Posts Tagged ‘intervention’

The latest “good idea” to come out of DC regarding solving the housing crisis and credit crisis would be to allow a government fund to buy troubled mortgages from the banks.  Funding would be done jointly from Uncle Sam and Vulture/Hedge Funds.  Thus, rewarding those entities for taking the risk and effort to recover value and make fortunes on the backs of the troubled homeowners!!!!

No one is a bigger capitalist and supporter of the free markets than me, but the perversity of the ideas coming out of DC and celebrated by those still with cash is absurd.

A Wall Street Journal article this week indicated that these funds would by the mortgages at $0.05 to $0.20 on the dollar of “face value” thus putting a market value and theoretically some liquidity into a market that has had a dearth of players (folks willing to buy or sell at a mutually agreed upon price).  The thought is that by adding government dollars and some guarantees against loss to these vultures and speculators, that things would then get better for all!

This is inane!  Once again, the most aggressive investors/institutions will be treated as rolyalty and “protected” by those suffering under situations created to make money from them!

The best idea still and one that I have discussed in the past and will continue to support is the following:

Allow the borrowers to buy back their outstianding mortgages and outstanding credits at the same rate as Uncle Sam is proposing they be sold to Vultures.  Provide government financing and guarantees to allow the refinancing of the principal and accrued interest at “pennies on the dollar” to those suffering, with deferrals on payments until income levels have rebounded to facilitate repayment of the reduced amounts.

Why should the Government entice vultures to buy on the distress of the public, and then profit on their further distress?  Why not have the Government be the instrument for settlement of the sources of distress?  Why not have the individual families receive the benefit from their own recovery?  Reduce the levels of sources of profit to 3rd parties and institutions?  Foster a benevolent solution, rather than dumping the paper in the hands of vultures and collection agencies to further harass those facing hardship and eviction?

Enough raping of the populace by the Wall Street Titans and Banking Giants!!!  We have see that quarterly profits and earnings for shareholders rewarded by temporarily higher stock prices is a recipe for disaster!

A change is needed. A reason for hope!  Let us hope the new administration sees the light and makes positive things happen for our society!

Also check out http://alphainventions.com/ a great website for all new posts!

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Ge, which had for all intents and purposes closed down GE Capital, its finance division, in November, has finally announced layoffs.

Back in November, GE very quietly announced that it would not be doing any financing through GE Capital, except to only the highest rated credit risks. They completely killed their Senior Bank Lending programs, their Health Care Financing, their trade financing and reviewing of most new deals.

Their announcement came as a surprise to Wall Street investment bankers, who had come to rely on GE Capital as the leading source for Senior Bank Debt when doing M&A. With GE out of the market, hundreds of deals died on the table in the 4th quarter.

GE had inidicated they would review their position re GE Capital and new lending in the first quarter. They had made some remarks in a news release, but it was very unclear as to what steps they were taking.

With the layoffs announced today, comprising of 11,000 highly paid financial professionals (15% of the employees of GE Capital), GE’s intentions and expected operations are quite clear.

GE Capital, which had once generated approximately half of GE’s net income, will be no more as we knew it. Thus, GE’s earnings, as we knew them, will be no more.

The main questions that still exist have to do with the level of potential write-offs that exist on GE Capital’s balance sheet.

Also check out http://alphainventions.com/ a great website for all new posts!

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In his article, which you can read at http://www.forbes.com/manufacturing/forbes/2009/0202/031.html?story_url=http%3A%2F%2Fwww.forbes.com%2Fforbes%2F2009%2F0202%2F031.html&username=MoneyAssistant&email=dijana.howard%40gmail.com&title=General+Manager

you will note that he is very optimistic about the future of the industry. He firmly believes and I agree with him that 10-15 years from now, there will be more auto companies, rather than less. He believes that though the changes are traumatic, the ultimate outcome will be beneficial. The future industry will be stronger, more diverse, offer a greater variation of vehicle with various energy sources, and greater flexibility in environmental compatibility.

I agree, we have much to look forward to. After, we get through the current economic storms.

Citi yesterday agreed to “cramdowns” for resetting mortgage amounts and rates for troubled borrowers.

Politicians all across America declared that this was a breakthrough, etc.

One would not think it at all surprising though, given the $45 billion pumped into Citi by our great Uncle, and our Uncle’s willingness to absorb more than $300 billion of future Citi losses.

Socialism clearly has some benefits. With a tight leash (like Citi is on), the master can dictate many things.

It is amazing of late to watch the news wires and see the number of successful business people who are committing suicide due to the “Red Plague” and its economic chaos.

Yesterday, we read the Steven Good of the Sheldon Good Real Estate Auction house committed suicide.

The day before we read that Adolf Merckle, one of Germany’s wealthiest men, committed suicide as his business conglomerate began having finance problems brought on the the credit crisis and the global economic slow down.

There have been hedge fund managers in the US and England who have given up hope and have left their families, as well as Rene-Thierry Magon de la Villehuchet, a private investor and aristocrat who trusted Madoff with his family fortune and the fortunes of his clients.

All these men have been successful, powerful, professionals with years of experience, as well as diverse skill sets.

The question is “Is the situation so dire as there is no escape, no hope, no solution?” We should hope and pray not.

If these men, at apexes in their careers and industries, have no hope, what about you and me? What about those folks being forced from their homes? The unemployed, the folks with credit way over their heads, the people whose life is more of a daily struggle than a “success story”.

Each should be thankful. Irregardless of how dire seems appear, there are always solutions, answers and ways of resolving things, without “escaping to the next world”.

This will get better, they always do. This time is no different in that regard. There will be opportunities ahead. Staying alive is important to future success!

Today’s Wall Street Journal had a small article buried within the paper which once again demonstrated how screwed up our American Government/Financial Systems are.

See http://online.wsj.com/article/SB123094029211850265.html

Fannie Mae announced on Monday that it is raising its fees to lenders for guaranteeing or buying certain mortgages. The article notes that the fees will increase to 3.25% of the loan amounts after April 1st, from the current 1.25%.

At a time when our Federal government is spending billions to buy up mortgage paper with the effect of lowering market rates for conforming mortgages, the two agencies now under conservatorship have the gaul to raise the fees. This has the same impact of adding 2 points to a mortgage or stepping the rates back up.

The Federal Housing Agency spokesperson has stated that they will review the public’s objections to the rate increase.

Crazy, but believable…………… Help us Barney Frank!!!!


Congrats to Chip for taking such a dire subject and injecting a sense of humor and a bit of hope.

From our perspective at MoneyAssistant.org there is a ton of pain ahead. In addition to expected spikes in unemployment and further underemployment, tightened credit and higher interest rates, and expected deficits at all levels of government, housing and other asset values are continuing lower.

With an expected $2 trillion of consumer debt defaults over the coming year, many of us will either be in various modes of workouts with our lenders, creditors and governments.

There is much to fear out there in the business community. This is evidenced by continued severe tightness of credit markets, recent bond issues by some fairly solid companies at rates between 13% and 16%, the bond markets pricing in default levels of 12%+ (more than 1 in 10 large companies are expected to go bust), and corporate valuations that are at 60% of values just 12 months back.

Thankfully, Uncle Sam has put bailouts, restructurings, recapitalizations, and HOPE into the current language of our economic chaos (I refer to it as the Red Plague.) If they will expand the circle from Wall Street, Banks, Detroit, to include Main Street and its small businesses and the consumers/homeowners, we may all survive and be in better shape at the end of this ordeal.

See https://guruatmoneyassistant.wordpress.com for additional comments and thoughts.
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Read the Article at HuffingtonPost


Great article.
Lots of risk and parallels, but fortunately (hopefully) different due to FDIC protection of depositors and fast government intervention.

See additional thoughts at https://guruatmoneyassistant.wordpress.com
Read the Article at HuffingtonPost

Two Wall Street Journal columns jump from their website today.
After Dow’s Collapse, Guarded Hope

After the U.S. stock market’s third-worst year in more than a century, many investors are hoping for a turnaround in 2009. But considering the pain that has continued for more than a year, they are reluctant to bet on it.

Stimulus Versus Recession

The U.S. is preparing massive efforts to battle the twin threats of deep recession and deflation in 2009. The results will affect the investment climate for years to come.

These two observations are right on target, but the impact and implications so grand, that the folks at the WSJ should be shouting from the building tops in Manhattan, Greenwich, The Hamptons, and DC.

First, it should not be understated but the International Monetary Fund had estimated financial security losses in the range of $1.4 trillion as of this past October. To date, US institutions have only written off less than $800 billion! The IMF estimates were before the $50 billion evaporation of Madoff assets and the severe financial market declines of late October and November.

Additionally, there have been several estimates in the area of $2 trillion for the total losses to be expected by the inability of the “two pillars” of homeowners/credit users and small businesses to obtain any lifelines quickly and without “strings” of steel to further sink them. The lifelines are not appearing on Uncle Sam’s drawing boards at the moment, which means that we should not count on them in the near future. Uh, oh!!

Current LIBOR based mortgage rates are in the area of 2.25% currently for up to $2 million!!! The rates are less than the average yield of a local CD for a few months. Fixed rate conforming mortgages are at less than 5% for 30 years. We can expect mortgage rates to further decline as the Fed continues to intervene in the market for Fannie and Freddie securities. (They have billions of $ in their pockets to manipulate the market and lower the rates further.) Unfortunately, other than the variable LIBOR loans, jumbo fixed mortgages are still in the range of 8% or so. Because the government is ignoring this sector of the market, there has been only increases in the rates as the riskiness of the credits have increased.

Banks are demanding more collateral, rather than less. In a time of declining asset values, with collateral worth less, fewer and fewer are able to meet the stricter lending requirements. Where is Super Paulson and our Hero Bernacke when we need them???????? Will HOPE and CHANGE help? Or should we turn to God as our only salvation?

Today’s WSJ made the analogy of an individual escaping from a very painful marriage. The journalist stated that this individual would be very likely to resist remarrying. The journalist paralleled the experience to a stock investor during 2008 and their fear of buying stocks in 2009. I thought this very appropriate.

In a world of great interconnection, with great uncertainties, the need for faith and confidence in systems and governments, unified and coordinated efforts are crucial. Given all we have seen from our government over the past year and years, can we have confidence? Should we have hope?

Given the way America has been raped and brutalized by Wall Street, can we have faith in the Heroes of Capitalism to save us?

Please share your thoughts and ideas………

According to a press release, “The Federation of Small Businesses is . . . calling on the Government, the banks, local councils and consumers to play their part during the year by providing support to small businesses in fighting regulation, accessing finance and maintaining cash flow to buck the increasing trend of business closures.”

The Federation for Small Businesses needs to do more than just issue a press release.

The government has financed the banks, protected Wall Street and back stopped the auto industry, but government and our political and financial leaders have ignored the needs and potential catastrophic impact of the small business failure.

Limiting interest rates is just one limited step. Encouraging banks to lend, promoting a major SBA program similar to “HOPE for Homes”, encouraging lenders to extend credit rather than reduce amounts available, are but a few of the many steps they could take.

The FSB is to be commended, but at the same time must call upon the communities across the US to mobilize and lobby Uncle Sam to work to protect our small businesses, their employees, and the core of the American Economy.

As a small business owner suffering from a reduction in income levels due to the recession, I am very familiar with the shortage of credit for small businesses. It impacts the small businesses directly, as credit cards and other signature loans are their liquidity lifeblood. Also, customers and clients rely on credit to purchase services and products and with credit levels being reduced and credit needs not being fulfilled, consumption and purchase levels are down significantly.

Much comes back to the Federal Government and their missteps regarding the TARP and providing capital to our banks. One would think that the government bailout would have helped the small businesses indirectly, but then again, nothing has been as “one would have thought” over the past 6 months.

Today’s Wall Street Journal cites the anticipation of looming “mortgage cram-downs”, as a result of the failure of government’s steps to cease the increase in foreclosures.

The article notes that there are 7.5 million homes underwater currently and that foreclosures are expected to exceed 8.1 million over the next four years!!!! It also notes that Congress was hoping to help 400,000 homeowners through its latest program, “Hope for Homeowners”, but only 357 have applied for the program to date.

Sounds like one of the pillars we discussed yesterday on this blog is still not being secured!!! Unless action is taken, we will see the Red Plague sweep the homeowners and consumers downriver, like the banks and Wall Street firms were washed away this past year.

Unfortunately, the free market and refinancing will not solve the liquidity crunch paralyzing the homeowner/consumer pillar and the small business pillar.

Some insight and real hope are desperately needed. And fast!

Now that the government has bailed out Wall Street, the Banks, the insurance companies, the auto makers, and countless others, the real question is “Is it enough?” What needs to be done to get our economy back on track? Are we on the verge of being “back on track”?

The latest Forbes magazine refers to the “Depression on the Fourth Quarter” and is cautiously optimistic about improvements possibly already underway. They refer to their Chirps Index and are hopeful.

See http://www.forbes.com/forbes/2009/0112/037.html

The index referred to above is a great index. Its optimism is refreshing and encouraging. We all hope that things get better from here.

After all the government assistance and economic support, there are two pillars of our economy which are still faltering. One pillar is comprised of the over-leveraged homeowners and consumers who have no option to refi their mortgages at today’s attractive rates due to excessive declines in the values of their homes or in their credit scores.

The other pillar that has seen no support from political or economic leadership is the small business owners. Millions of small businesses were decimated in the Mini Depression of the 4th Q, due to revenue fall offs of 10-90% and the drawing down or elimination of available credit by those “saved” by Uncle Sam. Many of these millions of small businesses, employing between 1 and 10 employees are on the verge of closing their doors, filing personal and corporate bankruptcy and becoming wards of the economic state. As the US economy and its economic growth over the past 20 years has been powered by our small businesses, their mass genocide due to the economic environment will be costly and painful.

There is an estimated $2 trillion of potential defaults and write-offs that could result from further deterioration of the remaining two pillars.

Hopefully, new leadership in DC will force the hand of the beneficiaries of the government’s handouts and cheap money to assist (1) the homeowners and consumers and (2)the small businesses of America.

If these two pillars falter then the “Chirps” the new index is hearing are just echoes of chirps from the past.

With credit lines continuing to be cut, banks not negotiating outstanding loans, and new loans only being extended to those who do not need the money, there is but ONE QUESTION: WHERE IS THE MONEY?

How can $340 billion have not have any impact? How can Paulson and Congress let the greed of the banks and institutions destroy whatever remaining confidence Americans had in the government?

As Dr. Michael Savage has said, the US has just witnessed the greatest legal theft of $340 billion in the history of the world. The only beneficiaries have been the creditors, shareholders and CEOs of those institutions receiving the $. Please show me examples of the Americans and Main Street who have benefited!!!!!!!!!!!!

Paulson, Bernacke, Bush and our favorites Pelosi, Reid, and VP Cheney are all to be blamed. The should be held accountable for the fraud they have perpetuated on the American Taxpayers. We have been duped.

Those without jobs, those who have lost and will lose their jobs and credit, will pay. Pelosi, Reid, Cheney, Bush, Bernacke and Paulson can continue to dance all day until the sun sets and beyond, while we all suffer from the Red Plague they have contributed in spreading!!!!!!!!!!!!!!!

Tell me your thoughts…………

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Yesterday’s Wall Street Journal reported that the number of miles driven in America had fallen by 8.9 billion miles or 3.5% in October 2008 versus October 2007.  The Department of Transportation reported that this was the largest decline for the month of October since 1971.  They noted that this decline came despite the fact that gas prices have declined from above $4 per gallon to less than $2 over the past 4 months.

The Federal Tramsportation Secretary, Ms. Mary Peters, was quoted as follows:  “The fact that the trend persists even as gas prices are dropping confrims that American’s traveling habits are fundamentally changing.”

What??????????? Since when do a few months when the world is in a state of economic and social chaos make a “trend”?  What about other factors besides “Americans’ Passion to Drive”?

Does Ms. Peters know and understand that unemployment levels across the country are tremendously elevated?  Has she read or heard anywhere that many hundreds of thousands and more are threateden with job loss?  Has she been informed by her brilliant staff that the volume of new car purchased have crashed?  That the equivalent of more than 2 million cars are being retired off of the American roads?

Has she heard the pundits and “talking morons” saying “The American People have voted.  And, they have voted they do not want GM, Ford and Chrysler vehicles?”

Has she thought about the connection between consumer credit and vehicle usage, whether for personal enjoyment purposes, business travel, or shopping?  With available credit lines being reduced cumulatively by hundreds of billions of dollars and interest rates on cards rising to up to 35% per year, might these things have an impact on driving patterns?

Would one (with any clue) conclude that with all these changes going on in the economic and cultural climate, that the use of one’s car and the miles driven may be impacted?  Would one consider these changes permanent (which in my mind is defined as “set forever”)?

I think not.  But then again, I am not in DC and nor am I a “leader”.

Maybe President-Elect Obama will select his DC Leaders based on intellect, ability, reading comprehension, and their understanding of the area they are to oversee?  Would that be asking too much?  Might that have a positive influence on the future of America?

May God help us!

There are some out there who have said, “The American people have spoken, and they have said they do not like GM, Chrysler and Ford autos.”

It is absolutely more accurate to say, “The American people have spoken, and during the past three months demand for new cars has dropped, like a rock.”

The current run rate of new car purchases calculates to the annual removal from the road of approximately 2 million cars per year.  This is the first time that there has been a net decline in autos on the road in the history of the auto!

America has run out of credit.  America has run out of cash.  America is unemployed.

The 2 million car number is very close to the 1.9 million of newly unemployed workers since the start of the year.

Mystery?

If 1.9 million less people are going to work each day, how many less cars are needed?

Please share your thoughts and comments…..

The biggest banks that have received the biggest free giveaway of American taxpayers’ wealth, are now stealing the life blood of every household and the economy and our government is either blessing the theft or ignoring it.  The Red Plague of losses, illiquidity and falling values and prices continues.

Traditionally, interest rates on credit cards were competitive and set based on one’s credit ability, payment history, and market rates.  Today, credit card companies are bumping their rates up to 30+% because they want to.  This is in the face of the 10 year Treasury bond below 3% and the billions in free dollars they have received to stimulate the economy from our dear Uncle Sam.

At these rates, the amounts due will double over less than 3 years. These rates are userious, abusive and immoral.  But, Mz. Nancy and Mr. B Frank ignore the issue.  This is an issue that can not be ignored.

If outragious mortgages are reset, foreclosures abayed, and homeprices attempted to be stabilized to protect the American citizens’ balance sheets and financial solvency, the system will collapse around the explodign levels of consumer debt.

The average American with outstanding balances will get eaten in userious rates and ensuing fees.  Bankruptcy and further financial chaos of the American financial system, banks, Wall Street and Main Street can not be too much further behind.

God help America from the Death Wish of America’s Financial System and Greed (and the Blindness and Ignorance of the regulators tasked with protecting us)!!!!

The biggest banks that have received the biggest free giveaway of American taxpayers’ wealth, are now stealing the life blood of every household and the economy and our government is either blessing the theft or ignoring it.  The Red Plague of losses, illiquidity and falling values and prices continues.

Traditionally, interest rates on credit cards were competitive and set based on one’s credit ability, payment history, and market rates.  Today, credit card companies are bumping their rates up to 30+% because they want to.  This is in the face of the 10 year Treasury bond below 3% and the billions in free dollars they have received to stimulate the economy from our dear Uncle Sam.

At these rates, the amounts due will double over less than 3 years. These rates are userious, abusive and immoral.  But, Mz. Nancy and Mr. B Frank ignore the issue.  This is an issue that can not be ignored.

If outragious mortgages are reset, foreclosures abayed, and homeprices attempted to be stabilized to protect the American citizens’ balance sheets and financial solvency, the system will collapse around the explodign levels of consumer debt.

The average American with outstanding balances will get eaten in userious rates and ensuing fees.  Bankruptcy and further financial chaos of the American financial system, banks, Wall Street and Main Street can not be too much further behind.

God help America from the Death Wish of America’s Financial System and Greed (and the Blindness and Ignorance of the regulators tasked with protecting us)!!!!

Remember hearing that our brains have 100 billion neurons when we are born, and that with every glass of wine or cigarette we kill 10,000?  Didn’t 100 billion sound like an amazing amount?  I always wondered how I could have 100 billion connections inside my little brain……

I just participated in a discussion with a leading neurologist who cited the 100 billion number.  The first thought that came to my mind when I heard him say it, was “huh, 100 billion is not so much.”  I then thought, if 100 billion is not so many, what would be an amazing number?  700 billion, 800 billion, 1 trillion??????????

When our dear Uncle Sam can throw around 35 billion $, or 350 billion $, or 700 billion $, or another 800 billion $, is it really not such an amazing number?

How our perspectives have changed!!!! When 100 billion is no longer an impressively large number, and our US deficit for 2009 may well be $2 trillion!!!

I am thrilled to be up and running with this blog. The US economy is shuddering to a trickle, the markets are continuing to fall, house values are moving lower still, and foreclosures and bankruptcies are skyrocketing. There are new and major layoffs announced each day. And, our government, including the Treasury, Federal Reserve and SEC, continue to make the situation worse rather than better.

The failure for the government to intervene consistently scares the hell out of me. I am not for intervention, but we are in such a bind, intervention is the only hope.

I will be blogging regularly on the tough financial situations so many are facing, sharing ideas and suggestions, and recommendations.

Our website, http://www.moneyassistant.org, is not fully operational, but will be within the next few days. It will be a resource for those facing challenges, including small businesses and families, and also be a place to find opportunity to find solutions. We will attract investors and lenders and others seeking solid profits on their investments.

The first iteration will be a work in progress. We ask for your patience, understanding and feedback.

Given the number of friends I have in dire situations, I am hoping that my comments and work is beneficial and helpful.

Good luck to us all!
God Bless.