Tag Archives: Recovery Plan

Unemployment: I’m Surprised at the Surprise

Someone has to say it.  It desperately needs to be said.

Does ANYONE know the meaning of “unexpectedly?”

Continue reading

So Much For The GM Love

So the other day I gushed about my man crush with GM.  I love Chevy and have always rooted against Ford.  But with the government bailout of GM and the destruction of 100 year old bankruptcy law by the administration, I left my love on the side of the road and embraced Ford.

I was only too happy to have GM pay back their money.

Continue reading

Ford vs. Chevy

Finally!  I can go back to rooting for my old favorite.  GM was able to pay back their loan from Uncle Sam nearly 5 years early.

Continue reading

Fannie and Freddie Done

Thank gawd!  To finally see the two agencies almost single-handedly responsible for the financial crisis of the last 2 years on the ropes almost makes up for last night’s horror show.  Almost.

“It’s clear that Fannie and Freddie, as they currently exist, should be put out of existence, which means the important question is what combination of entities public and private will replace them,” said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee.

Continue reading

This is Where Obama is Getting His Jobs

Zero Sum Game

Government Regulation at Work

As the Obama administration becomes more and more involved in the day-to-day business of more and more businesses, you have to wonder what his real goal is?  If it is to drive the best and brightest from the industry in question, well, then this should be seen as a sign of success:

NEW YORK (Reuters) – A top executive at American International Group Inc has resigned because of pay curbs imposed by the Obama Administration’s pay czar, the insurer said on Wednesday.

Anastasia Kelly, AIG’s vice chairman for legal, human resources, corporate affairs and corporate communications, resigned effective December 30 for “good reason” and is eligible for severance pay under the terms of the company’s executive severance plan, the insurer said.

Kelly stands to be paid about $2.8 million in severance, according to a source familiar with the matter.

Kelly’s resignation comes after Kenneth Feinberg, who is charged with monitoring pay levels at companies that received taxpayer funds, imposed pay caps for AIG’s top executives.

Earlier this month, Feinberg set the compensation structures for the 26th through 100th highest-paid employees at four firms, including AIG, limiting most cash salaries to $500,000.

And she’s not the only one.  Apparently there are other top execs ready to walk:

She was among five executives reported by The Wall Street Journal to have notified the insurer that they were prepared to resign and collect severance benefits if their pay was cut sharply by Feinberg. Chief Executive Robert Benmosche separately also had considered quitting because of the pay constraints, the Journal has reported.

And the impact to the bank:

Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University, said no AIG employee was irreplaceable.

“We have been duped into thinking that these AIG employees have some kind of secret code that no other employee could discover if they were hired to replace them and therefore they are able to basically hold the company ransom,” Hurley said.

Imagine if the government bailed out the Minnesota Vikings.  And then, in order to make them competitive, demanded that the team could only pay their QB $500,000.  Brett Favre walks.  The Vikes finish 3-13.  As it stands today, they are the number 2 seed and a decent bet at playing in their 5th Super Bowl.

Hope for Change.

Hard to See This Coming

In an effort to curb banks from “predatory lending” and “profit taking”, Washington lawmakers enacted legislation that our Dear Beloved Leader signed into law.  Basically the new law makes it harder for banks to raise rates it charges folks who fail to make payments.

First, I often find it hilarious when groups of people chastise banks or lenders for trying to make money for “selling money” or lending money to people.  Especially when these people fail to pay that money back.  Fail to pay it back either “on time” or “at all”.  As if these lending institutions exist for the sole purpose of handing out discretionary money.  At times likes these, I always ALWAYS trot out my favorite “put your money where your mouth is” argument.  { by the way, didja catch that pun?!?  money where your mouth is? }.  If someone you know, or even if it’s you in this situation, think that people, banks or institutions should lend money without regard to being paid back, go to prosper.com and lend your own money to people who can’t afford to pay it back.  This is the perfect opportunity.  You don’t have to be a fancy shmancy bank with billions of dollars.  Even a couple hundred bucks would be appreciated.

Okay, back to the point.  When banks are restricted in their ability to sell their product to a group of people, they will react by:

  1. Stop selling that product
  2. Charging the non-regulated customers more for the same product
  3. Like the force of water, work around the obstacle

In this case, the banks choose option #3:

(AP) It’s no mistake. This credit card’s interest rate is 79.9 percent.

Typically, the First Premier card comes with a minimum of $256 in fees in the first year for a credit line of $250. Starting in February, however, a new law will cap such fees at 25 percent of a card’s credit line.

In a recent mailing for a preapproved card, First Premier lowers fees to just that limit – $75 in the first year for a credit line of $300. But the new law doesn’t set a cap on interest rates. Hence the 79.9 APR, up from the previous 9.9 percent.

The new law restricts the fees for selling money.  So, in response, the banks just raise the rate of interest.  Awesome.

But even with these new rates, does a credit card appeal to certain people?

As harsh as First Premier’s terms seem, that could be a blow to those who rely on the card, said Odysseas Papadimitriou, CEO of CardHub.com.

“Even when the cost of credit is astronomical, for people in true emergencies, it’s much better than not having access to credit,” said Papadimitriou.

Sure.  In fact, for some people, even at these rates, the borrowed money passes the marginal value threshold.  Then again, so did the flat rates the government restricted.

"This One Time…..In Band Camp…"

I’m relatively new to really REALLY watching politics.  I guess, in the past, I didn’t care.  Mostly I was single, renting and didn’t make enough money to care about taxes.  The last decade has seen that ALL change.  I am no longer single, I have children, own a home, make more money and am seriously considering starting my own business.  I also spend more time at home than I used to spend before all the changes aforementioned.   Combine this with the very compelling story of last year’s election; first time in many years that a  President or Vice President wasn’t running, and you have good drama.  AND we would have the opportunity to see America’s first woman or black Presidential candidate.  All good political drama.

Back to my point.  I am really pretty new to political theater.  So, maybe as I say this, it’s really not so unusual.  Could even be par for the course.  But to me, this is absolutely stunning.  Not only in the hypocrisy of it all, but in the sheer ignorance of any semblance of economic thinking.

WASHINGTON (Reuters) – The Obama administration pledged on Thursday to back beleaguered mortgage finance giants Fannie Mae and Freddie Mac no matter how big their losses may be in the next three years.

Serious?  Banks are paying BACK their TARP funds and these guys are asking for, and getting, more money?  At least they’ll have to be smart in their use of it, right?

It also jettisoned a demand that the two companies cut the size of their mortgage-related investment portfolios next year, allowing them to provide even more support in the near term for a housing market recovering from its worst slump in decades.

Nope.  Business as usual; continue to sell money to people who can’t afford it.

So, how is it that some businesses are capped and controlled and can’t WAIT to get out from under government control while others seem unable to even WANT to get out?  Is it political or is it simply a way of life?  Is it really possible that the Obama administration is giving political favors to supporters or, perhaps, does he simply think that a fascist* banking system is the most effective method by which to establish financial systems?

The Treasury’s announcement came just hours after the companies said their chief executives would be paid up to $6 million on an annualized basis for 2009.

Fannie Mae and Freddie Mac are congressionally chartered companies that buy up mortgages from banks and other originators to keep mortgage markets liquid. Some of the debt is repackaged as securities and sold off to investors, and the government has been buying an increasing share.

Sadly, for Liberty loving people, it would seem that the answer is “Both”.  Obama is both paying political favors, $6 million to the CEOs, AND feels that economic fascism is the preferred method of financial systems.

Like I said, I am new to this.  Maybe this is business as usual.  But from the cheap seats, this is ugly.

*   From wiki:  Fascists promoted their ideology as a “Third Position” between capitalism and communism.  Italian Fascism involved corporatism, a political system in which the economy is collectively managed by employers, workers and state officials by formal mechanisms at national level.  Fascists advocated a new national class-based economic system, variously termed “national corporatism”, “national socialism” or “national syndicalism”.  The common aim of all fascist movements was elimination of the autonomy or, in some cases, the existence of large-scale capitalism.

Fascist governments exercised control over private property but did not nationalise it. They pursued economic policies to strengthen state power and spread ideology, such as consolidating trade unions to be state or party-controlled.

More of the Same

Wanna know why we are in the trouble we’re in right now?  People spent too much money.  Many times, money they didn’t even have.  They either bought a house they had no business buying or they refinanced that house and spent the money somewhere else.

Either way, we simply spent too much money.

And the only way that we are going to be able to get better is to let this thing play out.  The over spending, and the bubble that it created,  has GOT to play out, and get out, of the system.  Pure and simple.

Which makes me shake my head when I read this:

Under the program, eligible borrowers who are behind or at risk of default can have their mortgage interest rate reduced to as low as 2 percent for five years. They are given temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete necessary paperwork, including proof of income and a hardship letter.

See, the Government has set up a program that allows folks who are in trouble with their mortgage to get help.  Ignore, for a second if you can, the fact that the government has no business stepping and helping these people.  Focus instead on if the program works or not:

Only one in three homeowners who have signed up for the Obama administration’s mortgage relief plan have sent back the necessary paperwork, highlighting continuing problems for the government’s effort to stem the foreclosure crisis.

It doesn’t.  And how could it?

Lenders, however, say the majority of borrowers either don’t complete the paperwork or don’t make the payments. At Bank of America, for example, only a quarter of the 65,000 borrowers in trial modifications have sent back their paperwork.

The bank blamed “ineffective communications with customers, shortcomings in document maintenance, misunderstandings about program requirements, and the inability to comply by some borrowers,” according to written remarks from Jack Schakett, Bank of America’s credit loss mitigation strategies executive.

I mean seriously.  Can you imagine going to the DMV for help on your mortgage?  Can you imagine the confusion that must reign at these offices?

Government.  Sheesh

Could This Turn Out Any Other Way?

Look, there are over paid people in this world.  Athletes.  Movie stars.  Middle managers at large corporations.  Sure.  I get it.  And to a l ot of people, people who really work and work physically, the money that some of the people make is gross.  That being said, the market adjusts pretty well and compensates those people fairly well.

Is shoveling horse manure more physically demanding than running a large Fortune 50 account?  Yup.  Are more people suited to shoveling manure than managing said account?  Just as sure.  Hence, the value of the skill is different and the compensation changes.

Which just makes this news predictable:

Anastasia Kelly, general counsel of AIG , Rodney Martin, head of one of AIG’s international life insurance businesses; William Dooley, who runs the financial-services division including AIG Financial Products; Nicholas Walsh, vice chairman and head of the international property and casualty unit; and John Doyle, who runs the U.S. property and casualty division, said in written notices Dec. 1 that they’re willing to leave by the end of 2009…

In October, Feinberg cut 2009 compensation for AIG’s top 13 employees by 57%, including limiting most base salaries to no more than $500,000. Another 12 top employees had already left before the review began, according to the WSJ.

Now, you can argue that execs are overpaid.  And you might even be able to convince some people of that fact.  But what you CAN’T prove is that THESE execs are overpaid in relation to their peers.  These people, in theory, are among the best in the world at what they do.  There might be only a few hundred who have the ability to rise to the positions these people have.  And that is among billions of people.  They SHOULD be paid well.

Now they will, just not at AIG.