We've come just short of the government completely taking over Wall St. According to CNBC, as stated on Kudlow and Company on Oct.13, 2008, the U.S. is moving toward following the European Model of attacking this financial crisis we're in.
The U.S. government will use the $700 billion-dollar bail out package to do the following, as well as buy bad assests from the companies at a significantly discounted price.
- Buy equity stakes in U.S. companies
- Expand deposit insurance
- Guarantee interbank lending
This is a double-edged sword however because on the one hand, we need to save the economy, but on the other hand, it doesn't necessarily seem to punish the companies for their bad behavior. I guess the stock market punished them enough this past week and the government buying equity in them will only devalue their current shareholders.
On the political front. This turn around will still help Democrats. Although the stock market rallied and was up 900+ points today, this will not help Republicans at this stage of the game because Obama has already capitalized on - and continues to ride the wave of the failure of the economy. I think a lot of voters will say, "Wow. good thing things are improving, but let's never go through that again. We need to get some new blood in there to change things up a bit and avoid that crisis again." The other thing Obama has going for him is that his liberal views are more European than most Liberals, so this Europeanization of the U.S. financial system will only validate his view point that American capitalism is fundamentally selfish and wrong.
Unfortunatly it's a Republican administration validating Obama's view point.
Monday, October 13, 2008
Wednesday, October 8, 2008
Should We Help Home Owners?
Question: Should we have a bailout for home owners and what should it be? If Wall St. is to blame for financing and earning money off of risky loans, so are the homeowners who couldn’t afford to buy a home in the first place. We’re helping at least the confidence in Wall St. improve, how can and should we do the same for home owners?
Answer #1
There is probably no more distressing or devastating feeling of failure than the prospect of losing your home. It represents shelter and safety, the major investment of a lifetime. However many of the subprime homeowners put no money down, nothing, into their homes and so they really have no investment to lose. They don't need "bailing out" of anything. Even though the value of homes has declined, 96% of homeowners are paying their mortgages on time. Some of these people will need our help. What we want to ensure is that these people are able to continue to make a living, keep their jobs and their home. Housing values recover. One way this can be done is by lowering the corporate tax rate to allow businesses, especially small businesses to continue to grow and create new jobs. The US has the highest corporate tax rate in the world. The one thing that could be the death knell for the economy would be higher taxes on small business. 85% of all small businesses would fall into Barack Obama's tax hike "on the wealthy". For small business to survive and produce credit must be available. It is the credit markets that are frozen fight now. The recent congressional rescue as well as the lowering of global interest rates is designed to do just that by providing credit to banks and a floor to the housing market. Whether this is done by government purchasing of mortgage backed securities or direct subsidies to home owners, we, the American Taxpayer, have already been committed by our congress to do this through the rescue bill and the bailout of Freddie Mac and Fannie Mae. We are paying for the aquiesence of our representatives to the liberal, socialist doctrine of "fairness" made into law by the Democrats and Jimmy Carter through the fair housing act of 1975. This mandated banks to loan money to people of unworthy credit. These loans were implicitly guaranteed by us, the taxpayers, through "Government Sponsored Enterprises" (GSE's) now known infamously as Freddie Mac and Fannie Mae. They bought these risky loans making their CEO's, most notably Tim Johnson and Frank Raines (who are now both prominent advisors to Barack Obama) into multimillionaires. (Even after being dismissed for fraudulent accounting practices at Freddie Mac, Mr. Raines walked away with 90 million dollars.) These CEO's and other officials at Fannie and Freddie kicked back millions of dollars into the campaign coffers of Barney Frank, Chuck Schumer, Chris Dodd and others(1) who continued to defend Freddie and Fannie to the end even when they were supposed to be in charge of oversight. When the stock market reaches a floor and the housing market, aided by the rescue bill, finds its true value, only then will confidence and liquidity reenter our system. Should we aide worthy homeowners? Yes, we should and we must and we are.
1. Wall Street Journal Oct 2, 2008: "What they Said About Freddie and Fannie."http://online.wsj.com/article/SB122290574391296381.html?mod=todays_us_opinion
Answer #2
Article
Answer #1
There is probably no more distressing or devastating feeling of failure than the prospect of losing your home. It represents shelter and safety, the major investment of a lifetime. However many of the subprime homeowners put no money down, nothing, into their homes and so they really have no investment to lose. They don't need "bailing out" of anything. Even though the value of homes has declined, 96% of homeowners are paying their mortgages on time. Some of these people will need our help. What we want to ensure is that these people are able to continue to make a living, keep their jobs and their home. Housing values recover. One way this can be done is by lowering the corporate tax rate to allow businesses, especially small businesses to continue to grow and create new jobs. The US has the highest corporate tax rate in the world. The one thing that could be the death knell for the economy would be higher taxes on small business. 85% of all small businesses would fall into Barack Obama's tax hike "on the wealthy". For small business to survive and produce credit must be available. It is the credit markets that are frozen fight now. The recent congressional rescue as well as the lowering of global interest rates is designed to do just that by providing credit to banks and a floor to the housing market. Whether this is done by government purchasing of mortgage backed securities or direct subsidies to home owners, we, the American Taxpayer, have already been committed by our congress to do this through the rescue bill and the bailout of Freddie Mac and Fannie Mae. We are paying for the aquiesence of our representatives to the liberal, socialist doctrine of "fairness" made into law by the Democrats and Jimmy Carter through the fair housing act of 1975. This mandated banks to loan money to people of unworthy credit. These loans were implicitly guaranteed by us, the taxpayers, through "Government Sponsored Enterprises" (GSE's) now known infamously as Freddie Mac and Fannie Mae. They bought these risky loans making their CEO's, most notably Tim Johnson and Frank Raines (who are now both prominent advisors to Barack Obama) into multimillionaires. (Even after being dismissed for fraudulent accounting practices at Freddie Mac, Mr. Raines walked away with 90 million dollars.) These CEO's and other officials at Fannie and Freddie kicked back millions of dollars into the campaign coffers of Barney Frank, Chuck Schumer, Chris Dodd and others(1) who continued to defend Freddie and Fannie to the end even when they were supposed to be in charge of oversight. When the stock market reaches a floor and the housing market, aided by the rescue bill, finds its true value, only then will confidence and liquidity reenter our system. Should we aide worthy homeowners? Yes, we should and we must and we are.
1. Wall Street Journal Oct 2, 2008: "What they Said About Freddie and Fannie."http://online.wsj.com/article/SB122290574391296381.html?mod=todays_us_opinion
Answer #2
Article
Divided Government is Best
Here's a great article from the Wall Street Journal on Sept. 12, 2008 by Don Luskin
Trust
How do you place trust in someone? Is it the way they talk to you or the way they look at you? Is it their actions towards you? Is it what they do when no one's looking that causes you to either trust or distrust them?
I've not always been the best at judging people right off. But, I do tend to trust people who wear their heart on their sleeve, so to speak, more so than those who don't.
Perhaps that's why in this political environment, I think Sen. Obama and Sen. Biden are more qualified to lead this country but don't trust them to lead it. The fact that Sarah Palin and John McCain don't know the answer to questions sometimes and take harsh stands on certain issues makes me trust them more because I know where they stand.
Who you associate with affects who you are - for bad or for good. No matter how silly people think the claim that Obama has had associations with William Ayers who was a domestic terrorist in the 1960s and therefore subscibes to some of Ayers extremist ideas is, this is not silly to me. This very well could mean that Ayers' found in Obama's ideas a few of his own and therefore chose to help propel Obama into national politics in the hope that finally someone might represent his [Ayers] radical ideas in Washington. The Obama campaign has issued this statement saying this association is ludicrous, but in my short life, I understand that the people you choose to surround yourself with, influence you.
All this leads me back to my point that although Obama has many, many things going for him - enthusiasm, intelligence, looks, more votes. I don't know who he is down below the talk. I think I know Sen. McCain and Governor Palin - even if I don't want to.
I've not always been the best at judging people right off. But, I do tend to trust people who wear their heart on their sleeve, so to speak, more so than those who don't.
Perhaps that's why in this political environment, I think Sen. Obama and Sen. Biden are more qualified to lead this country but don't trust them to lead it. The fact that Sarah Palin and John McCain don't know the answer to questions sometimes and take harsh stands on certain issues makes me trust them more because I know where they stand.
Who you associate with affects who you are - for bad or for good. No matter how silly people think the claim that Obama has had associations with William Ayers who was a domestic terrorist in the 1960s and therefore subscibes to some of Ayers extremist ideas is, this is not silly to me. This very well could mean that Ayers' found in Obama's ideas a few of his own and therefore chose to help propel Obama into national politics in the hope that finally someone might represent his [Ayers] radical ideas in Washington. The Obama campaign has issued this statement saying this association is ludicrous, but in my short life, I understand that the people you choose to surround yourself with, influence you.
All this leads me back to my point that although Obama has many, many things going for him - enthusiasm, intelligence, looks, more votes. I don't know who he is down below the talk. I think I know Sen. McCain and Governor Palin - even if I don't want to.
What do Americans want to hear?
The town-hall style presidential debate last night wasn't the most interesting debate we've ever listened to, but it did raise a question in my mind. What is it that Americans want to hear from their president?
I thought McCain won the debate. It was the first time he gave some solid, detailed answers about his plans. He distanced himself from Bush and Obama. He set out a plan to help home owners with their mortgages, and he wasn't too silly. However, a CNN poll this morning said that Obama won the debate 52% to 30%. I was shocked the gap was that big, and then I realized the reason for this could be boiled down to the candidates responses and voters reactions to the following question.
Tom Brokaw asked the candidates this question - Is health care a right, a privilege or a responsibility?
McCain answered that it was a responsibility, and Obama answered that it was a right.
A FoxNews focus group said that that was the turning point in the debate for them. Until that point, a little more than half believed McCain was winning the debate - even as the topic up to that point was the economy. But, after the healthcare question, many in the focus group said Obama won that question and continued to win the rest of the debate.
Why? Why did McCain lose for saying it was a responsibility and that people should be given money to chose their own healthcare across state lines, and why did Obama win for saying it's a right and the government is going to provide everyone with health care coverage?
I think it's because Americans are changing. They want things done for them. The idea of small government - which allows the people to manage their lives is no longer appealing to many Americans. The idea of the government taking care of all the details is.
But, this didn't use to be the case. The pilgrims who crossed the ocean to come to a free America sacrificed almost everything they had to come to a country where they could live their lives the way they chose - not the way the Government chose for them.
Has it just become too hard to make the decisions ourselves? Have the insurance companies, banks, laywers, etc. made decision making so painful we'd rather not have the choice?
I thought McCain won the debate. It was the first time he gave some solid, detailed answers about his plans. He distanced himself from Bush and Obama. He set out a plan to help home owners with their mortgages, and he wasn't too silly. However, a CNN poll this morning said that Obama won the debate 52% to 30%. I was shocked the gap was that big, and then I realized the reason for this could be boiled down to the candidates responses and voters reactions to the following question.
Tom Brokaw asked the candidates this question - Is health care a right, a privilege or a responsibility?
McCain answered that it was a responsibility, and Obama answered that it was a right.
A FoxNews focus group said that that was the turning point in the debate for them. Until that point, a little more than half believed McCain was winning the debate - even as the topic up to that point was the economy. But, after the healthcare question, many in the focus group said Obama won that question and continued to win the rest of the debate.
Why? Why did McCain lose for saying it was a responsibility and that people should be given money to chose their own healthcare across state lines, and why did Obama win for saying it's a right and the government is going to provide everyone with health care coverage?
I think it's because Americans are changing. They want things done for them. The idea of small government - which allows the people to manage their lives is no longer appealing to many Americans. The idea of the government taking care of all the details is.
But, this didn't use to be the case. The pilgrims who crossed the ocean to come to a free America sacrificed almost everything they had to come to a country where they could live their lives the way they chose - not the way the Government chose for them.
Has it just become too hard to make the decisions ourselves? Have the insurance companies, banks, laywers, etc. made decision making so painful we'd rather not have the choice?
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