The news this morning is that Fannie Mae will ask the government for an additional $8.4 Billion in assistance. That's right, another $8.4 Billion on top of the $84 Billion that Fannie has already received. The request comes on the heels of Fannie's most recent quarterly earnings in which the company reports an $11.5 Billion loss for the first quarter of 2010. In the Wall Street Journal that author notes that Fannie and Freddie are providing stability to the housing market, implying that their existence is necessary. At a cost of $145 Billion? Really?
Here are some further facts for you. Fannie has over $3 Trillion in loans... $3 Trillion... In the entire world, only the US, China, Japan, and Germany have a GDP that is higher than the amount of loans Fannie has guaranteed... Think about that.
In the first quarter of 2010 Fannie, Freddie, and the FHA provided guarantees and insurance on 96.5% of all new home loans. It is the proverbial monopoly
While every other financial firm of similar size is thoroughly diversified in vast arrays of markets, Fannie and Freddie are involved in one single asset class. Compare them to Bank of America, JP Morgan Chase, Goldman Sachs, and Wells Fargo and you begin to see why these two companies should not exist. No company of that size can survive offering one single product unless they have a monopoly. In the case of Fannie and Freddie, I think that the 96.5% number demonstrates that they have a state-granted monopoly which is unhealthy, dangerous, reckless, irresponsible, and now it appears to be criminal given the rate at which they are destroying the value of taxpayers dollars.
Mr. Senator, when will this end? Just get it over with. Break these companies apart, end the monopoly, save taxpayers from having to finance a lifestyle that many people were never qualified for, and let the markets fall to their REAL levels. Nearly everyone can see that this is unsustainable, why can't you? You should have realized this $145 Billion ago. Please do this now before we waste another $145 Billion. And while you're at it, Mr. Senator, please raise interest rates, quit manipulating false economic results, stop lending to unqualified people through the FHA, and realize that not every American can afford a home, nor should they. Please do this Mr. Senator, before it is too late.
Tuesday, May 11, 2010
Tuesday, April 13, 2010
TAXES?!
A recent report indicated that the federal government will increase taxes on dividends and long-term capital gains from their favorable 15% rate to the new ordinary income rate of 39.6%. This also comes with the stipulation that the rate will eventually head to over 44% within the next two years. Why is this egregious? Because it taxes people for saving money.
Any interest income earned from savings accounts is considered a dividend by the IRS and is subject to dividend tax requirements. Coupled with increasing the tax on savings, the government is choking investments by hammering smart investors who put their money into companies that grow, produce income, and contribute to our economy.
This tax will be used to backstop losses from saving homeowners who are underwater.
So let me get this straight: we are taxed for spending, taxed for investing, taxed for saving, and taxed for breathing (just kidding, but I hear an air tax is in the works). In what world does this make sense? Why should we do anything but hide our earnings in a hole in the ground and demand that we always be paid in cash?
Ah, but the benevolent federal government is coming to the rescue! Saving people who bought homes they never could afford, bankrupting companies who adhered the to very lending practices the government wrote, cutting rates on lenders who are owed money for the public's spending sprees, and all the while the government has the audacity to suggest that they are not the problem but the solution.
I understand there are victims out there. People who were truly taken advantage of in the days of loose money. But who created that environment? Who demanded that every American have a home (a reckless and irresponsible policy)? Who pressured the Fed to keep rates low to induce cheap money? Who subsidized the worst-run companies in the country (Fannie and Freddie) with the sole intent to cheapen the dollar and get people in homes they had no business buying?!
I cannot believe the sheer audacity of our government. They sit on their perches and wag their fingers at "fat-cat" bankers for creating the mess when the bankers simply played by the rules that congress created! The bankers have shareholders to answer to for their stupidity and greed, but what about congress? Why are we not demanding an audit of their arrogance?
Taxing one person's savings and investments to pay for anther's foolishness is not "redistributing income." It's theft.
Any interest income earned from savings accounts is considered a dividend by the IRS and is subject to dividend tax requirements. Coupled with increasing the tax on savings, the government is choking investments by hammering smart investors who put their money into companies that grow, produce income, and contribute to our economy.
This tax will be used to backstop losses from saving homeowners who are underwater.
So let me get this straight: we are taxed for spending, taxed for investing, taxed for saving, and taxed for breathing (just kidding, but I hear an air tax is in the works). In what world does this make sense? Why should we do anything but hide our earnings in a hole in the ground and demand that we always be paid in cash?
Ah, but the benevolent federal government is coming to the rescue! Saving people who bought homes they never could afford, bankrupting companies who adhered the to very lending practices the government wrote, cutting rates on lenders who are owed money for the public's spending sprees, and all the while the government has the audacity to suggest that they are not the problem but the solution.
I understand there are victims out there. People who were truly taken advantage of in the days of loose money. But who created that environment? Who demanded that every American have a home (a reckless and irresponsible policy)? Who pressured the Fed to keep rates low to induce cheap money? Who subsidized the worst-run companies in the country (Fannie and Freddie) with the sole intent to cheapen the dollar and get people in homes they had no business buying?!
I cannot believe the sheer audacity of our government. They sit on their perches and wag their fingers at "fat-cat" bankers for creating the mess when the bankers simply played by the rules that congress created! The bankers have shareholders to answer to for their stupidity and greed, but what about congress? Why are we not demanding an audit of their arrogance?
Taxing one person's savings and investments to pay for anther's foolishness is not "redistributing income." It's theft.
Wednesday, March 17, 2010
THE NOTHING CURE
I recently read an article in the March issue of Forbes Magazine entitled "The Nothing Cure." The author outlines a study undertaken by Harvard Doctor Ted J. Kaptchuk in which he established three different groups a patients suffering from irritable bowel syndrome (IBS). In his experiment, one group received fake acupuncture with encouraging talk, one group was placed on a wait-list for acupuncture, and the third group received the fake acupuncture without the warm encouraging talk. The results were remarkable. Of those who received fake acupuncture and encouraging talk, more than 62% reported vastly improved conditions.
The message: don't ignore the placebo effect. As Dr. Kaptchuk states "expectation of a cure- and the rituals associated with medical treatment- can improve real-world symptoms. Our own will, imagination and belief can modulate the course of illness." Humans have an incredible ability to will themselves to overcome any obstacle. In many cases they only need a motivator. Something they can believe in.
I found the results of this experiment fascinating. The only thing that limits us is the confines of our own mind. If we strip that away, we have the ability to do anything we desire. It requires work, focus, determination, and perseverance. That is where, I think, nearly everyone gets tripped up. People find excuses to not put in the work. They look for reasons to slack, to limit themselves. They take the easy road. And, in the case of this experiment, the easy road means suffering until someone else offers hope.
Wouldn't it be easier if you just decided for yourself?
The message: don't ignore the placebo effect. As Dr. Kaptchuk states "expectation of a cure- and the rituals associated with medical treatment- can improve real-world symptoms. Our own will, imagination and belief can modulate the course of illness." Humans have an incredible ability to will themselves to overcome any obstacle. In many cases they only need a motivator. Something they can believe in.
I found the results of this experiment fascinating. The only thing that limits us is the confines of our own mind. If we strip that away, we have the ability to do anything we desire. It requires work, focus, determination, and perseverance. That is where, I think, nearly everyone gets tripped up. People find excuses to not put in the work. They look for reasons to slack, to limit themselves. They take the easy road. And, in the case of this experiment, the easy road means suffering until someone else offers hope.
Wouldn't it be easier if you just decided for yourself?
Thursday, January 14, 2010
Taxing Banks
The news today is that the Obama Administration wants to hammer the "fat cat bankers" with a tax in an effort to recover the money lent out under the TARP program. Officials in Washington have engaged in finger-pointing following the announcement with Barney Frank stating "They got us into this mess, its their fault, they should be taxed. They acted irresponsibly, greedily, and recklessly."
My feelings regarding Mr. Frank aside, this is one of the most ridiculous pieces of proposed legislation ever conceived. The issues with this proposal are as follows: the President has stated that one of his main objectives for this year is to generate job growth through continued economic stimulation and increased lending activity from the financial sector. What bank is going to lend when it is being taxed by the Federal Government for a program that many were forced to participate in?
Additionally, the proposed tax will not be limited to banks who took money from the government; any bank with over $50 Billion in assets (which is quite a few) will be taxed 15 basis points (or fifteen hundredths of one percent) of total assets for a period of TEN YEARS simply because it is a bank and because it is their fault we are where we are. That may not sound like a lot, but go ahead and multiply .0015 by $50 Billion or $100 Billion or even $1 Trillion as some of these banks have. You will quickly see why Washington is interested in this tax.
But that isn't nearly as bad as the other clause in the proposal. See, TARP was originally only intended for financial institutions who had an overabundance of assets which had uncertain values. But it quickly morphed into a program that lent to AIG, GM, Chrysler, and individual homeowners (many of whom had purchased homes they never should have even looked at). The problem is that Washington is trying to strike a deal with labor unions for its healthcare overhaul and politicians do not have the backbone to tax labor unions for their expensive health plans and tax their companies for poor operation. GM, Chrysler, AIG, and homeowners will not be taxed for the money they took. Because all of this is the banks' fault, they will pay for GM and Chrysler and AIG and underwater homeowners, it is their fault that all of these groups are in trouble. It is their fault that GM and Chrysler and AIG made moronic strategic decisions. It is their fault that people took easy money and bought homes they could never afford. Its all their fault.
Just to be clear, this isn't Alan Greenspan or Ben Bernanke's fault for cheapening the dollar, artificially lowering interest rates and encouraging lending to people who were not credit worthy. This isn't Barney Frank and Chris Dodd's fault for defending Fannie Mae and Freddie Mac's lending practices. This certainly isn't their fault for desiring to have every American in a home, regardless of income or credit-worthiness. This isn't their fault. It's not their fault that Fannie and Freddie could lend to terrible borrowers at obscenely low rates that no healthy, smart financial institution could ever dream of. It isn't their fault for lending obscene amounts to people that no healthy, smart financial institution would ever touch.
None of these parties are responsible for their decisions and actions. It is all the banks' fault. It's the banks' fault for everything.
Listen, I am not going to sit here and say that all banks acted with utmost discretion and intelligence, with an eye to the future. I know there were terrible things going on on wall street. I know there was predatory lending going on. I know that cheap money and greed are deadly combinations. I am not a wall street apologist. But I do know that wall street acted on what was going on the market and the market was being led by two institutions who had federal backing who made some of the worst financial decisions of all time. I do know that those institutions were encouraged by the government to engage in those practices. I do know that wall street saw these loans, knew that they had to be bad, and packaged them together and sold them to the highest bidder. But the only reason these instruments sold was because they were supposedly "government backed."
But just remember. It's all wall street's fault. They are to blame and it's time for them to pay up......
My feelings regarding Mr. Frank aside, this is one of the most ridiculous pieces of proposed legislation ever conceived. The issues with this proposal are as follows: the President has stated that one of his main objectives for this year is to generate job growth through continued economic stimulation and increased lending activity from the financial sector. What bank is going to lend when it is being taxed by the Federal Government for a program that many were forced to participate in?
Additionally, the proposed tax will not be limited to banks who took money from the government; any bank with over $50 Billion in assets (which is quite a few) will be taxed 15 basis points (or fifteen hundredths of one percent) of total assets for a period of TEN YEARS simply because it is a bank and because it is their fault we are where we are. That may not sound like a lot, but go ahead and multiply .0015 by $50 Billion or $100 Billion or even $1 Trillion as some of these banks have. You will quickly see why Washington is interested in this tax.
But that isn't nearly as bad as the other clause in the proposal. See, TARP was originally only intended for financial institutions who had an overabundance of assets which had uncertain values. But it quickly morphed into a program that lent to AIG, GM, Chrysler, and individual homeowners (many of whom had purchased homes they never should have even looked at). The problem is that Washington is trying to strike a deal with labor unions for its healthcare overhaul and politicians do not have the backbone to tax labor unions for their expensive health plans and tax their companies for poor operation. GM, Chrysler, AIG, and homeowners will not be taxed for the money they took. Because all of this is the banks' fault, they will pay for GM and Chrysler and AIG and underwater homeowners, it is their fault that all of these groups are in trouble. It is their fault that GM and Chrysler and AIG made moronic strategic decisions. It is their fault that people took easy money and bought homes they could never afford. Its all their fault.
Just to be clear, this isn't Alan Greenspan or Ben Bernanke's fault for cheapening the dollar, artificially lowering interest rates and encouraging lending to people who were not credit worthy. This isn't Barney Frank and Chris Dodd's fault for defending Fannie Mae and Freddie Mac's lending practices. This certainly isn't their fault for desiring to have every American in a home, regardless of income or credit-worthiness. This isn't their fault. It's not their fault that Fannie and Freddie could lend to terrible borrowers at obscenely low rates that no healthy, smart financial institution could ever dream of. It isn't their fault for lending obscene amounts to people that no healthy, smart financial institution would ever touch.
None of these parties are responsible for their decisions and actions. It is all the banks' fault. It's the banks' fault for everything.
Listen, I am not going to sit here and say that all banks acted with utmost discretion and intelligence, with an eye to the future. I know there were terrible things going on on wall street. I know there was predatory lending going on. I know that cheap money and greed are deadly combinations. I am not a wall street apologist. But I do know that wall street acted on what was going on the market and the market was being led by two institutions who had federal backing who made some of the worst financial decisions of all time. I do know that those institutions were encouraged by the government to engage in those practices. I do know that wall street saw these loans, knew that they had to be bad, and packaged them together and sold them to the highest bidder. But the only reason these instruments sold was because they were supposedly "government backed."
But just remember. It's all wall street's fault. They are to blame and it's time for them to pay up......
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