The Best Money Guy

Obama War Budget Games

2009-03-31T17:55:00.001-07:00

In my younger days, I was not much of an Ozzie Osbourne fan. But, on occasion one of my housemates would be driving me nuts with Black Sabbath’s music and I’d catch some lyrics that resonated.

Today, the words from Black Sabbath’s “War Pigs” comes to mind, especially when I listen to the stupid, usless words coming from our elected officials and their appointed henchmen.

COST OF A GLOBAL EMPIRE

Generals gathered in their masses
Just like witches at black masses
Evil minds that plot destruction
Sorcerers of deaths construction
In the fields the bodies burning
As the war machine keeps turning
Death and hatred to mankind
Poisoning their brainwashed minds, oh Lord yeah!

The U.S. war machine keeps turning. As we enforce our will on foreign countries, we produce more people who hate us.

Just when you think the U.S. government is beginning to make sense by withdrawing troops from Iraq, they make the terrible decision to shuttle 21,000 more troops into the Afghan calamity.

At a cost of $3.2 billion per month, we will throw another $38 billion down a rat hole in a country that has no vital strategic importance to the United States.

Barack Obama is doing this to prove that he is a true statesman.

In a word – CRAP. Obama, how up impressing us and stop trying to promote yourself. Leadership is about taking the right action, not about sucking up to a bunch of self-serving international politicians.

The Soviet Union killed over 1 million Afghans, while driving another 5 million out of the country and the Soviets left bankrupted and defeated after ten years.

Young Americans will continue to die for who? For what?

Our foreign policy during the last eight years can be summed up in one military term, SNAFU - Situation Normal All Fouled Up.

These foreign interventions are a smoke screen for what is really going on in this country. When a government has unsolvable domestic problems, they try to distract the public by creating foreign conflicts.

General Douglas MacArthur understood the danger. "I am concerned for the security of our great Nation; not so much because of any threat from without, but because of the insidious forces working from within.”

Any doubt that the Military Industrial Complex is as strong as ever should be removed after examining Obama's 2010 budget.

It calls for 26% more in spending on Defense than President Bush spent in 2006.

Hey, the Soviet Union collapsed in 1989, leaving the United States as the only remaining superpower on earth.

Since 1990, the United States has depleted the U.S. Treasury of $7 trillion for spending on Defense.

There is no military on earth capable of challenging us, so why would there be a need to spend this much on the military?

Over this same time frame the U.S. spent $360 billion on science, space & technology and $52 billion on energy, a mere 6% of the spending on killing machines.

Military expenditures benefit humanity in no way.

If these trillions had been invested by the private sector or devoted to energy and scientific research, our economy might not be a hollowed out shell dependent on China and oil exporting countries.

Nationalists argue that the Defense industry employs millions and benefits the country.

These companies employ brilliant engineers and scientists who spend their days developing things that kill people more efficiently.

If they had been employed developing electric cars, solar power, wind power, nuclear power, an efficient electric grid, infrastructure upgrades, or finding a cure for Alzheimer's, would the United States be better off today?

The National Debt in 1990 was $3.2 trillion.

Today, it is $11 trillion.

This is a 343% increase in nineteen years.

What benefit has $7 trillion of spending on Defense produced for the United States or the world?

In 2001, spending on Defense was 17% of total governmental spending.

In 2008, Defense, Homeland Security, and war spending accounted for 26% of government spending.

In the meantime, major cities have had blackouts due to an overloaded electrical grid, our 156,000 structurally deficient bridges crumble, one hundred year old water pipes burst under our streets every day, and we send $500 billion per year to foreign countries for oil.

FYI, the 19 terrorist hijackers who implanted their plan with knives spent less than $500,000 to pull off their 9/11 acts of terror.

The United States has spent over $1 trillion in response, without capturing the mastermind of the attacks.

The National Debt in 1990 was $3.2 trillion.

Today, it is $11 trillion. This is a 343% increase in nineteen years.

What benefit has $7 trillion of spending on Defense produced for the United States or the world?

In 2001, spending on Defense was 17% of total governmental spending.

In 2008, Defense, Homeland Security, and war spending accounted for 26% of government spending.

In the meantime, major cities have had blackouts due to an overloaded electrical grid, our 156,000 structurally deficient bridges crumble, one hundred year old water pipes burst under our streets every day, and we send $500 billion per year to foreign countries for oil.

The 19 terrorist hijackers who implemented their plan with knives spent less than $500,000 to pull off their 9/11 acts of terror.

The United States has spent over $1 trillion in response, without capturing the mastermind of the attacks.

You would think we must be trying to keep up with our enemies by spending $765 billion per year on the Military.

But the facts are that the United States is spending as much as the rest of the world combined!

Our two potential rivals, Russia and China, spent $192 billion combined in 2008. This is 27% of U.S. spending!

From a foreign perspective, one must wonder why the U.S. is spending such vast quantities on our military. They can only conclude that it is for offensive intentions rather than defensive.

The United States soil has not been attacked by a foreign power since December 7, 1941. Prior to that surprise attack, a foreign power hadn't attacked the U.S. since the War of 1812.

With this level of spending, our leaders feel compelled to interfere in the business of sovereign nations.

Killing the proposed 26% defense spending increase and a 10% cut would free up $225 billion. That means we could give evey one of the 15 million unemployed Americans a check for about $15,000.

You decide. More bombs or help out our co-workers and friends that have lost their jobs.

Make a difference call and write your elected officials today.

What would you do with $42,000?

2009-03-31T16:22:00.000-07:00

I want you to imagine that tomorrow afternoon; you went to your mailbox and found US Treasury check for you for $42,000. And, there was another letter for your wife and every one of your children and each contained a $42,000 check. Wow, I’d bet that you would be one happy camper, and you’d probably pay off the credit cards, the car loan, and save or invest the rest.

For almost everyone I know, this would be a huge blessing, and would substantially change our life situation.

Well people, I’m sorry to say that we’re not getting the check. Instead, we are getting the $42,000 bill.

Yes, $42,000 for every man woman and child in America. That’s the amount ($14 Trillion) that this idiotic dishonest government has committed to Wall Street, the big banks, and hedge funds.

I don’t know about you, but I’m mad as hell about this. Why are Obama and his dynamic duo of Geithner and Bernanke destroying our futures while they are giving their friends and insiders our money? Why is Congress doing nothing to protect us as individuals from the nastiest recession in history. Why are we allowing 15 million and counting workers to lose their jobs, and millions of families to end up living in tent cities under the freeways?

More importantly, why have you not screamed bloody murder to your elected officials? I mean, this is more onerous that what set off a bunch of Bostonians to seize a British ship and dump its cargo of tea into the Boston harbor.

If this doesn’t get your blood boiling, I want you to go out and get two large poster boards. With a wide marker write “The Fed Stole $42,000 of my and your money and we did nothing.” Then, with a two pieces of string, string the boards together, drape them over your head, and go out to the busiest intersection you can find and march around for a few hours.

Maybe then you’ll realize how much we need to get rid of this lame excuse for a Government.

Revolution anyone?

Open Letter to the President re Getting a Mortgage

2009-03-20T12:45:00.000-07:00

Dear President Obama.

The Home Mortgage Doublespeak Continues

Dr. Bernanke and his friends at the Fed seem to be completely out of touch with the real world.

I am a mortgage broker in Las Vegas. The Fed says it is using taxpayer money to drive down mortgage rates. But the banks are doing everything they can to maximize their profits and keep the mortgage rates high. This is the primary reason home sales are continuing to tank, regardless of what the rich boys at the Fed and the banks tell you.

Here’s and example:

A Veteran with a solid job, wants to buy a bank-owned, previously foreclosed home for less than $75,000.

He has modest savings and can put 5% down. He has good income and few expenses, so his debt-to-income ratios are conservative, 21% and 33%. His FICO score is 571 because he has some old medical collections on his credit report. Paying off the collections will reduce his FICO score – another stupid thing that is worth you looking into.

Now here’s where the banks are screwing the public once again:

1. Because his FICO is under 620 the banks want 3 additional points or $2250 upfront;
2. Because the loan is under $75,000 (too small) the banks want another 0.75 points or $563 upfront;

This totals 3.75 points or $2813 to do the loan, irrespective that the loan is VA insured. This is outrageous. But, it gets even more stupid.

The par VA interest rate is 4.875%. This would make the monthly payment $377.

Financing 1.85 points (the maximum the banks will allow) into the loan raises the rate to 6.875%, increasing the payment by $91 to $468, and still requires 2.15 points or $1612 upfront.

Now, we have the VA mortgage insurance. The funding fee is $2351 and the monthly premium is $32.

The Veteran buyer now pays $500 per month. But hold on here. Because the lender will only allow the seller (the foreclosed bank that desperately wants to sell the property) to pay no more than 6% of the closing costs, the VA insured buyer must pay an additional $678 in closing costs even though the seller is willing to pay this cost.

In summary, the banks have increased the buyer’s interest rate 2%, and gouged more than $6000 in fees for an average working American to buy a home. Mr. Bernanke and the Fed can buy all the T-bills they want – but the banks are still ripping us off.

I hope that you can see why we feel that you, Mr. President are not getting the straight talk from Mr. Bernanke and his banking buddies. The banks are making it almost impossible for average working Americans to purchase or refinance homes unless we pay them outrageous sums.

Dr. Bernanke’s Out of Touch with Working America

2009-03-20T09:58:00.000-07:00

Dr. B, I listened to your speech today to the Community Bankers, hoping that you might have in the last few weeks learned what is really going on down at our level – where working America lives. But, you again demonstrated that you live in a world that just doesn't get it.

The Fed can give trillions of dollars of our tax dollars to your friends and fat boy bankers, but they are not going to lend it to the average working American to buy a home. After all, why should they when they can take your free money and loan it to their buddies to build apartment buildings knowing they are creating housing demand by simply not making mortgages to hard working Americans.

Here’s the facts – although FHA and VA loans are supposedly not FICO driven, yet, the investors will not buy a loan unless the borrower has a minimum FICO of 620. Now get this through your academic elitist brain – the majority of working Americans have a FICO under 620. So they are simply shut out of the opportunity to buy a home or refinance.

Am I angry with you? Yes, as are the majority of Americans. You and your buddies just don’t get it. We know you are masterminding the destruction of the middle class with hostile credit and monetary policies. You talk the nice talk, but your actions only support the rich getting richer.

So, while you blather about how wonderful your policies are (for the rich) you are guaranteeing that hard-working middle-class Americans will continue to get screwed, loose their jobs and homes, and then suffer the results of soon to be massive inflation.

Obama - Talk First with No Real Action

2009-03-16T09:33:00.000-07:00

Sorry President Obama, but I'm now terribly disappointed with your continuous public posturing after the cash has gone out the door.

Today you're doing it yet again, spouting the noise that the AIG $165 million in bonus' should not have happened.

You didn't mention the $10 million Mr. Pandit of Citi bank collected from the taxpayers. Or the almost $10 million Mr. Lewis of Bank of America collected from us taxpayers. You didn't bother to mention the $165 million plus of TARP (Taxpayers Are Ripped Period) money that was redirected from the U.S. banks and handed over to Goldman Sachs (another of Mr. Paulson's friends and family program.) and foreign banks.

So far, it seems to me that you talk the talk for self promotion, but your policies are no better than your predecessor's. You have now presided over the redistribution of the average American's earnings into the hands of a small number of already rich and wealthy with the mantra "that no big financial institution shall fail".

Well, what about all of us that are failing and suffering?

While you polish your image with TV speeches, we're getting laid off, going without health insurance, wiping out our savings, losing our homes, and suffering more and more every day.

So here are my suggestions that would help the 15 million formerly working that you could immediately implement:

1. Increase the unemployment benefit to two times the local poverty wage level;
2. Exempt unemployment from all Federal, Social Security, Medicaid, and State taxes;
3. Have the Federal Government pay the both the employer and employee portions on unemployment benefit income for Federal, Social Security, Medicaid, and State taxes;
4. Have the Federal Government provide zero-cost medical insurance for the unemployed;
5. Extend unemployment benefits to when the individual returns to work at 75% of their former income, not the imaginary current weekly limit.

And, by the way, what stuff do you smoke that has you believing that 50+ year old former managers are going to get jobs building roads and electric grids? Come on now, please get real.

The Best Money Guy

The Paulson Maneuver - A Swindle in the Making?

2008-07-31T10:38:00.000-07:00

Treasury Secretary Paulson is no dope. He knows that the U.S. economy cannot operate without foreign capital financing American excesses. He knows that our extravagant delusions of getting rich by borrowing more than you can ever pay back are con games. And, he knows that expensive bailouts can only work if overseas money comes rushing in. But what he knows and fears and is not telling us is that the foreign investors are getting worried.

In a free market economy, Fannie and Freddie might be allowed to go under. Investors and lenders would both suffer, but the economy would go on. Economies get stronger when they get rid of the heavy weight of excesses.

But, contrary to what Larry Kudlow and Steve Forbes would have you believe, this is not a free market. It is a market where the big players have the edge for themselves because they are connected.

FYI, since 2003, the Wall Street crowd was paid over $250 billion in bonuses on debt-backed securities that are now worthless. Now that these securities are nearly worthless, the U.S. government is bailing out the whole system. The Wall Street pros get to keep their bonuses, with not even a “thank you” to the feds. Remember, Paulson is a Wall Street boy with a purported multi-billion dollar net worth.

Paulson and the D.C. crowd know they can't let Fannie and Freddie go under because their debt is held by foreigners.

Even though I suspect the feds would love to stiff the foreigners, they can’t. At least not yet.

The Chinese, are the single largest lenders to U.S. government agencies. The feds desperately need that flow of juice from the Far East to continue.

So Paulson decided to let the stockholders take a loss, but not the bondholders. And presto, we have the Paulson Maneuver.

The Paulson Maneuver will hold until it is no longer needed or until all of these clowns leave town. And yes, that date is not far away. By deftly changing the short selling rules rules via the SEC, by writing what is effectively a blank check for Freddie and Fannie, and cloaking it in a banner that is promoted as rescuing homeowners, most of which will never get rescued, and by pressuring the FASB to delay requiring banks and financial organizations to honestly report their assets and liabilities, Paulson has put a tourniquet on the massive bleeding of our financial system.

IMO, this is a cute short term game allowing the connected to escape and leave the empty bag for the new arrivals in January.

But, back to our foreign investors. They will lose their money when inflation turns against them. When they are convinced that inflation exceeds their risk reward, they will dump the dollar and refuse to lend more to U.S. government agencies.

When the foreign investors bail, the feds will have no further use for them. And you will see the first ever default on U.S. debt.

Brace yourselves.

The Best Money Guy.

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Mark Your Calendar for the 2010 Implosion

2008-07-30T15:46:00.000-07:00

At its board meeting earlier today, FASB voted today to have a single effective date for its proposed amendments to FAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and FIN 46R, Consolidation of Variable Interest Entities, which impact off-balance sheet treatment of securitizations, including mortgage and other securitizations.

We wrote yesterday that the FASB was under intense pressure to delay implementing its proposed rule changes that would provide real transparency in financial accounting and would expose $5 to $10 Trillion in bogus assets to the light of day.

See http://thebestmoneyguy.blogspot.com/2008/07/plunge-protectors-united-create-another.html

The effective date agreed to today by the FASB board would be: fiscal years beginning after Nov. 15, 2009.

(Thus, for calendar year-end companies, the effective date is essentially 2010, a year later than the initial half of the ‘dual effective date’ originally proposed, which would have been 2009 - with a one year deferral for existing QSPEs to 2010.)

Nice move folks. Let's hide the garbage under the rug for another two years and hope that it will quietly go away.

Can't anyone on Wall Street or in Washington D.C. tell the truth? And what is supposed to happen before 2010 to fix this $5 to $10 trillion accounting deception? At some point this junk is going to bubble to the top.

In the mean time, enjoy the Plunge Protection Team's inspired market rallies.

The Best Money Guy.

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Tick Tock Tick Tock It's the Crock!

2008-07-30T14:26:00.000-07:00

Today, the Fed gave the insiders another reprieve, and more access to the Fed bargain shoppers window so all the fat cats can keep on borrowing (Is it still borrowing when they don't expect to get repaid?) against their worthless paper securities.

Mr. Bernanke and the Fed crowd decided to extend the free money game to their friends until January 30, 2009. Interesting how this is only ten days after a new president gets to sit in the hot seat.

Without the Fed backing and the Security and Exchange Commission's temporary rule against naked short selling, there's no doubt that more banks and brokerages would be under fire.

Merrill Lynch yesterday may have produced enough bad news to create doubts about its future and the future of Wall Street. The unprecedented write-downs and fire sales, however, are necessary to repair its balance sheet and rebuild confidence before year end.

What really drives up my blood pressure on this gift is that just yesterday Merrill "sold" (A very loose term here.) $31 billion of mortgage-backed securities to Lonestar, that is essentially a collection agency operating as an investment company, for only 22 cents on the dollar with seller financing and a full recourse guarantee. Meaning, that the securities really have little if any value. See http://thebestmoneyguy.blogspot.com/2008/07/making-merry-at-merrill-little-guy-cant.html
My question to Mr. Bernanke is if the market is essentially valuing this paper at only 22 cents on the dollar, and requires seller financing and full recourse to buy it, why in blazes are you and the Fed lending against this collateral at close to 100% loan to value for six months, knowing that we will NEVER get repaid?

Isn't this the best "no documentation liar loan" program ever created?

Remember, yesterday here I suggested that the best solution was to simply restructure every mortgage that is backed by these securities down to 22 cents on the dollar and let the individual citizen, instead of the Wall Street fraudsters, get the break.

(IMO, the Fed gift program was the primary reason for the Dow to rally nearly 200 points even though oil is back at $125/barrel and gasoline is again well over $4/gallon.)

Please, somebody get the plank ready, because the crocodile is looming and Captain Hook needs to take a dip into reality.

With apologies to Peter Pan.

The Best Money Guy

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Mud Slinging Season is Open

2008-07-30T14:02:00.000-07:00

I caught this McCain ad on the tube the other night. Remember to hit your browser back button to come back here. http://www.youtube.com/watch?v=oHXYsw_ZDXg

All I can say is, Senator McCain, you continue to disappoint me. And I was once a conservative, now I'm an independent. I was a Libertarian for a bit until my eyes were opened when I learned that there is no such thing as a free market. Sorry Kudlow!

This country needs leadership, not more fear mongering, and mud slinging contests.

So, if you are truly a leader (as I thought you were before "W" apparently neutered you a few years ago) how about standing up for doing the right thing the American way. Not the neocon attack crappy way.

We've had enough of this garbage for the last eight years. It's tired, annoying and unproductive. We have huge issues that need fixing now. Let's hear from you on real plans that can work to save America. Not these stupid attack ads.

Keep this crap up and I'll start writing checks to the Obama campaign.

The Best Money Guy

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Plunge Protectors United Create Another Bubble

2008-07-30T06:33:00.000-07:00

Oh, what a wonderful double talk, non-free market world we live in.

One of my favorite clowns (After Kramer of course.) on CNBC is Larry Kudlow, who, with all of his experience and intelligence can't seem to separate his political biases from his economic senses.

Kudlow, and his buddy, Steve Forbes, scream for free markets only until things are not going their way, meaning the stock markets continuously marching upward. So, a few weeks ago, in the midst of the nastiest part of the bear market, Kudlow and Forbes abandoned their "free market capitalist hats", and were screaming for multiple forms of government intervention. Are all Republicans by nature flip floppers?

And, of course, the denizens of the current administration, specifically Secretary of the Treasury Paulson, and the Chairman of the Securities and Exchange Commission, (SEC) Mr. Cox, (both political appointees of the great "W"), obliged with a couple of zingers.

Paulson came up with blank checks for bankrupt Fannie and Freddie and Cox decided to hobble stock short selling, thereby creating a massive short covering rally.

Rolling the clock forward to this past Monday, July 28, Cox's short selling ban was set to expire, and since there are even more ominous financial events on the horizon, (I'll get to this in a bit, remember the letter "Q".), the markets swooned with the Dow dropping 240 points.

Undoubtedly, the phones in Cox's and Paulson's office were ringing off the hook, and miraculously, the SEC rushed out a press release announcing the extension of the short selling ban early in the morning on Tuesday, July 29.

Presto, the short sellers rushed to cover again, and the Dow blasts up 260 points.

Today, Wednesday, July 30, with the markets looking to swoon a bit again, the Fed with Mr. Bernanke jump in and extend to the banks, broker dealers, investment banks, hedge funds, and all their other rich and connected folks, the ability to borrow against any worthless IOUs they can generate to January 30, 2009 at a measly 2% interest. And, guess what -- the markets pop up again.

Question. Why doesn't the Fed simply refinance all American, owner occupied home mortgages at 2% instead of giving the deals to only their insider friends? At least these are backed by real assets, our homes.

Now, remember that we have a little event coming up, called a presidential election. Notice that the Fed craftily extended the free money window past the upcoming inauguration of a new president.

Also, note that the SEC has stated that the temporary ban on short selling will not be extended past midnight August 12. My guess is that they will try to create a permanent rule change. But, remember, there are only 12-15 carefully selected banks and companies covered under the temporary rule.

BTW, who decided what companies should be on this list of the protected? How did they deicide? And, don't you think that every CEO in the USA is not being contacted by some Republican operative to "ask his opinion about extending the short sale ban to cover his company, and if he would like to make a campaign contribution"? This may be the best political fund raising protection racket ever!

And, you might want to consider that according to S&P that profits of US companies have dropped over 25%, the most ever. Yet, the market is going up? Can you say "plunge protection"?

OK, you say, so what? I told you before to remember the letter "Q".

In the secondary debt- and mortgage-backed securities market, (Where mortgage-backed securities are created and traded.), there is a thing call a Qualifying Special Purpose Entity (QSPE), know to insiders as the "Q".

Qs are yet another of Wall Street's accounting tricks to keep mortgage and debt-backed assets and liabilities off the books of banks etc. (You know, the friends of the Fed with now free access to our money.)

Up until recently, the FASB (Federal Accounting Standards Board, the supposed self-regulating authority of accounting. Ha!) let the wolves count the chickens in the hen house. But, since the mortgage debacle, the FASB crowd has gotten religion and decided to do some house cleaning.

So, FASB has proposed changes to two previously obscure (and equally obtuse) accounting standards known as FAS 140 and FIN 46R. Bottom line, these changes could bring back as much as $5 to $10 trillion back on to the balance sheets of various financial institutions!

Now you can imagine why the insiders are getting very nervous.

FASB has been expected to release its proposal on the two accounting standards by the end of August, and then leave it open for public comment for 60 days; parts of the new rule could be applied as soon as next year for companies with fiscal years beginning after Nov. 15.

As you might guess, the "W" administration and Wall Street crowd are furiously working to block this change until they leave town.

Hint - the fat lady has not left the stage, not yet.

The Best Money Guy.

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Don't Worry Honey - I Shrunk the Stores (Updated)

2008-07-30T06:16:00.000-07:00

UPDATE --

Today it became official.

The parent company of Bennigan’s, an Irish-themed bar and grill with about 200 sites across the country, filed for bankruptcy, a move that will put hundreds of employees out of work and leave many landlords with empty retail space during a painful time in the real estate market.

A sister brand, Steak & Ale, will also close. Franchise units of Bennigan’s will remain open for now, a spokeswoman, Leah Templeton, wrote in an e-mail message.

We told you - this is not the all clear signal for the economy.

From yesterday's post:

In the midst of today's bear market bounce because an already known consumer survey taken at the top of last month's bear market rally, came up with a minor and insignificant increase, my favorite financial bubble heads on Bloomberg and CNBC have failed to mention that Mervyn's department stores filed for bankruptcy and Bennigans is quickly (like in the middle of the night) closing restaurants.

(A quick Google news search reports locations from Chicago, New Jersey, Florida and Colorado are among those that have not opened for business.)

Don't worry, though, because based on rumors that our band of fools in Washington are going to somehow step in and and remove speculators from the oil and commodities markets has caused oil to drop $3+/barrel, and Wall Street is celebrating.
All of this might just be good news for GM since it still has a few million unsold monster Tahoe SUVs, and it is due to report its non-earnings (meaning another multi-billion dollar loss) Thursday.
So, it seems that corporate America's strategy is to shrink the package sizes, shrink the portion sizes, raise prices as much as possible, keep wages flat, reduce the number of store locations open for business thereby forcing us to drive further, and sell as much of itself to foreign governments as possible.

This way we all get happy in our shrinking of America situation.

Don't Worry, Be Happy

The Best Money Guy.

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Writing on the (Great) Wall - No Free Speech in China

2008-07-30T05:20:00.000-07:00

On Wednesday, July 30, the Beijing Olympics, Games organisers announced that reporters will not have complete access to the Internet during the Beijing Olympics Games, reversing a pledge to bring down the Chinese firewall of censorship.

Sun Weide, spokesman for the organising committee said, "During the Olympic Games we will provide sufficient access to the Internet for reporters. Sites linked to the banned Falungong spiritual movement and other unspecified ones would remain blocked for the thousands of foreign reporters covering the games".

It seems we have a bit of a difference in the meaning of freedom of speech.

Given that China has a history of going back on it's promises, I'm a bit concerned that they hold trillions of dollars of our debt and are buying as much of our assets as possible.

This is a wake up call America! Remember, he who has the gold rules.

The Best Money Guy

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Who's First -- America or Partisan Politics?

2008-07-30T04:32:00.000-07:00

Hey, Senators McCain and Obama, how about showing up in Washington D.C. together this week and standing side-by-side in supporting renewable energy?

Both of you have claimed support for renewable energy. And, in case you haven't heard, Senator Reid is going to hold a vote this week on an extension of renewable energy tax credits.

This is really interesting because in Arizona, Senator McCain's home state, the Solana solar plant people say the tax credits are necessary to make the project economically viable.

In case you don't remember, in June — with three Democrats (Obama, Clinton, and Kennedy) and McCain absent, a vote on the tax credits fell seven votes short of the 60 needed.

Of course, the Spanish company planning to develop the Arizona solar plant, Abengoa, says they would have to take it overseas. “We’re looking at other places around the world,” said Fred Morse, senior adviser to Abengoa’s U.S. branch, citing projects the firm is considering in Spain, Morocco and Algeria. (I'm wondering why U.S. companies such as Halliburton, Lockheed Martin, etc. are not pursuing these projects?)

The renewable energy tax credits are scheduled to expire at the end of the year, dealing a devastating blow to the renewable energy industry just as politicians on both sides of the aisle cite the need for it as a solution to America’s energy woes.

“The fate of Solana is in the hands of the investment tax credit,” said Steven Gotfried, a spokesman for Arizona Public Service. “With that investment tax credit, a future with renewable energy becomes a reality. And without it, it puts it in jeopardy.”

Gotfried said that beyond the benefits of green, renewable energy, the billion-dollar investment in Solana would create 1,500 construction jobs and 85 permanent, highly skilled positions. The project would be built and owned by Abengoa Solar. The Arizona utility would purchase energy from the Spanish engineering firm; Abengoa estimates that the nearly 2,000-acre plant could sell $4 billion worth of energy over 30 years.

“If built today, this will be the single largest solar power plant in the world,” said Morse. “Without a year extension of the [tax credit], the Solana project can’t be built because the financing won’t be made viable because the numbers won’t work.” With the credit, officials said that the numbers do work.

“With the tax credit and the technology Solana will be using, concentrated solar power [becomes] very competitive and a viable option when you compare it to natural gas,” Gotfried said.

FYI, McCain has missed nearly 400 votes in the 110th Congress. What has he been doing?

Senator McCain, you've spoken favorably about solar power and you've lamented that there is not enough of it. So, will you walk the talk or just keep on talking the talk? Can you stand up for what's best for America and not be controlled by big oil money?
(see http://thebestmoneyguy.blogspot.com/2008/07/flip-flop-oil-drops.html)

Senators McCain and Obama, this is an opportunity for both of you to stand side by side for America. Will you put America first and drop the partisan stupidity?

The Best Money Guy

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Flip Flop Oil Drops

2008-07-29T14:40:00.000-07:00

Today, oil dropped to just a tad under $121/barrel and the Dow rallied 266 points recovering from yesterday's 240 point drop. Nice roller coaster folks, hey?

Considering oil was up near $147 a few short weeks ago, it's a bit amusing that the bubble heads are now signaling all clear to get back in the market with what's left of our money. OK, people, now that gasoline is down a few cents per gallon, it's still closer to $4 than it is to $2, and as far as I can tell, this is not giving me enough money to take a long vacation in Hawaii anytime soon.

What's rather interesting to me, is that in June, when oil was ramping up, Senator McCain did yet another flip flop in a meeting with oil company executives and decided to support coastal oil drilling.

Now, Washington Post is reporting that, within days of the meeting, oil and gas execs ponied up nearly $1 million to elect McCain.

Call it good timing, serendipity, or price manipulation (Isn't it market price manipulation when the move the prices down as well as up?), this might be a clue that the McCain White House will let the big oil companies call the shots.

Here's a video that points out Senator McCain's relationship with the oil lobby. Remember to hit your browser back button to get back here. http://www.youtube.com/v/SkUj9EIINIs&rel=0

Just for fun, yesterday McCain held a photo-op in front of a California oil well renewing his push for offshore drilling.

If McCain is hoping to use gas prices as a wedge issue to win the election, driving the oil prices down for a bit might help soothe the populace and take away another real issue.

Remember, my viewpoint is that energy is the decisive issue in the election. See http://thebestmoneyguy.blogspot.com/2008/07/energy-lets-get-going-now.html

I believe that only a multi-dimensional progressive solution—a huge plan to shift our economy to clean energy, rapidly deploy nuclear fusion, prevent climate change, and create millions of jobs, and drilling for the short term is the only real solution.

So, please, Senator McCain, please refrain from pushing short-term, quick-fix, band aid gimmicks like coastal drilling to win votes. We all deserve better from you.

The Best Money Guy

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Another Senator Caught in the Cookie Jar

2008-07-29T13:25:00.000-07:00

Today, Sen. Ted Stevens, the longest-serving Republican senator and a figure in Alaska politics since before statehood, was indicted on seven counts of failing to disclose thousands of dollars in services he received from a company that helped renovate his home.

The first sitting U.S. senator to face federal indictment since 1993, Stevens has been dogged by a federal investigation into his home renovation project and his dealings with wealthy oil contractors.

Prosecutors said Stevens received more than $250,000 in gifts and services from VECO Corp., a powerful oil services contractor, and its executives. From May 1999 to August 2007, prosecutors said, the 84-year-old senator concealed "his continuing receipt of hundreds of thousands of dollars worth of things of value from a private corporation."

The indictment unsealed Tuesday says the items included: home improvements to his vacation home in Alaska, including a new first floor, garage, wraparound deck, plumbing, electrical wiring; as well as a Viking gas grill, furniture and tools. He also was accused of failing to report swapping an old Ford for a new Land Rover to be driven by one of his children.

On Capitol Hill, Sen. John Warner, R-Va., called Stevens a hero, adding, however, he didn't know any details about the indictment. "All of us have time that we have to deal with that are tough," Warner said. "I wish him the best."

Gee John, want to try tough times out for a bit, come out here to Vegas and get foreclosed on. Please, give me a break here, Senator Warner.

Prosecutors said Stevens "took multiple steps to continue" receiving things from oil services company VECO Corp., and its founder, Bill Allen. At the time, the indictment says, Allen and other VECO employees were soliciting Stevens for "multiple official actions .... knowing that Stevens could and did use his official position and his office on behalf of VECO during that same time period."

VECO's requests included funding and other aid for the oil services company's projects and partnerships in Pakistan and Russia. It also included federal grants from several agencies — as well as help in building a national gas pipeline in Alaska's North Slope Region, according to the indictment filed in U.S. District Court in Washington.

A moderate Republican, Stevens has served almost 40 years in the Senate, where he unabashedly steered money to toward his remote and sparsely populated home state. He often drew criticism, however, for going around the traditional appropriations process to fund his pet projects.

The Justice Department has closely followed that money, looking for where it intersects with the senator's son, Ben.

A lobbyist and former state senator, Ben Stevens was paid as a consultant for many in the fishing industry who benefited from legislation his father drafted. When Ted Stevens created a $30 million marketing fund for Alaska seafood, Ben Stevens helped decide which companies got the money. Some were his clients.

Ben Stevens also had financial ties to a company that stood to make millions off a piece of federal legislation his father wrote. But he repeatedly has said he never lobbied his father and both men have dismissed such criticism for years.

Yeah, sure. Like you all don't chat over dinner too. Time to go Senator Stevens, please leave what few cookie crumbs you haven't grabbed behind for us average citizens.

The Best Money Guy

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Making Merry at Merrill - The Little Guy Can't Catch a Break

2008-07-29T12:27:00.000-07:00

Merrill Lynch is selling a big slice of its toxic mortgage asset-backed securities and issuing new stock to raise $8.5 billion of fresh capital.

The world's largest brokerage, struggling to right itself as the credit crisis continues, said it will issue more than 200 million new common shares as part of the deal. Merrill said it will write-down $5.7 billion because of additional losses on the sale of mortgage securities and hedging contracts.

The biggest benefactor in the deal is Temasek Holdings, the Singapore sovereign wealth fund that is already one of Merrill's biggest investors. The firm agreed to buy $3.4 billion worth of shares at a yet-to-be determined price, as long as Merrill pays Temasek $2.5 billion in cash.

In addition, Merrill's management plans to buy 750,000 shares, no doubt at a huge discount too.

Merrill said it will sell a large portion of asset-backed securities and terminate hedges linked to bond insurers. So far this year, Merrill has lost and written down $40 billion from failed investments.

Lone Star Funds, a Dallas-based distressed-debt fund will acquire asset-backed securities with a nominal value of $30.6 billion for $6.7 billion. That's 22 cents on the dollar. Even better, Merrill is financing the purchase (Seller financing!) and is taking full recourse (meaning if Lone Star can't make a profit Merrill takes the deal back!) That's a real sweet deal.

The real reason for this maneuvering is to cut Merrill's accounting exposure by $11.1 billion from its level on June 27, leaving $8.8 billion of these securities on its books. More of Wall Street's creative accounting at work.

Here's my ethical and moral question.

Would it not be a better for America if Merrill could have offered every beleaguered home owner that has a mortgage covered in these securities a restructure down to the 22% level? For example, a $200,000 mortgage could have been reduced to $44,000. Assuming an average securitized mortgage of $200,000, this means that there were approximately 15,500 homeowners that Merrill could have rescued. Do you think any homeowner would have turned this gift down? Wouldn't this have been a better deal for more Americans? And Merrill could have done this without any recourse exposure.

Once again, the little guy can't catch a break.

The Best Money Guy

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Got Debt? Keep Digging

2008-07-29T09:56:00.000-07:00

I was reading about several foolish consumers that have managed to get their credit card balances up so that their interest payments total more than 40 percent of their pretax income and thousands more in fees. Unfortunately, there are millions that are in the same boat.

Years of spending with easy credit have left a record number of Americans standing at the financial edge. They have amassed a mountain of debt that grows ever bigger because of high interest rates and fees.

It's clear that the past eight years of easy lending practices of America’s merchants of debt have led millions of Americans to the limit. More and more, Americans have little chance of paying off their debt.

It is not just individuals but the entire economy that is now suffering. Practices that produced record profits for many banks have shaken the nation’s financial system to its foundation. As a growing number of Americans default, banks are recording hundreds of billions in losses, devastating their shareholders.

To reduce the risk of a domino effect, the Bush administration created an emergency rescue plan for Fannie and Freddie.

Over the last eight years, the increased availability of credit has been the primary factor boosting the economy.

But behind the big increase in consumer debt is a major shift in the way lenders approach their business. In earlier years, actually being repaid by borrowers was crucial to lenders. Now, because so much consumer debt is packaged into securities and sold to investors, repayment of the loans takes on less importance to those lenders than the fees and charges generated when loans are made.

Lenders have found new ways to squeeze more profit from borrowers. Though prevailing interest rates have fallen to the low single digits in recent years, for example, the rates that credit card issuers routinely charge even borrowers with good credit records have risen, to 19.1 percent last year from 17.7 percent in 2005 — a difference that adds billions of dollars in interest charges annually to credit card bills.

Average late fees rose to $35 in 2007 from less than $13 in 1994, and fees charged when customers exceed their credit limits more than doubled to $26 a month from $11.

Mortgage lenders similarly added or raised fees associated with borrowing to buy a home — like $75 e-mail charges, $100 document preparation costs and $70 courier fees — bringing the average to $700 a mortgage, according to the HUD. These “junk fees” have risen 50 percent in recent years.

Today the focus for lenders is not so much on consumer loans being repaid, but on the loan as a perpetual earning asset.

Recent changes in the bankruptcy laws, supported by financial services firms, make it all the harder for consumers, especially those with modest incomes, to get out from under their debt by filing for bankruptcy.

For decades, America’s shift from thrift could be summed up in this familiar phrase: When the going gets tough, the tough go shopping. Whether for a car, home, vacation or college degree, the nation’s lenders stood ready to assist.

Companies offered first and second mortgages and home equity lines, marketed credit cards for teenagers and helped college students to amass upward of $100,000 in debt by graduation.
Every age group up to the elderly was the target of sophisticated ad campaigns and direct mail programs. “Live Richly” was a Citibank message. “Life Takes Visa” proclaims the nation’s largest credit card issuer.

Eliminating negative feelings about indebtedness was the idea behind Mastercard's “Priceless” campaign, which came out in 1997.

Mortgage lenders took to cold-calling homeowners to persuade them to refinance. Done to reduce borrowers’ monthly payments, serial refinancings allowed lenders to charge thousands of dollars in loan processing fees, including appraisals, credit checks, title searches and document preparation fees.

Not surprisingly, such practices generated dazzling profits for the nation’s financial companies.

And since 2005, when the bankruptcy law was changed, the credit card industry has increased its earnings 25 percent.

The 2005 bankruptcy reform was designed by creditors to benefit credit card companies and hurt their customers.

Because many of these large institutions pool the loans they make and sell them to investors, they are not as vulnerable when the borrowers default. At the end of 2007, for example, one-third of Capital One’s $151 billion in managed loans had been sold as securities.

As the profits in this indebtedness grew, financial companies moved aggressively to protect them, spending millions of dollars to lobby against any moves lawmakers might take to rein in questionable lending.

Just two generations ago, America was a nation of mostly thrifty people living within their means, even setting money aside for unforeseen expenses.

Today, Americans carry $2.56 trillion in consumer debt, up 22 percent since 2000 alone, according to the Federal Reserve Board. The average household’s credit card debt is $8,565, up almost 15 percent from 2000.

College debt has more than doubled since 1995. The average student emerges from college carrying $20,000 in educational debt.

Household debt, including mortgages and credit cards, represents 19 percent of household assets, according to the Fed, compared with 13 percent in 1980.

Even as this debt was mounting, incomes stagnated for many Americans. As a result, the percentage of disposable income that consumers must set aside to service their debt — a figure that includes monthly credit card payments, car loans, mortgage interest and principal — has risen to 14.5 percent from 11 percent just 15 years ago.

By contrast, the nation’s savings rate, which exceeded 8 percent of disposable income in 1968, stood at 0.4 percent at the end of the first quarter of this year, according to the Bureau of Economic Analysis.

More ominous, as Americans have dug themselves deeper into debt, the value of their assets has started to fall. Mortgage debt stood at $10.5 trillion at the end of last year, more than double the $4.8 trillion just seven years earlier, but home prices that were rising to support increasing levels of debt, like home equity lines of credit, are now dropping.

The combination of increased debt, falling asset prices and stagnant incomes does not threaten just imprudent borrowers. The entire economy has become vulnerable to the spending slowdown that results when consumers hit the wall.

Bottom line - until consumers get their debt down or gone, we're in for a long grinding bear market with lots of bear market rallies.

The Best Money Guy.

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/
Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Don't Worry Honey, I Shrunk the Stores

2008-07-29T08:49:00.000-07:00

In the midst of today's bear market bounce because an already known consumer survey taken at the top of last month's bear market rally, came up with a minor and insignificant increase, my favorite financial bubble heads on Bloomberg and CNBC have failed to mention that Mervyn's department stores filed for bankruptcy and Bennigans is quickly (like in the middle of the night) closing restaurants.

(A quick Google news search reports locations from Chicago, New Jersey, Florida and Colorado are among those that have not opened for business.)

Don't worry, though, because based on rumors that our band of fools in Washington are going to somehow step in and and remove speculators from the oil and commodities markets has caused oil to drop $3+/barrel, and Wall Street is celebrating.

All of this might just be good news for GM since it still has a few million unsold monster Tahoe SUVs, and it is due to report its non-earnings (meaning another multi-billion dollar loss) Thursday.

So, it seems that corporate America's strategy is to shrink the package sizes, shrink the portion sizes, raise prices as much as possible, keep wages flat, reduce the number of store locations open for business thereby forcing us to drive further, and sell as much of itself to foreign governments as possible.

This way we all get happy in our shrinking of America situation.

Don't Worry, Be Happy

The Best Money Guy. For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

An Open Letter to Mr. Paulson

2008-07-29T06:03:00.000-07:00

Dear Mr. Paulson:

It seems that you and your team are working furiously to prop up the financial industry. Unfortunately, just about everything you do seems to help the insiders and leaves us average citizens screwed.

So that you might at least attempt to demonstrate that you are for us taxpayers, I thought you might want to consider this suggestion.

I was reading how distressed debt-backed assets are being sold for pennies on the dollar. For example, Lone Star's recent deal to acquire $30.6 billion of Merrill CDOs for the equivalent of 5.5 cents on the dollar.

These securities are backed by our mortgages, car loans, credit card debt, and student loans, etc. I thought it might be a better deal for all of us if these deals included a rule that reduced the outstanding principal debt amount. For example, if Lone Star is getting the debt for 5.5% of the face value, why not require that all debt collateralized in these securities be immediately written down by 4 times the 5.5% or 22%?

If this was done, both the creditors and debtors would win.

Now, I know that it is a challenge for you and Wall Street to engineer a game where both sides win, as most of Wall Street is based on a zero sum game. But, I am challenging you to enact rules or legislation or something that gives the individual American a fair deal.

Regards

The Best Money Guy.

Copy to Senator Reid and Speaker Pelosi

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Got U.S. Cash? Buy Banks & Brokerages

2008-07-29T04:08:00.000-07:00

Just about one one hour after we wrote about the awful state of the U.S. banks and brokers yesterday, and only a few days after their CEO stated "we have plenty of cash", Merrill Lynch announced that it was getting another transfusion of $5 billion from Singapore’s state investment company, Temasek.

I've got to ask Mr. Thain, Merrill's CEO, when was he lying, now or before? This is a bit more important since, in it's press release, Merrill craftily omitted that under it's previous cash injection arrangement with Temasek, it has to pay Temasek $2.5 billion to get the $5 billion. (In the perspective of a home mortgage, that would be like having to pay 50 points as an upfront origination fee!)

Merrill now joins a number of its Wall Street friends, including Morgan Stanley, who this week received an infusion from China’s sovereign fund, in getting fresh capital from deep-pocketed state investors in Asia and the Middle East.

Capital flows from Asia and the Middle East are a growing trend as nations seek to recycle surplus U.S. dollars into U.S. assets. Looking at it from a different perspective, we pay to much for their oil and stuff, and they take their excess profits and buy our few remaining industries so they can gain an even tighter control over our future.

One foreign investment manager quipped, "Now that various companies and countries are in trouble, this is a great time to go swooping in and picking some of those things up."

Earlier in December the city-state's sovereign wealth fund Government of Singapore Investment Corporation invested nearly $10 billion to help recapitalize UBS along with additional funds from an unidentified investor.

The Financial Times reported Friday the unidentified Middle Eastern investor channeling $1.73 billion into Swiss bank UBS is from Saudi Arabia. The report citing an unidentified figure with knowledge of the negotiations said investors could include the Saudi royal family, with Price Sultan, the nation's defense minister, involved in the deal.

In the past week, Morgan Stanley announced it would sell about $5 billion in equity units convertible into common stocks, equivalent to a 9.9% stake, to China's sovereign wealth fund China Investment Corp. The investment was the second foray by China's sovereign wealth fund into the U.S. since paying $3 billion for a 9.3% stake in the initial public offering of Blackstone In November Citigroup received a $7.5 billion investment from the Abu Dhabi Investment Authority.

Also that month China's second-largest life insurer, Ping An Insurance paid $2.7 billion for a 4.2% stake in Belgo-Dutch banking and insurance group Fortis, a move that made it the largest single shareholder.

China's largest listed brokerage Citic Securities stuck a cross investment alliance with Bear Stearns that saw the Chinese firm take a 6% stake in the Wall Street firm with an option to increase that stake to 9.9%. Under the deal, Bear Stearns received a 2% stake in the Chinese firm and has the option to lift its stake by a further three percentage points.

In July U.K banking group Barclays agreed to sell a stake to Temasek and China's state-controlled China Development Bank.

The transfer of U.S. wealth goes on and on and, just like the old Sonny and Cher song, we can kiss our assets goodbye.

The Best Money Guy.

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

The Fat Lady Ain't Singing Anymore

2008-07-28T18:21:00.000-07:00

Hey, Kudlow, Kramer, and the plethora of bubble heads on Bloomberg and CNBC - the last rally in the stock markets was a classical bear market rally fueled by even more Government meddling into your beloved not-so-free markets.

Now, us growing poorer every day "investor once a member of the middle class, now descending into Dante's inferno faster that a kid on a greased skateboard, are pulling what's left of our money out of value-oriented mutual funds (401Ks, IRAs, etc.)

In the language of the funds, this is called big-time redemptions. And coming only a few weeks before the September 30 fund accounting closing date means the funds are scrambling to raise cash, and that means they are selling whatever they can.

Since many of the "value" funds are overly loaded up on financials already, this is yet another case of a lot of big elephants stampeding towards the tiny exit, and presto the Dow drops another 200 points in a "quiet" day.

Worse yet, the reality is that there is simply no way to reach a solid conclusion about the book value of the banks and financial companies, and without a rational book value, the stock value is essentially unknown.

Housing price compression is still very much in progress, and by some estimates we are only half way to the bottom.

Most investors (and all of the financial media bubble heads) don't grasp the reality of the situation. That the banks still have a pile of dirty laundry to deal with.

Last week, Bank of America marked it's newly acquired Countrywide assets to market, resulting in a 15% cut in Countrywide's value. Because of the huge leverage at Countrywide, this move nearly wiped out the firm's book value.

If other leading mortgage holders get to half that rate, we would see Citi, JP Mogan Chase, Merrill Lynch and Lehman, that hold more than a trillion dollars in mortgages experience another 30% to 50% destruction in their book value.

The book-value destruction will pulverize bank values as reality further hits the loan-loss-reserves at the holders of America's home equity loans, Alt-A and subprime mortgages. If Fannie and Freddie get incredibly lucky (fat chance IMO) and only write off 3% of their mortgages, they will have $150 billion in net worth destruction and be broke.

Where will the money come from to pay back the bond holders who funded these loans? Us taxpayers, of course.

If the tax credits that are held on the books of Fannie and Freddie at around $30 billion get valued at their true value (remember, with their loss-carry forwards from written-off loans, Fannie and Freddie will not be able to use any tax credits for a decade or more!), they are bankrupt already.

Opera anyone?

The Best Money Guy

For honest home mortgages at the lowest rates and costs go to http://www.bestmoneyguy.com/ Don't waste your time with low ball bogus quotes designed to lure you into a bad surprise at closing. We deliver what we quote and always show you the wholesale rates and costs.

Stampeding Elephants Want A Bailout - Again

2008-07-28T16:18:00.000-07:00

This afternoon, I was reading an article from Paul McCulley, the Managing Director at PIMCO, the world's largest bond manager. (http://www.pimco.com/ for more information.)

(I've include the full article for your reading.)

If I can summarize, he essentially states that the holders of debt-backed securities, are trying to all rush out the door like proverbial stampeding elephants, unloading (selling) these "assets" for whatever they can get for them, thereby driving the prices lower, and forcing more selling. (Just like what happens when a company's stock crashes, right?)

And, just like with a stock, when there are more sellers than buyers, the price keeps dropping.

So, Mr. McCulley proposes that, since this is "bad", the Federal Reserve should acquire these assets (with taxpayer money), and stop the prices from declining, thereby saving the sellers (Yes, the banks and investment banks once again!)

In a word, HORSEPUCKY!

These clowns created this toxic garbage, created bogus accounting rules to hide their bad business decisions, and want the taxpayers to save them (and their billion dollar incomes) once again.

Mr. McCulley quotes that the Fed did has the power to act: Section 13(3) of the Federal Reserve Act of 1932, that the Fed has the power to lend to essentially anybody against any collateral, so long as it declares it is necessary to do so because of "unusual and exigent circumstances."

OK, Mr. McCulley and Mr. Bernanke - how about lending to all of us working people using your Fed power. Most of us would love to buy a highly discounted foreclosed home. How about letting every American holding a mortgage or a home equity or a car loan refinance at the friendly Fed rate of 2%? Many of us would love to consolidate our high interest credit cards into nice Federal low 2% rates. Why not convert all student loans to the 2% rate? Why not let every citizen that wants to borrow some money to start a business borrow at 2% from the Fed?

So, how about it? Another massive bailout of the big fat Wall Street elephants or give every American a break?

Hell, this might even turn the economy around.

The Best Money Guy

Mr. McCalley's article is below.
----------------------------------------------------------------------------------

The Paradox of Deleveraging By Paul McCulley

Back in college, most of us took microeconomics before we took macroeconomics. In fact, at Grinnell College where I went, microeconomics was a prerequisite for macroeconomics. The reason was simple: microeconomics begins with the concepts of supply and demand, an essential starting point for the study of macroeconomics. But you only know you've mastered both when you intuitively grasp that macroeconomics is not just the summation of microeconomic outcomes, but rather the interaction of microeconomic outcomes.

For me, a simple concept brought this realization: the paradox of thrift. For those of you who might not recall, the paradox of thrift posits that if we all individually cut our spending in an attempt to increase individual savings, then our collective savings will paradoxically fall because one person's spending is another's income – the fountain from which savings flow.

This principle is part of a whole range of macroeconomic concepts under the label of the paradox of aggregation: what holds for the individual doesn't necessarily hold for the community of individuals. Understanding this paradox is absolutely vital to understanding macroeconomics and even more so to understanding what is presently unfolding in global financial markets.

Double Bubbles Bust

Once the double bubbles in housing valuation and housing debt burst a little over a year ago, everybody, and in particular, every levered financial institution – banks and shadow banks alike – decided individually that it was time to delever their balance sheets. At the individual level, that made perfect sense.

At the collective level, however, it has given us the paradox of deleveraging: when we all try to do it at the same time, we actually do less of it, because we collectively create deflation in the assets from which leverage is being removed. Put differently, not all levered lenders can shed assets and the associated debt at the same time without driving down asset prices, which has the paradoxical impact of increasing leverage by driving down lenders' net worth.

This process is sometimes called, especially by Fed officials, a negative feedback loop. And it is, though I prefer calling it the paradox of deleveraging, because the very term cries out for both a monetary and fiscal policy response, not just a monetary one. Lower short-term interest rates via Fed easing are, to be sure, useful in mitigating deflating asset prices, particularly if they serve to pull down long-term rates, which are the discount rates for valuing assets with long-dated cash flows.

But monetary easing is of limited value in breaking the paradox of deleveraging if levered lenders are collectively destroying their collective net worth. What is needed instead is for somebody to lever up and take on the assets being shed by those deleveraging. It really is that simple.

Time to Lever Up Uncle Sam's Balance Sheet

As Keynes taught us long ago, that somebody is the same somebody that needs to step up spending to break the paradox of thrift: the federal government, which needs to lever up its balance sheet to absorb assets being shed through private sector delevering, so as to avoid pernicious asset deflation. That's a fiscal policy operation and, fortunately or unfortunately, fiscal policy is not made by a few learned technocrats above the political fray of the democratic process, but is squarely in the hands of the legislative branch, consisting of 535 politicians, with far more lawyers than economists among them.

Yes, I know that Congress passed a properly Keynesian stimulus package earlier this year, the benefit of which we are feeling now, sending over $100 billion in rebates to the citizenry, borrowing the money to do so and levering up the Treasury's balance sheet with debt in an equal amount. So, yes, I may be too harsh when I challenge the economic literacy of Congress: they do understand that Uncle Sam should borrow and spend, directly or indirectly through tax rebates to citizen spenders, to truncate the paradox of thrift (even if they don't know what that is).
But levering up Uncle Sam's balance sheet, to buy assets to break asset deflation resulting from the paradox of deleveraging still seems to be a foreign, if not a sinful proposition. This need not be, and should not be. Yet we hear endlessly that any levering up of Uncle Sam's balance sheet to buy assets must be done in a way that "protects tax payers." By definition, levering Uncle Sam's balance sheet to buy or guarantee assets to temper asset deflation will put the taxpayer at risk – but will do so for their own collective good!

This was defacto what the Federal Reserve did when it put up $29 billion on nonrecourse terms to buy assets so as to facilitate the merger of Bear Stearns into JPMorgan. As I said at the time, and wrote about two months ago, this was a fiscal policy operation, conducted by the Fed. Logically, it should have been conducted by the Treasury using appropriated spending power from Congress. But alas, that "right" solution was not legally available to the Treasury, whereas the Fed did have the power to act: Section 13(3) of the Federal Reserve Act of 1932 gave the Fed the power to lend to essentially anybody against any collateral, so long as it declares it is necessary to do so because of "unusual and exigent circumstances."

But make no mistake, it was a fiscal policy action demonstrated by (1) the fact that the Fed sold a similar amount of Treasuries from its portfolio, increasing the supply of Treasuries in the market by the same amount, and (2) the fact that any losses the Fed experiences on that $29 billion will reduce dollar-for-dollar the amount of seigniorage profits that the Fed remits to the Treasury. At the end of the day, there are $29 billion more Treasuries on the open market than otherwise would be the case, and the Treasury is, one small step removed, on the hook for any losses the Fed experiences on the $29 billion of non-Treasury assets it now de facto owns.

Yes, that $29 billion is actually a loan to a Limited Liability Corporation (LLC) set up to hold the Bear assets, with JP Morgan providing a $1 billion subordinated loan (sometimes called the "first loss" tranche) to the LLC. But that is merely a technical detail – the bottom line is that we the taxpayers bought $29 billion of Bear's assets.

To their credit, legislators did figure that out – albeit after the fact. And they were none too happy about it, despite accepting the Fed's and Treasury's logic that it simply had to be done, for the greater good of the citizenry. Legislators rationally guard their constitutional powers over the federal purse.

And Now to Freddie and Fannie

Which brings us to Mr. Paulson's request to Congress to give him – and his successor – the power to spend unlimited amounts of taxpayers' funds to buy the debt or equity of Fannie Mae and Freddie Mac. I confidently predict that he's not going to get unlimited authority; it will most likely be checked by counting any such deficit-financed injections into Fannie and Freddie against the Treasury's statutory borrowing limit, which can be lifted only by Congress. But Mr. Paulson is going to get most of what he wants, if only because legislators are too fearful of the consequences if they stiff arm him.

Between now and then, the Federal Reserve stands ready to lend to Fannie and Freddie, again using Section 13(3) as its enabling authority. But unlike the case with the $29 billion spent for Bear's assets, any Fed lending to Fannie and Freddie is explicitly being billed as a "bridge" to Treasury lending or investing in the agencies. This is the way it should be: bailouts and backstops with taxpayer funds should be legislated by Congress and placed on the Treasury's, not the Fed's, balance sheet.

In fact, I envision that legislation will explicitly direct the Treasury to "buy out" any lending that the Fed does to Fannie and Freddie. Indeed, in what might be a bit of wishful thinking, I believe it would be highly appropriate for Congress to authorize the Treasury to buy out the Fed's $29 billion loan to the LLC holding Bear's assets, putting it on the Treasury's balance sheet, where it belongs.

Section 13(3) should be used only when it is absolutely necessary to avoid systemic financial turmoil. That's not to say that the Fed shouldn't be cooperative in any necessary bailouts or backstops. The fact of the matter is that the Fed is the only entity in Washington able to spend money without prior Congressional approval. Thus, when the stuff is truly hitting the systemic oscillator, the Fed has to unplug it.

But Section 13(3) should be considered sacred, used only in extremis, so as to ensure the Fed's operational monetary policy independence in the pursuit of sturdy growth and low inflation. It's never been a good idea to have the monetary authority and the fiscal authority housed under the same decision-making roof.

That's not to suggest that there is no room for coordination between the monetary and fiscal authorities. This is particularly the case when the economy is experiencing asset deflation, begetting debt deflation and deleveraging. Indeed, none other than Chairman Bernanke made this case when he was Governor, first in November 2002 in his famous speech titled "Deflation: Making Sure 'It' Doesn't Happen Here", and then in May 2003, in a speech titled "Some Thoughts on Monetary Policy in Japan".

In the first speech, the economic menace at hand was the risk of goods and services price deflation in the United States; in the second speech, the menace was the reality of goods and services price deflation in Japan. Currently, in the United States, asset price deflation is the menace at hand, not goods and services price deflation.

But make no mistake, asset price deflation can be every bit as nefarious as goods and services deflation. Indeed, asset price deflation in the context of deleveraging is, in my view, much more nefarious than modest goods and services price deflation, since asset price deflation undermines the capital base of levered financial intermediaries, begetting yet more deleveraging and further asset price deflation.

Harkening back to those two speeches from Mr. Bernanke, it is very clear that he sees the role of the central bank as different in deflationary times than inflationary times. Specifically, in the speech on Japan, he said (my emphasis):

The Bank of Japan became fully independent only in 1998, and it has guarded its independence carefully, as is appropriate. Economically, however, it is important to recognize that the role of an independent central bank is different in inflationary and deflationary environments. In the face of inflation, which is often associated with excessive monetization of government debt, the virtue of an independent central bank is its ability to say "no" to the government. With protracted deflation, however, excessive money creation is unlikely to be the problem, and a more cooperative stance on the part of the central bank may be called for. Under the current circumstances, greater cooperation for a time between the Bank of Japan and the fiscal authorities is in no way inconsistent with the independence of the central bank, any more than cooperation between two independent nations in pursuit of a common objective is inconsistent with the principle of national sovereignty.

Again, I'm aware that he was speaking in the context of both goods and services price deflation and asset price deflation in Japan, not just asset price deflation. So the parallel is not complete with current circumstances in America, which involves elevated goods and services inflation in the context of asset price deflation.

In fact, I believe the Fed faces a more daunting challenge now than the Bank of Japan did back then, in that the Fed has to balance the risks of both goods and services inflation and asset price deflation, whereas the Bank of Japan did not have to do so. Put differently, Japan faced both the paradox of thrift and the paradox of deleveraging, screaming for the Bank of Japan to subordinate itself for some time to the fiscal authority. This is not the case now in the United States, which is experiencing only the paradox of deleveraging, not the paradox of thrift, though the latter malady is certainly a fat tail risk if the former malady is not ameliorated, notably in house prices.

Bottom Line

Conventional wisdom holds that when an economy faces a paradox of private thrift, it is appropriate for the sovereign to go the other way, borrowing money to spend directly or to cut taxes, taking up the aggregate demand slack. Indeed, that is precisely what Congress did earlier this year, sending out $100+ billion of rebate checks, funded with increased issuance of Treasury debt. Good ole fashioned Keynesian stuff!

Concurrently, conventional wisdom is struggling mightily with the notion that when the financial system is suffering from a paradox of deleveraging, the sovereign should lever up to buy or backstop deflating assets. But analytically, there is no difference: both the paradox of thrift and the paradox of deleveraging can be broken only by the sovereign going the other way.

Fortunately, Congress is finally grappling with this reality, as it moves towards passage of Mr. Paulson's plan for backstopping Fannie and Freddie with taxpayer funds. It's not a fun thing to do, particularly following the use of $29 billion of taxpayer funds to facilitate the merger of Bear Stearns into JPMorgan. But it is the right thing to do. And it is further the right thing that Congress is doing it, not the Fed under Section 13(3), except as a possible bridge to Treasury authority.

Energy - Let's Get Going NOW!

2008-07-28T14:31:00.000-07:00

As a teenager in the 1960's I remember the incredible goal and challenge that John F. Kennedy issued to America - to put a man on the moon in ten years.

Well, we have a new challenge and a critical test of our ability to survive as a nation, so let's change it into an opportunity to demonstrate what we are really made of. If we don't solve the oil/energy problem we are toast.

There is an answer sitting just a bit out of our reach. It's nuclear fusion. And, it's been carefully pushed into the background over the last eight years by the current Washington regime. Wonder why? I'll get to that in a bit. But first, a bit of science.

In a fusion reaction, two light atomic nuclei fuse together to form heavier ones. The fusion process releases a large amount of energy, which is the energy source of the sun and the stars.

Fusion has some key features which make it an attractive option in a future energy mix: the fusion process is inherently safe; waste which will not be a burden for future generations; no emission of greenhouse gases; and the capacity for large scale energy production.

Sounds great so far, right?

First of all, fusion is an almost limitless fuel supply. The basic fuels are distributed widely around the globe. Deuterium is abundant and can be extracted easily from sea water. Lithium, from which tritium can be produced, is a readily available light metal in the Earth´s crust.

No transport of radioactive materials is required in the day-to-day operation of a fusion power station, as the intermediate fuel tritium is produced and consumed within the power plant.

The fusion reaction is inherently safe. Only about two grams of fuel is present in the plasma vessel, enough for a few seconds of "burn". As fusion is not a chain reaction, the reaction can never run out of hand.

Fusion produces no greenhouse gas emissions. Fusion power plants will not generate gases such as carbon dioxide that cause global warming and climate change, nor other gases that have damaging effects on the environment.

Fusion is suitable for the large-scale electricity production required for our increasing energy needs. A single fusion power station could generate electricity for two million households.

Waste from fusion will not be a long-term burden on future generations. Only metal parts close to the fusion plasma will become radioactive. Any radioactive waste generated will be small in volume and the radioactivity will decay over several decades with the possibility of reuse after about 100 years.

So, you might ask what the Dept. of Energy (DOE) has been doing for the last eight years? Answer - building better nuclear bombs and the infamous bunker-busters.

In fact, as recently as May 27, 2008, DOE Under Secretary Ray Orbach axed the Princeton fusion experiment closing the National Compact Stellarator Experiment (NCSX) construction project. Remember, just a few months ago, oil was an affordable $90/barrel! Mr. Orbach said, "the decision evaluated the project's value against the taxpayer interests".

You should know that the Tokamak Fusion Test Reactor (TFTR) operated at the Princeton Plasma Physics Laboratory (PPPL) from 1982 to 1997. TFTR set a number of world records, including in 1994 TFTR produced a world-record 10.7 million watts of controlled fusion power, enough to meet the needs of more than 3,000 homes.

Let's summarize a bit. In 1997 we have working experimental fusion reactors (Princeton is only one of several.) In 2008 we have none and oil is over $120/barrel. Does anyone remember the still secret Vice President Cheney National Energy Plan?

There is a bit of good news.

A joint international research and development project, ITER aims to demonstrate the scientific and technical feasibility of fusion power. The partners in the project are; the European Union, Japan, the People´s Republic of China, India, the Republic of Korea, the Russian Federation and the USA. ITER will be constructed in Europe, at Cadarache in the South of France.

In June 2005, it was decided by the Parties to construct ITER in Cadarache, in the South of France. On 21 November 2006, a Joint Implementation Agreement was signed by the Parties, which established the international ITER Organization.

Just like any international consortium, ITER is moving a glacial speed and is full of distractions.

On July 07, 2008 Dr. Nebel, working on the experimental Bussard IEC fusion reactor said that a 1.5 meter [diameter] power fusion reactor generating 100MW of power could be built for as little as $20 million. (Note, Dr. Nebel is under a publishing embargo and cannot discuss the data.)

Hopefully this will be confirmed in August or September of this year with results published and next stages funded.

FYI, the typical U.S. nuclear power plant produces between about 500 and 1300 MW and is substantially larger than 4 cubic feet! Theoretically, this leads us to think that it is possible to power a city the size of Las Vegas with a couple of well placed, tractor-trailer sized fusion power generators.

Now, back to us and the constant blame coming from Washington.

I'm so tired of hearing the political blaming blather from both the Democrats and Republicans, neither of which want to accept that they have done essentially nothing for years other than waste trillions of dollars in everything from insane stupid wars on this and that, pushing corporate welfare programs, and routing financial pork to their constituents, pandering for more votes.

Mr, McCain and Mr. Obama - here's my challenge to you.

Stand together and commit one hundred percent of America's creative and engineering genius to implementing and deploying nuclear fusion electric generation in ten years.

Yes, I said ten years.

If both of you will simply state this publicly, oil will immediately drop to $50/barrel. And, if you back your statements with real, serious, abundant funding at all levels we will achieve energy independence in only ten years.

Time for both of you to stop pandering to every minority group and get on to something really big and important.

Enough said.

The Best Money Guy

Is It Flim or Is It Flam? The Latest from Mr. Paulson

2008-07-28T11:46:00.000-07:00

This afternoon, Secretary of the (empty) Treasury announced that his latest idea was for Fannie and Freddie (now that he engineered their bail out with a blank check by us taxpayers) should begin to issue Covered Bonds as a mechanism for raising money to fund more home mortgages.

Since most Americans are clueless as to what a covered bond is, I've enclosed a brief lesson below.

But, don't think that this latest maneuver from our friends in Washington is necessarily in your best interest. I'll get to this in a bit, but first the lesson.

Covered bonds are securities created from either mortgage loans or public sector loans and make up one of the oldest and largest sectors of the European bond market.

Covered bonds are securities issued by a bank and backed by a dedicated group of loans known as a “cover pool”.

There are two different types of covered bonds: those backed by high-quality mortgage loans and those backed by public sector loans.

If the issuing bank becomes insolvent, the assets in the cover pool are separated from the issuer’s other assets solely for the benefit of the covered bondholders.

Covered bonds are similar in many ways to mortgage and asset backed securities with one major difference: the loans backing a covered bond remain on the balance sheet of the issuing bank. (Remember this!)

The bonds are therefore obligations of the issuing bank, and the issuer retains control over the assets. It can change the make-up of the loan pool to maintain its credit quality, which can benefit investors, and it can also change the terms of the loans. By contrast, mortgage and asset backed securities are typically off-balance-sheet transactions in which lenders sell loans to special purpose vehicles that issue bonds, thus removing the loans—and the risk associated with those loans—from the lenders’ balance sheets.

Possibly, the most important characteristic of covered bonds is that they define how investors will be protected if the issuing bank goes bankrupt. (Ok, so if Freddie and/or Fannie (or both) go under, the investors are protected, by who? Guess?)

Covered bonds can potentially offer investors yields higher than government bonds without significantly altering the risk profiles of conservative portfolios.

Covered bonds are full recourse debt instruments, meaning that holders have a preferential claim on the assets in the cover pool and the proceeds arising from them if the issuer defaults. Should an originating bank fail to make payments on a covered bond for any reason, interest payments from the underlying mortgages would go to investors.

Demand for covered bonds has proved so strong that U.S. mortgage lenders, which have access to the large and liquid mortgage-backed securities market in the U.S., are eyeing the covered bond market for financing. Washington Mutual Inc., the once upon a time largest U.S. savings and loan institution, became the first U.S. lender to tap the covered bond market in September 2006, issuing more than €4 billion.

OK, here it is. The big U.S. banks are strapped for cash. Mr. Paulson wants Fannie and Freddie to be able to issue covered bonds, so they can raise money to keep the housing market alive. He, and the fools in Congress have already given Fannie and Freddie a blank check, so the potential investors of newly issued covered bonds will essentially have ZERO risk - meaning, yes, dear readers, you and I will guarantee the investors returns, even if Fannie and Freddie go bye-bye.

Please, will someone help me, I've fallen and I can't get up, there's just too much flim and flam under my feet.

The Best Money Guy.

Are We Ready to Tell the Truth?

2008-07-28T10:22:00.000-07:00

I've been in the home mortgage business for more than twenty years. What started out as a part-time endeavour became a full-time second career when the technology and telecom recession (or the dot-com bust) hit in 2000. Seems funny that this is also when the neocons with "W" at the front, took control of our country.

For most of my mortgage career, I helped prospective home buyers get their first or move-up home. I counselled my clients on how to get the best rates, the lowest costs, and how to get mortgages that would be in their best, long-term financial interests.

When the rates started going down, I helped my customers get lower rates on their fixed term mortgages, helping them reduce their expenses and even pay off their mortgages sooner.

Along the way, we got the now infamous sub-prime boom where lenders went crazy lowering lending standards so that almost anyone with a social security number (and even many without) could get a huge loan with virtually no documentation other than their signature.

For me, this seemed absolutely crazy, and I refused to jump into the game.

To me, it seemed that the entirety of the housing boom became nothing but a collection of related industries, all built on lies.

Borrowers lied about their income and assets to qualify for loans they can’t pay on houses they can’t afford.

Appraisers lied about what a home is worth to facilitate the writing of loans by mortgage brokers that look better to the lenders backing them than they actually are.

The lenders then lied to the marketplace when they bundle these bogus loans up and sell them as solid, asset-backed investments.

And now, courtesy of "W" (Thankfully, he will be gone by January), and the now Democratic Congress, we the taxpayers are now quickly becoming the bag holders.

Now, we are still in a state of denial. The cheerleaders of Wall Street keep screaming the worst is over. Yet, the average, hard working family has next to a zero chance of being able to buy a distressed home without having a nice pile of cash. (Sorry, he new housing bill is not going to fix this mess as lenders still don't trust borrowers.)

There are solutions. Watch for my message to the candiates and the parties.

The Best Money Guy

Scam Alert - Target -- Your Home Equity

2008-07-28T09:27:00.000-07:00

Even though the home mortgage business and home equity lines of credit are difficult to get, the fraudsters are still at it.

If you have significant equity in your home (Yes, Delores, some people do!) , you are likely to become a target real soon.

The Identity Theft Assistance Center, a nonprofit industry group, reports that identity thieves have recently began making targets of individuals with good credit because such people often have substantial untapped home equity.

A home equity line of credit is an ideal vehicle for criminals because they are typically “big pools of money,” and if consumers do not regularly check their accounts, that pool can drain quickly.

The FBI's annual mortgage fraud report, which was released in April, cited home equity credit fraud as an “emerging scheme” in the slumping real estate and mortgage market.

Now that lenders have vastly tightened their lending criteria, criminals who specialize in mortgage fraud have little choice but to move upstream and seek out victims with good credit. Home equity lines are a favorite option because they are almost as easy to open as a credit card account, as long as a criminal has the proper financial information.

Those with poor credit have been preyed upon by identity thieves in recent years, because thieves who pretend to be such owners could easily obtain mortgages from subprime lenders with little documentation.

Typically, the perpetrators pose as homeowners to establish home equity credit accounts online. Criminals will then often send a fax to the bank requesting a wire transfer of funds to a different account. To verify the request, the bank unknowingly calls the perpetrator. Duh!

Homeowners who have significant equity in their homes may be well-advised to check their credit reports frequently.

One way for a homeowner to determine if someone has created an equity credit line is to enroll in an identity fraud detection service.

The major credit bureaus; Equifax, Experian and TransUnion; offer credit monitoring services.

Be warned.

The Best Money Guy.

A Senator with Chutzpah Takes a Stand

2008-07-25T11:42:00.000-07:00

Today, Senator Jim DeMint (R SC) announced that if there is any federal buyout of Fannie Mae and Freddie Mac it must include an immediate end to lobbying and political activities, including donations to think-tanks and other non-profit organizations.

He said "If American taxpayers are forced to buyout Fannie Mae and Freddie Mac, their lobbying and political activities should stop.”

We agree, thanks senator DeMint for standing up on this yet another ripoff of the American taxpayer.

If we plan to use taxpayer dollars to buy shares of these troubled companies, they should be treated like other federal entities. Any legislation exposing taxpayers to this risk should include a serious debate on long-term reforms, and a ban on lobbying must be included.

You might want to know how Fannie Mae and Freddie Mac have survived scandal and crisis.

Easy, they greased just about everyone in Washington.

Over the past decade, they have spent nearly $200 million on lobbying and campaign contributions. But the political tentacles of the mortgage giants extend far beyond their checkbooks. The two government-chartered companies run a highly sophisticated lobbying operation, with deep-pocketed lobbyists in Washington and scores of local Fannie- and Freddie-sponsored homeowner groups ready to pressure lawmakers back home.

Fannie Mae and Freddie Mac have been such prolific donors to political parties, candidates and PACs that they are the #1 and #3 top contributors in the mortgage industry and rank in the Top 100 political donors of all time.

Washington is in a frenzy to ‘do something’ about the mess at Fannie Mae and Freddie Mac, but Congress should not rush to use this ‘crisis’ to put the United States government in the mortgage business. Everyone should be skeptical of putting taxpayers on the hook for entities that have over $5 trillion in liabilities, while the national debt is already over $9 trillion.

Congress created this problem by creating special rules at Fannie Mae and Freddie Mac and ignored the problem for years.

Now we have to bail them out again.

Sorry, but rushing this 642-page piece of crappy legislation (that I bet no one has read in its entirety), through with a Saturday vote is unacceptable.

We need more thoughtful and honest work form all of you in Washington.

Democrats and Senator Reid, IMO, should let Fannie and Freddie fail and then go pick up the pieces.

The Best Money Guy.

Senator Dorgan's Folly - Blame the Mysterious Speculators for High Oil Prices

2008-07-25T09:30:00.000-07:00

Senator Byron Dorgan (D, ND) has stated that "Oil speculation is a carnival of greed." And, while his fellow Democrats are pushing back against proposed offshore drilling, he's busy doing television appearances accusing hedge funds of driving up prices by speculating irresponsibly on futures markets, and accusing the Republicans of aiding them in doing so.

It seems Sen. Dorgan can't quite figure out that the real reason hedge funds, (and investment banks, and Wall Street broker dealers) can afford to speculate wildly in the commodities, equities, and bond markets is that the Federal Reserve, under Mr. Bernanke, has effectively given them the ability to borrow at a rate close to zero, a nearly infinite amount of money by simply running over to their friendly Fed window with a handful of copies of what are supposed to be mortgage and consumer debt backed securities of questionable value, no questions asked.

His proposed legislation is designed to “ring out” hedge fund speculation. The bill would require that the U.S. Commodity Futures Trading Commission (CFTC) “distinguish between what is commercial and what is speculative trading and then to treat the speculative trading in a different way, with higher required margins. Since when can the CFTC distinguish anything? These guys have been the foxes in the hen house for years.

By increasing the required margins, the bill would theoretically reduce the capacity of hedge funds to speculate in oil. Sure, all they have to do then is just borrow more from the Fed.

He said, “These markets were not established for this. It’s become a carnival of greed with an unbelievable amount of speculation by people who have no interest in oil. They only have interest in making money by speculating.”

In a rare demonstration of Congressional intelligence, Minority Whip Roy Blunt (R, MO) said, "The GOP isn’t keen on fighting speculation through regulation. I don’t think members of Congress are smart enough, frankly, to figure out how to block all the commodities speculation in the world.”

The Wall Street Journal (WSJ) has ridiculed the plan, and the Washington Post just loves it. The financial industry is lobby to block the plan.

The WST argues that to avoid tighter regulations on speculation, traders will simply up and move to another futures exchange market with looser regs. Our best bet is on the Dubai exchange.

Senator Schumer (D NY) one of our favorite Washington fools, did his politically correct but logically absurd writing to the WSJ, "That even if they did trade in a new exchange, they would still be U.S. traders and still be covered by U.S. law -- "which is exactly why I fought to ensure that the bill addresses futures trading at the trader level, not the exchange level."

Now, boys and girls - let's get real here, if we make it more difficult for folks to trade anything in a U.S. market, the trading will move to a non-U.S. market. If the traders are restricted from trading because they are U.S. citizens, either the trading jobs move offshore to non-U.S. citizens or the U.S. traders will let their foreign compatriots execute the trades for them.

Would someone please give Sen. Dorgan and Sen. Schumer a quick lesson instant messaging via a Blackberry?

Is there any wonder that, with this kind of logical thinking that the Democrats have accomplished basically nothing since we gave them control of the Congress two years ago?

The Best Money Guy

Help Me I've Fallen & Written a 642 Page Law

2008-07-25T02:01:00.000-07:00

I spent most of last night attempting to read the latest monstrosity from Congress, Representative Barney Frank's (D) supposed "Save the Housing Business...." bill. Needless to say, it was not a fun night.

What strikes me the most about this 642-page epic is that it effectively bails out the hedge funds masquerading as mortgage securitization entities - our good friends, Fannie and Freddie, with a nice blank check.

So, it seems that U.S. Treasury Secretary Henry Paulson and Rep. Frank have achieved the miraculous, creating an infinite amount of money for the bailout from thin air.

What started as having the U.S. Treasury (Mr. Paulson's domain) buy $2.5 billion of equity in the corporations, if needed, has now become "undefined" -- meaning an infinite amount of money.

(Note to Mr. Paulson, why not simply buy the foreclosed, bank owned homes for ten cents on the dollar and give them away in a lottery to Americans that earn less than $50,000 per year?)

The only thing I can image that's better than this trick would be for American Express to mail every U.S. citizen a new "Blue" card with no spending limit and no repayments ever required.

(Hint to "W", this would be an awesome stimulus package to hand out before you leave town.)

But, back to the bill. It provides $300 billion to refinance and insure loans through the government-sponsored enterprises (GSEs). Being experts at the art of the understatement, Paulson and Frank have told us that only a fraction of that sum will actually be needed, but they don't know what the final number will be.

I was laughing out loud imagining me going into my bank, asking for a new, unlimited credit line, and offering no collateral other than my good name, and watching the bank VP react to the request.

And, I can't seem to figure out how this bill will help more than a small handful of hapless homeowners facing imminent foreclosure.

The GSEs are now holding more than 1 trillion dollars worth of insured mortgages, and a staggering $7 billion worth of Real Estate Owned (REO). Foreclosures are now running at better than 4,000 a day across the U.S. and are climbing upward faster than a scared monkey in an Indiana Jones movie. Also, with the collapse of the mortgage finance markets, the GSEs are now responsible for 80% (and growing) of loans originated in 2008 .

The amount of money needed to support this broken system during a period of financial stress and decreasing real estate values is at least staggering, and at most wildly understated.

Since the U.S. Government is flat broke, the only way to fund this Frankenstein is to sell even more record levels of Federal debt. (I know, this is completely illogical, but it is government finance.) And, the sale of debt will increase dramatically as the cost of all this support and stimulus comes due.

The primary buyers of our IOUs are now foreign banks (Oil kingdoms, China, and Japan), and their appetite for our paper will be tested. So, presto, interest rates are jumping up to entice them to buy our (what may soon become junk) paper.

(FYI, we now borrow $1 billion a day of money from the middle east and then immediately give it back to them for their daily profit and add interest due on top of it. Is this rational?)

There is no way this type of free spending is not going to break the the pocketbooks of us American taxpayers.

So, let's all send Mr. Paulson and Rep. Frank a nice thank you note for bailing out their rich friends once again while burying us with more debt. Please include the following, "YOU'RE FIRED".

The Best Money Guy.

P.S. Watch for my future post on how to really get us of this mess and turn lemons into lemonade.

The Truth Why Are Mortgage Rates Going Up

2008-07-24T10:11:00.000-07:00

Today, Freddie Mac's chief economist Frank Nothaft, said that the 30-year fixed-rate mortgage average was up from last week to 6.63% with an average 0.6 origination point."

He blamed market concerns about rising inflation, further weakness in the housing market and greater probability that the Federal Reserve will raise short-term rates this year all combined to push mortgage rates higher this week. And that some of the key drivers to these concerns were consumer prices jumping 1.1% (annualized) in June - the largest increase since September 2005 on a year-over-year basis - coupled with consumer prices growing at a 5% clip (on a year-over-year basis), the strongest since February 1991.

Now, here's the truth.

Over the last 18 months, there has been a systematic destruction and elimination of lenders in the mortgage business. Some claim that this is because they did bad things, and yes some did. But the real truth is that up until this time, mortgages were routinely and easily sold to investors via Wall Street and what is called the securitization process.

Securitization means that mortgages are pooled into investment vehicles so that an investor, possibly a pension fund, can buy a long-term stream of income at a fixed rate or return. You might think of this as being similar to giant CDs.

Now, because Wall Street committed fraud on a massive scale (the dirty secret Mr. Paulson and Mr. Bernanke are trying to hide) by duplicating and over-selling these investments, Wall Street has simply exited the mortgage securitization business. This leaves Fannie Mae and Freddie Mac as the only buyers and securitzation packagers of mortgages. Unfortunately, Fannie and Freddie are out of cash, and now simply can't afford to buy more mortgages and hold them without having investors ready to buy the resulting securities. BTW, Fannie and Freddie are not without blame in this mess either.

FYI, there are many investors ready and willing to buy mortgage backed securities paying a stable 6% to 7% rate if they had a good feeling that the home owners would keep paying the underlying mortgages. But, our friends on Wall Street have lost all credibility, and Fannie and Freddie are not far behind in the lack of trust department. IMO, most people are happy to pay their mortgage.

So, with only a few investors willing to buy securitized mortgages, they can be real picky and ask for whatever rate they want.

Now, add to this the wonderful 600-plus page Congressman Barney Frank monstrosity of legislation (HR 3221) called something like the "Homeowners Rescue Plan" ....blather blather blather.

Along with about another hundred or so bombs, this gem essentially forces mortgage investors to forgive portions of the home owners debt and reduce the formerly agreed upon interest rate. Don't read me the wrong way here, I'm all in favor of helping people, but this is really dumb because anyone knows that if investors have to take a loss, they will simply make it up by raising prices on the next opportunity. And, presto, there you go, we have now higher mortgage rates.

My suggestion to the Democratic leadership via Senator Reid and Speaker Pelosi was to shut down the Iraq spending of more than $1 billion per day, bring our troops home, and hand out the daily billion dollars to hopeless screwed homeowners via a television lottery show. This would sure be more fun than watching Howie Mandrel try to fake out another unsuspecting hapless contestant on the ridiculously over-dramatic "Deal or No Deal" And for the male viewers, we can redeploy the "Briefcase Babes" and let them hand out the cash in person. Is Ed McMahon still available?

The Best Money Guy.

Wowee - The Federal Minimum Wage Rises to $6.55 Today

2008-07-24T05:35:00.000-07:00

Today, about 2 million struggling Americans get a raise as the federal minimum wage rises by a gargantuan 70 cents.

Unfortunately, gasoline has gone up more than $1.00 and food prices are blasting up. Just to make it interesting, businesses will pass the cost of the wage hike to consumers by either raising prices or shrinking product package sizes. (No more Wheaties for me.)

The increase, from $5.85 to $6.55 per hour, is the second of three annual increases required by a 2007 law. Next year's boost will bring the federal minimum to $7.25 an hour. Undoubtedly just in time for gasoline to pass $5.00.

Last week, the Labor Department reported the fastest inflation since 1991 — 5 percent for June compared with a year earlier. Energy costs soared nearly 25 percent. The price of food rose more than 5 percent.

The minimum wage hike is a drop in the bucket compared to the increases in costs, declining labor market, and declining household wealth that consumers have experienced in the past year.

The new minimum is less than the inflation-adjusted 1997 level of $7.02, and far below the inflation-adjusted level of $10.06 from 40 years ago, according to a Labor Department inflation calculator.

Twenty-three states and the District of Columbia have laws making the minimum wage higher than the new federal requirement, a group covering 60 percent of U.S. workers, according to the Economic Policy Institute, a think tank. These folks (They obviously have never had to figure out how to live on the minimum wage.), fail to mention that the 2008 Federal TRIO poverty income level in the contiguous 48 states was $15,600 for a single person and $31,800 for a family of four.

With the new hourly wage rate, a single minimum wage worker will earn $13,624 assuming she doesn't take any days off. For those of you that are math impaired that means they are guaranteed to be in poverty. Even more glaring is that the average social security senior citizen is getting only $1085/month that is equivalent to only $6.26/hour. We are putting our seniors into poverty with an annual income of $13,020.

Now, I'm not a spend and entitlement freaky liberal (I'm actually closer to a Jeffersonian Conservative), but this is a glaring sin.

We've got to fix this quick or we're going down for the count fast.

The Best Money Guy.

The Roll-Call Vote on the Housing Bill - The Democrats Spend & Spend

2008-07-24T05:04:00.000-07:00

FYI - Here is the 272-152 roll call by which the House passed the bill that supposedly aims to help homeowners facing foreclosure and to prevent mortgage giants Fannie Mae and Freddie Mac from collapsing.

Want to bet how many Democrats read the bill, and how many understand what it will really cost us?

My estimate is a minimum of another $1.5 TRILLION added to the already bankrupt USA debt.

The Best Money Guy.

A ”yes” vote is a vote to pass the bill.

Voting yes were 227 Democrats and 45 Republicans.

Voting no were 3 Democrats and 149 Republicans.

X denotes those not voting.

ALABAMA: Democrats -- Cramer, Y; Davis, Y.
Republicans -- Aderholt, N; Bachus, N; Bonner, N; Everett, N; Rogers, Y.
ALASKA: Republican -- Young, N.
ARIZONA: Democrats -- Giffords, Y; Grijalva, Y; Mitchell, Y; Pastor, Y.
Republicans -- Flake, N; Franks, N; Renzi, N; Shadegg, N.
ARKANSAS: Democrats -- Berry, Y; Ross, Y; Snyder, Y.
Republicans -- Boozman, N.
CALIFORNIA: Democrats -- Baca, Y; Becerra, Y; Berman, Y; Capps, Y; Cardoza, Y; Costa, Y; Davis, Y; Eshoo, Y; Farr, Y; Filner, Y; Harman, Y; Honda, Y; Lee, Y; Lofgren, Zoe, Y; Matsui, Y; McNerney, Y; Miller, George, Y; Napolitano, Y; Pelosi, Y; Richardson, Y; Roybal-Allard, Y; Sanchez, Linda T., Y; Sanchez, Loretta, Y; Schiff, Y; Sherman, Y; Solis, Y; Speier, Y; Stark, Y; Tauscher, Y; Thompson, Y; Waters, Y; Watson, Y; Waxman, Y; Woolsey, Y.
Republicans -- Bilbray, N; Bono Mack, Y; Calvert, Y; Campbell, Y; Doolittle, N; Dreier, Y; Gallegly, Y; Herger, N; Hunter, Y; Issa, N; Lewis, Y; Lungren, Daniel E., Y; McCarthy, N; McKeon, Y; Miller, Gary, Y; Nunes, N; Radanovich, N; Rohrabacher, N; Royce, N.
COLORADO: Democrats -- DeGette, Y; Perlmutter, Y; Salazar, Y; Udall, Y.
Republicans -- Lamborn, N; Musgrave, N; Tancredo, N.
CONNECTICUT: Democrats -- Courtney, Y; DeLauro, Y; Larson, Y; Murphy, Y.
Republicans -- Shays, Y.
DELAWARE: Republicans -- Castle, Y.
FLORIDA: Democrats -- Boyd, Y; Brown, Corrine, Y; Castor, Y; Hastings, Y; Klein, Y; Mahoney, Y; Meek, Y; Wasserman Schultz, Y; Wexler, Y.
Republicans -- Bilirakis, N; Brown-Waite, Ginny, X; Buchanan, Y; Crenshaw, N; Diaz-Balart, L., Y; Diaz-Balart, M., Y; Feeney, N; Keller, Y; Mack, N; Mica, N; Miller, N; Putnam, Y; Ros-Lehtinen, Y; Stearns, N; Weldon, N; Young, N.
GEORGIA: Democrats -- Barrow, Y; Bishop, X; Johnson, Y; Lewis, Y; Marshall, Y; Scott, Y.
Republicans -- Broun, N; Deal, N; Gingrey, N; Kingston, N; Linder, N; Price, N; Westmoreland, N.
HAWAII: Democrats -- Abercrombie, Y; Hirono, Y.
IDAHO: Republicans -- Sali, N; Simpson, N.
ILLINOIS: Democrats -- Bean, Y; Costello, Y; Davis, Y; Emanuel, Y; Foster, Y; Gutierrez, Y; Hare, X; Jackson, Y; Lipinski, Y; Rush, X; Schakowsky, Y.
Republicans -- Biggert, Y; Johnson, N; Kirk, N; LaHood, Y; Manzullo, N; Roskam, N; Shimkus, N; Weller, Y.
INDIANA: Democrats -- Carson, Y; Donnelly, Y; Ellsworth, Y; Hill, Y; Visclosky, Y.
Republicans -- Burton, N; Buyer, N; Pence, N; Souder, N.
IOWA: Democrats -- Boswell, X; Braley, Y; Loebsack, Y.
Republicans -- King, N; Latham, N.
KANSAS: Democrats -- Boyda, N; Moore, Y.
Republicans -- Moran, N; Tiahrt, N.
KENTUCKY: Democrats -- Chandler, Y; Yarmuth, Y.
Republicans -- Davis, N; Lewis, N; Rogers, N; Whitfield, N.
LOUISIANA: Democrats -- Cazayoux, Y; Jefferson, Y; Melancon, Y.
Republicans -- Alexander, N; Boustany, Y; McCrery, Y; Scalise, N.
MAINE: Democrats -- Allen, Y; Michaud, Y.
MARYLAND: Democrats -- Cummings, Y; Edwards, Y; Hoyer, Y; Ruppersberger, Y; Sarbanes, Y; Van Hollen, Y.
Republicans -- Bartlett, N; Gilchrest, Y.
MASSACHUSETTS: Democrats -- Capuano, Y; Delahunt, Y; Frank, Y; Lynch, Y; Markey, Y; McGovern, Y; Neal, Y; Olver, Y; Tierney, Y; Tsongas, Y.
MICHIGAN: Democrats -- Conyers, Y; Dingell, Y; Kildee, Y; Kilpatrick, Y; Levin, Y; Stupak, Y.
Republicans -- Camp, N; Ehlers, N; Hoekstra, N; Knollenberg, Y; McCotter, N; Miller, N; Rogers, N; Upton, N; Walberg, N.
MINNESOTA: Democrats -- Ellison, Y; McCollum, Y; Oberstar, Y; Peterson, Y; Walz, Y.
Republicans -- Bachmann, N; Kline, N; Ramstad, N.
MISSISSIPPI: Democrats -- Childers, Y; Taylor, Y; Thompson, Y.
Republicans -- Pickering, Y.
MISSOURI: Democrats -- Carnahan, Y; Clay, Y; Cleaver, Y; Skelton, Y.
Republicans -- Akin, N; Blunt, N; Emerson, N; Graves, N; Hulshof, X.
MONTANA: Republicans -- Rehberg, N.
NEBRASKA: Republicans -- Fortenberry, N; Smith, N; Terry, N.
NEVADA: Democrats -- Berkley, Y.
Republicans -- Heller, Y; Porter, Y.
NEW HAMPSHIRE: Democrats -- Hodes, Y; Shea-Porter, Y.
NEW JERSEY: Democrats -- Andrews, Y; Holt, Y; Pallone, Y; Pascrell, Y; Payne, Y; Rothman, Y; Sires, Y.
Republicans -- Ferguson, Y; Frelinghuysen, N; Garrett, N; LoBiondo, N; Saxton, N; Smith, Y.
NEW MEXICO: Democrats -- Udall, Y.
Republicans -- Pearce, N; Wilson, N.
NEW YORK: Democrats -- Ackerman, Y; Arcuri, Y; Bishop, Y; Clarke, Y; Crowley, Y; Engel, Y; Gillibrand, Y; Hall, Y; Higgins, Y; Hinchey, Y; Israel, Y; Lowey, Y; Maloney, Y; McCarthy, Y; McNulty, Y; Meeks, Y; Nadler, Y; Rangel, Y; Serrano, Y; Slaughter, Y; Towns, Y; Velazquez, Y; Weiner, Y.
Republicans -- Fossella, N; King, Y; Kuhl, N; McHugh, Y; Reynolds, Y; Walsh, Y.
NORTH CAROLINA: Democrats -- Butterfield, Y; Etheridge, Y; McIntyre, Y; Miller, Y; Price, Y; Shuler, Y; Watt, Y.
Republicans -- Coble, N; Foxx, N; Hayes, Y; Jones, N; McHenry, N; Myrick, N.
NORTH DAKOTA: Democrats -- Pomeroy, Y.
OHIO: Democrats -- Jones, Y; Kaptur, N; Kucinich, Y; Ryan, Y; Space, Y; Sutton, Y; Wilson, Y.
Republicans -- Boehner, N; Chabot, N; Hobson, Y; Jordan, N; LaTourette, Y; Latta, N; Pryce, Y; Regula, N; Schmidt, N; Tiberi, Y; Turner, Y.
OKLAHOMA: Democrats -- Boren, Y.
Republicans -- Cole, N; Fallin, N; Lucas, N; Sullivan, N.
OREGON: Democrats -- Blumenauer, Y; DeFazio, N; Hooley, Y; Wu, Y.
Republicans -- Walden, N.
PENNSYLVANIA: Democrats -- Altmire, Y; Brady, Y; Carney, Y; Doyle, Y; Fattah, Y; Holden, Y; Kanjorski, Y; Murphy, Patrick, Y; Murtha, Y; Schwartz, Y; Sestak, Y.
Republicans -- Dent, N; English, Y; Gerlach, N; Murphy, Tim, Y; Peterson, X; Pitts, N; Platts, N; Shuster, N.
RHODE ISLAND: Democrats -- Kennedy, Y; Langevin, Y.
SOUTH CAROLINA: Democrats -- Clyburn, Y; Spratt, Y.
Republicans -- Barrett, N; Brown, Y; Inglis, N; Wilson, N.
SOUTH DAKOTA: Democrats -- Herseth Sandlin, Y.
TENNESSEE: Democrats -- Cohen, Y; Cooper, Y; Davis, Lincoln, Y; Gordon, Y; Tanner, Y.
Republicans -- Blackburn, N; Davis, David, N; Duncan, N; Wamp, N.
TEXAS: Democrats -- Cuellar, Y; Doggett, Y; Edwards, Y; Gonzalez, Y; Green, Al, Y; Green, Gene, X; Hinojosa, Y; Jackson-Lee, Y; Johnson, E. B., Y; Lampson, Y; Ortiz, X; Reyes, Y; Rodriguez, Y.
Republicans -- Barton, N; Brady, N; Burgess, N; Carter, N; Conaway, N; Culberson, N; Gohmert, X; Granger, N; Hall, N; Hensarling, N; Johnson, Sam, N; Marchant, N; McCaul, N; Neugebauer, N; Paul, N; Poe, N; Sessions, N; Smith, N; Thornberry, N.
UTAH: Democrats -- Matheson, Y.
Republicans -- Bishop, X; Cannon, N.
VERMONT: Democrats -- Welch, Y.
VIRGINIA: Democrats -- Boucher, Y; Moran, Y; Scott, Y.
Republicans -- Cantor, N; Davis, Tom, N; Drake, N; Forbes, N; Goode, N; Goodlatte, N; Wittman, N; Wolf, N.
WASHINGTON: Democrats -- Baird, Y; Dicks, Y; Inslee, Y; Larsen, Y; McDermott, Y; Smith, Y.
Republicans -- Hastings, N; McMorris Rodgers, N; Reichert, N.
WEST VIRGINIA: Democrats -- Mollohan, Y; Rahall, Y.
Republicans -- Capito, Y.
WISCONSIN: Democrats -- Baldwin, Y; Kagen, Y; Kind, Y; Moore, Y; Obey, Y.
Republicans -- Petri, N; Ryan, N; Sensenbrenner, N.
WYOMING: Republicans -- Cubin, N.

Will Someone Please Take the Credit Cards Away from Mr. Bush

2008-07-24T04:05:00.000-07:00

And the frivolous spending goes on and on.

Today, the Bush administration plans to shift nearly $230 million in aid to Pakistan from counter terrorism programs to upgrading that country’s aging F-16 attack planes, which Pakistan prizes more for their contribution to its military rivalry with India than for fighting insurgents along its Afghan border.

It seems to me this is a no-brainer opportunity to cut some fat and unnecessary spending, even though $230 million is a drop in the bucket compared to the more than $1 Trillion that is dumped down the drain each year by the D.C. crowd.

As usual, some members of Congress have greeted the proposal with dismay and anger, and may block the move. More likely they are simply getting a bit of press and will let OUR money go to Pakistan. The lawmakers and their aides say that F-16s do not help the counter terrorism campaign.

It looks to me that the timing of the Bush action caught lawmakers off guard, and is meant to curry favor with the new Pakistani prime minister, Yousaf Raza Gilani, who will meet with President Bush in Washington next week. Kind of like buying your new date a nice surprise present with daddy's money, right?

BTW, the financing for the F-16s would represent more than two-thirds of the $300 million that Pakistan will receive this year in American military financing for equipment and training, meaning borrowing more money so they can give it to Lockheed Martin.

Senator Patrick J. Leahy (D, VT), the head of the appropriations subcommittee on State Department and foreign operations and Nita M. Lowey (D, NY) the head of the House appropriations subcommittee on foreign operations need to hear from us taxpayers with a simple message - "STOP SPENDING OUR MONEY ON THIS NONSENSE".

The big spenders in Washington have already given more than $10 billion in military aid to Pakistan since the Sept. 11 attacks, when President Musharraf agreed to become an ally in the campaign against terrorism.

Here's my suggestion (and I'm sending it over to Senator Reid this morning).

KILL THIS DEAL NOW. IMMEDIATELY STOP SPENDING OUR MONEY THAT WE DON'T HAVE. WE'RE BROKE AND YOU ALL ARE IRRESPONSIBLE.

If you want to spend $230 million, why not give it in $100,000 gift cards to 2300 randomly selected, soon to be foreclosed homeowners.

Or, how about randomly picking 230 starving senior citizens that are desperately trying to survive on only social security and making them instant millionaires. If that seems a bit too narrow a distribution of funds, give 2300 seniors $100,000 each or 4600 seniors $50,000 each.

And, since you're being generous with our money, please make it tax free to the recipients.

Simply, Senator Reid and Speaker Pelosi, it's time to put Americans first. Please remember that you do work for us, right?

The Best Money Guy

Washington's Financial Voodoo

2008-07-23T20:58:00.000-07:00

Get this, seven and one half years into the neoconservative administration that has NEVER turned down an opportunity to spend money that they and their the fearless leader don't have, the gang in Washington is sending the Housing Fix It Bill to the president for his already guaranteed signature.

This masterpiece of subterfuge called legislation, promoted by Congressman Barney Frank (D) was fundamentally written by his friends at Bank of America (BoA). Remember, Bank of America bought Countrywide and immediately fired seven thousand employees, and as of yet, has refused to reveal the true financial position of this pig.

The crew at BoA has been fiercely lobbying Mr. Bernanke and Mr. Paulson for their own bailout program modeled after the JP Morgan / Bear Stearns midnight fleecing of the taxpayers. Hence this wonderful bill.

So far, from what we can see those poor hapless homeowners that are facing foreclosure because they go into loans that they now can't afford will now supposedly have an opportunity to refinance with the FHA mortgage insurance plan.

We've seen the basic rules and it looks to us like this is another version of the Washington shell game because the deal requires the homeowner to refinance for 90% of the original loan amount. Now, this doesn't seem to make much sense if the property is now worth 20% to 40% less than the original purchase price and was purchased with 100% financing.

For example: If the house was bought for $300,000 with a 80% first loan of $240,000 and a 20% second loan of $60,000, your friendly bank (BoA?) will be happy to refinance you into a FHA insured loan (30-year rates are now close to 7%, but wait for the zinger!) for 90% of the original amount or $270,000, (here comes the first zinger), but, the house is only now worth $260,000 (a 20% drop), so the homeowner will have to come up with the missing $10,000.

Now, how many homeowners that are facing foreclosure have an extra $10,000 to throw into the fire?

But, wait a minute, there is yet another zinger. You see, the FHA is what is called a self-funded agency. This means they charge for their services to pay their ever increasing bureaucratic costs of operation. The bill gives the FHA the ability to charge 3% of the loan amount as an upfront insurance premium plus a monthly insurance premium. Remember, mortgage insurance protects the lender, not the homeowner, in the event of a default by the borrower.

So, in our above example, the homeowner now needs another 3% or another $7800 to get this great deal. Oh, and we haven't mentioned loan closing costs. By our calculation, the new deal will end up costing the homeowner more per month, and will saddle them with a still upside-down mortgage.

But wait, if the homeowner can't handle this, your friendly bank will suggest that you roll the costs into your new loan, and to keep your payments down, that you take a 5-year adjustable since that rate is still in the low 5% range. Can you spell swindle?

Nice going Barney, you've just demonstrated that it takes a politician to really screw things up and tht you will continue to dig us deeper into this multi-trillion-dollar hole.

The grown-up thing to do would be to confess that we have created this problem, and then bite the bullet, take our medicine.

When those folks who are supposed to steward our nation’s money fail to act as adults, when blue-chip CEOs, megafund managers, investment bank managers and Washington regulators put off, deny and blame, their prominence magnifies these human flaws to awesome economically threatening proportions.

Right now in Washington, they are blaming:
“It can’t be our fault that banks are failing. SOMEONE did SOMETHING bad. And that someone must be punished!”

For decades, Washington has allowed the big banks to run rampant. In the name of “deregulation,” they allowed them to lend money to folks without jobs. They allowed them to bundle that paper into junk bonds. And they allowed Wall Street to buy and sell those bonds as if they were genuine gold certificates.

And now the whole deal is collapsing like the house of cards it always was.

These guys played a fool’s game, and anyone who got sucked in to their “free money” scam could be said to deserve their just deserts.

If you “buy” a house with no money down and pay only interest, then you cannot complain when you have to leave it behind. It was never really your house. You had no equity interest. You were renting!

If you buy a trillion dollars worth of bonds without truly understanding that only the top third had any real defined value, then you are a fool who deserves to be bankrupt.

If you lie about it, you should be punished. There are ample laws already on the books pertaining to frauds of this nature.

If you claim to be a libertarian, to "allow the free market to act on its own"; then you must accept when it acts badly. Sorry about that, Larry Kudlow and Steve Forbes. Please stop your incessant whining for government intervention.

Unfortunately, we are human, and are not content to reap what we have sown. And so, on Bloomberg, CNBC, and in Washington, they deny, call for quick fixes, and blame.

The rate cuts failed. Rather than rescue the economy, billions of “free dollars” given to the hedge funds and investment banks have pushed inflation to its fastest yearly rate in more than two decades so they again could reap huge profits.

The rebate checks failed. June’s tepid 0.8% retail sales gain is a farce, comprised entirely of higher gas prices.

And the bailouts are failing. “It’s just Bear Stearns, really! Oh wait, maybe Lehman, too. And Indymac. And Fanny Mae and Freddie Mac…” Who is next? (Hint - watch the banks.)

So now they threaten and blame while terrified depositors in line at bank branches were threatened with arrest if they did not accept that they could not access their cash.

In Washington, SEC Chairman Christopher Cox is heaving about subpoenas in an attempt to find out who “talked down” the quasi-federal mortgage banks over the weekend rahter than fessing up to the truth that he hog-tied all the SEC regulators and investigators (except for the ones he forced out) after taking over for the visibly hapless Harvey Pitt.

We don't need a fortune telling gypsie to tell us what is going on here, do we?

And if that doesn’t stop the bleeding, Mr. Cox has implemented a ban on selling Fannie, Freddie, and shares of his other favorite (well connected?) companies to drive the stock markets up without rational logic. Because “it was those evil naked short sellers who brought us low!”

Right now, all the politicians are doing is digging the hole deeper, pushing the inevitable day of reckoning further out into the (we think near-term) future.

It is going to be a massive hurt to dig us out of this mess.

In the meantime, you will only see more failures, more layoffs and more losses. If you are politically inclined, you might care to tell someone in Washington to suck it up, get on the stick, quit whining and blaming, and start digging us out. This means stop spending, cutting budgets, and eliminating pork and stupid subsidies. (Fat chance this will happen! But, I'm trying to be an optimist.)

Hunker down and watch out for the first ever default on USA debt coming soon to a political theater near you.

The Best Money Guy

Newest Anti-Recession Business Opportunity - Scrap Metal

2008-07-23T02:35:00.000-07:00

As always, Americans at all economic levels remain creative in finding ways to earn an income in this ever increasing supposedly invisible recession. This time it is in acquiring and selling scrap metal.

The new entrepreneurs are stealing the manhole covers, storm drains, and street grates in cities around the country, as they are increasingly valuable commodities on the scrap market.

In Philadelphia alone, more than 2,500 covers and grates have disappeared in the past year, up from an annual average of about 100.

Thieves have so thoroughly stripped some neighborhoods on the city’s north and southwest sides that some blocks look like slalom courses, dotted with orange cones to warn drivers and pedestrians of gaping holes, some nearly 30 feet deep. The city is spending hundreds of thousands of dollars — $300,000 at last count — to replace the missing covers.

Thieves can get $5 or $10 for wrought-iron inlet covers, which weigh about 40 pounds and cover curbside drains. The larger manhole covers in the center of the streets weigh about double and triple that and are worth commensurately more.

Phoenix has lost more than 160 of its manhole covers and street storm drains this year, up from 10 last year.

More than 80 drains and manhole covers have been stolen in Long Beach, Calif., this year.

Thefts in Cleveland, Memphis, Miami, and Milwaukee have more than doubled.

New York reports no increase. (They must still be making more money stealing our money.)

In New Jersey, thieves stole a one-ton bronze statue of a horse from the former Garden State Park racetrack cut the statue into thousands of pieces, and sold as scrap to a junkyard.

I've got to hand it to the new entrepreneurs, they are adapting quickly to the new American economy.

The Best Money Guy

Home Buyers and Borrowers Can't Get a Break

2008-07-23T01:34:00.000-07:00

Just like the upcoming peak of the summer heat, the troubles at the mortgage loan finance giants, Fannie Mae and Freddie Mac, are driving mortgage rates up, threatening to deal another blow to the faltering housing market and your pocketbook.

Even as the fools in Congress (oops, I mean the policy makers) rushed to support the two companies, home loan rates have approached their highest levels in five years.

The average interest rate for 30-year fixed-rate mortgages rose to 6.71 percent on Tuesday, from 6.44 percent on Friday.

The average rate for jumbo loans, (loans that cannot be sold to Fannie and Freddie), was 7.8 percent, the highest since December 2000.

Loan rates are rising because of concern in the financial markets (Meaning Wall Street is screaming "fire" to get what it wants.) about the future of Fannie Mae and Freddie Mac, which own or guarantee nearly half of the nation’s $12 trillion mortgage market.

Mr Paulson and Mr Bernanke and their band of Wall Street cronies have proposed a rescue, and of course they have urged Congress to approve it quickly. (Have you ever heard a Wall Street shill NOT scream "buy it now"?)

But, don't expect any rescue to save us average working folks from higher interest rates or increasingly difficult credit requirements for borrowers.

Bond investors (really Wall Street in this sheep disguise), are driving up interest rates on securities backed by home loans. And, of course the added cost is being passed on to consumers through the mortgage markets.

FYI, for a $400,000 loan, the increase in 30-year rates in the last few days would add $71 to a monthly bill, or $852 a year.

All of this will pressure our supposed representatives in Washington to give the Treasury Department (really Mr. Paulson and his band of wolves on Wall Street) the authority to lend more money (that the Government doesn't have, thereby increasing the debt above an amazing $9 TRILLION) to Fannie and Freddie and even better, to buy their stock with more of the money that they don't have (meaning borrowing more). And, the more the Government has to borrow by selling more Treasury bonds, means more commissions on bond sales by, guess who, the Wall Street bond dealers. Nice game, hey?

Now, this is really a cute game of hide the pea (even if it is a huge $9 Trillion) under the shell. What's next Mr. Paulson? Will you bring in David Copperfield to make all of this vanish just in time for a bit of consumer feel good just before the election?

We all know that higher interest rates make it harder and more expensive to refinance existing debts and to buy homes. Worse yet, rising mortgage rates make it less attractive for current homeowners to consider selling and moving up. So, this only further inhibits the housing market. And, massively increasing the already insane national debt only increases interest rates even more. Please, call your Congress person today and give them a quick lesson in basic housing market economics!

Essentially, the clowns in Washington are doing a version of consumer debt consolidation on a massive scale. But, as is typical in government, they are not lowering the interest cost but raising it and extending the term of the loan. This is simply a case of financial suicide, that can only lead to the ultimate conclusion - bankruptcy, and that will be the USA defaulting on it's debt.

So folks, hang onto whatever you have left and pick up a few Krugerrands to stuff under your mattress. The fat lady hasn't even left her dressing room.

The Best Money Guy

In Vegas, Housing is Still Unaffordable - Ouch!

2008-07-22T02:20:00.000-07:00

In today's Las Vegas Sun (the 1/16th of a newspaper that's supposed to have us believe that there is freedom of speech in Las Vegas other than the extreme neocon dribble printed in the Las Vegas Review Journal) there is a story regarding the study done on behalf of local governments that was conducted for the Southern Nevada Regional Planning Coalition by Restrepo Consulting Group and the Theodore Roosevelt Institute that states "Despite the housing slowdown that has dropped median house prices more than 20 percent in the past year, affordability remains a long-term problem that could stop industries and workers from moving to Southern Nevada".

It also suggests it’s not enough to have affordable housing on the fringes of the valley or in satellite communities and calls on local and state government and businesses to work together to craft solutions to address housing affordability and accessibility. Possibilities include employers building housing for employees or, at a minimum, providing bus passes.

What a joke - can you imagine the big boys at the casinos cutting their profits by purchasing bus passes for the maids and caretakers?

In a display of pure consulting balderdash, John Restrepo, the study's author said, “We are building a large percentage of homes in the suburbs and in some cases the exurbs, and when you don’t build homes where people work, that creates a disconnect and affects productivity. That means there needs to be an effort to create greater housing densities closer to the resort corridor and a greater investment in mass transit".

OK, so why not drop the prices on the "Vertical Vegas" vacant condos and start selling them to the locals instead of the famously rich and wealthy that come to Vegas just enough times a year to claim their exemption from their state income taxes.

Another pearl of wisdom from Mr. Restrepo - "For housing to be affordable, the monthly mortgage payment shouldn't exceed 30 percent of the owner’s monthly gross income. In the leisure and hospitality industry, the annual average salary is $30,372, which translates to an appropriate mortgage payment of $768 a month. The maximum affordable loan amount is $90,618."

"In the construction industry, the annual average salary is $51,376, which translates to a monthly payment of $1,284 on a home valued at $176,699."

Hey there, Mr. Retsrepo - I've been using the 3 times annual gross income rule for the last 20 years in the mortgage business. When did you first discover this - last week?

A bit more of Mr. Restrepo's statistics before I scream -- "The dominant market segment in 2007 consisted of homes priced from $250,000 to $300,000, which were 24 percent of the housing stock. About 20 percent were priced from $200,000 to $250,000 and 12 percent to 13 percent were priced less than $200,000."

"Even with the price drops, about 45 percent of the market was priced above $300,000, but homes need to be priced from $212,000 to $276,000 to be considered affordable."

"From January to April, 57 percent of the housing units sold on the Multiple Listing Service were priced at $250,000 and below. That shows buyers are taking advantage of those opportunities, but Restrepo said there are still problems."

Now, it does not take a PhD. genius to know that the average working family simply cannot afford to purchase the size and type of home they need here in Las Vegas because the wages are lousy. Worse yet, we live in a city that is dominated by giant employers that refuse to contribute to real economic and wage growth, a vibrant educational system, and a state supposed government that is mired in an attitude to workers that is stuck in the 19th century.

If you think its going to get better soon, forget it. The new FHA mortgage rules are even more restrictive and make the required mortgage insurance simply unaffordable for the majority of the buyers in the market.

How to fix this mess - well we need new, high wage jobs, such as engineering, software development, energy systems, medical technology. How can this happen? Well, first we have to fire the incumbents that are owned by the status quo crowd. Then, we need a real, quality education system including a major revamp of the Clark County atrocity, the CSN joke of a junior college, and UNLV where the newest program is "Party Management or How to Sell $500 Pool-side Cabanas to inebriated 20-somehtings". Let's get Chancellor Jim Rogers, Senator Harry Reid, and Dina Titus together in one room and get to work on re-inventing Las Vegas.

If we don't get on top the education and job creation issues, this city is doomed to be the home of low wage service jobs, unaffordable housing, growing ghettos and crime, and a totally lousy place to raise a family.

The Best Money Guy.

More Wall Street Hoopla with Bank of America

2008-07-21T07:24:00.000-07:00

Bank of America's net off 41%, tops target, Wall Street jumps for joy.

Bank of America Corp., joining the ranks of other U.S. banking giants, experienced a decline in second-quarter profit that nonethelesss topped Wall Street estimates, financial results showed Monday.

BoA reported second-quarter net income fell 41% to $3.41 billion, or 72 cents a share.
The consensus of analysts had been for quarterly earnings of 59 cents a share.

Let's see, 41% less income and this is GOOD news? Oh yeah, it oculd have been worse.

The results included merger and restructuring costs of $212 million on a pretax basis. Bank of America closed on the acqusition of Countrywide Financial, the troubled mortgage lender, on July 1, the first day of the third quarter.

Countrywide, whose results weren't reflected in Bank of America's second-quarter report, had a second-quarter net loss of $2.33 billion.

Bank of America's provision charges increased to $5.83 billion in the latest quarter from $4 billion, while revenue rose 3% to $20.32 billion on expanded net interest yield, loan growth and higher income from service charges, mortgage banking and investment and brokerage services.

Come on people, give us some credit. By simply not including the mess at Countrywide, the books are COOKED.

And, who believes Wall Street and Mr. Paulson anyway.

IMO, get ready for the next leg down later this week when the hype fizzles.

The Best Money Guy

Are the Bears Dead or Just Snoozing?

2008-07-21T07:13:00.000-07:00

Is the bear market dead? Or is it just taking a well-deserved break before hunting down its next victim?

Was that it?

Did we just see the bottom, the tipping point, the moment the falling knife hit and stuck?
Last Thursday, the Dow Jones Industrials hit a low of 10,731, bringing its losses over the past nine months to some 23%. Since then, we have seen a modest 5% rebound, accompanied by endless tales from Wall Street and Washington as to how that singular moment marks “the end of the 2008 bear market.”

Done… fini… fait complete.

Dead bear walking.

Back up the truck, mortgage the house (if you can find an agent still in business), cash out the kids’ college funds! Now is the time to buy, buy, buy! Especially the beaten-down Financials! They are diamonds in the mud!

Pardon me a moment, but you've got to be joking.

I am supposed to buy Citigroup now because it “only lost $2.5 billion when it was expected to lose $12 billion”?

Excuuuuuse me?

Once upon a time, a $2.5 billion loss was thought of as a disaster of unmitigated proportions. Suicide watches would be announced for stockholders, while CEOs pondered which suit and tie would look best for their perp walk.

These days, a chief exec who can’t hit the minus $1 trillion mark is a piker, and his stock is supposed to be a bottom-feeding buy.

Seriously, before you dial the phone for your broker or hit send to E-Trade, you ought to take a deep breath and think this through.

Citi didn’t lose another $10 billion this quarter because it’s still sitting on a hoary load of bad paper. That is exactly why I still expect it to lose billions more.

It’s been three quarters since the last time Citibank announced a profit (and even that gain was most probably just “gray” bookkeeping). Even the execs concede that it will be two or three years before the company is profitable again. CEO Vikram Pandit has baldly stated that he expects to flush another $400 billion to $500 billion over the next few years.

Citi is clearly not a growth prospect right now. But guess what: It ain’t a reliable income source either, as its failing loan portfolios are forcing management to take a chainsaw to dividends!
Oh, that’s all the ingredients of a red-hot opportunity, all right… if you are looking for a tax deductions for years to come.

Now you must forgive me for picking on one poor outfit that clearly has a rough row to hoe. Lord knows, Mr. Pandit and his chums in the corner offices at 399 Park Avenue might even have to wait another year before trading in for new Bentleys (which is rough, because the old ones have those ugly stains on the back seat!)

Quite frankly, I am having a very hard time feeling sorry for them… or wrapping my mind around the idea that the financials as a group are any sort of a buy right now.

JP Morgan Chase is the best of the lot: To date, it has only cut gains in half. Of course it also bought up all of Bear Stearns’ trash, and probably has yet to thoroughly sort through that mess.

Merrill Lynch is in the soup to the tune of $4.89 billion. And now they are playing chicken with the ratings services. Merrill claims that if Moody’s will just let it retain its current rating, lower borrowing costs might allow MER to make a profit this year… or might not.

Moody’s says that another quarter of losses might cost MER its rating… or might not. Sometimes getting a definitive statement out of these Wall Street suits is like nailing a blob of mercury to a board.

800 lb. credit card gorilla Capital One slashed second-quarter profits some 40%. Oh, and its customers are dead-beating them at an ever-increasing rate.

On Thursday, Wells Fargo’s earnings “beat estimates” for what that’s worth. UBS was so excited by the news that it downgraded WFC Friday morning. The Swiss giant is worried about WFC’s “flexibility.” In plain English: It might not have enough cash to cover a bank run.
Oh yeah: I said bank run, because that’s what we are down to folks, as police turn away angry depositors from IndyMac’s closed doors.

And don’t talk to me about FDIC insurance, either. Anyone who has ever participated in this agonizing, drawn-out process knows that it takes months if not years before you see your money again.

If you are lucky.

Hey, you’re a smart bunch of folks, with common sense to spare. What do you think?

Do you see all this as evidence of a genuine bottom in financial stocks? Or was the recent two-day rise a mild reaction to Wall Street jawboning and Washington rule changes… a mere pause while the bear cleans up and prepares for his next meal?

The Best Money Guy

The Russians Were Right

2008-07-18T16:10:00.000-07:00

Much of what goes on in public finance is fraudulent. The rest is nonsense.

As recently as February of this year, Russian officials cleared the way for two of its sovereign wealth funds, the Reserve Fund and National Wellbeing Fund, to invest in various foreign bonds, including those issued by the twin towers of American residential finance, Fannie and Freddie.

“The prospect for every GSE bond clearly states that it is not backed by the United States government,” says Matt Kibbe, president of FreedomWorks. “That’s why investors holding agency bonds already receive a significant risk premium over Treasuries.”

The Russians ignored the warnings and grabbed the risk premium.

Today, fully 21% of Russia’s monetary reserves are invested in the obligations of Fannie, Freddie and the Home Loan Banks.

And the largest holder of Fannie and Freddie debt is another friendly foreigner, China. The middle kingdom, according to the FreedomWorks organization, owns $376 billion worth of U.S. agency bonds.

Altogether, foreigners hold $1.3 trillion of them.

Maybe the foreigners didn’t understand what they were getting into. Or maybe they did.

Franklin Delano Roosevelt, whose family had made a fortune in the opium trade, promised the nation a “New Deal” during the Great Depression of the ‘30s. But what he gave it was more like the old false shuffle.

The president pulled cards from the bottom of the deck, pretending that government bureaucrats could do a better job of allocating capital than private investors.

In 1938, he set up the Federal National Mortgage Association, b.k.a. Fannie Mae.

Then, as now, the national housing market was in crisis. House prices had been declining for almost a decade. Who wanted to lend money against falling collateral values? Only a fool...or a government.

For the next 32 years, the firm resembled a nationwide savings and loan institution -- borrowing from large institutions and lending to smaller ones, keeping a piece of the spread for its trouble. But Fannie Mae was an imposter from the get-go.

Lenders knew that it had something no free market business ever had – the full faith and credit of the US government behind it. Fannie was able to borrow at below-market rates; lenders knew they had no risk of losing their money in a default or bankruptcy.

Fannie, with the aces dealt her by the Roosevelt administration, dominated the business for the next 30 years.

Then, another crisis came along, followed by another bamboozle, this one perpetrated by Lyndon Johnson.

Specifically, the feds were spending too much on wars – the War on Poverty at home...and one against the Viet Cong across the ocean.

Victory eluded Lyndon Johnson on both fronts, but his handling of Fannie Mae should have brought him at least a bronze star. Attempting to balance the government’s ledgers (this was in the days when Americans still believed in balanced budgets), he moved the mortgage business off of the Federal government’s books, privatizing it as a ‘government sponsored agency.’ For good measure, he created a competing organization – the Federal Home Mortgage Association, b.k.a. Freddie Mac.

Many are the ham-fisted dictators and sticky-fingered kleptocrats who have nationalized industries. Even without a credit crunch for camouflage, Francois Mitterand nationalized 36 leading French banks in 1982.

Robert Mugabe grabbed farmland in the Zimbabwe.

Evo Morales took the gas industry.

And Hugo Chavez seized the Orinoco oil fields in 2007.

But Lyndon Johnson rarely gets credit for his great advance in the history of public larceny: he privatized the profits while nationalizing the losses. This formula has been a honey pot for clever dirigistes ever since, providing countless opportunities for defeated politicians, hacks and hustlers – speaking fees, consulting contracts, board memberships, bonuses, stock options – things that wouldn’t be possible for a “public” company.

In effect, Fannie Mae could pick the taxpayer’s pocket twice – once by sticking him with a mortgage he couldn’t really afford and a second time by raiding the taxpayers’ vault for a bailout.
In the case at hand, by the year 2007, the CEOs of Fannie and Freddie were earning salaries that would have been respectable, even on Wall Street.

Fannie’s main man, Daniel Mudd took home $13.4 million in 2007, a year in which the firm lost $2.1 billion. While the Freddie Kruger of mortgage finance, Dick Syron, pocketed $18.3 for helping Freddie Mac to a $3 billion loss and a 33% trim for the shareholders.

As recently as May of this year, Mr. Mudd told the New York Times that he was “seeing the best opportunities since I’ve been in this business.”

Two months later, both Fannie and Freddie are “insolvent,” says former Fed governor William Poole.

In a better world, Mudd and Syron would be hanged...and the bondholders would be wiped out along with the shareholders. But last Sunday, U.S. Treasury Secretary Henry Paulson announced a bailout.

And on Monday, an auction of Freddie Mac debt was oversubscribed.

Now Mr. Paulson wants to once again move the debts off the balance sheet and the Wall Street crowd is already clamoring for breaking Fannie and Freddie into eight to sixteen smaller companies.

History does repeat itself, and the Russians were right; the deck was stacked from the very beginning.

The Best Money Guy

Fedspeak - "Simon, you're broke"

2008-07-18T15:56:00.000-07:00

Here in the U.S.A. the little voters still hope to get something for nothing.

The head of the Dallas Federal Reserve Bank, Richard Fisher, speaking to the Commonwealth Club of California said: “...tonight I speak for neither the committee, nor the chairman, nor any of the other good people that serve the Federal Reserve System. I speak solely in my own capacity. I want to speak to you tonight about an economic problem that we must soon confront or else risk losing our primacy as the world’s most powerful and dynamic economy.

“...If you wanted to cover the unfunded liability of all three [Medicaid] programs today, you would be stuck with an $85.6 trillion bill.

That is more than six times as large as the bill for Social Security. It is more than six times the annual output of the entire U.S. economy.

“Add together the unfunded liabilities from Medicare and Social Security, and it comes to $99.2 trillion over the infinite horizon.

Traditional Medicare composes about 69 percent, the new drug benefit roughly 17 percent and Social Security the remaining 14 percent.

“I want to remind you that I am only talking about the unfunded portions of Social Security and Medicare.

It is what the current payment scheme of Social Security payroll taxes, Medicare payroll taxes, membership fees for Medicare B, copays, deductibles and all other revenue currently channeled to our entitlement system will not cover under current rules.

“Let’s say you and I and Bruce Ericson and every U.S. citizen who is alive today decided to fully address this unfunded liability through lump-sum payments from our own pocketbooks, so that all of us and all future generations could be secure in the knowledge that we and they would receive promised benefits in perpetuity. How much would we have to pay if we split the tab?

Again, the math is painful.

With a total population of 304 million, from infants to the elderly, the per-person payment to the federal treasury would come to $330,000.

This comes to $1.3 million per family of four—over 25 times the average household’s income.” “No combination of tax hikes and spending cuts, though, will change the total burden borne by current and future generations.

For the existing unfunded liabilities to be covered in the end, someone must pay $99.2 trillion more or receive $99.2 trillion less than they have been currently promised. This is a cold, hard fact.

The decision we must make is whether to shoulder a substantial portion of that burden today or compel future generations to bear its full weight.

“...Throughout history, many nations, when confronted by sizable debts they were unable or unwilling to repay, have seized upon an apparently painless solution to this dilemma: monetization.

Just have the monetary authority run cash off the printing presses until the debt is repaid, the story goes, then promise to be responsible from that point on and hope your sins will be forgiven by God and Milton Friedman and everyone else.

“We know from centuries of evidence in countless economies, from ancient Rome to today’s Zimbabwe, that running the printing press to pay off today’s bills leads to much worse problems later on.

The inflation that results from the flood of money into the economy turns out to be far worse than the fiscal pain those countries hoped to avoid.

“Earlier I mentioned the Fed’s dual mandate to manage growth and inflation.

In the long run, growth cannot be sustained if markets are undermined by inflation.

Stable prices go hand in hand with achieving sustainable economic growth.

I have said many, many times that inflation is a sinister beast that, if uncaged, devours savings, erodes consumers’ purchasing power, decimates returns on capital, undermines the reliability of financial accounting, distracts the attention of corporate management, undercuts employment growth and real wages, and debases the currency.

“Purging rampant inflation and a debased currency requires administering a harsh medicine.

We have been there, and we know the cure that was wrought by the FOMC under Paul Volcker.

Even the perception that the Fed is pursuing a cheap-money strategy to accommodate fiscal burdens, should it take root, is a paramount risk to the long-term welfare of the U.S. economy.

The Federal Reserve will never let this happen. It is not an option. Ever. Period.”

He went on to tell his audience that they, as voters, must deal with this situation. Since the obligations cannot be met, they must be reduced. Fair enough.

But what candidate is going to tell the voters that they must give up their free healthcare?

And what voter is going to vote for such a thing?

Mr. Fisher is right about the problem; he is wrong about the solution.

The problem will not be fixed by the feds...nor by the voters. Popular democracy – ridden with its lobbyists, insiders and hustlers – will not allow it.

Instead, the government will go broke.

Maybe Pakistan's Investors Have the Right Idea

2008-07-18T15:40:00.001-07:00

Yesterday, in Pakistan investors rioted.

They began by breaking out the windows of the Karachi stock exchange and then stoning officials.

What set off this popular uprising was the 15th day of declining prices – bringing the total loss for Pakistani investors to 35%.

The Pakistanis are fairly new to the ways of modern markets. They don’t seem to realize that prices go up and down. They don't seem to understand that markets are supposed to be beyond the reach of public officials. “We demand that all stock prices be frozen at current levels,” said a representative of the Small Investors Association, perhaps speaking for small investors all over the world.

All over the planet, stocks have lost ground. The least of the losers, so far, is the United States, where the S&P is only off about 15% from its high. Aren't we lucky?

In Europe, losses are in the 20-25% range. And in China and Vietnam, investors have lost about half their money.

One thing for sure, the little guys around the world still don't get the point -- regulators always favor big brokers and investors. (Ask yourself, how many small investors take the regulators to lunch or hire lobbyists or big law firms to pander and represent them?)

I guess we should consider ourselves lucky since we seem to have gotten by (at least for this quarter) with just a 15% haircut even though major market declines can take 80% or 90% of your money.

Send your thank you notes to your favorite lobbyist in Washington D.C.

The Best Money Guy

Fannie & Freddie (No, this is not a TV soap opera)

2008-07-18T15:27:00.000-07:00

So far this year, the AP reports that “Fannie and Freddie spent $170 million on lobbyists.”

What did you expect from these clowns that are paying themselves huge amounts while raiding the treasury?

Like any good corporation, they knew it didn’t hurt to have friends in high places and that in Washington it takes some "grease" to get what you want.

But the two mortgage companies had the deepest pockets in town – generously paying fees and expenses for a long list of former members of Congress and Capitol Hill hacks. The $170 million paid to lobbyists was just the beginning.

Executives of the firms were also among the biggest contributors to political campaigns and to politicians’ pet programs and vanity charities.

What a glorious scam!

The two pretended to be important parts of private enterprise...partaking in the grand scheme of risk/reward along with all other capitalist businesses...but they had the world’s biggest government standing behind them all the time.

For Fannie and Freddie it was all reward and no risk, right from the beginning. They could funnel millions in profits from homeowners to politicians. Then, when they got into trouble, lay the losses onto shareholders and taxpayers.

So the question is who is dumber: the public voter or the public shareholder?

I guess we shall soon find out.

The Best Money Guy

A Warning Call

2008-07-18T05:59:00.000-07:00

In a quietly circulated memo released this morning to it's member banks, (Made available by the Wall Street Journal.) the FDIC (The government organization that supposedly insures our bank accounts up to a limit of $100,000.) , now is requiring effective August 18, that large banks (Banks with $2 billion in deposits or $20 billion in assets.) to immediately standardize information provided to the FDIC and to immediately add systems that can automatically place holds on "very large accounts".

Read between the lines - our government is setting up a quick and easy mechanism (Such as an email blast to the banks?) to stop you from withdrawing your money from your bank. Wonder why they might want to do that?

Given that us boomers are supposed to have at least $3 million for a decent retirement, (Oh well, I'm not in that category.) I only have a couple of accounts to worry about. I suggest you consider your situation if your funds are suddenly "on hold", the Fed's term for "you ain't gonna get it until we're good and ready!)

Now, I wonder under what circumstances would our friends in Washington issue this freeze of our accounts order? Possibly a default on the Federal $9 TRILLION dollar debt?

BTW, I barley survived the great savings and loan crisis when all of my accounts were frozen by the geniuses in Washington, even though I did nothing wrong, and my S&L was totally solvent. It took the feds more than 100 days to get around to releasing a couple of my accounts, and by then my creditors were working on repossessing my cars, foreclosing on my home and properties, and destroying my credit score. This was further complicated even though I was earning a nice living, my paychecks were being direct deposited into accounts that I could not access, and it took more than two months to get this fixed.

Now, I'm not saying that we should run out and take the cash and bury it in the back yard. But, keeping a tidy sum and some Krugerrands under the mattress might not be a bad idea.

Oh, one more thing. The Feds include access to safe deposit boxes in this instruction. Sorry, those items get frozen too.

Caveat Emptor.

The Best Money Guy

Is Wall Street Crazy?

2008-07-18T04:43:00.000-07:00

Here we go again.

This morning, Citigroup reported a $2.5 BILLION loss, but since it beat Wall Street's lowered expectations, the stock and the market futures are moving up.

Citigroup posted yet another loss and laid off more employees in the second quarter as it struggled with surging loan defaults and as more consumers fail to make loan payments, but Wall Street started handing out the happy juice since the shortfall was smaller than the silly (lowered of course) levels it had anticipated.

The nation's biggest banking company by assets reported Friday it lost $2.5 billion. In the same time frame last year, the bank earned $6.23 billion.

I can't quite figure out how this is good news, after all. the difference from last year to this year is an amazing negative $8.7 billion. Look at it this way, would you be celebrating if this year you went from having an income to having zero income and borrowing another third of your previous annual earnings? Duh!

Citigroup Inc.'s securities and banking division wrote down the value of its assets by $7.2 billion, before taxes, and an asset revaluation cost its consumer lending business $745 million. Credit costs jumped to $7.2 billion as more consumers defaulted on their loans -- implying that while losses in the credit markets are decelerating, losses from actual defaults in Citigroup's mortgages, home-equity loans, auto loans and credit card lines are mounting. Isn't this going the wrong way?

Citigroup has failed to turn a profit for three straight quarters now.

Using it's inscrutable logic, Wall Street appears to be deciding that the prospect for the ailing financial sector may not be as dire as they feared, therefore it's time for us fools to buy more shares of companies that are losing money, so they are raising the stock prices to entice us to buy their shares before the prices go up even more. Ha!

By the way, Citigroup's revenue fell 29 percent to $18.7 billion and the bank reduced its work force by 6,000 during the quarter, bringing its job cut total to 11,000 for 2008.

So, let's all run out and celebrate this magnificent management example of capitalism and do what the Bloomberg and CNBC cheerleaders are telling us to do, that is buy more Citigroup shares.

A better idea than buying a share of this pig is to find a terminated Citi employee and take them out for a modest lunch. Do a good deed this weekend and be thankful that you don't own a whole pile of this pooper masquerading as a business.

The Best Money Guy

Come on Nancy, give the guy a break

2008-07-17T23:18:00.000-07:00

Yesterday, House or Representatives Speaker Nancy Pelosi called President Bush "a total failure".

She stated "he has been a total failure in everything from the economy to the war to energy policy", in an interview on CNN.

"You know, God bless him, bless his heart, president of the United States, a total failure, losing all credibility with the American people on the economy, on the war, on energy, you name the subject."

She then tsk-tsked Bush for "challenging Congress when we are trying to sweep up after his mess over and over and over again."

We know that Pelosi's outburst was a departure. Her usual practice in public has been to call Bush's policies a failure — not his presidency or him, personally.

Now Nancy, we all know how great "W" has been for the country.

Just look at the share price of Exon Mobil, Haliburton, and Schlumberger, or the price of a barrel of oil, or a gallon of milk or gasoline. How can you not love him if you are a farmer, milk producer, oil worker, or share holder of one of these companies. Or if you were in the moblie home business, you love George since your inventory was bought by the FEMA geniuses at the highest possible prices to provide "temporary" housing to the poor souls suffering in New Orleans.

And after all, now your blue chip stock dividends are nearly tax free, and didn't he send you a "stimulus check" too?

Nancy, please keep the blaming down a bit. We all love George.

After all, he proved that any Yale party animal and ROTC junior officer can become president (as long as your dad was president), make all of his friends and family rich beyond their wildest dreams, and leave us working folks holding the bag while running a formerly great country into insolvency. He did give us the 21st century version of the Crusades so that over-steroid, super-stacked, super heroes would become fashionable again. And, he did give us the former "Axis of Evil" that we are now sucking up to (and providing billions of our dollars in free money) because they are dismantling a never was functioning nuclear facility.

Heck, Nancy, look at the new words Bush added to our lexicon such as: WMD (things one says exist but are never found). Also, you must remember that he single handily got us to stop drinking Bordeaux and eating brie. He even got us to rename french fries for a bit.

Nancy please remember that our view of Congress, your domain, is even worse than it is for fool George. You too have done a great job accomplishing nearly nothing while letting the neocons run amuk. I don't remember seeing you taking the time to refute the front man Colin Powell, on his incredibly and obviously contrived rationale for this apparently now never ending war of futility.

(FYI, the Democrat controlled Congress approval rating has hit a new low of just 18 percent, down from 23 percent last month, according to a new AP-Ipsos poll. Bush's approval is at 28 percent, about even with the 29 percent rating last month.) Only 16 percent of those surveyed thought the country was moving in the right direction, a new low as well, although statistically the same as last month's 17 percent.

And, Nancy we really love it that last week you and Senator Reid and the Democrats dropped any pretense of trying to fight the president on important legislative battles — even the most important part of your jobs, which is passing spending bills that keep the government running.

It's not that there are not critically important things to do before November. So, why don't you and the Democrats take charge now and show some backbone? Or, is it your game plan to let America dissolve into fiscal and emotional bankruptcy and possibly chaos only to ensure a Democrat wins the Presidency?

Come on Nancy and Harry - get to work on fixing this mess now. We need leadership, not partisan horse pucky.

The Best Money Guy

And How Much Do You Owe?

2008-07-17T22:52:00.000-07:00

Commenting on the US government's GSE (Fannie Mae and Freddie Mac) rescue plan and its impact on the public debt limit, Congressman Barney Frank (Democrat) said that any aid to Fannie Mae and Freddie Mac would be counted against the federal debt limit, which Congress must vote to increase.

FYI, The current public debt limit is $9.815 TRILLION and total public debt subject to the limit as of July 15 was $9.440 TRILLION.

(In case you don't remember our debt was under $1 TRILLION when financial genius George W. was inaugurated.)

Treasury Secretary Paulson, (one of my favorites in this cast of scallywag characters), favored exempting the rescue plan, which might add as much as another $5 to $7 TRILLION to the debt, from the public-debt limit.

Isn't this called "off balance sheet accounting"?

And, isn't "off balance sheet accounting" exactly what has gotten us into this mess from the beginning?

Can you and I "exempt" some of our selected debts from our financial loan applications and credit reports if we don't want our lenders to see them?

Ostrich-like behavior will surely entice our lenders (the Bank of Japan, the Bank of China, and the middle eastern oil barons) to lend us more money so we can keep running this country into the dirt. Duh?

Nice try Mr. Paulson, but would you please go back to the nearest community college and take a refresher course in Accounting 101 and Ethics.

The Best Money Guy

For Sale in America (Not Quite the Brooklyn Bridge)

2008-07-17T22:00:00.000-07:00

Two days after our master stock manipulator, oops I mean Secretary of the (empty) Treasury, Mr. Paulson, talked about emergency regulatory actions that triggered a two-day rebound in its stock and most of the market, the Wall Street Journal reports, (citing unnamed people familiar with the matter), that Freddie Mac is considering raising capital by selling as much as $10 billion in new shares to investors to avoid a full-blown government rescue for Freddie.

Richard Syron, Freddie's chief executive, told the Journal: "We're considering the full array of options before us ... We're not at the stage of talking about the exact when."

Want to guess which plan he prefers, becoming a civil servant with a GS-something pay check, or a private plan so he can collect another $15 million or so in compensation like he did last year?

OK, Prince Alaweed of Saudi Arabia and Citibank, here's you chance to hedge your bets by owning the buyer of the debt and be the seller of the debt. What a sweet deal.

What's next from the titans of the mortgage industry?

Here's an idea, let's get Hugo Chavez, the president of Venezuela to barter a bazillion barrels of oil for good old Fannie Mae. Heck, it will come with some nice downtown Washington D.C. real estate that he can convert to vacation home.

Thank God that it's almost Friday in yet another wacked out week in financial America.

The Best Moeny Guy

Get out your sweaters

2008-07-17T20:29:00.000-07:00

Fresh news from our friends in the wonderful world of energy.

According to the executive director of the National Energy Directors Association, and the Wall Street Journal, the natural gas heating bills of US families could rise 30-50% this winter.

For those working folks who use heating oil, prices could rise 50-100%.

This means that many families in New England could face costs of $1,600-$1,700/month to cover heating oil, electricity and gasoline costs next winter.

Now, do you all remember that Vice President Cheney and his energy buddies crafted a still secret National Energy Plan way back in 2000 while we could afford to heat and cool our homes, use electricity, and drive our cars. Do you wonder why the "plan" is still a secret?

Plan ahead - buy sweaters, blankets and sleeping bags now - there's going to be a run on these this winter.

And please send your thank you notes to Mr. Cheney. Hopefully he will get them before he goes shooting his friends again this duck hunting season.

The Best Money Guy

Tired Campaign Mantra - The Terrorists Are Coming (Again)

2008-07-17T18:59:00.000-07:00

I was just reviewing the latest fear mongering blather coming from another one of Mr. Bush's talented executives, Homeland Security Secretary Michael Chertoff, who has brought us color coded fear warning alerts and airport security that requires that we remove shoes, water, and nail clippers from our possession before we fly, for a cool $500 billion per year.

He said, "European terrorists are trying to enter the United States with European Union passports, and there is no guarantee officials will catch them every time".

Chertoff's noted that the country is entering a potentially vulnerable period with the presidential nominating conventions coming up next month; the presidential election in November; and the transition to a new administration in January — all of which may be attractive targets for terrorists.

FYI, thankfully, this was his last scheduled appearance before the House Homeland Security Committee.

Demonstrating his far reaching understanding of human behavior, Chertoff said "that the more time and space al-Qaida and its allies have to recruit, train, experiment and plan, the more problems the U.S. and Europe will face down the road".

Interestingly, he hasn't noticed that the more time and money we spend on the gargantuan and impossible to manage Department of Homeland Security, the less we get for out shrinking bucks from this quagmire of bureacracy.

Chertoff said "The terrorists are deliberately focusing on people who have legitimate Western European passports, who don't appear to have records as terrorists. I have a good degree of confidence we can catch people coming in. But I have to tell you ... there's no guarantee. And they are working very hard to slip by us."

Chertoff reiterated his concern that terrorists could sneak radiological material into the country on small boats or private aircraft. This material could be used to create an explosive device known as a "dirty bomb."

Chertoff and other intelligence officials have delivered similar warnings before, and he offered no new information about specific threats or an imminent attack.

Chertoff stated that the Homeland Security Department has a strategy to protect against this small boat vulnerability and is testing radiation detection equipment in Seattle and San Diego ports. Chertoff said that getting out a regulation to pre-screen and enhance security of general aviation aircraft coming to the U.S. from overseas is one of his top priorities. He also said he expects to approve new radiation detection technology this fall.

So, let's see, six years, and we can't stop madmen from impersonating others unless they try to carry-on nail clippers and soda bottles. Wow, I'm impressed.

Chertoff dismissed any rumor that he is on a list of potential running mates for Sen. John McCain, the presumptive Republican presidential nominee. but, that didn't stop him from using this final appearance to mouth the tiresome Republican fear-mongering line.

Chertoff's term as the country's second Homeland Security Secretary ends when a new administration takes over the White House in January.

For a farewell gift, let's give him a one-way ticket to Bikini Atoll, where he can spend the rest of his time cleaning up the nuclear radiation mess.

Goodbye Mr. Chertoff, and good riddance.

Oh boy oh boy, now we've got a rally

2008-07-17T17:10:00.000-07:00

OK, boys and girls, it seems that the Dow is up over 500 points in just two days, and the over-paid talking heads on Bloomberg and CNBC are just gushing while extolling the performance of corporate America doing their magic by beating the estimates of Wall Street's analysts.

Golly gee, but did I miss something or what?

Wells Fargo started this bash by beating estimates (meaning it made more than the lowered estimates of the Street's crowd of touts) but it did it by using a bit of financial engineering that was well hidden in the footnotes of the report.

It seems that Wells decided to change it's internal rules so that non-performing loans would now not be reported as non-performing unless they had no payments made for the last 180 days. (Previously this was 120 days.)

Nice trick Wells. Suddenly all of those loans that are on the books vanished for another quarter. Even better, all the collections department now has to do is get the hapless borrower to pay any amount, and presto whamo, the loan moves off the non-performing list for half a year.

Of course, Bloomberg refused to bring back Oppenheimer analyst Meredith Whitman, who blasted Wells as one of the most secretive (re their financial reporting) prior to the earnings announcement, and nary a word was uttered by the bubble-headed Bloomberg cheerleaders regarding this bit of accounting magic.

Voila, Wells stock soars as the short sellers get squeezed, and the market rally begins.

Golly gee Batman, this is better than my own personal bat boomerang.

Enjoy the party folks, I suggest you unload your stocks into this rally while the booze is flowing.

The Best Money Guy

2006-01-27T03:34:00.000-08:00

Published in the Las Vegas Sun, Fri, Jan 27, 2006
Letter to the Editor -- School Board members should be ousted

Regarding the search for a new Clark County Schools superintendent that was the subject of Thursday's story in the Sun that carried the headline, "Now what?".

The answer is simple -- fire the Clark County School Board and call for a special election as soon as possible. The inferior educational results, the constantly increasing expenditures, the abysmally low student performance metrics, and the total absence of true purpose -- providing our students with the best education possible -- all point to an executive team (the School Board) that needs to go now before more students are damaged.

If this was a corporation, I would be shorting the stock to zero.

Dennis Curcio
The Best Money Guy

2006-01-01T03:21:00.000-08:00

Appeared in the Las Vegas Sun, Jan 1, 2006

Letter to the Editor: Make public officials accountable

Two of the Sun's Dec. 28 stories, "Police aim to curb bad driving" and "Kids' safety at crossroads," are perfect examples of the nearly complete abdication of accountability and responsibility of enforcing existing traffic laws and basic public safety by the local government and the police.

The constant tired song from the public officials that they can't do anything is unacceptable. The answer is simple: The taxpayers (meaning customers) must insist that the service providers do their jobs satisfactorily by aggressively enforcing the existing traffic laws. This means getting the police out on the streets and the public works managers out of their cushy offices and out on the streets as crossing guards.

The Sun could better serve the community by including the names, addresses and e-mail addresses of the public officials in future stories so that the taxpayers could better contact them.

Dennis Curcio The Best Money Guy

2005-11-04T03:29:00.000-08:00

Published in the Las Vegas Sun, Fri, Nov 4, 2005

Letter to the Editor - Campaign funds easy to track

Regarding the Sun's Nov. 2 editorial, "Faulty campaign finance laws"

Is it just Nevada, or is it a hallmark of the current version of the Republican Party nationwide to hide the truth about campaign contributions and who is buying the votes of our representatives?

It would take an average Web database developer less than a week to set up a searchable, sortable database for a candidate and replicate it for every elected position.
The information could easily include the name and address of the contributor, the amount and the date and would be available on the Internet. Possibly Nevada would provide the service for a nominal cost.

Of course, then we would all be able to see who is buying our representatives' votes, and that would not be acceptable to the current breed of politicians.

DJ Curcio
The Best Money Guy