Hank Paulson and his band of merry squanderers of our children's future have a new fancy. They want to un-freeze the consumer credit markets so that people can borrow more money to buy cars they can't afford, education they can't afford, houses they can't afford. Ah what the heck the latest "plan" is meant to help people buy anything they can't afford.
From the Wall Street Journal today, "Treasury Secretary Henry Paulson, seeking to ease strains in the
consumer credit market, plans to announce Tuesday the formation of a
program to increase the availability of auto loans, student loans and
credit cards, according to people familiar with the matter. The lending facility, which will be operated by the Federal Reserve, is
expected to provide loans to investors who want to buy securities
backed by credit cards, auto loans and student loans, these people
said. Treasury will contribute between $25 billion to $100 billion to
the facility from its $700 billion Troubled Asset Relief Program."
All I can say is heaven help us. This should be a time when people learn their lessons about debt and begin to live differently. The government is doing all it can to prevent that by intervening in the debt markets. And guess what. They're doing it with your money! That's right. Hank "Santa Claus" Paulson is spending your money so that someone can get credit at 15% interest to buy an X-Box on Black Friday.
There's a name for this. It's called robbing Peter to pay Paul. These phony machinations will continue to distort the markets, prevent people getting out of debt and punish those who have managed to live a prudent lifestyle even as most people lost their minds.
Thanks for nothing Hank.
Recently in Opinion Category
It's been a tough year for many people who've been caught up in the whole mortgage and housing mess. A lot of people got way over extended in all kinds of wild mortgage loans. And many people are losing their jobs as companies affected by mortgage losses cut staff and even close up shop altogether.
There's still another shoe yet to drop too. Energy prices are rising rapidly and the cost of goods and services has begun to follow, but hasn't yet matched, the upward trend in energy prices. As a result the next twelve months may be tougher than the previous twelve months for a lot of people. There's something you can do though. Think before you act.
People can't get back into the homes that they've lost. People probably can't get back into jobs at the businesses that have laid them off. And when those people do get back to work they will probably take salary cuts. There's a lot that we can't change. What we can change is the way that we approach important life situations. We can think before we act. We can act rationally instead of emotionally.
Acting rationally is rarely fun. And very few people want to be marked as a worry wart or spoil sport. Those kinds of characterizations are fleeting. I know a few people who thought they were heroes in mid-1999, borrowing money to buy stocks with absolutely no rational chance at succeeding. The market was flying high. A year later all of those people had taken huge losses. And while they were seen as pioneers and brave investors in 1999, no one was interested in what they had to say later in 2000. The emotion is fleeting and the perceived fortune brought on by emotional decision making is fleeting.
By now everyone has heard or experienced the current issues with real estate markets first hand. There are lots of home owners having tough times these days. Some of it is their own fault. Some bought too much house for their income. Some took on zero-down loans with low teaser rates that were only destined to go higher. Some speculated in property and thought they'd flip and get rich. Others used their home's imaginary capital gains as a cash machine to fund a high lifestyle.
A variety of villains have emerged during this time when many are realizing that home ownership was not the guaranteed investment that many thought it was. At least, its not a good investment when you're in for a short period of time with a variable rate mortgage. There's no question that banks, mortgage brokers and home builders played to the base desires of people and happily took advantage of the situation. We see it time and again. People get a little taste of financial success and then they get greedy.
One segment of the real estate profession that seems to have escaped scrutiny are the realtors themselves. They don't lend people money and they don't make any real promises. Yet I'm very sure that they played a key part in this mess. And many are playing a key part in dragging out this down turn longer than it will need to go on.
Realtors are cheerleaders for property sellers. Most realtors are in the game to get the highest price for the seller at all costs. Higher prices mean higher commissions. Unfortunately sometimes higher prices mean that buyers end up with a really bad financial investment. On top of the cheerleading there are loose connections with mortgage brokers. And quid pro quo deals with inspectors who promise not to be too harsh in their reports. It's a dirty game but it doesn't look too dirty. The subtle fibs that realtors tell are harmful as well. Bright people who are on their toes can see through this stuff. But most of us kind of go a little crazy when we're shopping for a house. So we miss the small stuff.
So I think that some of the blame for the way things got with real estate needs to be placed with realtors. There are too many who are too poorly trained while lacking real ethics. I'm sure that many a realtor will disagree with me. Most of those folks are full of it.
Anyway, now that the markets have taken a turn south a lot of these hacks have been forced from the profession. That's a good thing. With any luck they will never return. The good ones deserve to get more commissions. In some areas the drop in real estate values has not been so pronounced. But the market is slow. And realtors in these areas just might be (aw what the heck they probably are) screwing it up for their clients who want to sell.
You see, I had been shopping for a house in Albany for several months until a deal fell south a couple of weeks ago. The experienced sucked. Every single house I looked at was over priced by at least $25,000. I'm not kidding. I used websites like Zillow, Trulia and Eppraisal to track down comp sales and prior sale prices on all the homes I was interested in. I did my homework on the true market value of homes. My realtor was pissed that I was doing this.
"Kid, you're on a roll. Enjoy it while it lasts, 'cause it never does."
- Lou Mannheim to Bud Fox in the movie Wall Street.
Very true words spoken by a great character in a great film. Young stock broker Bud Fox (played by Charlie Sheen) loses focus on what's real and gets caught up in the world of all things fast and all things grey. Grizzled exec Lou Mannheim (played by Hal Holbrook) tries to drop some golden nuggets in Bud's pocket. Unfortunately Bud isn't buying it. If you haven't watched the film then please do to see how it ends up.
Now we've seen some pretty heady times over the past decade. In the late 1990s the internet sector was white hot. And the desire to get in on high tech riches drove the stock market indices through the roof. People threw money at companies without even caring if there was a business model. Everyone was in. The venture capitalists were in. The bankers were in. The street was in. Average Joe's were in thanks to online trading. The fundamentals were missing though. Too many companies. Too many crazy ideas being promoted by people who had no business running companies. It all came crashing down.
Money poured out of the markets. And then slowly the money poured into real estate. The internet stock bubble gave way to a real estate bubble. Conditions were ripe. Low interest rates combined with easy credit created a situation where people felt comfortable spending more money. Mortgage products got exotic to meet the needs of those who had little capital to play. Fixed rate mortgages gave way to 5/1 option ARMs with 100% financing. People got stars in their eyes and suddenly offering above the asking price became all the rage. Buying to flip became the rage. Everyone was in...again. Heaven help us.
Can you see the cycle? The eighties, the nineties, the two-thousands. Its all the same. Lou Mannheim's words fade away easily when dollar signs are in the air. So now we're in the third hangover of the last twenty years.
A lot of people have gotten banged up by this latest tumble in the bushes. Like the last one I know some people who are scratched and bleeding. For many people the situation is worse than that. And like last time its all their fault. You have to assume that the people at the banks are not your friend. They aren't looking out for you. The real estate agents are not your friend. They are not looking out for you. These are the two people you deal with (and rely on) the most in a real estate transactions. They just want you to buy and hopefully buy something expensive.
I've recently had what I think is a revelation. Maybe its just the end of a long stream of frustration about the way people conduct themselves in their personal lives. I lump myself in that crew so I'm not just throwing stones at others.
It seems that a lot of people (myself included at times) get caught up in the hype of being in competition with everyone around them. We look at the cars. We look at the clothes. We look at the houses. We look at other people's job titles. There are many different ways that we covet and get jealous about things.
So many people are trying to get these things so that they can be somebody. And the pursuit of these things often clouds what is really important in life. I think that happiness, health and family are really the most important things. But all these pursuits get in the way of that.
Last fall when a group of New York City police officers shot and killed a Brooklyn man during an incident whose accounts vary widely depending on the point of view, City Councilman Charles Barron called for violence against police.
Among Barron's hate filled tirades was that statement that, "We're not the only ones who can bleed." Unfortunately, the former Black Panther's calls were answered recently when two New York City police officers were gunned down at a traffic stop in early July.
Officers Herman Yan and Russel Timoshenko were doing the right thing when they pulled over a stolen SUV in Brooklyn. As they approached the vehicle from both sides they were ambushed in a hail of gun fire. Officer Yan was shot twice but saved by his bullet proof vest. Officer Timoshenko was shot twice in the face. He was horribly disfigured and later died of his wounds.
The three dirt bags (career criminals all) inside the stolen vehicle took off like the gutless cowards they are. Fortunately all have since been captured and will likely never see the light of day again.
There will be no "day of outrage." Silence from Charles Barron. Silence from the crooked Reverend Al Sharpton. Silence from all the rabble rousers whose agenda is less about peace and justice and more about the profitability of division.
I've got no problem with people protesting when they see a great wrong committed in their community. The Sean Bell shooting appears to have been a horrible mistake. The officers involved made a mistake. But its also clear that this wasn't part of some master plan to wipe out young black men.
I had an argument with a real dunce yesterday on the subject of power generation.
My point was that using less electric power if you can (especially on very hot days) is a good thing overall. His point was that it doesn't matter how much power you use because the greedy electric companies should be able to make as much clean power as we need. If things were only that simple.
In areas like the Northeast, using less power can help save lives on peak demand days. Most of the power to the densely populated areas (like New York City) is delivered from long distances across lines that can only hold so much power. Capacity is strained. And the ability to deliver that capacity is strained as well.
Those who use less power close to the highly populated help to insure that electricity will get delivered to those who really need it. Those who use less power further away, but along the transmission path help more energy to be available under less constrained transmission conditions.
I watched the Live Earth concerts this past weekend and am still amazed that people think that these kinds of events can change the world.
There were huge concerts on seven continents. The concerts drew huge crowds and hundreds of millions of viewers on TV and the web. What was the draw? Great music in my opinion.
People have always gone to these events for the performers. In 1986 I went to the Amnesty International concert at Giants Stadium to see the likes of Santana, Peter Gabriel, Bryan Adams, The Police and U2. The point for me and just about everyone there was the music. I have no idea what Amnesty International achieved as a result of those concerts.
Fast forward 21 years and we have these massive concerts going on simultaneously. The point is supposed to be that we need to save the earth from ourselves. Unfortunately, the process of holding these concerts represents a setback in the movement.
