Archive for December, 2012
For starters, the problem with going over the fiscal cliff isn’t what you think it is.
Because if we go over the cliff and there are meaningful (which means it’s about time) spending cuts and across-the-board tax hikes (which wouldn’t be so bad, except for this…), what do you think politicians are going to do with new revenues?
They’re going to spend them to offset the “sequestered” spending cuts that they’ll say are coming at the wrong time!
What are they going to do with all that revenue?
Now here’s another good idea from the geniuses that ruin, I mean run, our country.
The Obamarama administration really wants to help homeowners whose homes aren’t worth what they borrowed to buy them. In other words, they are “underwater.”
A lot of the loans to homeowners that are underwater are owned outright or, at a minimum, insured (more often both) by Fannie Mae and Freddie Mac, the government-sponsored (which means taxpayer saddled) enterprises that the government had to take over when in 2008 they lost on their trillion-dollar bets that home prices would go up forever. Geniuses!
In fact, these geniuses own or insure close to half of all home loans in the United States. Obviously, they like to bet big. But they didn’t bet alone. They had betting partners.
The casino was the whole country and the whole system. The mortgage originators, prime and subprime lenders, banks – everyone was handing out loans because, get this, they wouldn’t be responsible for the loans they were making. Fannie and Freddie were buying them all up while the guilty parties would make money as Fannie and Freddie pipelined more products to – guess what – make more loans!
In case you forgot, that’s where all the money came from in the whirling dervish derby that fed the mortgage bubble and aided and abetted Alan Greenspan’s how-low-can-you-go interest rate policies. I guess we can call him the Big Pit Boss. But I digress…
So, if Fannie and Freddie own your loan and you’re underwater, they have been cattle-prodded by the geniuses above them (yep, government geniuses) to let you refinance at a lower rate (lower than the crushing, sucker’s rate that ballooned on you). Because, as an investor (that’s what home buying really is – an investment, not a right) you made a go-for-broke bet at the table and forgot your basic math. Math that says, “One, plus the none that I have, equals three, so this is a good bet I can double down on and retire.”
What will these geniuses think of next?
The opening line of a December 11, 2012 New York Times editorial on federal and state authorities choosing not to indict HSBC for money laundering reads: “It is a dark day for the rule of law.” It may be a dark day for the rule of law, but it’s business as usual for the banks.
America’s heralded and frighteningly powerful Department of Justice, along with all of the not so heralded or frightening banking regulators, simply refused to prosecute Britain’s biggest bank out of fear of “collateral consequences.”
In other words, they’re “too big to prosecute.” That’s what Andrew Bailey, the chief executive-designate of the Prudential Regulation Authority, said about the usual deferred prosecution agreement that accompanied HSBC’s $1.9 billion fine. The Prudential Regulation Authority is set to replace the U.K.’s Financial Services Authority – the country’s current toothless watch dog.
It’s just another example of too big to fail and too big to jail.
Deferred prosecution agreements and hefty fines levied against the world’s TBTF banks have become commonplace. Still, there are relatively few criminal charges, just wrist-slapping, don’t-do-it-again fines and public spankings.
It is a dark day for the rule of law because the money cloak has effectively been cast over all things having to do with justice.
Let’s call it what it is: buying immunity.
I am laughing right now, really.
Not because the market opened down more than 1% this morning; that’s only funny if you’re short (okay, I’m laughing a little).
And not because we’re all still here; it is 12-21-12, you know!
I am laughing at what happened last night. I am laughing that House Speaker John Boehner’s “Plan B” for the Fiscal Cliff wasn’t even voted on.
Why not? I can’t imagine – it had all the right stuff.
According to Mr. Bonehead’s website, “The bill focuses on stopping waste, fraud, and abuse in federal programs, eliminating government slush funds (including an ObamaCare slush fund), and reducing waste and duplication in government bureaucracies.”
And that was just the trash talk about cutting wasteful spending in the bill. He also wanted a tax cut for Americans making under a million dollars a year. I’m for that!
So what’s making me laugh, when on the surface the bill seems to make some sense?
It’s what you can’t see (because most of it is hidden, or if it’s there it’s buried) that’s funny. In fact, two things in the bill are so funny that they almost brought me to tears.
Let’s go have a laugh together.
When it comes to the Federal Reserve, it’s not a matter of what you see is what you get. It’s more a matter of what you don’t see is what you’ll end up getting.
Getting, as in up the you-know-what!
I’m talking about getting socialism shoved up our capitalist backsides, for one thing.
It’s simple: We are about to go over the so-called fiscal cliff. Why? Because Congress can’t figure out how to stop spending money it doesn’t have.
Forget the whole revenue side of the equation. It’s only part of the mix of fixes, and the only fix that matters ain’t fixed.
Stop spending money you don’t have and you don’t have to tax people more to pay for a bunch of crap they don’t need, don’t want, and don’t even know they’re getting.
Oh, that would be because on top of what we are getting there’s even more that we’re not getting. Congress’ paymasters are getting pork and beans for whatever they want because that’s how our Congress gets elected, by greasing the wheels of insiders to get taxpayer money for their private purses, enough to plentifully pay for campaigns.
But that’s only the “private” side of spending.
The spending scheme has mushroomed by expanding (and paying sickeningly outrageous wages and benefits) an ever-growing number of government workers.
And by expanding entitlements beyond what we are entitled to.
And by expanding welfare and “social programs.”
Yes, I am including 99 weeks of unemployment, and accompanying food stamps, and free money for unwed mothers to have more kids so they can collect more free money, and free day care, and all the other free stuff that ain’t free if someone (that’s you and me) is paying for it.
All that spending creates a class of people, a voting class. And, guess what they vote for?
Duh, that would be more free stuff.
So what’s this got to do with the Fed?
I’m glad you asked…
Thank you all for your questions and comments. Please keep sending them my way.
You can contribute to the discussion by posting at the bottom of any article, or by emailing firstname.lastname@example.org.
We’ve covered a lot of ground in the past few weeks, and there are a lot of questions, so let’s get started.
Q (Re: The Truth About Prepaid Cards): If you have the cash to buy the card, then why not use the cash to buy things with? Am I from a different planet or something? ~ S.
A: People buy cards with cash because they can pay bills with it (over the phone, or by filling in the card account number etc. on the return bill and mailing it), buy stuff online, buy stuff at locations that only take cards, swipe quickly at merchant outlets that have shorter lines for card users, not have to deal with change, a host of other reasons (a lot of them for security and convenience) and still access cash when they need it at ATMs.
Q: I was surprised that AMEX decided to go so down-market, which might well affect their image. However, they are going where the money is, perhaps big time. ~ Malcolm F.
A: I’m speculating here because I’m not privy to American Express’ corporate strategy. Since they already have a huge chunk of the “upscale” credit card market (especially business accounts), why not expand to where there are significantly more customers?
Behind the scenes, on a “technical” basis, the prepaid card business (unlike AMEX’s credit card business) requires users to “deposit” money onto the cards. Banks accept deposits and use deposits to fund loans, maybe trade it across different markets, and perform other banking business functions with depositor money as “capital,” which technically it is NOT. Nonetheless, AMEX can do the same thing with the money that’s deposited onto Bluebird cards. Of course, at a minimum, there’s some “float” (interest) that they earn sitting on all the cash they are collecting and don’t have to pay depositors to fork over.
As far as it affecting their image, I doubt it will. Unless the Bluebird card business does something stupid and has financial problems, upscale customers won’t give a hoot. Besides, there are plenty of AMEX card users who shop at Walmart. The next thing will be cross-marketing opportunities, whereby you’ll get deals sent to you, online or in the mail from AMEX for Walmart merchandise (or wherever Bluebird cards will be accepted) based on what you buy with your AMEX card.
You do know that “they” track all your purchases, don’t you? And that you are profiled eight ways to Sunday, you know that, right?
Also, it may be to some of Walmart’s customers’ credit (even just psychologically) to be associated with AMEX, especially if they can’t get an AMEX card. And you know, that if they become good Bluebird users, they may get an invitation from AMEX to step up and pay them an annual fee to become a “member.”
Wow… there’s an offer you can’t refuse.
Let’s keep going…
If you think for one second that the Federal Reserve System is a Godsend that backstops America’s banks and our economy in times of trouble, you’d be right for that one second.
But if you take any time to learn how the Fed really works and in whose interest they operate, you’d make yourself sick for a long, long time.
The truth about the Federal Reserve is that it’s a dangerous, insidious socialist tool.
Rather than allowing free markets to function as a “clearing mechanism” that rewards success and punishes failure, the Fed fosters underdevelopment of third-world nations, props up corrupt governments, protects the greedy, self-serving banking constituency it serves, and by design promotes socialism to further its mandate to enrich its masters.
I’m sick of the Fed and their control over the U.S. Congress, the American economy, and the world order.
It’s about time the American public revolted against the Fed and our pandering Congressmen who pimp for it, abrogated their Constitutional duties to it, and get rich off it, all the while pretending they control it and it’s some kind of Constitutional safeguard.
You see, the Fed was the brainchild of a bunch of the world’s most powerful bankers and a few greedy U.S. Congressmen who were not surprisingly in the employ of banker backers.
The history of the Fed is a fascinating story about American politics and power-broking bankers. The undisputed truth about the creation and mandate of the Federal Reserve System is laid bare, beautifully I might add, in G. Edward Griffin’s “The Creature from Jekyll Island.”
I thought I knew a lot about the Fed, and it turns out I do. But there is so much more that I didn’t know, and it’s all laid out in the book, with all the accompanying references and proof.
It chilled me to my very core.
A few weeks ago, I wrote about how prepaid cards are proliferating, that American Express and Walmart had come out with a no-fee card called Bluebird, and not everything is as it seems.
You all chimed in with lots of great comments, including some that questioned what I really had against prepaid cards, especially if they are “no-fee” cards and serve those with less-than-average wherewithal (wherever that descending measure is these days) who rely on them for everything from consumer transactions to bill paying and ATM access.
First of all, let me say that I think prepaid cards are good. They’re not great, but I hope they get there.
But I want to talk about what’s not great, and how to make prepaid cards better.
I told you about the interchange fees that are charged to merchants and how those end up being passed along to consumers. Maybe that’s not such a big deal if we can quantify their additional cost on a per-item basis. All I’ll say about that is, it adds up.
My problem with prepaid cards is what we can’t see about them.
What’s going on behind the scenes? Do they offer adequate protection to their users? Is the proliferation of them going to present some systemic risk? How should they be regulated?
Regulation? I know what some of you are thinking. We have too many regulations as it is, and the regulators are all asleep at the wheel anyway, so regulation is the problem not the answer.
I agree with you, but not exactly. You’ll see what I mean.