Archive for Economy

More Greed

Posted in Economy with tags , , on October 30, 2008 by gyma

There’s a gas station on the corner just as I arrive to work.  The price continues dropping and this  morning it is $2.42 for regular unleaded.  I couldn’t help but think this is somehow related to the election since the price always seems to drop at this time.

Then I heard on NPR that Exxon Mobil posted its 2nd largest EVER 3rd quarter profits of $14.83 billion.

How are we going to solve our energy problems when we have greedy corporations and no leadership in Washington?  A large segment of the population doesn’t make enough money to keep a roof over their heads and food on the table, let alone pay $4/gallon for gas to get to the job that pays $10/hr.  Yet keeping prices artificially low means we’ll never suck it up and do the right thing.

If Obama is elected next Tuesday, I will hold his feet to the fire and expect him to keep his promise to work on this problem diligently.  At least I believe he’ll be willing to listen, whereas McCain will be more interested in satisfying his lobbyist friends who helped finance his crappy campaign.

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Senate Version Of Bailout Bill

Posted in Economy with tags , on October 1, 2008 by gyma

I’ve just started slogging through the 451-page version of the bailout bill.  My first thought was, wow from 3 pages to 451!  That’s a lot of ink.

Honestly, I’m having trouble reading through all this and skipped through some of the introductory pages.  By the time I got to page 16, I discovered the makeup of the Oversight Board.  It includes the following 5 characters:

  1. The Chairman of the Federal Reserve (Ben Bernanke)
  2. The Secretary of the Treasury (Henry Paulson)
  3. The Director of the Federal Housing Finance Agency (James B. Lockhart III)
  4. The Chairman of the SEC (Christopher Cox, the guy McCain wants to fire)
  5. The Secretary of Housing and Urban Development (Steve Preston)

Does this inspire confidence?  Not for me.  Bernanke, Cox, and Paulson are clearly part of the problem, not the solution.  Preston is relatively new in his position, but he is a former investment banker with Lehman Brothers.  You should also know that Preston replaced Alphonso Jackson, a Bush  loyalist, who was forced to resign for multiple wrongdoings.

As for Lockhart, the FHFA is a new agency created just last summer, in part to oversee Fannie Mae and Freddie Mac. 

This isn’t so much oversight as it is the foxes guarding the hen house.  They couldn’t find at least three independent outsiders to put on this board?

We are truly being played as suckers.  I’ll continue digging to see if it gets better or worse.  Any bets?

UPDATE:  I’m up to page 70 now where I found Sec. 125 which creates a Congressional Oversight Panel.  The panel would be comprised of five members as follows:

  1. 1 person appointed by the Speaker of the House of Representatives
  2. 1 person appointed by the Minority Leader of the House of Representatives
  3. 1 person appointed by the Majority Leader of the Senate
  4. 1 person appointed by the Minority Leader of the Senate
  5. 1 person appointed by the Speaker of the House of Representatives and the Majority Leader of the Senate, after consulting with the Minority Leaders of the House of Representatives and Senate

and will apparently provide regular reports to congress on the current state of the financial markets and the regulatory system.

2nd UPDATE:  The insertion of the increase in FDIC insurance from $100,000 to $250,000 begins on page 91.  I found it interesting that this is a temporary increase that would expire on December 31, 2009.  If you are one of the poor souls who might have more than $250,000 $100,000 in one institution at the end of 2009, you’d better get a calendar right now and put a big red X on December 31 so you remember to divvy up those accounts or risk losing a great deal of money.

Starting on page 115 you’ll find all the other “sweeteners” added to this bill to encourage its passage.  The list is mind boggling.  It includes extensions of renewable energy credits, the creation of some new clean renewable energy bonds, something to do with a special rule to implement FERC (Federal Energy Regulatory Commission) and state electric restructuring policy, the expansion and modification of investment credits for coal gasification, a temporary increase in the coal excise tax to help fund a trust account for black lung disease, the creation of a carbon audit of the tax code, an increase in tax credits for biodiesel and renewable diesel, an extension and modification of alternative fuel credit, the creation of a tax credit for the purchase of plug-in electric vehicles, a modification to the energy efficiency credits available for appliances produced after 2007, an extension to the AMT (Alternative Minimum Tax) Relief bill, extensions of other IRS deductions such as state and and local sales taxes, qualified tuition, expenses for school teachers, and tax-free distributions from IRA accounts to charitable institutions, etc.  I’m now at page 275 and I need a break.  More later.

3rd UPDATE:  Starting on page 270 you’ll find the beginning of the business tax provisions including things like extensions of the research credit, a new markets tax credit, the extensions of some cost recoveries for improvements to restaurants and retail spaces, something that has to do with the amount of excise tax paid to bring rum into this country from Puerto Rico (!), an extension of the economic development credit for American Samoa, an extension of the mine rescue team training credit, an Indian employment credit, a provision for accelerated depreciation for business property on Indian reservations, a 7-year cost recovery period for motorsports racing track facilities, an extension of the work opportunity tax credit for Hurricane Katrina employees, tax incentives for investment in the District of Columbia, an extension and modification of duty suspension on wool products, some provisions related to film and television productions, exemption from excise tax for certain wooden arrows designed for use by children (I’m serious – it’s on page 300), income averaging for amounts received in connection with the Exxon Valdez litigation, and a modification on the penalties on tax return preparers who understate taxpayers liability.

Starting on page 310 you will find the addition of the “Paul Wellstone and Pete Domenci Mental Health Parity and Addiction Equity Act of 2008.”  By election day I might need to take advantage of this myself.

The mental health portion goes through page 344 where you’ll find something for rural schools followed by something for states that contain federal lands. 

Skip ahead to page 394 and you can read about the “Heartland Disaster Tax Relief of 2008” which will provide temporary tax relief for areas damaged by severe storms, tornadoes, and flooding during 2008.

And there’s a bunch of other junk in there including something about people who commute on their bicycles.

The only thing I couldn’t find was something for dwarfs.  Otherwise I think the senate covered all its bases.

So when your representative votes for this bill do you think he/she was voting to bail out Wall Street or for that provision to exempt excise taxes on wooden arrows? 

Egads!

Nation, Heal Thyself

Posted in Economy with tags , , , on September 27, 2008 by gyma
Andrew Bacevich

Andrew Bacevich

I watched Andrew Bacevich, author of The Limits of Power, on Bill Moyers Journal last night.  This was a rerun which first aired on August 15th.  Bacevich is a self-described conservative Republican, graduate of West Point, a Vietnam veteran who has since retired from the military as a colonel, possesses a Ph.D. from Princeton University in American Diplomatic History, and is currently on the faculty of Boston University.

Bacevich believes that what’s wrong with America is Americans themselves.  It is our unyielding desire to have more and more and more without ever paying for anything.  It is like a cancer eroding from within and if we are unable to get it under control, we will be destined for a difficult future.

Bacevich traces the beginning of our current problems to the 1960s and a rise in consumerism.  Then in the 1970s the world shifted.  Prior to the 70s, the United States set the global price of petroleum.  In 1972 domestic oil production peaked, OPEC was formed, and the United States no longer had control of oil prices.  Then in 1975, for the first time, America’s imports exceeded exports and it has continued to be that way ever since.

According to Bacevich, Americans faced a dilemma – we could either learn to live within our means and do with a bit less, or we could use our military power to encourage other countries to accommodate our ever increasing need for more.  We chose the latter.

At this point Jimmy Carter turned to the country seeking advice.  He spent 10 days at Camp David talking to average Americans as well as economists, small town mayors, spiritual leaders, business leaders and others.  Then on July 15, 1979, Jimmy Carter addressed the nation in a way that did not pander.  He clearly explained where the country had been, where it currently was, and where it was headed.  He offered leadership on our emerging energy crisis and was widely ridiculed by the right, which dubbed his speech, The Malaise Speech.  If you haven’t read it recently, I highly recommend you do so now. 

Along comes Ronald Reagan who does pander to Americans by telling us we need not listen to the naysayers, those who profess gloom and doom.  Reagan sold himself as a conservative, but he was anything but.  From an article published in The American Conservative on September 8, 2008, Bacevich goes on to say:

…[B]eguilinghis fellow citizens with talk of “morning in America,” Reagan added to America’s civic religion two crucial beliefs: credit has no limits, and the bills will never come due. Balance the books, pay as you go, save for a rainy day—Reagan’s abrogation of these ancient bits of folk wisdom did as much to recast America’s moral constitution as did sex, drugs, and rock and roll….

During his inaugural address Reagan said all the right things about getting our collective house in order.  He once again promised “to check and reverse the growth of government.”  But did he?

Um, no.  Again, from Bacevich’s article:

…[d]uring the Carter years, the federal deficit had averaged $54.5 billion annually. During the Reagan era, deficits skyrocketed, averaging $210.6 billion over the course of Reagan’s two terms. Federal spending nearly doubled, from $590.9 billion in 1980 to $1.14 trillion in 1989. The federal government did not shrink. It grew, the bureaucracy swelling by nearly 5 percent….

American profligacy during the 1980s had a powerful effect on foreign policy. On one hand, Reagan’s willingness to spend without limit helped bring the Cold War to a peaceful conclusion. On the other, American habits of conspicuous consumption drew the U.S. ever more deeply into the vortex of the Islamic world, saddling an increasingly debt-ridden and energy-dependent nation with commitments it could neither shed nor sustain….

So here we are today wondering how we ended up in this mess.  Go read the rest of Bacevich’s article or watch his interview with Bill Moyers.  Then honestly ask yourself what you truly think is the most important American value to hold near and dear to your heart.  Is it unfettered consumption, or is it freedom from global tyranny caused by borrowing from would-be rogue nations.

We hold the answer to that question in our spending habits.  Counting on our government to make those decisions for us is childish and unproductive.

 

 

I.O.U.S.A.

Posted in Economy with tags , , on September 23, 2008 by gyma

[h/t Rainy Day Thoughts]

“I Gulped”

Posted in Economy, Politics with tags , on September 19, 2008 by gyma

Call me a cynic, but when I read this article on the Feds proposal for getting the country back on track, I immediately wondered whether the Feds are telling the truth, the whole truth, and nothing but the truth.

Remember when we were told the sky was falling and we would all be nuked by Hussein if we didn’t bomb them first?  Turned out not to be so.

Oh, then there was the passage of the Patriot Act.  Remember that?  No one had the time to actually read it, but we were all told it needed to be passed or we’d all die.

Well, I’m beginning to wonder now about this outrageous bailout after reading this:

[snip]

Sen. Charles Schumer, D-New York, said that when he heard what might happen to the economy if Congress failed to act, “I gulped.”

Missing from this article is a discussion about regulation or international cooperation.  Will the American taxpayer bear 100% of this burden?  Is John McCain still crowing about all those tax cuts for the same fat cats who created this meltdown?  Will anyone be held accountable?

It’s looking to me like this is just another CYA.  Yes this would have hurt Main Street if we allowed the market to do its thing, but you know what?  It would have hurt Wall Street much, much more.  And they deserved every bit of it and then some.

I’m disgusted.

WSJ Calls McCain Comments “Unpresidential”

Posted in Politics with tags , , on September 19, 2008 by gyma

Ouch.  Once you’ve lost the WSJ editorial board, can a Republican still get elected?

New Wave Of Home Foreclosures?

Posted in Money Matters with tags , , , on September 19, 2008 by gyma

Last week Bloomberg.com posted an article called “Alt-A Mortgages Next Risk for Housing Market as Defaults Surge.”

Alt-A mortgages were provided to individuals who had good credit ratings but couldn’t or didn’t want to provide income verification.  There are about 3 million borrowers with these type of mortgages, totaling $1 trillion worth of debt.

In same cases these were 3-year interest only loans starting at 6.25%.  Most people who took out these loans believed the housing market would continue rising and they would be able to sell before the rates reset at much higher rates (e.g., 10.6% and higher).

Of the 3 million borrowers with Alt-A mortgages, it is estimated that 70% of them overstated their income and could be in danger of defaulting.

Ugh.  Just go read the article so you see who the guilty banks are.  And make sure your bank balances are within the limits to be fully covered by FDIC.  If I had my primary checking account with Wachovia, I’d consider finding a new bank soon.  We do have an IRA with Wachovia but we can survive if we had to wait until the FDIC came through.