We are getting together small items to donate to the Trenton Area Soup Kitchen....aside from meals, they also offer their clients "hygiene bags", which can be a real god send.

So, we're keeping our eyes peeled for hotel sized soaps, shampoos, etc. wash clothes, razors, and lotions.

Sound like its time to start a drive...

After three decades of social austerity, is there anyone else who finds the whole bail out mess distasteful?

I mean seriously---our Government has had no trouble for over two decades cutting back on social spending---why when it comes to "Business" do all the rules change? For a long time, the government practiced "oversight"---that meant someone was ALWAYS watching, in case some corporate whiz kid got the idea to make a little profit in a not very legal fashion.

Business bleated. Business moaned.

Business convinced Government that since it wasn't a business, it shouldm't be interfering with business. Soon they demanded an easing, then a erasure of any Government regulation...which of course included oversight. They even hinted that the citizens would be better off investing their own Social Security funds...in...you guessed it...BUSINESS.

 

But this one beats all.

Imagine an adult child going to a parent, and calmly explaining that they are in a bit of a pinch. See, they went to Vegas the weekend before. And they maxed out not only all their cards, and credit...well Dad...I sort of took YOURS along too. And While I was at it, I double mortgaged your house. The good news is that I couldn't get ALL your money...and now I need the rest. But I don't want you hassleing me...or giving me any lectures or hard times about it. Just hand over the check, and I won't be mad at you for assuming I am not really an adult...

I didn't REALLY read something that said they expect the "loan" to come unencumbered---no oversight? Because Government doesn't understand business...and shouldn't  try to. Am I the only one who thinks this sounds a lot like a balky teenager? And maybe I don't WANT to just hand over the money until I am reasonably sure those ding dongs are not going to simply piss it away? Maybe I need something in writing that says if do this, no American jobs will be at risk for a year or more? That means no layoffs, no down sizing---no cutting the rank and file to fatten the bottom line.

And don't tell me those morons will be compensated for making this mess.

Not one bloody word about "golden parachutes", or "defered compensation". In real life, when you screw up you can get fired. No one who did this grand a scale of fuck up should be able to walk off whistling...are you listerning DC?  Y'all better be kicking butt, and taking names...and better yet, LET the chips fall where they may. The conservatives are forever bitching about "throwing money after every problem:" and what a terrible practice that is. Well guys...for once I am agreeing with you. We absolutely should NOT throw money at this one.

And yes, I get that if we don't bad stuff will happen. But you can't promise that it won't happen anyway if we do this...and I am thinking of all the people 700 BILLION dollars could feed and care for if the chit hits the fan....which I am expecting any time soon. My concern is that we will have spent it ALL trying to prop up this sagging economy...and when we are facing economic depression, we won't even have breadlines...bad move.

 

And do NOT tell me that Business knows what to do. If they did, they would not be drowning in the sea of red ink that caused this meshagas....Corporate America bought itself one HELL of a high end  house...but the mortgage was an  ARM, and no we're expected to pay for the house warming party.

 

The answer to that is not just no...but FUCK no.

I offer them the advice they offered to the lower middle class when the sub prime first started showing up..."Learn to live within your means guys...you're supposed to be adults."

 

 

 

If you read back , I seem to have a distressing knack for calling things long before the news mags and experts ever mention them. I'm not brilliant. I am not actually psychic...but...I pay attention, and I call 'em as I 'em.

When I saw people living on triple what used to be "comfortable" in terms of credit card debt, I asked aloud if that was such a swift idea.

When houses locally were selling for twice, even three times what they were worth, I knew that was crazy...and unsustainable.

When people tapped their home equity during the inflated markets, I questioned the wisdom of short term fixes.

And when everyone else had gone to Wall Street, dreaming of a golden future, I remembered when I was kid...and the Dow Jones was reckoned in the hundreds...not the tens of thousands.

There were differences then.

We had regulations on banks, and investments that had been in place since the Great Depression, specifically to prevent monetary collapse.  The Economy itself was also different...someone could work in a factory, and still afford a house. But all that changed. We became a "service" economy, and suddenly the jobs were "outsourced".Wall Street was urged to become more "world class", like the insanity of Hong Kong. There was even a call to allow people to invest their social security benefits in the stock market, where the returns were much more significant.

Fast Forward to the last year.
Bear Sterns.
Merrill Lynch.
And now Lehman Brothers.

We're talking names people trusted...and certainly there was money to be made. But as surely there was money to be LOST. I was reading an article about the lead man over at Bear Stern who said they HAD to write bad paper...because if they didn't. someone WOULD. And the investors were demanding higher returns. To my mind, that's like a Tibetan Monk demanding world peace...a nice idea, but not gonna happen.What he doesn't mention is that we've been artificially stimulating Wall Street for well over a decade. How?

It went like this. Wall Street would have a bad day---and a call would go up for the Fed to cut the "prime rate". That's the money that our government loans to business, and the interest rate they charge.

Only for the last few years, the prime rate had been much lower than the interest we paid to make the loan. Think of it this way...we borrowed billions of dollars at 10 percent interest...then LOANED it to business to "stimulate the economy...at 3 percent. (The numbers are speculative---but the general idea is accurate...we're making loans for a lot less than it costs us. That's anything but sound business...but we did it. ) This is what led to business making dumb ass decisions with their own investments. Why NOT?

The Sub Prime mess is something a stone blind person could have seen a MILE off.  The same year they loosened the regs on Wall Street, they came up with a Program That Wasn't. The idea was to put home ownership within the reach of the lower middle class, without costing anything to the feds. So they came up with what the industry would come to refer to as "Liar Loans", or "no document mortgages." You could get one without proof of income...just sign here.

Now the banks and mortgage companies knew they were worthless loans---so they charged the highest rates possible for them, hoping to max out their return before the loan defaulted. THEN, they sold the loan as "an investment opportunity". If the loan customer kept current, the investors made money...sometimes a lot of it.  Of not...well...do the math. They lost.

Funny...I've read of pyramid schemes, and Ponzi schemes---and they struck me as being based on the same economic footing as Sub Prime mortgages. Only the Sub Primes were sold as wonderful investment deals.

HUH?

You let someone borrow money against a property you knew was over priced...in an market that was clearly unstable. The poor, or those with bad credit were forced to take the loans, since nothing else was being offered, usually with an ARM (Adustable rate mortgage) rate.  ARMS never go down...just up. It made the purchase of a house affordable for a year or two...then the mortgage "reset"...usually for double or more than it had been before.

I met a man recently who told me quite a story. He had a house that needed work...and did a re-finance to pay for it. He had heard of ARM's, so he didn't want one of those...instead he signed a "negative equity loan", without fully understanding what that meant. For two years, his 1200 dollar mortgage went down to 600 dollars. What a deal! Then he got a letter from the mortgage company saying that the next payment would be $1900 dollars...from then on.

He hadn't understood the terms of the new loan. It had "loaned" him his own money---taken from the equity in his home. Then it froze the first two years of payments at a very reduced level...sort of like the "minimum payment" on a credit card. Now no one in their right mind would charge 100,000 dollars to a credit card, then make only the minimum patment...But sadly, that's what this "hybrid" loan did. Worse...since he borrowed against the equitt in the house, even if he wanted to sell, that amount would have to be paid off first...and once the market fell, he owed more than the house was worth.

You might ask yourself HOW all this came to be.

Deregulation is part of the answer.
Another part is :mortgage companies. They are not banks---so they are not subject to the same rules. Most of them located in Delaware---the same state that is home to almost every credit card bank in the country....because Delaware has some very attractive laws for banks, and other financial institutions. Banks started getting out of the home loan business years ago. What a lot of them began to do was "brokered" loans to mortgage companies. They would then collect a fee for the business without acquiring risk.

Nice work, if you can get it.

A few years back, I considered a home equity loan. I walked down to my local bank, and told them what I needed, and they handed me a form for something called "Green Tree". It was the mortgage company they used...but the Bank itself didn't handle home loans anymore. When I got the offer back, I declined the mortgage, THANK GOD. My existing mortgage was established in my home state. It is subject to the rules here---as long as I don't re-finance with a company from somewhere else. If you do, the rules change. You are no longer protected by your states banking rules.

Why is that important? Money of course. New Jersey, for instance doesn't allow "pre-payment" penalties.

That means that if I wanted to pay off my mortgage, all I would pay is what I owe now. Otherewise, they can tack tens of thousands of dollars onto the pay off, to "compensate" them for lost interest. I read about a man recently who had a bit of money, and took out a small mortgage against a paid off property to get a low "teaser rate". He thought he could invest the money, pay off the loan, and come out way ahead. He also knew about the "no prepayoff penalty" clause in the law. What he didn't know, is that the mortgage company he chose was located in...you guessed it...Delaware. Not subject to NJ law.

He saved two years of interest, but ended up paying far more money to get free of the loan when the rate switched than he earned.

The point of all this is simple.
Wall Street had laid a HUGE goose egg.
People who were well to do last Friday may have woken up today to find themselves seriously hurting. And all of it was predictable. The Economy is supposed to run in cycles...up and down. Keeping it artificially high, to keep investors happy was a perscription for disaster...and now the bill is due. What's interesting to me is that all this was of no interest when it was simply the poor hurting.