I resolve some of the issues of the day…

March 6, 2009

(Copyright 2009)

I have some ideas on how to resolve some issues of the day:

THE MORTGAGE CRISIS: President Obama has announced his program, but as far as I can tell it only offers help to a limited few. While at one time I leaned toward thinking he ought to get the foreclosure problem solved first to bring stability to the financial system since we found out nearly our whole economy was tied up in bundled mortgage securities, I no longer feel that way. Let the market sort it all out and somehow get back to a realistic system of financing housing that would probably look like the way it was done thirty years ago or so. Hefty down payment, fixed-rate mortgage, the likelihood one would have the ability to pay a prerequisite.

California, the state that is broke, has an asinine new program to pay a gigantic tax credit for anyone buying a brand new (just built) home. Thousands of empty homes, and we need new ones? That’s the California mentality. (There is also a similar federal program, but I understand it is not limited to new homes.  But here’s the question, why the tax incentives? Finally there are bargains galore out there — except no one knows the future of a home investment now. But we do know the government needs the tax money, to pay off the national debt if nothing else. ) 

THE BANKING CRISIS: Please! Stop the insanity! Let the too big to fail banks fail, because like the small town no government bailout bank official said on ABC News, “they’re not too big to fail, they’re just too big.

Okay, so I’m not an economist, but it would seem to me that eventually some element of capitalism will fill the void left by banks too fearful or too greedy (they want to see how much they can extort from the government first) to do what it is they are chartered to do – loan (not give away) money.

I think all along what we should have done is go around the high flying investment bankers and let them stew in their own juices. Perhaps the bailout money should have been put into a temporary government loan entity.

The government using taxpayer money has showered trillions of dollars on those boo hoo babies who can only fly in private jets away from the riffraff (I feel some of their anticipated pain – in my own world far lower down on the totem pole I find myself going to the freak show that is the low cost supermarket). The Wall Street bankers must use government bailout money to wine and dine at plush resorts because, well in their world that is the way business is done. Of course back in the not-so-old days what happened if you made bad business decisions is you slipped out of that privileged world and, well, went into real estate. But things got so out of hand in the financial industry that the piles of bad debts worked their way into the system like a cancer. But the upside for the investment bankers was that they realized they now had leverage to blackmail the government and the people.

But it’s all a bluff. Call’em on it.

THE DOMESTIC AUTOMAKERS: They were going the wrong direction way before the current economic crisis. They were not flexible enough and let their production costs soar too high. And why would any company be saddled with paying people who no longer work for it? Let poorly managed companies fail and make way for better managed ones.

Actually that does not have to mean the end of the domestic auto industry. It does mean different players, and if the United Auto Workers don’t see reality, it may push the industry into the southern states where the foreign auto makers have found willing and appreciative workers.

I realize that as long as the Big Three were rolling in doe the UAW simply took the opportunity to get in on the action. But when market share plummets, what’s left?

HEALTH CARE: Some Republican lawmaker was quoted in a blog I read pronouncing that health care is not a right. Who said it was? Well, okay, many have, but I support universal health care of some type, but I would never hold that it was a constitutional right. But that does not mean that we as the people cannot provide for ourselves some health security through the structure of government. I have some hope now that the demand from the people is going to outweigh the selfish interest groups who stood in the way of this need for so long. I saw some little sign on the news that the private health insurance industry is in more of a compromise mood now that it has seen the true power of the people and their call for change as was witnessed in the last election. Financing will be the big stumbling block. Making the “rich” pay doesn’t work because that still doesn’t get the amount needed. I hate to say it, but the late conservative William F. Buckley Jr. and the more liberal ousted former Democratic governor of California Gray Davis agreed on one thing: the bulk of the taxes always have to come from the middle class (and don’t ask me for a precise definition of that) because there are more of them. But, although they struggle, all the other industrialized nations of the world finance some form of universal health care. But we wouldn’t want to see how they do it, would we? Okay, I’ll give you a hint: they pay for it by somehow spreading the costs. And why the business community (not really a homogeneous group, I suppose) is not solidly behind universal health care, I don’t know. I realize small business people have to have mixed feelings. That’s because they go to local chamber of commerce meetings where they wear white shoes and start out their presentations with the standby Republican right wing sarcastic joke: “Hi I’m from the government and I’m here to help you.” So the point is, government help is something to shun because it comes with strings attached, that is unless it is a small business loan or a tax credit for hiring foreign workers or moving production overseas. But in reality, employees covered for health insurance without any liability on their (businesses) part would seem manna from Heaven. Then again we could just write off the part of the population that can’t or no longer can afford health care and leave them to get sick and die, thereby saving tax expense and giving us more air to breathe.


Obama has the capital, now he must spend it wisely

February 25, 2009

(Copyright 2009)

The drought in leadership at the helm of the United States government has been broken, judging by the speech I just watched President Barack Obama deliver to a joint session of Congress.

It’s up the Republican obstructionists to either help or get out the way.

He was not long on detail, but you really can’t do that effectively in such a speech. You have to give an outline. You have to project an attitude. He did. And it seems to be a no non-nonsense move forward for and with the American people approach.

I think one of the things that is giving the Republicans fits is that they are so party and ideologically bound, while the new president, although liberal, is really projecting something beyond pure politics. As much as the Republicans want to wage that straight political battle, he won’t play by their rules.

I liked what he said about finally doing something on health care. He proved that he understands the problem and that he is ready to move beyond and around that tired old fight between the haves and have nots. I got mine, you get yours. So many people no longer have theirs, so many businesses finally realize that simply using health care benefits as an employee attractor is no longer fiscally feasible and yet they know they need to have their investment in their workforce protected. I think (I’m not sure on this one) that even Walmart discovered that just giving your employees a handout on how to get on government health care for the poor is not a substitute for a comprehensive health care plan.

Also Obama said that he has revised the budget process so the costs of the wars will be laid out for the current year with projections for years to come. We have ignored and/or fooled ourselves too long on the monetary costs of wars. Only recently have I heard experts actually saying that the cost of the wars is part of what has led us to our current economic crisis.

He warned that more money will be pumped into the banks but promised bankers will be held accountable and will not be able to use government money for their personal pleasures. We’ve heard that one before. Maybe some perp walks with bankers in chains is what we need to see.

I don’t know what the Wall Street reaction will be in the morning (I’m writing this right after the speech Tuesday evening). But I think at least the markets now have a clear message as to the direction we are going and more importantly the attitude of the new president. It would seem that stocks in innovative companies with an eye to the future (not the next quick dollar) should rise – renewable energy, for example.

Add 1:  And this morning I get the answer. Stocks are down amid concerns over the continual decline in home resales and falling home prices, as well as over concern that the credit crisis is worsening. It is troubling to know that our whole economy over these past many decades has been based on inflated home values. Seems to me we need something more like industrial and agricultural output with a dose of renewable energy to support our economy. And somewhere in there there has to be a whole lot of good paying jobs. Inflated home values did produce a lot of jobs — good paying jobs, not so much.

Getting the banking situation resolved seems to me the thing that needs to get the top priority. Housing is an offshoot of that, but I fear the president has just previously put forward a somewhat complicated sounding and maybe overreaching program in that regard.

I don’t think we want the government setting prices by forcing lenders to pull down the principle on houses, although lenders on their own might choose to do that. Unfortunately in probably the majority of cases, as tragic as it is, foreclosures need to take place, losses (to both the occupants and the lenders) to be suffered, the end result being bankruptcies for both individuals and lenders.

But only in that way can the market be determined. If in the end there is an oversupply of houses, the prices will at least settle in a more affordable category.

(Interest is a confusing thing to me. It would seem it needs to be set primarily by availability and risk, not by artificial government actions, part of what has caused the present crisis. From this time forward the price of risk will likely be higher on home mortgages.)

Only once the bad debt is finally settled (much of it by bankruptcy) can a new and improved banking sector rise up from the ashes.

While I am not sure President Obama’s approaches to each problem are the best, he has proved that he is indeed a forward thinker.

I think the wars will plague the Obama administration efforts, but he has not given any indication that he would back down from the challenges he faces in that regard. And although he has made some strong statements about fighting global terrorism, akin to those made by George W. Bush, he has not yet painted himself into a corner.

Although I appreciate and admire President Obama’s willingness to work with the Republicans, I almost wished I could hear him just tell them: “Oh, just shut up – I have work to do”! But he is much too wise a politician and too diplomatic for that.

One more thing. While his predecessor claimed to have “political capital” after his second election victory, he found it to be ephemeral, primarily due to his ineptness and pig headedness.

President Obama has as much political capital as any president I have seen in my 59 years. I hope he spends it wisely. from what I just saw, I have reason to believe he will.

P.s.

Right now the Republicans seem to be in the lonely position of the loyal opposition with no plan, only reaction, thus making them seem “reactionary”. A new leader will emerge if they are lucky.

Add 2:  And after initial reviews  I have concluded is won’t likely be the young and somewhat emaciated looking Bobby Jindal, Gov. of Louisiana, who gave the official Republican response to the Obama speech (I didn’t bother to thake that in — yadda yadda yadda).