Tag Archives: Financial

U.S. Has 2-5 Years Before Financial Meltdown

We all know it’s coming, but how long will it be before the United States reaches the point of no return? Senator Tom Coburn believes our “Greece” moment of financial meltdown is coming within 2 to 5 years, saying that the federal government is in the “midst of committing murder to our republic”.

Government Causes Housing Crash Then Sues Everyone Else

housing crisisThe U.S. government on Friday sued 17 banking firms for their roles in the housing crash. The financial institutions are being accused of selling $196 billion dollars of now-toxic mortgage backed securities to Fannie Mae and Freddie Mac.

The Federal Housing Agency (FHA) filed suits against Bank of America, Citigroup, JP Morgan chase and 14 others. FHA is the government agency that oversees Fannie and Freddie which raises questions. Is this just a maneuver for Fannie and Freddie to recover some portion of the massive losses that they were responsible for taking on?

Fannie and Freddie have notoriously backed loans with questionable characteristics. So-called NJNA (no job no assets) loans and loans where the borrower was likely borrowing more than they could afford. This created the easy credit climate where banks, under pressure from regulators and community groups like ACORN, were pressed to make sub-prime loans. Now, the government is coming after them.

The law suits will likely have a chilling effect on the economy. Banks as a whole will now be even more timid about being involved with FHA loans that are backed by Fannie and Freddie in fear of reprisals in coming years should the housing crisis worsen.

The banks have spent the last three years rebuilding their balance sheets. Now, the legal fallout from the mortgage crisis is creating a new wave of liabilities for them and uncertainty for the financial system. News that the economy added no jobs in August and that the lawsuits were pending slammed the stock market Friday and sent bank stocks tumbling. – The Wall Street Journal

Making it more difficult for home buyers to get loans will continue to weaken housing demand and depress prices. Current home owners will continue to see their equity, and therefor personal wealth, dwindle.

Bank were pressured by progressive groups and Democrat lawmakers to make loans to lower-income buyers that in many cases could not afford the homes they were buying. In order to defray the risk, financial institutions then packaged up those mortgages into mortgage-backed securities (MBS) which Fannie and Freddie then bought – as did many other institutions.

The suits are specific to the mortgage-backed securities sold to Fannie and Freddie stating that the banks misrepresented that the securities met the FHA’s underwriting rules and overstated the ability of the borrowers to repay the loans.

While the President needs the banking industry to loosen lending rules to create any semblance of a recovery, having his administration go after the largest institutions able to do so will likely create yet another government impediment to growth in the economy.

On one hand the administration is asking these banks to make credit more available to home buyers and home owners while simultaneously suing them for having done just that in the past. That kind of uncertainty and mixed-messaging is precisely what is hindering an economic turn-around.

If the government wants to place blame, a closer inspection of FHA, Fannie and Freddie, and progressive housing policies should be their focus.
The institutions so far named in the law suits are: Ally Financial, GMAC LLC (or what was GMAC), Bank of America, Barclays, Citigroup, Countrywide, Credit Suisse, Deutsche Bank, First Horizon , General Electric, Goldman Sachs, HSBC, JPMorgan Chase, Merrill Lynch, First Franklin Financial, Morgan Stanley, Nomura Holdings, The Royal Bank of Scotland(RBS), and Societe Generale

ACA of Texas Offers Financial Literacy Tips for Parents

ACA INTERNATIONAL EDUCATION FOUNDATION LOGO / ACA INTERNATIONAL EDUCATION FOUNDATION. (PRNewsFoto/ACA INTERNATIONAL)AUSTIN, Texas, Aug. 30, 2011 /PRNewswire-USNewswire/ — With Texas students from kindergarten to college heading back to school, adding financial literacy to your child’s curriculum this fall can teach invaluable skills for today and in the future.

“It’s never too early or too late to talk with your kids about personal finances,” said ACA of TexasPresident Jack Fischer.

As outlined in USA Today’s special supplement on youth financial literacy, teaching children about saving, credit, debt, budgeting and discipline in managing their own finances is essential to growth and development.  “From the very basic to the complex, parental involvement in helping their children better understand how to value and manage money is essential to helping them make successful financial decisions as they grow older,” said Chris Wunder, chair of the ACA International Education Foundation Board of Directors.

Helpful tips for talking to your children about financial management:

  • Be a role model. Parents, siblings and grandparents are important role models for teaching financial management to children. Lead by example.
  • Be honest. Building and maintaining trust with your child is essential. Admit mistakes and share how you learned from them.
  • Be interactive.  Effective teaching is a two-way street. Talking and listening with real life examples is important.
  • Be patient. Some children may not immediately grasp the concepts you are teaching, but don’t give up on your teaching efforts.
  • Start with an allowance.  For children, an allowance provides hands-on lessons in saving, spending, credit and budgeting.

ACA International Education Foundation is a 501(c) (3) nonprofit organization serving as the philanthropic arm of ACA International, the association of credit and collection professionals. The Foundation exists to promote the goal of increasing financial literacy in the United States. Outreach efforts includewww.askdoctordebt.com , which offers free, reliable answers to consumer questions and provides helpful resources.

ACA of Texas is a State Unit of ACA International, the Association of Credit and Collection Professionals.  ACA is the comprehensive, knowledge-based resource for success in the credit and collection industry.  Founded in 1939, ACA brings together more than 5,000 members in the United States and abroad, and their more than 150,000 employees, including third-party collection agencies, asset buyers, attorneys, creditors and vendor affiliates.  ACA establishes a wide variety of products, services and publications.  For more information on ACA International, visit www.acainternational.org .

CONTACT: Mark Schiffman
Tel. (952) 259-2124 or [email protected]

SOURCE ACA International Education Foundation


Wall Street Posts Record Profits, Where is the Financial Reform ?

     For those of us caught hoping and praying for an economic recovery, some very alarming news from Wall Street was reported today.  While many folks are unemployed, losing their homes and trying to feed their families, the  Obama Administration is content to let the Fatcats of wall street continue to rake in massive amounts of profits.  So much for President Obama’s promises that this pillaging of wealth will be stopped by his vaunted ” Financial Reform.” If we take a closer look, it is proven that Wall Street and connected cronies are reaping record profits in 2009, and even more in 2010. How can this be? 

 The Wall Street Journal lays it all out here in an article* dated 02/02/2011:

” In 2010, total compensation and benefits at publicly traded Wall Street banks and securities firms hit a record of $135 billion, according to an analysis by The Wall Street Journal. The total is up 5.7% from $128 billion in combined compensation and benefits by the same companies in 2009.”

This must be exactly what the leftists are talking about when they scream that the rich get richer while the poor get poorer, yet I see noone protesting Wall Street or the Obama administration today.  We saw G W Bush and today’s Republicans chastised for this exact same kind of  FatCattery when he was in office, and they still do it today. This will lead to some interesting debates when we see  Wall Street  forced to support Obama in 2012, while also currying favor from Republicans who control the purse strings in the House of Representatives. With a record profit of $135 billion dollars, I suppose there will be plenty of cash lying around for the increased lobbying of Congress on behalf of these Wall Street FatCats.

  President Obama also signed an Executive Order against Lobbyists in his administration during his first days in office. Much like the Financial Reform law he signed that has allowed record Wall Street profits to continue, President Obama’s Lobbyist ban was nothing more than empty words and broken promises to the people.  We see the proof in that statement here from politifact.com: **

“Grassley demands waivers and recusals on former lobbyists in the Obama administration:

” It’s been about three months since we gave a Promise Broken to Barack Obama’s pledge to restrict former lobbyists from serving in his administration. We found that the administration has granted waivers to several former lobbyists, allowing them to serve. The administration also allows recusals, where former lobbyists simply recuse themselves from discussions concerning whatever interest it is for which they used to lobby. The recusals have not been made public, and we don’t know how many have been issued.”

    So there we have it. Wall Street raking in record profits, which will be used to hire a record number of lobbyists, many of which are now working in the Obama  Administration. Obama campaigned on ” Hope and Change.”  Looking at these facts, anyone still hoping for any serious change from this administration has to be living in complete denial of reality. Throw in the fact that one poll was giving Obama a 53%  approval rating for his job performance, and we see just how misinformed and dysfuncionally ignorant a large part of our society truly is today. Wake up people.



*   http://online.wsj.com/article/SB10001424052748704124504576118421859347048.html?mod=WSJ_business_whatsNews

** http://www.politifact.com/truth-o-meter/promises/obameter/promise/240/tougher-rules-against-revolving-door-for-lobbyists/

Unintended Consequences: Outline of a Presidency

President Obama is clearly a victim of his own lack of experience.  Experience breeds wisdom, which can help leaders and thinkers understand what the consequences of their actions or inactions will be.  This President has education, a gift for eloquence, but his lack of experience is leaving Americans to deal with the end results.

After the BP disaster, his first task was to get a Duke basketball jersey.  His second, was to shut down drilling in the Gulf of Mexico.  This populist idea is of course a reaction that any normal person, not responsible for an entire nation, might rush headlong into.  Unfortunately, it may well shut down the economy in the entire Southeast of the United States.

..with Gulf lawmakers decrying the moratorium as an overreaction to the BP oil spill that  will compound the economic damage the disaster is inflicting on their states.  Lawmakers and industry groups warn that the moratorium could cost thousands of jobs and drain hundreds of millions of dollars out of the local economy. ..the deepwater drilling ban, which is estimated to affect 33 rigs in the Gulf, could eliminate up to 4,000 Louisiana jobs in the short-term and “possibly 20,000 jobs throughout the course of the year.” (link to full article)

While the disaster itself is not Obama’s fault, his inability to handle it is a direct reflection on his lack of leadership abilities and dearth of experience.  Of course Obama wasn’t thinking about the thousands of additional families that would now have their lives destroyed.  The BP accident is putting fishermen and tourism-based businesses at-risk, what’s one more private sector business?  We’re building government jobs at a rate of 10 government jobs for every one private sector worker.  Will your paycheck support ten government workers that are currently paid higher than their private sector counter-parts?  Maybe we need those roughnecks, roustabouts, engineers, seismologists and logistics providers after all.

Now certainly a Keynesian could get financial reform right – right?  Not hardly.  It’s already been made official that financial reform won’t put an end to financial institutions that are “too big to fail”.  That intended consequence just won’t happen.  Now, it’s becoming evident that the unforeseen will be more unpleasant surprises.  Timothy Ryan, the CEO of a financial markets association said that the financial reform will, “..limit banks’ ability to hedge their risks, Ryan said, and deplete institutions of capital. This also would raise mortgage and credit costs, he said.  That means mortgages will be less available to those with limited resources.  This will hurt main street as much as Wall street, perhaps more.

Health care reform is fraught with unintended consequences.  These are already being felt.  Primary care physicians are dropping Medicare patients or refusing to accept new Medicare patients in huge numbers,pharmacies are walking away from Medicaid drug coverage, and emergency rooms are staffing up for the increase in visits for non-emergent cases that will be generated instead of the reduction promised by the President.

One could point to how cash for clunkers actually delayed the recovery of the automobile industry by 4+ months, employers ceasing to hire due to Obamacare, employers choosing to stop providing health insurance, or wealthy Americans ditching their citizenship due to unfair taxation, etc, etc, but the list is ridiculously long.

Obama has no clue what he’s doing and even worse, no clue what his actions are going to do.  His successor will have plenty of reasons to talk about the mess that is being left to them – Obama, “Karma’s a Bitch”.

Obama's Policies Not Going the Distance

Other than Jimmy Carter, I am not sure we’ve had a President in recent history with so many policies that failed so dramatically so fast.  President Obama promised that he would do health care reform, wall street reform, and then he had his Keynesian stimulus policies tested.  So far, the mighty Obama.. has struck out.

Cash for Clunkers
Cash for clunkers: clearly the best medicine for ailing Detroit (which we Citizens had invested heavily in 2/3 of.  Certainly, the pouring of tons of federal dollars (a.k.a. your money) would help float the unions .. I mean manufacturers.. so that they help the economy recover.  Well, not really.  In fact, it shows that $3 Billion of tax payer money, does not buy happiness – or economic recovery as the case may be.  In fact, it may have delayed the recovery by 4-6 months as the industry was already seeing an upward slope in sales until the program caused them to see a quarter-over-quarter sales rate loss during the program.  One whole month showed a spike, after which a devastating drop in sales showed up, well below where the manufacturer’s numbers were before the program began.

If that wasn’t the medicine of truth, how about the truth about medicine?  Health care reform has now been cast into daylight – burns a little doesn’t it?  The government’s own Congressional Budget Office is saying that the program does not cut costs or the deficit now that the facts are known, doctors are dropping Medicare patients at unprecedented rates, pharmacies are running away from the program and even Canada, Oh Canada, is re-factoring it’s overly-expensive, government-run system (I know, not Obama’s fault, but he did try to  model this mess after them).  Then again, Speaker Pelosi did honestly say that Americans would find out what was in the bill once it got passed – we’re learning.

Then we have the President’s wall street reform (aka Financial Reform).  Even the liberal media admits that the financial reform bill doesn’t end “too big to fail”.

So cash for clunkers turned into your cash in the toilet, health care reform has given your cash to the reformers, and the financial reform doesn’t do anything to prevent your cash from disappearing into the bowels of  Wall street.  The President is claiming success on all of these things, and is thrilled about the Duke jersey he scored.  The rest of us.. not sure what we’re getting for well over $3,5 trillion dollars in reforms and stimulus.

So what’s an all talk, no action President supposed to do?  Well, ours is talking more – this time about cap-and-trade, alternate energy, and cap-and-trade policy, more new policy.  So far.. he’s Oh-for-three.  Can he take batting .000 after four at-bats?  .000 with the bases loaded even?  Sure he can – his contract isn’t up until 2012.  Let’s not renew it.

White House Blog: Watch Out for Loopholes in Financial Reform Bill

Dan Pfeiffer, the White House Communications Director, posted on the White House Blog, “The 10 Most Wanted Lobbyist Loopholes”. Mr. Pfeiffer is basically telling us that lobbyists are working to weaken Obama’s “Wall Street Reform” by limiting provisions in the bill.  Some of his concerns are things that we should genuinely look into, but others are just fear-mongering 101.

First, he says that the lobbyists will ask that only the Federal government be involved in enforcing the reforms.  Pfeiffer writes that, “..the Bureau would only supervise larger market participants.  Without state AG enforcement authority, the citizens of their states will have much less protection against illegal conduct. If you want to weaken consumer protections, that’s one way to do it.”.  But wait, I thought this was Wall Street Reform, to prevent the “too big to fail” problem from re-occurring.  Why does this bill need to choke small or medium lenders (your hometown bank or auto dealer) if those had nothing to do with the catastrophic failures Obama says this bill will prevent?

Next, Dan argues that the lobbyists will push to let non-banks have different regulations than banks by pointing out that, “..if a car dealer makes loans, or if a big department store sets up a financial services center, it’s doing what banks and credit unions do, and it should play by the same rules.”.  This point is poorly made.  He’s saying a department store and a bank are the same, but neither one of these institutions is supposed to be the major focus of the reform, remember.. too big to fail.

The post also talks about only letting firms make loans where they have “skin in the game”.  These provisions would be pointed at banks that make loans to folks that do not have the ability to pay.  Hopefully this would also prevent the government from forcing banks to make such loans that they would immediately want to sell off on to someone like, I don’t know.. Fannie Mae?  The author says that lobbyists would try to remove these provisions so that they could make these loans.  Banks don’t want these things and I can’t imagine them lobbying for them.  If any lobbyists were going to be pressing for these changes it will be whatever corrupted Phoenix arises out of the ashes of ACORN.

Some points in Mr. Pfeiffer’s post are things to watch for, but some wreak of an over-reaching central government.  He’s trashing the financial industry lobbyists but where is the discussion on special interest groups and key political power-mongers that will be pressing to make sure that Fannie Mae and Freddie Mac are allowed to continue operating as they did in the crisis?  Where is the outcry on the Congressionally-backed groups that also caused the meltdown?  This is an intellectually dishonest attempt to embarrass opponents of the legislation into giving in to the desires of the administration.  This is a poor attempt to create populist support for a massive government over-reach into the bowels of banking in America, and not just the big banks.