergency Economic Stabilization Act of 2008 and the senate version which some cynically call the “No Banker Left Behind” bailout.
If you have been watching the deliberations in the House and the Senate, you should have noticed a strange thing. While the politicians continually rail either for or against it, it is generally described as something that is vital and that “we must have”. But no one can actually say exactly why we must have this specific piece of legislation. I do understand the issues of credit markets seizing, etc. However, why do we need a bill with the specific tenants of this one, such as authorizing our government to use nearly $1 Trillion of taxpayer dollars to purchase distressed assets, including those of “foreign authorities and central banks” at prices which the government has already stated will be “above market value” and therefore just about guaranteed to lose money for the taxpayer? I know this is included in the legislation because I read HR3997, and Secretary Paulson has made testimony to the fact regarding the prices that will be paid. I suggest you go to this link and you will be given a summary of the first 32 pages of the bill and a link to download it:
http://foreverthecynic.blogspot.com/2008/09/full-text-of-hr-3997-emergency-economic.html
The bill gives the Secretary of the Treasury broad powers and has a mechanism to reward the same firms that got us into this mess. Such firms will be hired to manage the money, for a fee:
http://foreverthecynic.blogspot.com/2008/10/secretary-of-treasury-to-be-given-broad.html
Why on earth would we do these things? I don’t know, but everyone from Senator Obama to Senator McCain say it is absolutely vital that we do this, and do it NOW.
I’ll tell you what we really need; we need an energy policy that diverts the flow of the 100s of billions of dollars we send each year to oil rich countries and instead, returns it to our shores, where it can be used to rebuild the manufacturing and infrastructure of this country. But we won’t have the funds to do this unless we first develop our own sources of energy. Then each and every year, those $100s of billions that we don't send to despots and tyrants all over the world will be put to use here, in America. Once we have the power and electrical transmission systems on line, we can transition from oil based automobiles to electrics, which we have simultaneously developed with R&D funds provided to companies right here in the USA. We will have to expand and upgrade our electrical transmission system. We can then use any funds surpluses to alleviate the deficit and we can sell the technology we have developed to others all over the world.
We can become leaders in this 21st century endeavor. Washington is beginning to get the word; today for the first time I heard Senator Obama talk about improved electrical transmission system as part of infrastructure improvements, while defending the “bailout” bill before the Senate. However, Washington has a penchant for moving slowly on most issues.
This is not "new" news. But our politicians have ignored most of this for over 30 years. One must ask, why would they do that? Maybe this problem is simply too complex for them to understand, just like the financial system and markets of this country.
It is vitally important that each and every American get on board and press congress, the Senate and our President, whoever he may be, to make this a national priority of the greatest urgency. This is not something to do tomorrow. It is something that must occur today. This transcends party politics and many of the issues that our politicians use to maintain their status quo.
We can build a better future. Politicians have been talking about a “National Energy Policy” for over 30 years and have done absolutely nothing. NOTHING! There is only one way and that is for us, the citizenry to take back our government from the politicians. We are the owners. We are the taxpayers. It is our country, not theirs. They are but civil servants elected to do our bidding. It is time we began treating them as such and acting like the owners we are. TAKE BACK AMERICA FROM WASHINGTON – NOW!
It is our choice and it is our opportunity. We can continue to support politicians and their failed or non-existent policies or begin looking beyond the hollow issues our politicians use to maintain their status quo. We can live in the past, or we can choose our future. These are exciting times we live in, and to use that often quoted phrase “a crisis is a dangerous opportunity”. Let us not waste it. This election, there is only one platform to vote for and that is for the candidates who have made energy transformation of this country THE priority.
What do YOU think and what are YOU going to do about this?
I got a letter from Al Gore yesterday. OK, so it wasn’t really a letter prepared for me; it was a form letter sent to me because I am on the MoveOn.org mailing list. In many respects, it was similar to many emails and letters I have received during the past 10 years. This particular letter was written on behalf of a group called the DSCC.
The DSCC's purpose is a variation on the familiar theme of “take back America”. This time, they want me to send a donation to assist them in building a filibuster proof Senate with at least 60 Senators from the Democratic party.
I find it amazing that these people want me to join millions of Americans to take America and hand it to them on a gold platter! What they are essentially telling me is "Take back America from the Republicans and give it to us. We'll take care of it and of you."
I have been voting for about 40 years and I am absolutely convinced that none of these people is going to take care of me. Their promises keep getting greater and the debt keeps getting larger. Now it is over $10 Trillion and growing. After multiple Democratic and Republican governments we have no energy plan and we have no funds in the SS trust fund (only IOUs which our descendants will have to pay back). So much for the good life!
I have had enough!
The only way we will take back America is if WE THE PEOPLE take it for ourselves.If you have any doubts about who REALLY owns this country, then the events of the past few weeks should have been a “wake up call”. I am referring to the bill before the congress, HR3997 Emergency Economic Stabilization Act of 2008 and the senate version which some cynically call the “No Banker Left Behind” bailout.
If you have been watching the deliberations in the House and the Senate, you should have noticed a strange thing. While the politicians continually rail either for or against it, it is generally described as something that is vital and that “we must have”. But no one can actually say exactly why we must have this specific piece of legislation. I do understand the issues of credit markets seizing, etc. However, why do we need a bill with the specific tenants of this one, such as authorizing our government to use nearly $1 Trillion of taxpayer dollars to purchase distressed assets, including those of “foreign authorities and central banks” at prices which the government has already stated will be “above market value” and therefore just about guaranteed to lose money for the taxpayer? I know this is included in the legislation because I read HR3997, and Secretary Paulson has made testimony to the fact regarding the prices that will be paid. I suggest you go to this link and you will be given a summary of the first 32 pages of the bill and a link to download it:
http://foreverthecynic.blogspot.com/2008/09/full-text-of-hr-3997-emergency-economic.html
The bill gives the Secretary of the Treasury broad powers and has a mechanism to reward the same firms that got us into this mess. Such firms will be hired to manage the money, for a fee:
http://foreverthecynic.blogspot.com/2008/10/secretary-of-treasury-to-be-given-broad.html
Why on earth would we do these things? I don’t know, but everyone from Senator Obama to Senator McCain say it is absolutely vital that we do this, and do it NOW.
I’ll tell you what we really need; we need an energy policy that diverts the flow of the 100s of billions of dollars we send each year to oil rich countries and instead, returns it to our shores, where it can be used to rebuild the manufacturing and infrastructure of this country. But we won’t have the funds to do this unless we first develop our own sources of energy. Then each and every year, those $100s of billions that we don't send to despots and tyrants all over the world will be put to use here, in America. Once we have the power and electrical transmission systems on line, we can transition from oil based automobiles to electrics, which we have simultaneously developed with R&D funds provided to companies right here in the USA. We will have to expand and upgrade our electrical transmission system. We can then use any funds surpluses to alleviate the deficit and we can sell the technology we have developed to others all over the world.
We can become leaders in this 21st century endeavor. Washington is beginning to get the word; today for the first time I heard Senator Obama talk about improved electrical transmission system as part of infrastructure improvements, while defending the “bailout” bill before the Senate. However, Washington has a penchant for moving slowly on most issues.
This is not "new" news. But our politicians have ignored most of this for over 30 years. One must ask, why would they do that? Maybe this problem is simply too complex for them to understand, just like the financial system and markets of this country.
It is vitally important that each and every American get on board and press congress, the Senate and our President, whoever he may be, to make this a national priority of the greatest urgency. This is not something to do tomorrow. It is something that must occur today. This transcends party politics and many of the issues that our politicians use to maintain their status quo.
We can build a better future. Politicians have been talking about a “National Energy Policy” for over 30 years and have done absolutely nothing. NOTHING! There is only one way and that is for us, the citizenry to take back our government from the politicians. We are the owners. We are the taxpayers. It is our country, not theirs. They are but civil servants elected to do our bidding. It is time we began treating them as such and acting like the owners we are. TAKE BACK AMERICA FROM WASHINGTON – NOW!
It is our choice and it is our opportunity. We can continue to support politicians and their failed or non-existent policies or begin looking beyond the hollow issues our politicians use to maintain their status quo. We can live in the past, or we can choose our future. These are exciting times we live in, and to use that often quoted phrase “a crisis is a dangerous opportunity”. Let us not waste it. This election, there is only one platform to vote for and that is for the candidates who have made energy transformation of this country THE priority.
What do YOU think and what are YOU going to do about this?
A letter to our Senators sent today re: $700B Bailout
This is the text of emails sent today to our US Senators and a version was also sent to our Representative.
"My spouse and I am opposed to the Federal bailout of Wall Street, HR3997 and the Senate version. I believe the plans are seriously flawed.
I have read the House version and first, I do not think taxpayer funds should be allocated for the purpose of purchasing the assets of “any” financial institution, and specifically “foreign authorities and central banks.”
Second, I do not think that funds should be used for the purpose of hiring firms to help manage the assets of companies the government basically nationalizes. This has the potential of providing federal funds to the firms that contributed to, profited from or participated in the failure.
Finally, I think the primary purpose of the plan should be to address the problems of the taxpayers who are being asked to pay for this plan. I do understand there is more than enough blame to go around, and that many people were stupid or at the very least ignorant, and possibly millions participated in some form of fraud. However, this is a reward to the people who promoted and profited from this situation.
We are homeowners who purchased below our means and are practicing a philosophy of living below our means. We are saving for our retirement and have invested in bank funds such as CDs and we also have 401(k), 403(b) and Roth-IRAs which we have used to invest in American companies. We are feeling the pain of the current financial situation and while I am “entitled” to retire with social security benefits, I am in fact working and paying taxes. Frankly, my financial future is in jeopardy.
We are registered voters and my spouse and I will be thinking long and hard about the forthcoming election and we will be voting our conscience in this matter. "
"My spouse and I am opposed to the Federal bailout of Wall Street, HR3997 and the Senate version. I believe the plans are seriously flawed.
I have read the House version and first, I do not think taxpayer funds should be allocated for the purpose of purchasing the assets of “any” financial institution, and specifically “foreign authorities and central banks.”
Second, I do not think that funds should be used for the purpose of hiring firms to help manage the assets of companies the government basically nationalizes. This has the potential of providing federal funds to the firms that contributed to, profited from or participated in the failure.
Finally, I think the primary purpose of the plan should be to address the problems of the taxpayers who are being asked to pay for this plan. I do understand there is more than enough blame to go around, and that many people were stupid or at the very least ignorant, and possibly millions participated in some form of fraud. However, this is a reward to the people who promoted and profited from this situation.
We are homeowners who purchased below our means and are practicing a philosophy of living below our means. We are saving for our retirement and have invested in bank funds such as CDs and we also have 401(k), 403(b) and Roth-IRAs which we have used to invest in American companies. We are feeling the pain of the current financial situation and while I am “entitled” to retire with social security benefits, I am in fact working and paying taxes. Frankly, my financial future is in jeopardy.
We are registered voters and my spouse and I will be thinking long and hard about the forthcoming election and we will be voting our conscience in this matter. "
Tuesday, September 30, 2008
Why the Bailout Proposal Failed
Watch these two videos and you get a clear picture of why the bailout proposal which is officially titled "HR3997 Emergency Economic Stabilization Act of 2008" failed to pass the house on September 29, 2008:
http://www.youtube.com/watch?v=mbD62gNi9WE
http://www.youtube.com/watch?v=S27yitK32ds
http://www.youtube.com/watch?v=mbD62gNi9WE
http://www.youtube.com/watch?v=S27yitK32ds
I'm not convinced!
The Fed and the Treasury insist that the current solution, that is to say, the bailout that failed, "is the only solution". Furthermore, both Bernake and Paulson have thrown $100s of Billions at this problem. How do we know that the current proposal will work? How do we know that the $700B will be enough? What happens if it isn't?
I am not convinced. Here is the summary of an alternative proposed by Karl Denninger on his website.
http://market-ticker.denninger.net/archives/593-CONGRESS-STOP-AND-THINK!.html
(Also see http://stopthehousingbailout.com/)
"The solution is simple, it is elegant, and it will work.
I am not convinced. Here is the summary of an alternative proposed by Karl Denninger on his website.
http://market-ticker.denninger.net/archives/593-CONGRESS-STOP-AND-THINK!.html
(Also see http://stopthehousingbailout.com/)
"The solution is simple, it is elegant, and it will work.
- Force all off-balance sheet "assets" back onto the balance sheet, and force the valuation models and identification of individual assets out of Level 3 and into 10Qs and 10Ks. Do it now.
- Force all OTC derivatives onto a regulated exchange similar to that used by listed options in the equity markets. This permanently defuses the derivatives time bomb. Give market participants 90 days; any that are not listed in 90 days are declared void; let the participants sue each other if they can't prove capital adequacy.
- Force leverage by all institutions to no more than 12:1. The SEC intentionally dropped broker/dealer leverage limits in 2004; prior to that date 12:1 was the limit. Every firm that has failed had double or more the leverage of that former 12:1 limit. Enact this with a six month time limit and require 1/6th of the excess taken down monthly.
Once 1-3 are put in place then send in the OTS and OCC examiners and look at every financial institution in the United States. All who are insolvent and unable to raise private capital immediately are forced through receivership where the debt is converted to equity and existing equity is wiped out. With the CDS monster caged the systemic risk is removed, the bondholders provide the cushion for recapitalization (as it should be) and the restructured firm emerges with no debt while the former bondholders are now the owners (of the equity) in the resulting firm.
With a clean balance sheet the restructured firms remain in business and open the next morning able to raise and attract capital. "
Monday, September 29, 2008
"No Banker Left Behind" Bailout Fails
Just saw the news that the house voted down the $700B bailout plan "HR3997 Emergency Economic Stabilization Act of 2008".
Obviously, the electorate overwhelmed the Wall Street special interest groups.
Now it will get interesting!
Maybe we need a crises in our energy infrastructure and we'll finally get the electorate off their collective butts and stop taking what their local politician says for granted. What's next? We could actually get an energy program in this country and a real, viable, forward looking energy plan for the 21st century!
Obviously, the electorate overwhelmed the Wall Street special interest groups.
Now it will get interesting!
Maybe we need a crises in our energy infrastructure and we'll finally get the electorate off their collective butts and stop taking what their local politician says for granted. What's next? We could actually get an energy program in this country and a real, viable, forward looking energy plan for the 21st century!
It Started with the Rating Agencies
As for the current financial meltdown, there is more than enough blame to go around. There is no doubt that Fannie and Freddie Mac contributed to the problem by a lowering of standards, and that the Investment Bankers on Wall Street created the mess. But there is one fact about this which I think is a "smoking gun".
This failure is marked with something that I understand has never happened before. For the first time in history, bonds rated AAA defaulted while they were rated AAA. So the ratings agencies, who supposedly filter this stuff so we, the banks and others know what we are buying, either turned a blind eye, fell asleep at the switch, or were grossly incompetent. Or maybe all three!
These agencies should be fined and the executives who ran them, driven to the poor house!
This failure is marked with something that I understand has never happened before. For the first time in history, bonds rated AAA defaulted while they were rated AAA. So the ratings agencies, who supposedly filter this stuff so we, the banks and others know what we are buying, either turned a blind eye, fell asleep at the switch, or were grossly incompetent. Or maybe all three!
These agencies should be fined and the executives who ran them, driven to the poor house!
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