Rants and Raves

Just as the trucking industry tells us that delivery volume has been steadily increasing since the beginning of the years; retailers tell us that consumers are beginning to spend less.

And the Commerce Department announced that the recession was deeper than previously estimated.

Who’s doing the estimates?

Anyone with any sense knew the economy was in bad shape, and that it would likely take a number of years before there was any real improvement, and potentially a decade before we truly recovered.

You have to ask yourself are the people in Washington DC and on Wall Street stupid — or do they just think the American public are so stupid they will believe anything?

Personally I feel this is a catastrophic event in World history that requires leadership to acknowledge it’s severity and begin making long term plans for recovery while creating short term safety nets to keep society afloat.

Just one more sign that anyone who’s been in office in this country isn’t part of the solution — they’re part of the problem.

INCUMBENTS

Tags: Economy by roger
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The Fed is telling us that we’re on the road to recovery… that economic activity improved across all 12 regions tracked, and have reminded us that the last time all regions were in a growth mode was prior to December 2007.  Remember, though, the Fed told us all several months ago that economic activity improved in all regions except for St Louis (which was marginal).

The Fed chairman was upbeat in a report to congress that the economy is likely to expand, though slowly – and we needed to be weary of the European debt crisis (and slipped in warnings about high unemployment and a fragile housing market here at home).

But we’re also told by the Labor Department that job openings in April rose to the highest level in 16 month to 3.1 million (from 2.8 million in March).  Remember, these are openings advertised, not necessarily openings filled… and even with those statistics there are 5 unemployed people for each job opening.

I think it’s great to paint a positive picture — but I also think it’s important to keep people well grounded in the reality that the economic down turn is far from over; and while the Fed might like to encourage increased spending to speed a recovery — that’s more of a chicken-and-egg problem than they’re willing to admit… after all nearly 20% of this country is unemployed (though the government clever fuzzy math makes that number out to be much lower), and most of those people aren’t independently wealthy!

Tags: Economy, Finance, History by roger
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Thus far the collapse of the US housing market and [near] failure of Frannie Mae and Freddie Mac have cost US tax payers $145B… and it’s far from over.

The New York Stock Exchange have announced that the two companies will be delisted from the exchange next month (the stocks had been trading at the $1 per share mark — the minimum threshold to remain on the exchange — for over two years (since before the federal government took control of the companies).

The Federal Housing Finance Agency states that the delisting “does not constitute any reflection on either [company's] current performance or future direction.”

Right…

Fannie and Freddie were created by an act of Congress decades ago… as private companies.  They buy mortgages from banks, re-sell them to investors, and guarantee to pay off the loans if borrowers default.

And, of course, for the last decade they’ve been buying junk mortgages that banks irresponsibly made to people who couldn’t possible afford them on vastly over-valued property.

Of course, the bank’s weren’t the losers; the shareholders of Fannie Mae and Freddie Mac largely lost their proverbial shirts — but the tax payers bailed out the banks (and continue to fund Fannie and Freddie — and they continue to lose money).

Congress will have to decide how to handle this mess.  A GAO report last fall included these points.

1. Create a government agency to buy mortgages and re-sell them to investors. This would eliminate the profit motive that, some critics say, drove Fannie and Freddie to take the risks that led to their demise. It would also continue to subsidize the mortgage market, making it easier for Americans to buy homes. On the other hand, the government would still be putting lots of taxpayer money at risk to subsidize the housing market.
2. Reconstitute Fannie and Freddie as government-sponsored enterprises, similar to the way they were before. This might be accompanied by new rules limiting the risks the companies can take. Still, this would bring back the problematic ambiguities of having private, government-sponsored companies.
3. Dramatically reduce the government’s role in the mortgage business. In this model, there would essentially be no replacement for Fannie and Freddie. But the government might still take some role, such as selling insurance to cover mortgage default. This would reduce (but not eliminate) the risk to taxpayers, but it might also make it more difficult for people to get mortgages.

Tags: Economy, Finance, Housing, Politics by roger
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I’ve often said that the one fundamental human trait that Karl Marx always failed to consider when he talked about socialism was the intense greed that drive most humans.

Greed, the failing of socialism, is largely the driving force that makes capitalism work.

The United States doesn’t have a totally free market economy; the government regulates many aspects of businesses — perhaps it shouldn’t or perhaps it should regulate more — there’s always a good argument on both sides.

Maybe it’s time that the United States government regulated businesses by exactly the same set of laws that it regulates individuals by.

Giving corporations the exact same rights and privileges, and subjecting them to the exact same legal and tax structure.

Powerful corporations have too long tried to manipulate society and government to satisfy their greed, and such manipulation in the long run puts an undo burden on society.

I see few alternatives for our society to grow and flourish.

Since humans will likely never be able to build a Utopian society, socialism (or any system like it) is not an option… since the powerful (and rich) will it seems always try and manipulate society to satisfy their own selfish greed we cannot depend on them “to do what’s right”.

How then do we build a society that will last and continue to grow?

Level the playing field — through insuring that one tenant of socialism lives on: from each according to their ability (where in this case, ability is wealth).

Long ago when I was much more idealistic I felt that the progressive tax system the United States uses was wrong…

Now I believe that a progressive tax system, with no deductions, treating all individuals and all corporations equally might be the absolute best solution.

Corporations will scream that their profits will suffer — but in the end greedy corporations will pass along those costs to individuals… the ones what will suffer will be the very rich… they will start paying their fair share (those who profit from society should bear a much larger portion of the costs of propagating it).

I’d prefer a better solution, but until humankind changes, we have to deal with realistic solutions to real problems.

Tags: Economy, Finance, History, Politics by roger
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With the bailout of Fannie Mae and Freddie Mac continuing to drain tax coffers, the first quarter 2010 reported a substantial increase in home owners who missed at least one mortgage payment.

Below are three articles by The Associated Press (with complete links to NPR).

The number of homeowners who missed at least one mortgage payment surged to a record in the first quarter of the year, a sign that the foreclosure crisis is far from over.

More than 10 percent of homeowners had missed at least one mortgage payment in the January-March period, the Mortgage Bankers Association said Wednesday. That number was up from 9.5 percent in the fourth quarter of last year and 9.1 percent a year earlier.

Those figures are adjusted for seasonal factors. For example, heating bills and holiday expenses tend to push up mortgage delinquencies near the end of the year. Many of those borrowers become current on their loans again by spring.

Without adjusting for seasonal factors, the delinquency numbers dropped, as they normally do from the winter to spring.

More than 4.6 percent of homeowners were in foreclosure, also a record. But that number, which is not adjusted for seasonal factors, was up only slightly from the end of last year.

Stocks slid Wednesday as investors remain concerned with the European debt crisis. The rising number of mortgages also drew some attention. The Dow Jones industrial average fell more than 160 points in early trading.

Jay Brinkmann, the trade group’s chief economist, said the foreclosure crisis appears to have stabilized. Seasonal adjustments may be exaggerating the change from the previous quarter, he added.

“I don’t see signs now that it’s getting worse, but it’s going to take a while,” he said. “A bad situation that’s not getting worse is still bad.”

The number of American homeowners who have missed at least three months of payments or are in foreclosure has surged to around 4.3 million, Brinkmann estimated.

The Obama administration’s $75 billion foreclosure prevention program has barely dented the problem. More than 299,000 homeowners had received permanent loan modifications as of last month. That’s about 25 percent of the 1.2 million who started the program since its March 2009 launch.

About 277,000 homeowners, or 23 percent of those enrolled, have dropped out during a trial phase that lasts at least three months.

Economic woes, such as unemployment or reduced income, are the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. But homeowners with good credit who took out conventional, fixed-rate loans are now the fastest growing group of foreclosures.

Those borrowers made up nearly 37 percent of new foreclosures in the first quarter of the year, up from 29 percent a year earlier.

The risky subprime adjustable-rate loans that kicked off the foreclosure crisis are making up a smaller share of new foreclosures. They made up 14 percent of new foreclosures in the January-March period, down from 27 percent a year earlier.

Fannie Mae has again asked taxpayers for more money after reporting a first-quarter loss of more than $13 billion.

The mortgage finance company, which was rescued by the government in September 2008, said it needs an additional $8.4 billion from the government to help cover mounting losses.

Fannie Mae says it lost $13.1 billion, or $2.29 per share, in the January-March period. That takes into account $1.5 billion in dividends paid to the Treasury Department. It compares with a loss of $23.2 billion, or $4.09 a share, in the year-ago period.

The rescue of Fannie Mae and sister company Freddie Mac is turning out to be one of the most expensive aftereffects of the financial meltdown. The new request for aid will bring Fannie Mae’s total to $83.6 billion. The total bill for the duo will now be nearly $145 billion.

Late last year, the Obama administration pledged to cover unlimited losses through 2012 for Freddie and Fannie, lifting an earlier cap of $400 billion.

Fannie and Freddie play a vital role in the mortgage market by purchasing mortgages from lenders and selling them to investors. Together the pair own or guarantee almost 31 million home loans worth about $5.5 trillion. That’s about half of all mortgages.

The two companies, however, loosened their lending standards for borrowers during the real estate boom and are reeling from the consequences.

With the housing market still on shaky ground, Obama administration officials say it is still too early to draft any proposals to reform the two companies or the broader housing finance system.

But Republicans argue the sweeping financial overhaul currently before Congress is incomplete without a plan for Fannie and Freddie. They propose transforming Fannie and Freddie into private companies with no government subsidies, or shutting them down completely.

The legislation “touches nearly every corner of the economy,” Alabama Sen. Richard Shelby said in the GOP weekly radio and Internet address over the weekend. “But these major contributors to the crisis are left unscathed,” he added, singling out Fannie Mae and Freddie Mac.

Freddie Mac is asking for $10.6 billion in additional federal aid after posting a big loss in the first three months of the year. It’s another sign that the taxpayer bill for stabilizing the housing market will keep mounting.

The McLean, Va.-based mortgage finance company has been effectively owned by the government after nearly collapsing in September 2008. The new request will bring the total tab for rescuing Freddie Mac to $61.3 billion.

Freddie Mac said Wednesday it lost $8 billion, or $2.45 a share, in the January-March period. That takes into account $1.3 billion in dividends paid to the Treasury Department. It compares with a loss of $10.4 billion, or $3.18 a share, in the first quarter last year.

The company, however, cautioned that new accounting standards make it difficult to compare the most recent quarter with the year-ago period. In the first quarter of this year, Freddie Mac was forced to bring $1.5 trillion in assets and liabilities onto its balance sheet, causing the company’s net worth to plunge by $11.7 billion.

Nevertheless, the company’s CEO Charles Haldeman said, “We are seeing some signs of stabilization in the housing market, including house prices and sales in some key geographic areas.”

He cautioned, though, that the housing market “remains fragile with historically high delinquency and foreclosure levels, and high unemployment among the key risks.”

Created by Congress, Freddie Mac and sibling company Fannie Mae buy mortgages from lenders and package them into bonds that are resold to global investors. As the housing bubble burst, they were unable to raise enough money to stay afloat, and the government effectively nationalized them.

Freddie’s new request will bring the total taxpayer tab for both companies to about $126 billion.

With the housing market still on shaky ground, Obama administration officials argue that it is still too early to draft any proposals to reform the two companies or the broader housing finance system.

But Republicans argue that the sweeping financial overhaul currently before Congress is incomplete without a plan for Fannie and Freddie. Senate Republicans propose transforming Fannie and Freddie into private companies with no government subsidies, or to shut them down completely.

Tags: Economy, Finance, History, Politics by roger
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I’ve seen a number of initiatives from Boeing that are targeted at trying to get a US DOD contract for supplying tankers to the US Air Force.

I don’t think there’s anything wrong with Boeing as a potential supplier for tankers (though I would like everyone to review why we need to build tankers period); but Boeing seems to be forgetting that with government contracts, it’s the lowest bidder who wins.

Boeing talks about American jobs, know-how, unfair competition from Air Bus (well, Boeing probably thinks any competition is unfair)… but they don’t highlight the fact that they simply aren’t competitive.

Welfare capitalism to large is just another form of socialism — and part of the “trickle down” philosophy (the question is how much get’s skimmed of with huge executive bonuses and how much really does trickle down).

We need to think global; and keep moving forward to creating a global economy and global society rather than trying to make sure the grass in our own yard stays the greenest (of course we can talk about this on a state-by-state basis just as easily as a nation-by-nation basis).

I say, the the low bidder win; and let’s make sure that the defense budget is treated with the same scrutiny and cuts that other budgets are — waste is waste, and “saving” our troops (who were put in danger by a lie by George W) just isn’t a reasonable excuse to keep spending on destruction.

Tags: Economy, Politics by roger
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No, not Rowe vs Wade (but I’m sure I’ll have a rant on that if the current court hears a case that could reverse that land mark decision)… but Result Only Work Environment; essentially a version of “Flex Time” that is focused on increasing productivity by avoiding “presenteeism” (where someone is physically in the office, but mentally somewhere else).

You can read about an article on NPR about the Human Services and Public Health Department of Hennepin County (Minneapolis, MN).

The End Of 9-To-5: When Work Time Is Anytime

Tags: Economy, History, Politics by roger
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Paul Volcker for years has been adamant that banks should not be allowed to use federally insured money to gamble on the market.

Hard to deny that we need to make changes in the way Wall Street and Big Banking does business; remember, we’ve done nothing but bail them out and allow them to make record profits using tax payer money.

I personally believe the right solution is to tax big banking and to make it more profitable for them to break up into smaller (more easily regulated) business units.  This would also make small banks and credit unions much more capable of competing as well as prevent an economic collapse when one or two banks make bad investment decisions.

Tags: Economy, Finance by roger
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Yesterday Apple announced another record quarter in sales.  In fact, iPhone sales doubled in Q4 2009 (a good holiday present for Apple).

Tomorrow Apples announces a new tablet computer (at least that’s the rumor of what they will announce).

Google has a lot of ground to catch up with Apple in the phone market, and it certainly doesn’t appear that Apple is going to just stand by and wait for them.

I guess the one thing that Apples numbers show is that there is money to be made in economic hard times if you’ve got something people want.

Tags: Cellular, Communications, Computers, Economy, Hardware, Software, Technology by roger
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Obama may propose a discretionary spending freeze for three years.

Hopefully he’ll fully define what discretionary means; I remember the budget surplus (you know, “extra” money when the country had a trillion dollar debt) so I don’t make any assumptions what politicians in Washington mean by any term that they don’t have a clear track record using.

Of course, he’s already exempted the departments of Defense, Homeland Security, and Veterans Affairs (sound like he’s playing to the political right) from the freezes.

I think it’s great to implement “new” ideas to reign in government spending — of course I’d like to see some the “old” ideas (you know — those campaign promises Obama made that got him elected) implemented.

In the back of my mind I see this a yet another failure looming for the Obama presidency.

Tags: Economy, Politics by roger
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